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New All-Payor Kickback Statute: Eliminating Kickbacks in Recovery Act of 2018
January 31, 2019

The federal opioids law (the “SUPPORT Act”),[1] signed by President Trump on October 24, 2018, covered a myriad of issues. Thus, it may have been easy to overlook a dramatic change to the fraud and abuse landscape – a new drug anti-kickback statute, the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”) – that was included in the SUPPORT Act.

EKRA was originally proposed by Senators Marco Rubio (R-Fla) and Amy Klobuchar (D-Minn.) in an effort to target patient brokers who recruit patients for addiction treatment centers and receive payment in return. However, as discussed below, EKRA also expands potential criminal liability for remuneration to patients, as well as payments to third parties for referrals. And, this new federal anti-kickback statute is applicable to all payors, not just Federal payors. Thus, all providers must now keep EKRA in mind when structuring certain arrangements related to substance use treatment, and in reviewing existing arrangements.

What does the statute prohibit?

EKRA is an anti-kickback statute applicable to services covered by all payors and prohibits soliciting, receiving, paying or offering any remuneration, directly or indirectly, overtly or covertly, in cash or in kind,

  1. in return for or to induce referrals to a recovery home, clinical treatment facility, or laboratory, or
  2. “in exchange for an individual using the services of” a recovery home, clinical treatment facility, or laboratory.

A “clinical treatment facility” is defined as a medical setting, other than a hospital, that provides detoxification, risk reduction, outpatient treatment and care, residential treatment, or rehabilitation for substance use, pursuant to licensure or certification under State law. A “recovery home” is defined as 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. Finally, the term “laboratory” is not limited in any way to those laboratories involved in substance use disorder treatment, but rather, is broadly defined to encompass all laboratory facilities.

A violation of EKRA can result in a fine of up to $200,000, or imprisonment for 10 years, or both, for each occurrence.

Are there any exceptions to EKRA?

EKRA includes seven statutory exceptions and allows the Attorney General, in consultation with the Secretary of Health and Human Services, to create additional exceptions by regulation. The current statutory exceptions both track, and differ from, the Medicare and Medicaid anti-kickback statute (“AKS”) exceptions and safe harbors.

Exceptions that mirror the AKS safe harbors

The majority of exceptions under EKRA are similar to AKS safe harbors –

  1. General Discounts. Discounts obtained by providers if the reduction in price is disclosed and reflected in the costs claimed or charges made by the provider, under a health care benefit program.
  2. Special Discounts. Discounts in the price of an applicable drug that is furnished to a beneficiary under the Medicare coverage gap discount program.
  3. Federally Qualified Health Centers (“FQHCs”). EKRA adopts, through cross-reference, the AKS’s exception for remuneration between FQHCs and any individual or entity providing goods, items, services, donations, loans, etc. pursuant to a written agreement that contributes to the ability of the FQHC to maintain or increase the availability of services provided to a medically underserved population served by the health center entity.
  4. Personal Services and Management Contracts. EKRA adopts, through cross-reference, the AKS’s personal services and management contracts safe harbor.
  5. Patient Copayments or Coinsurance. Waivers of copayment or coinsurance so long as such waivers are not routinely provided and are provided in good faith.

Exceptions that Differ from AKS safe harbors

EKRA includes a compensation exception, similar to the AKS, for certain bona fide employment and independent contractor arrangements. However, unlike the AKS, the EKRA exception requires that compensation not be determined by, or vary with, (1) referrals to a particular recovery home, clinical treatment facility, or laboratory; (2) the number of tests or procedures performed; or, (3) the amount billed or received from the health care benefit program. Until further regulatory guidance is provided, EKRA does not appear to permit productivity or incentive-based compensation tied to business generation.  

“New” Exceptions

Finally, EKRA includes a new “alternative payment model” exception that is not found in the AKS safe harbors. This exception allows for payments made pursuant to an alternative payment model or pursuant to a payment arrangement used by a State, health insurance issuer, or group health plan if HHS has determined that such arrangement is necessary for care coordination or value-based case. Alternative payment models refer to (1) the shared savings program under Section 1899 of the Social Security Act, (2) a model created by the Center for Medicare and Medicaid Innovation other than a health care innovation award, (3) a demonstration under the Health Care Quality Demonstration Program, or (4) a demonstration required by federal law.

What are the implications of this new anti-kickback statute?

As mentioned above, perhaps the most important takeaway from EKRA is the expansion of potential criminal liability for kickbacks related to all payors (including, arguably under an expansive reading of the statute, even self-pay patients), not just federal healthcare payors. This expansion, coupled with EKRA’s application to remuneration to patients, means that EKRA potentially implicates many common industry practices, such as assisting patients with transportation to a treatment facility, or routine waivers of coinsurance or copayments. In addition to applying to all payors, as written, EKRA is applicable to all laboratories, not just those working with substance use treatment facilities.

Given that EKRA is new, and there have been no enforcement actions or clarifying regulations promulgated to date, the statute’s true impact is yet to be determined. Further, while EKRA provides that its prohibitions do not apply to conduct prohibited under the AKS, the statute does not address the federal AKS’s safe harbors. Thus, it is unclear how a particular agency will reconcile the safe harbors with the EKRA exceptions.

It is important to keep EKRA in mind when structuring arrangements in the substance use disorder context (or arrangements involving clinical laboratories) and to reevaluate existing relationships with clinical treatment facilities, recovery homes, and laboratories. Hooper, Lundy & Bookman will continue to closely follow EKRA, its enforcement, and related regulations to determine the ultimate impact of the new drug anti-kickback statute.

To learn more about this issue, please contact Alicia Macklin at 310.551.8161 in the Los Angeles office, or your regular Hooper, Lundy & Bookman contact.

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[1] Shortly after the bill was signed into law, HLB issued a high-level summary of the Act.

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