In 2018, Congress passed the “Eliminating Kickbacks in Recovery Act” (EKRA). This federal law makes it a crime to knowingly and willfully solicit or receive remuneration for referring patients to addiction recovery homes, clinical treatment facilities, or laboratories, or to induce referrals to such facilities. The law was intended to discourage predatory behavior toward those suffering from opioid addiction. The federal government wanted to prohibit unscrupulous healthcare facilities and their marketers from engaging in behavior that would prey upon addicts to get them into these facilities. Predatory behavior includes lying, pressuring, or otherwise manipulating addicts or their families into engaging and paying for a particular treatment program and related services.
Purpose of This Law
Opioid addiction is a growing epidemic in America, and addiction treatment is a growing industry. It is estimated that it is poised to double by the end of the decade. And as with any healthcare business, money is often the prime motivator. Because of this, treatment facilities can use shady tactics to recruit as many for their services as possible. How do they do this? Through effective sales and marketing. And while there is nothing wrong with this activity generally, the federal government became concerned with the type of sales and marketing was occurring. In a nutshell, the feds believed that compensating a sales force on the amount of business they bring in would motivate them to do whatever it takes to make a sale. This includes misrepresenting aspects of the treatment, making unfounded guarantees about outcomes, guiling or shaming addicts into signing up, making claims about how their facility is significantly better than the others, etc. The result of these concerns was EKRA.
Federal and Commercial Payors
To reiterate, EKRA makes it a crime to solicit or receive any compensation (including a kickback, bribe, rebate, reward, etc.) directly or indirectly, overtly or covertly, in cash or in kind, in return for referring any person or business revenue to a recovery home, clinical treatment facility, or laboratory. This sounds similar to the federal Anti-Kickback Statute (AKS), but EKRA takes things much further. The AKS only applies to services paid for by federal healthcare programs such as Medicare and Medicaid. But EKRA applies to services that are covered by federal as well as commercial payors.
Laboratories
The federal government also took the central purpose of the law – opioid treatment – and expanded it further. It decided that the prohibition against compensating for laboratory business no longer applied exclusively to lab tests related to opioid treatment. Instead, it now applies to any laboratory business. And while the AKS has a safe harbor to allow labs to pay bona fide W‑2 employees a percentage or per-patient compensation for bringing in business, EKRA’s safe harbor only protects flat-fee compensation arrangements (such as hourly or monthly salaries) for both W2s and 1099 contracted sales people.
What To Do
It has become clear that the feds take EKRA extremely seriously. In fact, several healthcare entities have been convicted of criminal violations and fined heavily. The law provides for not more than $200,000, an imprisonment term of not more than 10 years, or both, for each occurrence. The first thing to do is to establish a compliant compensation structure for sales and marketing personnel, and for anyone else who might be remunerated in any way under the EKRA analysis. You will also need a carefully drafted compliance program, including training for everyone involved with the company.
Conclusion
Relying on the old adage that knowledge is power, it is vital to get expert legal guidance to set up your business – including compensation structures – that meet your needs but that are compliant with EKRA and other applicable healthcare laws. Do not take these lightly. An ounce of prevention is truly worth a pound of cure. And with EKRA, there is no cure for violation…only punishment.