The Eliminating Kickbacks in Recovery Act (EKRA) was enacted rather surprisingly in 2018 and is an obvious overlay of the prohibitions already existing in the Anti-Kickback Statue (AKS), at least as applied to the recovery and laboratory healthcare industries.^[1] There has been considerable confusion about the interplay between EKRA and AKS. This article attempts to make some sense of the application of EKRA and AKS to common healthcare referral and payment relationships.

The relevant content of the EKRA Statute prohibits whoever “pays or offers any remuneration”:

“To induce a referral of an individual to a recovery home, clinical treatment facility, or laboratory; or

“In exchange for an individual using the services of that recovery home, clinical treatment facility, or laboratory.”

This EKRA prohibition does not apply to:

“(2) a payment made by an employer to an employee or independent contractor (who has a bona fide employment or contractual relationship with such employer) for employment, if the employee’s payment is not determined by or does not vary by–

“(A) the number of individuals referred to a particular recovery home, clinical treatment facility, or laboratory;

“(B) the number of tests or procedures performed; or

“(C) the amount billed to or received from, in part or in whole, the health care benefit program from the individuals referred to a particular recovery home, clinical treatment facility, or laboratory.”

Notably, there has been only a hand full of identified EKRA criminal enforcement cases (publicized by the U.S. Department of Justice) which have all been based on direct remuneration to a referral source in return for the referral of business. The decision in S&G Labs Hawaii, LLC v. Graves was the first of two district court opinions that have interpreted and applied the EKRA statutory provisions to sales and marketing arrangements.^[2] The S&G Labs case held that compensation to the employee (Graves) was “remuneration” under the EKRA Statute; however, the statutory provision prohibited remuneration “. . . to induce a referral of an individual to . . .” the laboratory. The court went on to find that the employee clients were “. . . the physicians, substance abuse counseling centers, or other organizations in need of having persons tested,” and there was “. . . no evidence that Graves’s client accounts included individuals who self-paid for S&G to perform urinalysis on their samples.” Accordingly, the court concluded that since “Graves was not working with individuals, the compensation that S&G paid him was not paid to induce him to refer individuals to S&G”; therefore, the compensation to Graves under his employment agreement did not violate EKRA. The later decision in United States v. Schena also applied the EKRA statutory prohibitions to employees of a laboratory engaged in sales and marketing activity and held that:

“The plain meaning of ‘to induce a referral of an individual’ includes situations where a marketer causes an individual to obtain a referral from a physician.”^[3]

The existing case law, however, also states that the EKRA statute should be read in the context of the AKS.^[4] AKS explicitly prohibits the offer of payment of any remuneration to any person to induce such person;

“To purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item” paid by Medicare or Medicaid.^[5]

AKS has a general employer/employee exception, which protects commission-based or other volume-/value-based payments as long as a bona fide employer–employee relationship exists between the payer and the payee.

A decision prior to the enactment of EKRA by the United States Court of Appeals for the Fifth Circuit in United States v. Alice Miles stated, “The payments from APRO to Premier [the marketing agent] were not made to the relevant decisionmaker as an inducement or kickback for sending patients to APRO [the home health agency recipient of the referrals].”^[6] The Court of Appeals found in the Miles case that the marketing agent was not in a position to make a referral (the physician or his staff made the referral selection of a home health agency) and therefore there were no illegal kickbacks under 42 U.S.C. § 1320a–7b(b)(2)(A) (AKS) . This holding is in accord with the S&G Lab decision; it may also govern the application of the EKRA in the cases where an employee sales representative arranged for referrals from a physician group (or another source) to the employer’s recovery home, clinical treatment facility, or clinical laboratory.

Furthermore, the AKS also more directly addresses payments to those (i.e., sales and marketing representatives) who recommend referrals to the employer (and as previously mentioned, the AKS has an employer–employee exception that allows for commission-, volume-, or value-based payments to the recommending parties ( 42 U.S.C. § 1320a–7(b)(b)(2)(A) ). Consequently, it is reasonable to conclude that the AKS more directly governs the payment arrangement with employees who recommend or arrange business referrals to the employer recovery facility or clinical laboratory. Therefore, the employer–employee exception under AKS should protect compensation with a reasonable commission feature or otherwise based on the volume or value of identified business or revenue (i.e., commission-based payments).

A less risky payment arrangement for employee sales representatives could take advantage of the specific exception in the EKRA (which would also, in any event, be compliant with the employer/employee exception in the AKS). This would require that the compensation arrangement not consider the number of individuals referred, tests referred, services billed, or revenue received based on the referrals by marketing representatives. A creative compensation arrangement that avoids a direct connection to this prohibited basis for payment could offer substantial protection under EKRA and/or the AKS.

The case law interpreting the EKRA is limited and only includes, to date, the Graves and Schena cases. These district court decisions have limited precedential value, have only been applied to a limited scope of conduct, and have contradictory applications of the EKRA. There will surely be additional developments with the interpretation and application of the EKRA, especially if it should be applied in context with the federal AKS.