In an effort to combat the ongoing opioid crisis, Congress passed in 2018 the Eliminating Kickbacks in Recovery Act (“EKRA”) imposing significant monetary penalties on anyone paying or receiving payment for referrals to a recovery home, clinical treatment facility, or laboratory. However, given its broad language, EKRA may reach organizations not involved with substance abuse treatment. Health care providers and laboratories, therefore, should be aware of EKRA and its implications on their practice. Entities subject to EKRA also should take steps to ensure compliance and reduce risk by:

• Updating applicable policies, procedures, and training materials.
• Re-evaluating applicable contracts and relationships for EKRA compliance, including marketing, sales, and patient broker arrangements.
• Taking appropriate steps where needed to come into compliance.

Below is an overview of EKRA, including its application, relationship to similar fraud and abuse statutes, and recent enforcement activity, along with key takeaways to consider.

What is EKRA?

EKRA is a criminal law passed as part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act. With respect to services covered by a health care benefit program, EKRA bans knowingly and willfully:

• Soliciting or receiving payment in return for referring a patient or patronage to a recovery home, clinical treatment facility, or laboratory; or
• Paying or offering to pay any payment to 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.

Payment includes any kickbacks, bribes, and rebates, directly or indirectly, overtly or covertly, in cash or in kind.¹

What entities does EKRA apply to?

EKRA applies to recovery homes, clinical treatment facilities, and laboratories defined as follows:

• Recovery home means a shared living environment that is, or purports to be, free from alcohol and illicit drug use and centered on peer support and connection to services that promote sustained recovery from substance use disorders.²
• Clinical treatment facility means any facility, other than a hospital, that provides detoxification, risk reduction, outpatient treatment and care, residential treatment, or rehabilitation for substance use, as licensed or certified under state law.³
• 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.⁴ Accordingly, EKRA includes all clinical laboratories whether or not they provide substance abuse testing or treatment.

How does EKRA compare to similar fraud and abuse statutes?

Prohibited inducements in the health care industry is nothing new. The Anti-Kickback Statute (“AKS”) has long existed to prohibit the knowing and willful payment of remuneration to induce or reward patient referrals or the generation of business involving federal health care program items and services.⁵ However, for those entities regulated by EKRA, it is significantly broader than its AKS counterpart.

First, EKRA prohibits referrals for private paid services. While AKS is limited to prohibited activity involving federal health care program items and services, EKRA applies to any services covered by a “health care benefit,” and thus extends to all services paid by both public and private sources, including commercial insurance.⁶ As such, organizations that have avoided AKS enforcement by only accepting private payment are now subject to EKRA if the organization is an EKRA regulated entity.

Second, EKRA has fewer and more narrowly defined safe harbors that allow for permitted referral relationships. While AKS has numerous permitted relationships described in the AKS safe harbors, EKRA has only the following seven safe harbors:

• Properly disclosed price discounts,
• Payments to employees/contractors that are not determined by or vary based on the volume of referrals,
• Certain Medicare drug discounts,
• Payments made under a qualifying personal services and management contract,
• Copay waivers or discounts that are not routinely provided,
• Certain payments to federally qualified health centers, and
• Payments under defined or approved alternative payment models.⁷

Third, EKRA’s employment safe harbor is more narrowly tailored. While the AKS employment safe harbor exempts nearly all payments to employees, the EKRA employee safe harbor only applies to payments that do not vary with the volume of referrals, including the number of individuals referred, number of tests/procedures performed, or amount billed to or received from the referred individuals.⁸

Fourth, EKRA makes no distinction between its treatment of independent contractors and bona fide employees. While the AKS employee safe harbor is limited to bona fide employee relationships, EKRA’s similar safe harbor includes independent contractors as well as employees.⁹

Lastly, EKRA has higher penalties than AKS. While AKS carries up to 10 years in prison and a $100,000 fine per violation, EKRA carries up to 10 years in prison and a $200,000 fine per violation.¹⁰

Given its breadth, EKRA regulated entities should tread carefully when navigating through the EKRA and AKS requirements and, where applicable, ensure compliance with both.

How has EKRA been enforced?

