Recent Government Focus on Laboratory Testing and The Impact Of EKRA—Where Are We in 2023?
The Eliminating Kickbacks in Recovery Act (EKRA) was enacted by Congress in October of 2018 as part of the SUPPORT Act.1 While its initial focus was to address patient brokering and kickback schemes within recovery homes and clinical treatment facilities, the implemented legislation had a broader reach as clinical laboratories were included in the list of entities subject to criminal penalties under this law.2 This addition has proved to be extremely important for the laboratory industry. The earlier government cases showed a focus on the traditional recovery homes and clinical treatment facilities. However, as noted below, the more recent cases also highlight the application of EKRA to laboratories.
Specifically, EKRA makes it a crime to pay or offer any remuneration “to induce a referral of an individual to a recovery home, clinical treatment facility, or laboratory” or “in exchange for the individual using the services of that recovery home, clinical treatment facility, or laboratory.” A recent decision highlights the potential damages that may be levied under the statute, which could include a maximum of 10 years in prison plus a fine of US$200,000.3
While EKRA broadly prohibits the conduct referenced above, the statute contains seven exceptions. Of note, these exceptions do not mirror other fraud and abuse exceptions, such as the exceptions found in the Patient Self-Referral Law or the safe harbor provisions of the Anti-kickback Statute (AKS).
In the four years since EKRA was enacted, the Federal Government has promulgated no regulations nor provided any interpretive guidance under the statute. Therefore, the case law, enforcement priorities, and government reports that address laboratories, clinical treatment facilities, and recovery homes are our main sources of guidance and are, therefore, critical when examining EKRA’s applicability.
Thus far, laboratories performing COVID-19 testing, in addition to other testing, have received a significant amount of attention from prosecutors and regulators. For example, federal prosecutors secured an EKRA conviction in the Northern District of California involving questionable COVID-19 tests; a Department of Health and Human Services (HHS) report was published highlighting the potential for unnecessary add-on tests performed in connection with COVID-19 testing; and the Department of Justice established a new strike force, with teams located through the United States, to combat COVID-19 fraud and abuse.
A look back at EKRA related developments over the past few years gives us a road map for EKRA application and emphasis for 2023:
1. Treatment Facility And Recovery Home Setting.
Some of the earliest cases prosecuted under EKRA have involved clinical treatment facilities and recovery homes. In U.S. v. Mohammed, prosecutors in the District of New Jersey obtained a guilty plea from an owner of a drug treatment facility who conspired to violate EKRA by paying a marketing company a fee for each patient referral in addition to other conduct.4 A year later, in the Central District of California, an owner of clinical treatment facilities and a “patient broker” were charged with a conspiracy to pay and receive kickbacks for referrals to clinical treatment facilities under EKRA.5 It is clear the government has looked to EKRA as an effective tool to prosecute in this setting.
2. Laboratories—COVID-19 Testing In Addition To Other Types Of Testing.
Some of the recent EKRA cases and government guidance involved laboratory testing, specifically COVID-19 testing in addition to other types of testing.
In May 2021, a lab owner in Louisiana was indicted for alleged violations of EKRA and the AKS, among other provisions, related to COVID-19 testing and respiratory pathogen panel claims.6
In September 2022, U.S. v. Schena, the president of a California medical technology company was convicted on a range of counts, including EKRA, related to various testing such as allergens and COVID-19.7 This is one of the earliest published cases involving a publicly-traded company and COVID-19 testing allegations.
This is very important since the Department of Justice has identified efforts to combat and prevent COVID-19 related fraud as a top priority for 2023.8
In December 2022, a report authored by HHS examined certain billing to government programs for questionably high levels of add-on tests in connection with COVID-19 testing.9
3. Non-Governmental Payors.
The scope of payors to which EKRA applies includes private payors. This sets EKRA somewhat apart from most other fraud and abuse provisions and federal prosecutors have used this tool in that very context: In Florida, U.S. v. Markovich (2020), two brothers who operated treatment facilities were convicted for conspiracy to violate EKRA involving commercial insurance claims.10 Additionally, EKRA charges were brought against a defendant alleged to be involved in the submission of improper claims to both government payors and to Blue Cross Blue Shield of Louisiana.11
4. Court’s Interpretation And Government Use Of EKRA.
In October 2021, in S&G Labs Haw. LLC v. Graves, a laboratory brought an employment breach of contract case against an employee after they attempted to restructure the employee’s compensation agreement to comply with EKRA.12 The employee counterclaimed, alleging that the laboratory breached the employment agreement by failing to issue appropriate compensation. The court sided with the employee’s counterclaim, because, among other things, it did not interpret the employee’s compensation structure and activities to be improper inducements of a referral under EKRA, because the employer’s physician clients were not considered actual “individuals” under EKRA. Interestingly, in the Schena case, the court opined on the EKRA interpretation in S&G Labs stating, “In its analysis of EKRA, S&G Labs failed to consider the plain meaning of the term ‘to induce,’ a broad phrase that encompasses indirect efforts by marketers to obtain patient referrals through physicians.” For the first time in Schena, we see the government’s use of EKRA and its interpretation of relationships between laboratories and marketing agents as well as how indirect patient referrals may also implicate the statute.
