INSIGHT: Labs Must Follow Two Kickback Laws During Covid-19

By Melissa L. Jampol

Despite rollbacks to Medicare and Medicaid requirements for clinical laboratory services during the Covid-19 pandemic, labs are still targets for prosecution under the Eliminating Kickbacks in Recovery Act. Epstein Becker Green attorneys say there’s been no EKRA guidance from the DOJ, which has stated its intent to aggressively pursue Covid-19 fraud, and offer compliance pointers.

In an effort to increase Covid-19 testing and diagnosis, there have been a series of regulatory rollbacks by Medicare and Medicaid.

These include:

  • the waiver of administrative sanctions for certain violations of the physician self-referral law (the Stark law) and the Federal Anti-Kickback Statute (AKS) for items and services furnished in good faith in response to Covid-19;
  • the decision by Medicare not to require an order from a treating physician as a condition of Medicare coverage of Covid-19 and certain related lab diagnostic testing; and
  • other flexibilities granted to clinical laboratories.

However, the first prosecution under the Eliminating Kickbacks in Recovery Act is an important reminder that despite the numerous changes to Medicare and Medicaid requirements applicable to clinical laboratory services during the Covid-19 public health emergency, laboratories still face risks as potential enforcement targets under EKRA.

This is particularly so as both the Department of Justice and the Office of Inspector General (OIG) for the Department of Health and Human Services have clearly stated that they intend to aggressively pursue detecting, investigating, and prosecuting wrongdoing related to Covid-19.

EKRA: Part of Package Addressing Opioid Crisis

Congress enacted EKRA as part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (the SUPPORT Act), a 2018 legislative package passed to address the opioid crisis.

Included to prevent patient brokering and kickbacks among entities involved in opioid treatment, EKRA’s language broadly prohibits knowingly and willingly soliciting, receiving, offering, or paying any remuneration—including any kickback, bribe, or rebate—for patient referrals. EKRA specifically applies to recovery homes, clinical treatment facilities, and—most notably during the Covid-19 public health crisis—all laboratories.

Additionally, EKRA expanded liability beyond the AKS and beyond federal health programs. EKRA applies to entities receiving payments from all health-care benefit programs “in or affecting interstate or foreign commerce,” thus newly subjecting private and commercial entities to federal regulation.

Additionally, although the purpose of EKRA was to address brokering for facilities providing opioid treatments, the language of EKRA does not limit its enforcement to such facilities but applies more broadly. Violations of EKRA can result in 10 years’ imprisonment and fines of up to $200,000 per occurrence.

First Publicly-Disclosed Prosecution: An 81-Year-Old Office Manager

On May 11, the U.S. Attorney’s Office for the Eastern District of Kentucky announced the sentencing of Theresa C. Merced in the first publicly-disclosed EKRA prosecution. Merced, an 81-year-old office manager of a Kentucky substance abuse clinic, was sentenced to five months’ imprisonment, five months’ home detention, and a $55,000 fine. She pleaded guilty to soliciting kickbacks, making false statements to law enforcement agents, and record tampering.

Prosecutors said Merced solicited kickbacks for referrals from a urine-drug testing laboratory between December 2018 and August 2019, including receiving a $4,000 check from the CEO of the laboratory as the first installment of a larger $14,000 inducement package. In exchange for referring urine drug tests to the laboratory, Merced also sought cash and in-kind payments, the hiring of five employees, and payment of the clinic’s utilities.

After initially denying knowledge of the $4,000 check when questioned by investigators, Merced claimed the check was a loan from the CEO to her husband, a physician at the clinic. Merced subsequently asked the CEO to alter the laboratory’s financial records to be consistent with her statements to investigators.

Unresolved Questions About EKRA’s Scope, Safe Harbors

Significantly, despite the fact that EKRA was enacted nearly two years ago, no guidance has been issued on the statute by either the DOJ or OIG. This has resulted in the clinical industry’s overall lack of understanding of the parameters that the government intends to use when enforcing EKRA—and the Merced case has done nothing to clarify the statute.

One significant problem is ERKA’s imperfect overlap with the AKS. Although EKRA’s language delineates that it “shall not apply to conduct that is prohibited” under the AKS, the government has not yet clarified how it intends to address inconsistencies between the AKS and EKRA, particularly for the different safe harbors set forth in each statute.

Unlike the AKS, which has numerous safe harbors, EKRA includes only eight specific safe harbors, which are in some cases more narrow than the AKS safe harbors. As a result, certain behavior permitted under the AKS—such as the safe harbor that permits payments from employers to employees if the relationship meets the requirements of a bona fide employment relationship—may be subject to enforcement under EKRA, which only permits such payments if made independently of the number of individuals, tests, or amounts billed.

Indeed, the Merced case did not result in AKS charges, so the question of how the DOJ intends to address the differences between the AKS and EKRA safe harbors remains unanswered. Additionally, it is still unclear if both EKRA and AKS violations can be charged together, particularly as a literal reading of EKRA suggests such charges would not be possible due to preemption issues.

Going Forward

While laboratories will continue to assume the critical role of conducting testing to diagnose and treat Covid-19 cases, Merced’s sentencing serves as a reminder that they must simultaneously and diligently ensure that they do not violate EKRA.

Furthermore, laboratories and providers must also keep in mind that the current pandemic-issued waivers—such as the Stark Law waivers—and other regulatory modifications, only apply in certain circumstances and do not apply upon the government’s determination that there has been criminal fraud.

Thus, EKRA and other statutes in the government’s health-care fraud arsenal are still applicable to new arrangements spurred on by the Covid-19 pandemic, such as physician testing sites, the use of alternate specimen collection devices, and the collection of specimens from patients’ homes or by pharmacists.

As always, laboratories should be diligent regarding their marketing efforts, payments to employees and independent contractors, as well as maintaining vigorous compliance programs.

Finally, laboratories should keep in mind that while these waivers and regulatory modifications are temporary and will expire upon the end of the Covid-19 emergency, Covid-19-related DOJ and OIG enforcement actions will last long after the crisis ends.

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