New Federal Kickback Statute Poses Severe Risks for Clinical Laboratories That Pay Commissions to Sales and Marketing Personnel

In October 2018, the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”) became effective. EKRA will have an immediate and significant effect on the marketing and sales activities of clinical laboratories, clinical treatment facilities, and recovery homes. EKRA, in relevant part, makes it a federal crime to knowingly and willfully:

• solicit or receive any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind, in return for referring a patient or patronage to a recovery home, clinical treatment facility, or laboratory; or

• pay or offer any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind–
  • 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.

A violation of EKRA is punishable by up to 10 years in prison and a $200,000 fine.

Although EKRA uses some of the same language that the existing federal Anti-Kickback Statute (“AKS”) uses, it is broader than the AKS in at least two very important respects. First, unlike the AKS, which applies only to federal healthcare programs, EKRA applies to both federal healthcare programs and commercial health plans. This means that the common practice of creating a federal healthcare program “carve out” to avoid federal liability is no longer a viable option for these types of healthcare providers.

Second, although EKRA contains an exception for remuneration paid to bona fide employees or independent contractors, that exception is not applicable if the remuneration paid to that employee or independent contractor varies with the number of individuals referred, the number of tests or procedures performed, or the amount billed to or received from a health plan. This provision is significant in that, before EKRA, such payments were permissible so long as they were made to a “bona fide employee.” EKRA changes this and potentially eliminates the possibility that clinical laboratories, recovery homes, and clinical treatment facilities may lawfully make any sort of commission-based payment to a sales or marketing employee, even if that employee meets the bona fide employee requirements.