FORECAST FOR 2023
As to the forecast for 2023, there are a number of potential trends in light of recent government priorities, settlements, and guidance that may impact EKRA. This would potentially include certain laboratories that focus on add-on tests related to COVID-19, such as individual respiratory tests and respiratory pathogen panels, genetic, and allergen tests. These laboratories will likely draw increased scrutiny from the strike force teams referenced above. The government has also successfully prosecuted companies in the electronic health record sector, both involving laboratories and otherwise.13 Certain marketing arrangements for laboratories such as commission-based compensation arrangements are another trend to monitor in 2023.14 In addition, the government has highlighted certain telehealth arrangements in one of their recent fraud alerts related to genetic testing.15 It is fair to anticipate further enforcement surrounding EKRA due to the lack of regulatory guidance and recent government activities.
1 The Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities (SUPPORT) Act, codified in relevant part at 18 U.S.C. § 220.
2 EKRA utilizes the definition of laboratory found at section 353 of the Public Health Service Act (42 U.S.C. § 263a) which states: “As used in this section, the term “laboratory” or “clinical laboratory” means 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.”
3 U.S. v. Schena, No. 5:20-CR-00425-EJD-1, (N.D. Cal. May 2022). To date, the defendant in U.S. v. Schena has not been formally sentenced in connection with this case. The sentencing hearing previously scheduled for 30 January 2023 has been reset to 10 April 2023.
4 Department of Justice, “Two California Men Admit Roles in Multi-State Recovery Home Patient Brokering Scheme,” https://www.justice.gov/usao-nj/pr/two-california-men-admit-roles-multi-state-recovery-home-patient-brokering-scheme (Sept. 15, 2020). See United States v. Mohammad (D.N.J.), https://www.justice.gov/usao-nj/press-release/file/1316956/download.
5 Department of Justice, “Justice Department Announces Series of Cases to Combat Addiction Treatment Kickback Schemes in Southern California,” https://www.justice.gov/opa/pr/justice-department-announces-series-cases-combat-addiction-treatment-kickback-schemes (Dec. 2021). See U.S. v. Mahoney, No. 8:21-CR-00183 (C.D. Cali. Oct. 2021).
6 Department of Justice, “DOJ Announces Coordinated Law Enforcement Action to Combat Health Care Fraud Related to COVID-19”,” https://www.justice.gov/opa/pr/doj-announces-coordinated-law-enforcement-action-combat-health-care-fraud-related-covid-19 (May 26, 2021). See U.S. v. Lepetich, No. 3:21-CR-00032 (M.D. La. May 2021).
7 U.S. v. Schena, No. 5:20-CR-00425-EJD-1, (N.D. Cal. May 2022).
8 Department of Justice, “Justice Department Announces COVID-19 Fraud Strike Force Teams,” https://www.justice.gov/opa/pr/justice-department-announces-covid-19-fraud-strike-force-teams (Sept. 2022).
9 U.S. Department of Health and Human Services, “Labs with Questionably High Billing for Additional Tests Alongside COVID-19 Tests Warrant Further Scrutiny,” https://oig.hhs.gov/oei/reports/OEI-09-20-00510.pdf (Dec. 2022).
10 Department of Justice, “Addiction Treatment Facility Operators Convicted in $112 Million Addiction Treatment Fraud Scheme,” https://www.justice.gov/opa/pr/south-florida-addiction-treatment-facility-operators-convicted-112-million-addiction (Nov. 2021).
11 Department of Justice, “DOJ Announces Coordinated Law Enforcement Action to Combat Health Care Fraud Related to COVID-19,” https://www.justice.gov/opa/pr/doj-announces-coordinated-law-enforcement-action-combat-health-care-fraud-related-covid-19 (May 2021).
12 S&G Labs Haw. LLC v. Graves, No. CV 19-00310 LEK-WRP, (D. Haw. Feb. 2021).
13 Department of Justice, “Pathology Laboratory Agrees to Pay $63.5 Million for Providing Illegal Inducements to Referring Physicians,” https://www.justice.gov/opa/pr/pathology-laboratory-agrees-pay-635-million-providing-illegal-inducements-referring (Jan. 2019).
14 See generally, U.S. v. Mallory, 988 F.3d 730 (4th Cir.) (Feb. 2021)).
15 See generally, HHS OIG, “Special Fraud Alert: OIG Alerts Practitioners To Exercise Caution When Entering Into Arrangements With Purported Telemedicine Companies,” https://oig.hhs.gov/documents/root/1045/sfa-telefraud.pdf (July 2022).