Eliminating Kickbacks in Recovery Act of 2018: A Long Sought-After Tool Is Realized
- January 18, 2019
By Rachel V. Rose and Sean R. McKenna
Congress in October 2018 passed a provision that offers a tremendous weapon to federal prosecutors in addressing illegal kickbacks in health care. The Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act)[1] addresses various aspects of the opioid crisis with over 120 separate bills. One of these bills is the little-touted SUPPORT Act's Section 8122—Eliminating Kickbacks in Recovery Act of 2018 (EKRA). Although the EKRA applies to only certain health care providers, it extends to all payors and therefore is much broader than the federal Anti-Kickback Statute (AKS)[2] in this respect. Most significant is that EKRA's a la carte approach to enforcement could lead to incongruous application against criminal defendants by prosecutors or agencies.
This article considers the overlap between EKRA and certain provisions of the AKS and discusses how the government may use EKRA to address compliance or alleged fraud and abuse.[3]
The Anti-Kickback Statute
According to the U.S. Department of Health and Human Services Office of Inspector General (OIG), "[t]he five most important Federal fraud and abuse laws that apply to physicians" are the False Claims Act (FCA),[4] the AKS, the Stark Law,[5] exclusion authorities, and the Civil Monetary Penalties Law.[6]
To thwart unethical practices by health care providers related to the receipt of kickbacks, bribes, or rebates in connection with items or services covered by the Medicare and Medicaid programs, Congress passed the AKS in 1972.[7] In general, "[t]he AKS prohibits anyone from knowingly and willfully offering, making, soliciting, or receiving any payment in return for (1) referring an individual to another person or entity for the furnishing of any item or service reimbursed by a federal health care program, or (2) recommending or arranging for the ordering of any service reimbursed by a federal health care program."[8]
One critical element is that "a person need not have actual knowledge of this section or specific intent to commit a violation of this section."[9] Notably, the Bipartisan Budget Act of 2018[10] doubled the maximum prison sentence from five to ten years and increased the maximum criminal fine for each AKS violation from $25,000 to $100,000.
The AKS expressly states that "a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim for purposes of [the FCA]."[11] As the Third Circuit held in United States ex rel. Greenfield v. Medco Health Systems, Inc.,[12] plaintiffs must establish that at least one claim submitted to a federal health care program was "exposed to a referral or recommendation" in violation of the AKS.
The AKS also provides "safe-harbors," which are refined on a regular basis through different laws.[13] To cultivate a culture of compliance, the federal government provided a list of commonly used AKS safe harbors, which include, but are not limited to the following: investment interests, space rental, equipment rental, personal services and management contracts, referral services, and electronic health records items and services.[14] Some of these are addressed in similar, but not analogous EKRA safe harbors.
Perhaps the most glaring safe harbor inconsistency between AKS and EKRA relates to commission-based payments to sales personnel based on federal health care business. The AKS generally makes it unlawful to provide remuneration, either directly or indirectly, in-cash or in-kind "in return for referring an individual" or "purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item" directly or indirectly reimbursable by a federal health care program. The health care industry has relied heavily on the bona fide employee safe harbor, which was upheld by the Eleventh Circuit in Jack Carrel, et al. v. AIDS Healthcare Foundation, Inc.[15] The opinion, which was issued in August 2018, was widely reported but is rather unremarkable as it confirms that payment of "per click" commissions for referrals by such employees to their employer are permissible under the AKS employee safe harbor.
In this case, three former employees filed suit under the FCA "alleging that the incentives offered to employees and patients are unlawful kickbacks that render false any claims for federal reimbursement."[16] Ultimately, the Eleventh Circuit held such a practice was lawful under both the AKS bona fide employee safe harbor and the Ryan White Act,[17] which specifically provides that "referrals" are covered "services."
However, note the different result if the scenario involved a lab under EKRA. In fact, such an incentive arrangement likely could have triggered a criminal prosecution under the plain language of EKRA. So, how do the AKS safe harbors compare to EKRA?
Eliminating Kickbacks in Recovery Act of 2018
EKRA, codified at 18 U.S.C. § 220, is an all-payor statute that makes it a federal crime to receive or offer "[i]llegal remunerations for referrals to recovery homes, clinical treatment facilities, and laboratories" (the "Recovery Kickback Prohibition"). This wording is broad and extends beyond clinical laboratory arrangements with treatment facilities. Penalties carry a $200,000 fine "per occurrence" and up to ten years in prison. Although similar to the federal Anti-Kickback Statute (including some of the AKS safe harbors), EKRA created an entirely new offense that in some circumstances would be illegal, but permissible under the AKS safe harbors.
Here are some critical differences:
- Unlike the AKS, which addresses all referral sources, EKRA applies to improper referrals to recovery homes, clinical treatment facilities, or laboratories—regardless of whether the referred service relates to substance use disorder treatment. Laboratories specifically include physician-owned labs.
- EKRA applies to all payors, hence it is more expansive than the federal AKS and more analogous to the Travel Act for illegal kickbacks rather than relying on state commercial bribery laws.
- EKRA contains eight "safe harbors"—some that track elements of existing AKS safe harbors and some that are new.
EKRA safe harbors that are similar to AKS include: (a) personal services and management contracts; and (b) Medicare coverage gap discounts; federally qualified health center; and the coinsurance/copayment waiver or discount (if not routinely provided and provided in good faith (analogous to AKS exception 42 C.F.R. § 1001.952(k) and CMP exception 42 U.S.C. § 1320a-7a(i)(6)).