The government has taken several enforcement actions since EKRA’s enactment beginning with the EKRA conviction in May 2020 of an office manager of a substance abuse treatment clinic for soliciting kickbacks from the chief executive officer of a toxicology laboratory in exchange for urine drug-testing referrals. The office manager solicited kickbacks of various forms ranging from requests for cash, hiring personnel to work at the clinic, and paying the clinic’s utility bills. The office manager pled guilty to the EKRA violation and was sentenced to five months imprisonment, followed by five months in home detention, and ordered to pay a fine of $55,000.¹¹

Later, in May 2021, the government extended EKRA enforcement beyond the addiction treatment space when it indicted the owner of a Louisiana clinical laboratory that did not operate in the opioid industry for violating EKRA in regard to COVID-19 testing as part of a $15 million fraud scheme. The government alleged the owner offered to provide kickbacks for referrals of specimens for COVID-19, other respiratory pathogen testing, and other unnecessary urine testing.¹²

In November 2021, EKRA enforcement cropped up again in the commercial insurance space when two brothers in Florida were convicted of conspiracy to violate EKRA by unlawfully charging $112 million of addiction treatment services that never took place or were not medically necessary and for paying and receiving kickbacks. Notably, the brothers did not defraud federal health care programs but rather defrauded private insurance programs.¹³

The government also has used EKRA to go after percentage-based compensation arrangements, although the two cases on this issue have reached differing conclusions. In S&G Labs Hawaii, LLC v. Graves, No. 1:19-cv-310 (D. Haw.), the United States District Court for the District of Hawaii held that a marketing employee's percentage-based compensation did not violate EKRA because the employee was marketing to physicians, not individual patients. However, in USA v. Schena, No. 5:20-cr-00425-EJD-1 (N.D. Cal.), the United States District Court of the Northern District of California rejected this conclusion, finding "the plain meaning of 'to induce a referral' includes situations where a marketer causes an individual to obtain a referral from a physician" and "it is irrelevant whether the referral was caused by communications to physicians or patients directly."

In short, EKRA is being broadly constructed and applied to a wide range of activities, including those involving commercial insurance claims and percentage-based compensation arrangements.

What now?

As enforcement of EKRA is expected to rise, especially as the government pushes to extend EKRA beyond addiction treatment, and the parameters of EKRA remain undefined, EKRA regulated entities should:

• Carefully scrutinize existing and future business relationships to avoid pitfalls and reduce risk.
• Ensure relationships meet the EKRA safe harbors, if applicable.
• Re-evaluate existing relationships, particularly marketing, sales, and patient broker arrangements, and take steps to come into compliance where necessary.
• Closely monitor future EKRA developments.

Although the maximum reach of EKRA has not been fully defined, one thing is certain. Providers and laboratories should familiarize themselves with EKRA’s requirements and not overlook this not-so-new tool in the government’s toolkit for regulating fraud and abuse.

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¹ 18 U.S.C. § 220(a)
² 18 U.S.C. § 220(e)(5).
³ 18 U.S.C.§ 220(e)(2).
⁴ 18 U.S.C. § 220(e)(4)
⁵ 42 U.S.C. § 1320a-7b(b).
⁶United States v. Markovich et al., No. 21-CR-60020 (S.D. Fla.) finding two brothers operating addiction treatment facilities guilty of defrauding commercial insurance companies in violation of EKRA.
⁷ 18 U.S.C. § 220(b); 42 C.F.R. § 1001.952.
⁸ 18 U.S.C. § 220(b)(2); 42 C.F.R. § 1001.952(i).
⁹ 18 U.S.C. § 220(b)(2); 42 C.F.R. § 1001.952(i).
¹⁰ 18 U.S.C. § 220(a); 42 U.S.C. § 1320a-7b(b)
¹¹ Eastern District of Kentucky | Jackson Woman Pleads Guilty to Soliciting Kickbacks, Making False Statements to Law Enforcement Agents, and Tampering with Records | United States Department of Justice and Eastern District of Kentucky | Jackson Woman Sentenced to 10 Months for Soliciting Kickbacks and Obstructing Justice | United States Department of Justice.
¹² U.S. v. Malena Badon Lepetich, No. 3:21-CR-00032-JWD-SDJ (M.D. La.)
¹³ United States v. Markovich et al., No. 21-CR-60020 (S.D. Fla.)