COVID-19 Testing and EKRA Enforcement Risk

April 20, 2020
Firm Publication

Widespread testing of patients and the public for COVID-19 exposure appears to be the key to reopening society sooner rather than later. Current estimates suggest that clinical laboratories across the United States have processed more than 3,800,000 specimens for COVID-19-related diagnostic tests, and that number can only be expected to increase as serological antibody testing becomes more widely available. The increase in demand for COVID-19 testing, however, poses its own array of potential compliance concerns and risks. Clinical laboratories providing COVID-19 testing should take care to ensure that their marketing and compensation arrangements comply with the federal Anti-Kickback Statute (AKS) and the Eliminating Kickbacks in Recovery Act (EKRA).

Given the risks of fraud and abuse associated with the pandemic, the U.S. Department of Justice (DOJ) has instructed U.S. Attorneys’ offices across the country to “prioritize the detection, investigation, and prosecution of all criminal conduct related to the current pandemic.” To that end, DOJ recently charged Erik Santos, the head of a Georgia marketing company, with allegedly steering Medicare patients to clinical and diagnostic testing facilities for COVID-19 and other related testing services in exchange for per-test kickbacks. Santos has been criminally charged with conspiring to violate the AKS and to commit healthcare fraud.

While DOJ has long used the AKS to root out fraud and abuse in the healthcare industry, it may also soon seek to employ EKRA, 18 U.S.C. § 220, to combat COVID-19-related fraud. By its terms, EKRA specifically applies to clinical laboratories, and its application is not limited to services reimbursed by federal healthcare programs. For that reason, clinical laboratories should familiarize themselves with the scope and applicability of EKRA and ensure their compensation and marketing agreements comply with its requirements.

Background and Scope of EKRA

EKRA was passed in response to the opioid epidemic as part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act) amidst a similar surge in the demand for clinical and diagnostic testing services in October 2018. EKRA makes it a federal crime (punishable by a fine of up to $200,000, imprisonment for up to 10 years, or both) to knowingly and willfully: (1) solicit or receive any remuneration in return for referring a patient to a recovery home, clinical treatment facility, or laboratory; or (2) pay or offer any remuneration either to induce such a referral or in exchange for an individual using the services of a recovery home, clinical treatment facility, or laboratory.

While EKRA provides for seven limited statutory exceptions, those exceptions do not necessarily track the AKS safe harbors healthcare providers have relied upon to structure their compensation and marketing arrangements. For example, EKRA’s bona fide employee exception is much narrower than the similar AKS safe harbor and does not permit volume- or value-based compensation even to employees. Thus, common and historically accepted clinical laboratory business practices—such as paying sales employees commission-based compensation—appear to be potentially within the scope of EKRA’s prohibition on kickbacks.

Crucially, EKRA applies to all payors and prohibits arrangements based on the value or volume of referrals even if no federal dollars are involved. While the AKS only applies to services paid for by federal healthcare programs, a clinical laboratory can be in violation of EKRA even if the testing services are reimbursed by private or commercial insurance, or if the patient pays out of pocket.

Uncertainty Regarding EKRA Enforcement

Given the breadth of EKRA’s statutory reach, the laboratory industry has anxiously waited to see if, and how, EKRA would be enforced. Thus far, prosecutors have used EKRA sparingly. DOJ has announced only one enforcement action under EKRA to date, which involved an office manager of a Kentucky substance abuse clinic who allegedly solicited kickbacks from a toxicology lab CEO in exchange for urine drug test referrals.

At present, it is difficult to predict whether DOJ will use EKRA as a tool for prosecuting COVID-19-related fraud. While the recent case against Santos in Georgia for his COVID-19 marketing scheme involved Medicare patients, DOJ may well have shown the same interest in prosecuting the scheme if it did not involve the referral of services reimbursed with federal dollars.

Conclusion

Despite the relative lack of EKRA enforcement actions to date, the increases in laboratory testing spurred by the COVID-19 pandemic may elevate EKRA as a future enforcement tool. The laboratory industry’s efforts to obtain legislative changes to more closely align EKRA with the AKS have not yet effectuated change.  As laboratories await clarification of EKRA, they should closely evaluate their compensation structures and monitor marketing practices related to COVID-19 testing to quickly identify and remediate any potentially noncompliant tactics.

If you have any questions about EKRA and COVID-19 testing, please contact the authors.