EKRA Enforcement Developments and Moving Forward

EKRA Enforcement Developments and Moving Forward

Recovery Homes, Clinical Treatment Facilities, and Laboratories must continue to be mindful of the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”), an all-payor statute enacted in 2018 prohibiting kickbacks related to remuneration for referrals to these entities. EKRA’s passage generated uncertainty surrounding its applicability and enforcement, particularly regarding the statute’s breadth and its interplay with permissible arrangements under existing federal health care laws. However, the Department of Justice announced its first conviction under EKRA at the beginning of 2020, signaling the government’s commitment towards enforcing the statute and emphasizing the importance of structuring compliant arrangements.

Podcast Participants

Alyssa James

Attorney, Hall Render

Gregg Wallander

Attorney, Hall Render

Alyssa James: Hello. Welcome to Hall Render’s Practical Solutions podcast, featuring thoughtful analysis and insightful commentary on the legal issues facing the healthcare industry. My name is Alyssa James and I am an attorney with Hall Render, the largest health care focused law firm in the country. Today my colleague, Gregg Wallander, and I will be discussing the EKRA Law, which stands for Eliminating Kickbacks in Recovery Act of 2018. This law was passed in October of 2018 as part of a larger act known as the Support Act, which focused on substance use, disorder prevention, as well as opioid recovery and treatment. This law was passed with the intention of being a comprehensive law that would combat the opioid epidemic at various levels within the healthcare industry.

Alyssa James: Now, I am going to kick it over to Gregg to give us a little more background and an introductory discussion into EKRA and its implications.

Gregg Wallander: Thanks Alyssa. EKRA was ultimately buried in an opioid law when it was enacted, and really caught a lot of people by surprise. It was not part of the initial drafts of the Support Act, as Alyssa mentioned, but it ended up being buried in there like a peanut butter and jelly in between two slices of bread, and it’s right in the middle there.

Gregg Wallander: We are faced to deal with this law, which is very comprehensive. EKRA is an all-payer statute and it addresses services that are covered by any health care benefit program, so it applies to both federal payers as well as commercial insurers. The reason is because it’s a federal law and applies to programs affecting interstate or foreign commerce. But what it really does is establish criminal sanctions up to $200,000 fines and 10 years imprisonment for kickbacks with respect to services covered by any type of healthcare benefit program, as I mentioned. It prohibits kickbacks regarding the solicitation or receipt of remuneration for referrals to recovery homes, clinical treatment facilities, or laboratories.

Gregg Wallander: Laboratories have received the most scrutiny under this law at this point in time, and EKRA further criminalizes the payment or offer of remuneration to induce a referral. So soliciting or inducing the referral can cause liability under EKRA. This is a very broad statute that impacts the ability to pay, solicit or receive money in exchange for referrals or patronage for recovery homes, clinical treatment facilities, or laboratories.

Gregg Wallander: Now, where we see some of these issues in practice really come into play, what about employees? What about payments for marketing services, payments to independent contractors, those kinds of things?

Gregg Wallander: We have discounts with respect to pharmaceuticals. We have discounts with respect to laboratory services. We have discounts that go across the board in the healthcare continuum. We have employment arrangements and we have services arrangements. There’s a lot to deal with here with EKRA.

Gregg Wallander: Alyssa, let’s talk a little bit about the exceptions with EKRA. Let’s go through them and we can chat about them. As I mentioned, there are discounts across the continuum, but there is an exception under EKRA for discounts as long as they’re properly disclosed and reflected in the entity’s cost or charges. In the supply chain context, there are exceptions for this. There also is exception coverage language for Medicare coverage gap drug discounts. From a discount perspective, EKRA does have those two exceptions to keep in mind.

Gregg Wallander: Alyssa, let’s talk about payments to employees and independent contractors.

Alyssa James: Sure. Thanks Gregg. As you mentioned, there are several exceptions to EKRA. I think one thing that just kind of more broadly is important to note is that some of the exceptions under EKRA are less forgiving, or permit fewer activities than would be permitted under the federal Anti-Kickback Statute. I think it’s important to kind of keep in mind when you’re thinking through these types of arrangements that something may be permissible under the Anti-Kickback Statute but not permissible under EKRA, and so that’s an important distinction. To your point, Gregg, regarding payments to employees and independent contractors, there is an exception for that under EKRA, but that exception requires that the compensation that’s paid to those employees or independent contractors not be determined by, or vary based on: the number of individuals that are referred to a particular entity that’s a part of the arrangement, or outside of the arrangement; the number of tests or procedures that are performed; or the amount that is billed or collected from health care benefit programs.

