January 22, 2019

Congress Expands Anti-Kickback Statute to Include All Payors for Laboratories, Clinical Treatment Facilities, and Recovery Homes

Recently, Congress enacted the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act, or the “SUPPORT Act,” to further address the nation’s opioid epidemic. However, included in the SUPPORT Act is a wholesale expansion of kickback prohibitions which will have a far-reaching effect on the healthcare industry – and in particular, laboratories. The Eliminating Kickbacks in Recovery Act (EKRA) provision is an all-payor statute that prohibits kickbacks related to referrals made to laboratories, recovery homes, and clinical treatment facilities (non-hospital medical settings that provide detoxification, risk reduction, outpatient treatment and care, residential treatment, or rehabilitation for substance use).

EKRA prohibits any solicitation or payment in exchange for patient referrals or to induce the referral of an individual to a recovery home, clinical treatment facility or laboratory. Unlike the federal Anti-Kickback Statute, EKRA applies to all healthcare benefit programs, including private payors. While EKRA provides certain exceptions, those exceptions are not as inclusive as the safe harbors to the Anti-Kickback Statute. Violations of EKRA can result in criminal prosecution with fines of up to $200,000 and imprisonment for up to 10 years, or both.

With the passage of EKRA, laboratories, clinical treatment facilities, and recovery homes should immediately consider reviewing all financial arrangements with healthcare providers, contractors and employees who are in a position to generate referrals – including marketing personnel and sales reps.

Absent an exception, EKRA prohibits any person or entity from knowingly and willingly offering, paying, soliciting, or receiving, directly or indirectly, anything of value: (1) in return for referring a patient or patronage to a recovery home, clinical treatment facility, or laboratory; or (2) to induce a referral of an individual to a recovery home, clinical treatment facility, or laboratory; or (3) in exchange for an individual using a recovery home, clinical treatment facility, or laboratory’s services. EKRA’s prohibition is broad, and affected providers in the industry should review the statute for compliance purposes. For example, the common industry practice of paying laboratory sales reps based on the volume or value of lab tests generated for the laboratory (when the test is paid by a commercial/private payor) will now subject laboratories to heightened scrutiny, and could be found to violate EKRA.

EKRA provides several exceptions that protect certain arrangements, specifically:

  • A properly disclosed and notated discount or other reduction in price under a healthcare benefit program

  • Payments to an employee or independent contractor that do not vary based on the number of individuals referred, the number of tests or procedures performed, or the amount billed to or reimbursed from a health care benefit program

  • Drug discounts under the Medicare coverage gap discount program

  • Payments made in compliance with the federal Anti-Kickback Statute’s personal services and management contracts safe harbor

  • Non-routine, good-faith waivers or discounts of any coinsurance or copayment amount

  • Arrangements with health center entities that serve medically underserved populations care if designed to increase availability or quality of services provided

  • Alternative payment model payments or payments under an arrangement used by a state, health insurance issuer, or group health plan, if HHS determines it necessary for care-coordination or value-based care.

  • One important distinction between the EKRA exceptions and the federal Anti-Kickback Statute’s safe harbors is the absence of the Anti-Kickback Statute’s employment safe harbor under EKRA. This means that previously compliant payment methodologies structured under the Anti-Kickback Statute’s employment safe harbor (such as paying W-2 employees a volume or value based commission) are now at risk of violating EKRA.

Congress included a pre-emption clause related to conduct prohibited by the Anti-Kickback Statute – “This section shall not apply to conduct that is prohibited under [the Anti-Kickback Statute].” It appears as though Congress – through the inclusion of this pre-emption –is recognizing that it has taken concepts from the Anti-Kickback Statute and is applying them to all health care benefit plans, but it is otherwise not trying to affect claims falling under the jurisdiction of the Anti-Kickback Statute. In other words, “regular kickbacks” under Medicare and Medicaid would continue to be governed solely by the Anti-Kickback Statute. Some commentators have questioned whether the word “not” should have been inserted before the word “prohibited,” or whether “prohibited” was intended to be the word “permitted” under the preemption clause. We think this is unlikely, and that it is more likely that Congress intended for this pre-emption to give clear instruction to the Department of Justice regarding the enforcement of EKRA when claims are also subject to Anti-Kickback Statute enforcement.

If your laboratory or clinical treatment facility has financial relationships with providers or other referral sources, or contracts with or employs marketing agents who generate referrals for your company, you should consider reviewing those arrangements with counsel who is familiar with EKRA and healthcare fraud, waste, and abuse laws. It is likely that your company may be required to make substantial changes to its provider/agent/employee compensation methodologies.


1 EKRA defines “health care benefit program” consistent with 18 U.S.C. § 24, which states that “health care benefit program” means “any public or private plan or contract, affecting commerce, under which any medical benefit, item, or service is provided to any individual, and includes any individual or entity who is providing a medical benefit, item, or service for which payment may be made under the plan or contract.” Thus, EKRA applies to private and public insurance plans.

