Expansion of Federal Anti-Kickback Prohibitions

By LYNDA JOHNSON and TIMOTHY EZELL


In October 2018, a new Federal anti-kickback law (the Eliminating Kickbacks in Recovery Act of 2018, or EKRA) became effective. This new law could have significant (even unintended) impact for providers in the substance abuse and/or clinical laboratory markets. Like the existing Federal Anti-Kickback Statute (Federal AKS), EKRA is a criminal statute, which provides for criminal fines and imprisonment. EKRA is a separate and distinct statute from the Federal AKS.

EKRA was enacted as one part of the Federal SUPPORT Act, which is an aggregation of numerous, separate bills / acts, including EKRA. The primary purpose of the SUPPORT Act is to legislatively attack the opioid epidemic which is certainly a nationwide crisis. However, with regard to EKRA specifically, the new prohibitions pertain to services that may have nothing to do with the opioid crisis. In other words, EKRA applies to laboratory services, regardless of whether the laboratory services relate to matters of substance abuse.

There are many differences between EKRA and the existing Federal AKS. This article focuses on two material differences.

The first material difference between the Federal AKS and EKRA, is that EKRA applies to any "health care benefit program" (which includes commercial pay insurance programs). The Federal AKS applies only to "state or federal" healthcare programs (i.e., Medicare, Medicaid and other government pay programs). Depending on a provider's business structure and payor mix, EKRA's broad scope could have material ramifications. For example, a clinical laboratory now must now be concerned with its business arrangements and referral sources as they relate to commercial pay patients as well, and not just government pay patients.

As an aside, it will be interesting to see how various government enforcement agencies pursue violations of EKRA which are alleged and relate to non-government pay business. Under the Federal AKS, the government enforcement agencies have readily available access to information from CMS and its contractors to determine whether a provider has violated the Federal AKS because the Federal AKS applies only to government pay matters. If the government is going to enforce the EKRA statute with regard to commercial insurance matters (i.e., not government pay), it will presumably have to obtain supporting information/evidence from commercial insurance companies in order to do so, which may be more difficult than obtaining information from other government agencies.

A second, more subtle, difference between EKRA and the Federal AKS is that it seems, at least on EKRA's face, that the "bona fide employment" safe harbor that is so often relied upon by providers under the Federal AKS, is much more restricted under EKRA. The Federal AKS provides numerous "safe harbors," which (if a provider meets the requirements of an applicable safe harbor) may give the provider assurance that the provider is not in violation of the Federal AKS. One such safe harbor is the "employee" safe harbor, which essentially indicates that, so long as payment is made from one party to another under a bona fide employment relationship, such payments from the employer to the employee will not be considered illegal kickbacks under the Federal AKS. There are nuances to this safe harbor. It is not the purpose of this article to address all possible nuances. But, suffice it to say, that this "employee" safe harbor is often relied upon with regard to Federal AKS compliance matters, particularly by clinical laboratories.

EKRA is materially different. EKRA does also have an "employee" safe harbor. However, under EKRA's employee safe harbor, payments from employer to employee may not vary by a number of individuals referred, a number of tests or procedures performed, or an amount billed to a health care benefit program. Thus, under EKRA, in order to qualify for safe harbor protection, a laboratory provider may not compensate even bona fide employees in a manner that takes into account the amount of business that such employee generates for the laboratory, whether government pay business of commercial insurance pay business. As a practical matter, existing laboratories could have bona fide W-2 employment arrangements with a sales representative that arguably meets the "employee" safe harbor under the Federal AKS, but now fails to meet the employee safe harbor under EKRA.

There are many unanswered questions regarding EKRA. It was enacted for a good purpose, but as with many new pieces of legislation, there may be unintended consequences. Hopefully further guidance will be forthcoming to clarify the apparent overbreadth of the statute.


Lynda Johnson and Timothy Ezell are both partners at Friday, Eldredge & Clark, LLP.

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