Alyssa James: And so when you read the plain language of that exception, and then review the exceptions to the exception, if you will, EKRA on its face prohibits the commission-based payments that are very common, especially in the laboratory space for sales reps and similar positions. The types of arrangements that maybe would be permissible under the Anti-Kickback Statute, for example, don’t meet the corollary exception to EKRA because of those caveats of what those payments to employees and independent contractors cannot be based upon. EKRA really is trying to focus more on fixed-fee compensation for employees and independent contractors, which generally speaking is a pretty big shift for the industry as far as what would be permitted for those types of relationships.

Gregg Wallander: That’s spot on. We’ve spent a lot of time, as you know, dealing with questions from clients across the country. Every conversation seems to be, “Is this really true? Can we not pay a commission anymore? Can we not pay incentive for achievement in this regard? Every sales person is compensated in this manner.” We agree and understand this sentiment. It does seem very unrealistic that the intent was to be this broad when you’re dealing with the private commercial insurance world. But, as Alyssa mentioned payments to employees and independent contractors that are not determined by, or vary with individuals referred, number of tests performed, or amount billed, really cut off a lot of mainstream and accepted sales arrangements.

Gregg Wallander: There are already laws on the books as well as industry guidelines, like the Pharmacode and AdvaMed Guidelines, which govern institutional relationships and sales relationships between entities to remove issues of inducement. So there are already safeguards on the books, but yes, we’ve had to advise that this law is broad and it potentially implicates a number of commission-based and other sales relationships.

Gregg Wallander: I think there are entities saying, “Wait, it’s just really hard to believe that this can be intended in this manner.” We certainly empathize with that. I think a lot of folks have been saying, “Hey, let’s see how this develops and see if Congress changes its mind or realizes that this was really an overreach.” We’ve talked with our DC office folks about this, and it’s not clear that really there is an intent to revisit this.

Gregg Wallander: It can be politically expedient on either side of the aisle to say, “Hey, we’re against opioid abuse, and so we’re not going to touch any of these laws for fear of looking weak,” or some other term. Again, our interest is in making sure we get this right, but it’s not clear that this law is going away anytime soon.

Alyssa James: I think that’s exactly right, Gregg. In the law itself, there are references to regulations that may be promulgated in the future, and we’ve seen nothing to that effect. We have this law that on its face seems overly broad and much more restrictive than existing laws, and not just in the sense that it also applies to commercial patients in addition to federal health care program patients, but also just in the conduct that on its face, it permits.

Alyssa James: In the year-and-a-half since it has been issued, we’ve seen no proposed regulations or any discussion about forthcoming proposed regulations that would maybe help clarify or fine-tune a little bit the intent and maybe give some additional framework for healthcare organizations, especially labs and entities that contract with labs, to maybe give a little more flexibility, or at least move the needle a little bit back to where it was before. When we’re talking about this, even though we’re talking about this in the context of an opioid law, it’s important to remember that it applies to all laboratory services, not just those related to opioid testing and treatment.

Alyssa James: So it’s very broad, and I think there are a lot of stakeholders in the industry who maybe aren’t aware of how broad it is. Or, like you said, Gregg, just waiting to see what happens before they take action to restructure all of their compensation arrangements that they may have with employees or independent contractors, specifically, at least with regard to that exception. So far, we haven’t seen any sort of guidance or inkling from Congress or regulators that would help to narrow down that scope a little bit or provide any more clarity.

Gregg Wallander: In moving forward, let’s round out a few of the final exceptions, and then we’ll move on to enforcement. There is an exception for: waivers or discounts of certain co-payments or co-insurance as long as it’s in good faith and not routine; certain transfers to federally-qualified health centers under the Anti-Kickback Statute safe harbor; and remuneration made pursuant to approved alternative payment models, meaning different kinds of payment programs for the government.