 

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About this Author

Laura D. Seng, Barnes Thornburg Law Firm, South Bend, Healthcare Attorney
Partner

Laura Seng is a partner in Barnes & Thornburg LLP’s South Bend, Indiana, office and is the chair of firm's national Healthcare Department. Ms. Seng concentrates her practice in regulatory compliance, transactional matters and medical-legal business issues for healthcare entities and individual providers. She is listed as a notable healthcare lawyer by Best Lawyers in America® and was recognized by her peers in Indiana Super Lawyers® as a “Rising Star” in healthcare law.  

Ms. Seng represents hospitals, physicians, multi-specialty clinics and healthcare...

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Rob Castle, Litigation Attorney, Barnes & Thornburg, Dallas, Texas
Partner

Rob Castle is a partner in the Litigation Department in Barnes & Thornburg’s Dallas office. Mr. Castle represents clients in a variety of industries; however, the majority of his practice focuses on healthcare industry clients.

Mr. Castle’s healthcare practice is nationwide and includes qui tam defense, civil and criminal government investigations, internal investigations, internal compliance review, billing audits, white collar criminal defense, hearings before administrative law judges, contract review, medical board hearings and investigations, licensing matters, certificate of need disputes, ERISA claims, and counseling on compliance issues. He represents multiple types of providers, including hospitals, hospices, home health agencies, long-term acute care facilities, inpatient and outpatient rehabilitation care providers, community care providers, pediatric home care providers, ambulatory surgery centers, physician groups and individual physicians. Mr. Castle also represents compounding pharmacies, reference laboratories, pharmaceutical companies, durable medical equipment manufacturers and distributors, and medical device and implant manufacturers and distributors. Prior to law school, Mr. Castle worked in medical sales for manufacturers and distributors in the clinical laboratory and medical/surgical fields.

In addition to healthcare law, Mr. Castle has also handled disputes for financial services institutions, private wealth managers and financial advisers, oil and gas companies, current and retired professional athletes, and a variety of other commercial businesses. Mr. Castle has experience filing and defending cases involving common law claims, including breach of contract, business torts and equitable claims, as well as state and federal statutory claims involving, among others, the False Claims Act, the Anti-Kickback Statute, the Stark Law, securities laws, ERISA, Title VII, Americans with Disabilities Act (ADA), Age Discrimination in Employment Act (ADEA), and other state and federal healthcare and banking statutes.

Mr. Castle has experience in state and federal courts and representing clients in venues throughout the United States, including Texas, New York, Delaware, Florida, Pennsylvania, Arizona, Colorado, California, Ohio, Kansas, Missouri, Georgia, Oklahoma, Mississippi, Louisiana, Nevada, Alabama and Wyoming.

A frequent speaker, Mr. Castle has delivered numerous presentations to attorneys and physicians on securities and healthcare issues.

Mr. Castle earned his J.D., cum laude, in 2002 from the Southern Methodist University Dedman School of Law, where he was a member of the Order of the Coif. Mr. Castle received his B.A. from Texas Tech University, where he was on the President’s List (students who earn a 4.0 GPA) each semester.

He is admitted to practice in the state of Texas and before the U.S. District Courts for the Northern and Eastern Districts of Texas.

 

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Robert A. Wade Health Care Lawyer Barnes & Thornburg Law Firm
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Robert A. Wade is a partner in the South Bend and Washington, D.C., offices of Barnes & Thornburg LLP. As a member of the Healthcare Department, Mr. Wade represents large health systems, hospitals, ambulatory surgical centers, physician groups, physicians and other medical providers. He has wide-ranging experience representing clients in matters involving the Stark Act, Anti-Kickback Statute, False Claims Act, and Emergency Medical Treatment and Active Labor Act.

With more than 25 years of experience, Mr. Wade counsels clients in developing...

574-237-1107
Julie Veldman, Health Care Attorney, Barnes Thornburg Law Firm, Columbus
Associate

Julie Veldman Harris is an attorney in the Columbus office of Barnes & Thornburg LLP, and a member of the firm’s Healthcare and Corporate departments as well as the Data Security and Privacy Practice Group. Ms. Harris delivers guidance on a wide-range of healthcare and general corporate legal issues, concentrating her practice on representing healthcare providers in all of their transactional and healthcare regulatory law needs.

Ms. Harris counsels businesses and organizations in relation to a variety of healthcare services and providers,...

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Matthew J. Agnew Health Lawyer Barnes & Thornburg Law Firm
Associate

Matthew J. Agnew is a healthcare operations, investigations, and dispute resolution attorney in Barnes & Thornburg’s Dallas office. He assists clients with navigating the complex healthcare regulatory landscape with a focus on practical and timely business solutions. 

He counsels clients in a variety of areas of healthcare law, including general regulatory compliance, Office of Inspector General and Department of Justice investigations, Stark Law, state and federal anti-kickback statutes, False Claims Act investigations, HIPAA, audits, payer...

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