EKRA Criminalizes Common Lab Referral Agreements

A new federal law criminalizes many common financial relationships between laboratories and those who refer patients to them. And because of sloppy drafting, EKRA’s scope is broader than anticipated.

A new federal law imposes potentially massive criminal penalties upon those who pay or receive payment for laboratory referrals. In 2018, Congress passed the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act), which included the Eliminating Kickbacks in Recovery Act (EKRA).

EKRA’s goal was to prohibit individuals from referring substance abuse patients in exchange for kickbacks to recovery homes, clinical treatment facilities, and laboratories. However, because of its broad language, it ensnares many who do not work with substance abuse patients.

What activities does EKRA make illegal?

EKRA is a criminal law, meaning that violations can result in prison time. It also means that a violator needs to actually intend to do something that the law prohbits (although, they don’t need to actually know it’s illegal!).  EKRA makes it a federal crime to:

• Solicit or receive payment in exchange for referring a patient to a recovery home, clinical treatment facility, or laboratory.
• Pay or offer any payment to induce someone to make a referral to a recovery home, clinical treatment facility, or laboratory.
• Pay or offer any payment in exchange for an individual using that recovery home, clinical treatment facility, or laboratory.

In essence, EKRA prohibits those making or receiving referrals to or from recovery homes, clinical treatment facilities, or laboratories from making or receiving payments for those referrals. EKRA is, therefore, a close relative of the Anti-Kickback Statute.

I’m not involved in substance abuse treatment. Does EKRA apply to me?

While EKRA’s purpose is to prohibit this behavior among those who deal with substance abuse, the law’s actual scope is much broader.

EKRA defines “laboratory” very broadly as “a facility for the biological, microbiological, serological, chemical, immuno-hematological, hematological, biophysical, cytological, pathological, or other examination of materials derived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of any disease or impairment of, or the assessment of the health of, human beings.” Basically, this means that EKRA includes ALL clinical laboratories – even if they don’t provide substance abuse testing or treatment. Thus, even if your laboratory isn’t one of the Congressional legislators’ intended targets, you can still be prosecuted by the feds for EKRA violations.

EKRA – in a slew of legislative drafting oversights – fails to even define the term “referral,” which will surely cause confusion in future EKRA enforcement actions. It also includes an overly broad (and thus likely useless) definition for a “clinical treatment facility.” The law defines clinical treatment facilities as any which can provide detoxification, risk reduction, outpatient treatment and care, residential treatment, or rehabilitation for substance use. Finally – and unlike the Anti-Kickback Statute’s bona fide employment exception – EKRA makes no distinction between its treatment of independent contractors and employees.  It could thus criminalize an employee’s conduct which, if examined under other federal healthcare fraud and abuse laws, would not violate the law or would fall within a so-called “safe harbor.”

My practice complies with the Anti-Kickback Statute. Does that make me EKRA-compliant?

At first glance, EKRA does appear to be simply the substance abuse version of the Anti-Kickback Statute (AKS).  However, a closer look at the law reveals EKRA’s new challenges – which might require you to do something affirmative, beyond maintaining AKS compliance.

EKRA explicitly says that it doesn’t apply to conduct that has already been prohibited by AKS. While this might seem like a clarification, it’s actually a huge source of confusion. In some situations, you may have engaged in conduct that was permitted by AKS, but which now puts you at risk for criminal prosecution under EKRA. For example, if you operate a laboratory that pays its employees volume-based commissions, you could be prosecuted under EKRA, despite the fact that AKS makes an exception for bona fide employees. Remember: unlike AKS, EKRA does not distinguish between an independent contractor and bona fide employee.

EKRA may also overlap with the Stark Law (although it does not specifically address whether it preempts Stark in this realm). Both EKRA and Stark may apply to an arrangement involving referring physicians who have financial relationships with EKRA-regulated entities (e.g., laboratories) and who refer designated health services to these entities. This means that some entities or practices that have been AKS-compliant must now acknowledge that they might not be EKRA-compliant.

Finally, it’s crucial to remember that EKRA applies to ALL payors (both public and private). In contrast, AKS only applies to government-funded entities. Thus, organizations (i.e., addiction treatment centers) that accept only private payment and have avoided the spectre of AKS regulation can now be prosecuted under EKRA.

Does EKRA have exceptions or safe harbors protect me and my practice?

EKRA does provide safe harbors and exceptions. As with all healthcare laws and regulations, the applicability of such safe harbors is incredibly nuanced, and with such significant potential consequences, this analysis should always be performed by an experienced healthcare attorney familiar with your business.

EKRA’s first safe harbor offers protection for arrangements that comply with the AKS personal services and management contracts safe harbor. This means that, in these narrowly defined situations, compliance with AKS means compliance with EKRA.

EKRA’s second safe harbor protects employers who pay their employees or independent contractors in a way that is not determined by or does not vary by: (1) the number of individuals referred, (2) the number of tests or procedures performed, or (3) the amount billed to or received from the individual referred.

In addition to its safe harbors, EKRA also includes eight statutory exceptions to the prohibition on remuneration payments:  

• discounts obtained by service providers;
• payments made to employees and independent contractors that meet certain structural requirements;
• drug manufacturer discounts provided under the Medicare coverage gap discount program;
• arrangements that meet the AKS personal services and management contracts safe harbor;
• waivers or discounts of coinsurance or copayments;  
• remuneration between healthcare entities and an individual/entity based on an agreement that improves either the access or quality of services to medically underserved populations;
• remuneration made due to an alternative payment model or model created by the Secretary of Health and Human Services (“Secretary”) for care coordination or value-based care; and
• any other regulatory safe harbor promulgated by the Attorney General in conjunction with the Secretary.

If your practice falls under any of these exceptions or safe harbors, then your activities are likely EKRA-compliant.

What happens if I violate EKRA?

Violators can be penalized with a $200,000 fine or up to 10 years in prison, or both (depending on the severity of the violation). EKRA is not something to take lightly, and it is crucial that you review your current setup to see if you might have any violations.

Contact an Experienced Healthcare Attorney at Jackson LLP for EKRA Compliance

Jackson LLP’s experienced healthcare attorneys help practices, medical professionals, and related companies maintain compliance with EKRA.  Our firm has counseled those in the laboratory industry and related fields about the risks posed by continuing to conduct “business as usual” post-EKRA, and our attorneys have helped clients understand their new obligations under this law.

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