Gregg Wallander: If you’re outside of the employment context and you’re looking at discounts or other kinds of payments, there are some other exceptions to examine and find out if you fall within those. The main question we’ve gotten after looking at the exceptions relates to enforcement, and with respect to all federal laws, usually when they get put on the books, there’s a time lag for enforcement as the Department of Justice gets its arms around it and as everyone in the industry kind of gets their arms around it. It looks like we’ve had to wait about a year and a couple of months for enforcement. EKRA was enacted in 2018, but just this year at the start of 2020, we finally have an enforcement action. Alyssa, you want to chat a little bit about that and go from there?

Alyssa James: Sure. As you mentioned, we’ve seen one enforcement action back in February. That enforcement action involved an office manager of a substance abuse clinic in Kentucky. That office manager was allegedly soliciting kickbacks from the CEO of a toxicology lab in exchange for urine screening drug testing referrals.

Alyssa James: The period of time in which the alleged conduct occurred was from around December of 2018 to August of 2019. In the period of time after EKRA was enacted, of course, but not an overly long-standing arrangement before it was under investigation. The office manager who allegedly received a check of $4,000 from the CEO of the toxicology lab as a part of a larger package of promised inducements (that were not actually received) ended up being sentenced to five months in prison followed by an additional five months of home detention, and was assessed a fine $55,000.

Alyssa James: Although the alleged inducement or kickback was really only valued at $4,000, her fine there was $55,000 plus time in prison, which is obviously significant. It doesn’t go up to the maximum allowable under EKRA which is up to $200,000 in fines and up to 10 years in prison. But certainly, it would appear that the government is trying to let folks know that the enforcement under EKRA, if you find yourself in that position, will not be taken lightly given the prison time and the fine assessed in the one enforcement action that we do have.

Gregg Wallander: Yes. This is significant, as again, when we wait for a law to be enforced, and people have wondered, “Can the government really mean this?” Well yes, they do. It is going to be a law that is going to be prosecuted in some manner. My sense is that we’ll see some sporadic enforcement. I think it’s going to take some sort of a marketing relationship, or some sort of sales commission relationship that has been very commonplace and deemed very legal forever, that rises to a level to see if in fact there would be congressional action.

Gregg Wallander: I think everybody needs to understand and to respect EKRA. There is an enforcement now on the books, it’s there. There was a $4,000 inducement situation which resulted in a $55,000 fine and five months in jail. Pretty significant given what the issue was.

Gregg Wallander: We’re going to have to continue to monitor this. Our advice is to continue to monitor EKRA. I think folks need to be aware of the scope of EKRA and that you can’t just assume that because it’s not government, that you don’t need to review all your relationships. You do need to review them. Again, don’t assume that if it’s just commercial, that you can move forward. Again, the government’s recent enforcement action underscores the need to remain keenly aware of the statute and maintain compliant arrangements.

Alyssa James: I think that’s exactly right. I know we’ve seen an increase recently in the necessity of EKRA-related analyses in light of the COVID-19 pandemic, for example, and proposed arrangements with labs related to COVID testing. Again, EKRA is not limited to opioid-related services and testing and there was a flurry of new arrangements and continue to be, to some extent, as a result of the pandemic that we’re currently facing. It’s important to keep EKRA in mind there as well and the implications that it may have on those arrangements.

Alyssa James: Of course, I think when folks are faced with very time-sensitive analysis and arrangements because of the nature of COVID and wanting to get that testing up and running, it’s easy to quickly put those arrangements in place without vetting out some of the regulatory implications, especially those like EKRA that folks may not be as familiar with. While there have been waivers issued for certain fraud and abuse regulations related to COVID treatment and responses, which we’ve discussed on previous podcasts, there have been no published waivers that are corollary to that for EKRA. So, it’s something to keep in mind. Just because something is in response to the pandemic doesn’t mean that these regulatory implications may not still be there.

Gregg Wallander: Exactly. In wrapping up, if you’re dealing with recovery homes, clinical treatment facilities, and laboratories, be aware of all of your relationships. Take a good inventory of them. Talk with counsel and see if any modifications are necessary. Appreciate everyone listening today and hope you are all safe during this time.

Alyssa James: Thanks everyone.

Gregg Wallander: Thank you.

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