By way of contrast, EKRA safe harbors include the following: (1) standard discount if the price reduction is properly disclosed and appropriately reflected in the costs claims or charges made by the provider or entity; (2) employee and independent contractor compensation (AKS only applies to a bona fide employee); (3) alternative payment methods, so long as the remuneration is made pursuant to an alternative payment model (i.e., Merit-based Incentive Payment System or the Medicare Access and CHIP Reauthorization Act of 2015) or a payment arrangement is declared necessary by the Secretary of HHS for care coordination or value-based care; and (4) other exceptions that fall under the authority of the U.S. Attorney General, in consultation with the Secretary of HHS, related to "payment, remuneration, discount, or reduction." Importantly, arrangements including employee compensation arrangements that comply with the AKS safe harbor may be contrary to EKRA and result in civil or criminal exposure.
Enforcement Perspectives
EKRA, as currently written, will have ramifications for both plaintiffs and defendants. Because of the potential for a "whatever fits" mentality, regulators and law enforcement officials now have a tremendous amount of discretion when to bring or enforce alleged criminal violations as either an EKRA or AKS violation. Another likely outcome is the government's or whistleblower's application of EKRA—along with the AKS—as predicates for FCA liability. From a defense standpoint, a chance remains that the Department of Justice or other agencies will recognize the problematic nature of EKRA and AKS in the employee context and address it through rulemaking. The OIG long has opined that percentage commissions for bona fide employees are lawful under the AKS. EKRA now states otherwise for all payors, including Medicare and Medicaid. EKRA therefore represents an opportunity for defendants and industry groups to challenge its application to cases involving inconsistent regulatory schemes and pronouncements. Such attempts should focus on the language of the safe harbors and address confusion generated by EKRA/AKS and the resulting lack of scienter. What remains to be seen is the use of EKRA by payors in private litigation, an increasingly contentious area between the payors and providers.
Conclusion
EKRA will have broader consequences for affected health care providers, especially when coupled with other laws (i.e., the Stark Law and the Travel Act). All-payor criminal statues are increasingly based on market realities. Opting out of federal business and paying large percentages for referrals, which EKRA essentially bans, is no longer viable (to the extent it ever was) in the lab space. Health care providers and executives should ensure they include EKRA-related training in their compliance programs as government adds a new tool in its antifraud and abuse efforts.
ABOUT THE AUTHORS:
Rachel V. Rose—Attorney at Law, PLLC (Houston, TX)—advises clients on health care, cybersecurity, and qui tam matters. She also teaches bioethics at Baylor College of Medicine. She has been named by Houstonia Magazine as a Top Lawyer (Health Care) and to the National Women Trial Lawyer's Top 25. She can be reached at [email protected].
Sean McKenna at the Law Office of Sean McKenna, PLLC (Dallas, TX) represents companies and executives in health care white collar and litigation cases, government investigations, and fraud and abuse matters. As a former ten-year Assistant U.S. Attorney, he has been Chambers and Partners recognized and named as a "Best Lawyer" since 2013. He can be reached at [email protected].
Endnotes
[1] Pub. L. No. 115-271 (Oct. 24, 2018).
[2] 42 U.S.C. § 1320a-7b.
[3] Important to this analysis also is the International Travel Act of 1961 (Travel Act), 18 U.S.C. § 1952. This criminal statute essentially federalizes state commercial bribery and increasingly has been used by the Department of Justice (DOJ) in alleged physician kickback investigations, notably involving toxicology labs and compounding pharmacies.
[4] Also known as the Lincoln Law, the FCA, 31 U.S.C. §§ 3729-3733, is primary tool for the government to recover from false or fraudulent claims. In Fiscal Year (FY) 2018, DOJ recovered over $2.8 billion through the FCA, with the majority coming from health care fraud. The AKS is often utilized as a basis for an FCA case. See DOJ, Press Release, Justice Department Recovers Over $2.8 Billion from False Claims Act Cases in Fiscal Year 2018 (Dec. 21, 2018), https://www.justice.gov/opa/pr/justice-department-recovers-over-28-billion-false-claims-act-cases-fiscal-year-2018.
[5] For a fundamental comparison of the AKS and the Stark Law, see https://oig.hhs.gov/compliance/provider-compliance-training/files/starkandakscharthandout508.pdf (last visited Dec. 23, 2018).
[6] OIG, A Roadmap for New Physicians Fraud & Abuse Laws, https://oig.hhs.gov/compliance/physician-education/01laws.asp (last visited Dec. 23, 2018).
[7] T. Crane, et al., What Is . . . The Anti-Kickback Statute?, American Bar Association (2014), https://www.americanbar.org/groups/young_lawyers/publications/tyl/topics/health-law/what-is-anti-kickback-statute/.
[8] Id.
[9] 42 U.S.C. § 1320-7b(h), https://www.law.cornell.edu/uscode/text/42/1320a-7b (last visited Dec. 23, 2018).
[10] Pub. L. No. 115-123, Section 50412 (Feb. 9, 2018).
[11] 42 U.S.C. § 1320a-7b(g).
[12] Case No. 17-1152 (3d Cir. 2018), http://www2.ca3.uscourts.gov/opinarch/171152p.pdf.
[13] 42 U.S.C. § 1320a-7b(b)(3).
[14] HEAT, Provider Compliance Training, https://oig.hhs.gov/compliance/provider-compliance-training/files/listofakssafeharbors508.pdf (last visited Dec. 23, 2018).
[15] Case No. 17-13185 (11th Cir. Aug. 7, 2018), http://media.ca11.uscourts.gov/opinions/pub/files/201713185.pdf.
[16] Id.
[17] 42 U.S.C. § 300ff, et seq.