DOJ Announces First Criminal Prosecution Under EKRA

Health Care Law Update

Date: February 12, 2020

The Department of Justice issued a press release on January 10, 2020,[1] announcing the first criminal prosecution under the Eliminating Kickbacks in Recovery Act (EKRA).[2] EKRA was signed into law in October of 2018 as part of larger legislation passed by Congress to address the opioid abuse crisis.[3] EKRA is a criminal statute that was intended to prohibit patient brokering in the context of substance use addiction treatment. It prohibits knowingly and willfully soliciting, receiving, paying or offering any remuneration (including kickbacks, bribes or rebates) to either induce a referral of an individual to, or in exchange for, an individual using the services of, a recovery home, clinical treatment facility, or laboratory if payable by a commercial or government funded health care program, subject to certain safe harbor exceptions.[4] EKRA applies to all clinical laboratory services, even those that do not relate to substance abuse treatment. It is questionable whether Congress intended the law to apply so broadly.

Congress gave the DOJ authority to promulgate regulations to clarify the exceptions to EKRA, but to date no regulations have been proposed. The language of EKRA is unclear and raises questions as to whether customary laboratory arrangements that comply with the Anti-Kickback Statute are protected from enforcement under EKRA.[5] The laboratory industry has been waiting for regulations, guidance and/or enforcement action to see how the DOJ interprets and will enforce EKRA. In the meantime, laboratories have been grappling with whether common laboratory arrangements that are not prohibited under the Anti-Kickback Statute are now prohibited under EKRA and need to be unwound or modified. Notably, while the following enforcement action involved a laboratory, the underlying conduct was egregious and did not penalize customary laboratory arrangements that are structured to comply with the Anti-Kickback Statute.

In the first criminal prosecution under EKRA, an 80-year-old office manager of a substance abuse treatment clinic in Jackson, Kentucky, pleaded guilty to soliciting kickbacks from the CEO of a toxicology lab in exchange for urine drug test referrals in violation of EKRA. According to the defendant’s plea agreement, the laboratory CEO gave her a $4,000 check as part of a larger package of promised inducements. When law enforcement questioned the office manager about the check, she denied knowledge of it, and told law enforcement that it probably was a loan from the laboratory CEO to her husband. She then called the laboratory CEO and asked that he alter the lab’s financial records so that the entry for the $4,000 check would say “rent/loan” to be consistent with what she told the agents. The office manager faces up to 20 years in prison and a maximum fine of $250,000.

Based on this prosecution, the DOJ is clearly focused on prosecuting criminal conduct under EKRA. However, it still is unclear whether the DOJ intends to prosecute individuals or companies for business arrangements made in good faith and reliance on applicable exceptions to the Anti-Kickback Statute. The issuance of regulations or other guidance would provide welcome clarification to laboratories trying to interpret and comply with EKRA.

FOR MORE INFORMATION

For more information, please contact:

Cori R. Haper
937.443.6856
Cori.Haper@ThompsonHine.com

Sarah M. Hall
202.263.4192
Sarah.Hall@ThompsonHine.com

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[2] 18 U.S.C. § 220. EKRA is part of the U.S. Criminal Code, which is only enforceable by the U.S. Department of Justice.

[4] The safe harbors include discount programs, payments to a W-2 employee or 1099 independent contractor, personal services that comply with the personal services and management contract safe harbor to the Anti-Kickback Statute, waiver or discount of coinsurance or copayments under certain conditions, payments under alternative payment models, among others, subject to satisfying the requirements of the applicable safe harbor.

[5] For example, laboratories may pay commissions to their employees based on sales volume under the employment safe harbor to the Anti-Kickback Statute, but EKRA prohibits compensating sales employees based on the number of individuals referred, number of tests performed, or the amount billed to or received from the health benefit program from the individuals referred to the lab. Additionally, the broad language of EKRA brings into question common laboratory arrangements such as in-office phlebotomists, lease payments to referring physicians, courier services, and other items that either are not deemed to be compensation under the Anti-Kickback Statute or that satisfy the requirements of a safe harbor.