The Eliminating Kickbacks in Recovery Act of 2018 (EKRA), codified at 18 U.S.C. § 220, represents one of the most significant expansions of federal healthcare fraud enforcement in recent history.
Originally enacted as part of the bipartisan SUPPORT for Patients and Communities Act to combat "patient brokering" and abusive referral schemes in the addiction treatment industry, EKRA's reach extends far beyond recovery centers to impact clinical laboratories and medical providers nationwide.
Healthcare operators, lab owners, marketing directors, and clinical administrators must understand EKRA.
Violations carry severe criminal penalties, and compliance models built solely around traditional healthcare fraud laws—such as the federal Anti-Kickback Statute (AKS)—are often insufficient under EKRA's broader scope.
What Is EKRA and What Does 18 U.S.C. § 220 Prohibit?
EKRA makes it a federal felony to knowingly and willfully solicit, receive, pay, or offer any remuneration (anything of value, including cash, gifts, commissions, or volume-based bonuses) in exchange for referring a patient or inducing the use of services at:
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Recovery Homes: Shared-living facilities that provide a housing environment free of alcohol and illegal drug use for individuals recovering from substance use disorders.
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Clinical Treatment Facilities: Medical or detox centers providing care for individuals with substance use disorders.
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Clinical Laboratories: Any facility providing biological, microbiological, serological, chemical, immunohematological, hematological, biophysical, cytological, pathological, or other examination of materials derived from the human body for medical diagnosis or treatment.
Crucial Distinction: Although EKRA was passed to curb substance abuse referral schemes, the statutory definition of a "laboratory" applies to ALL clinical laboratories, regardless of whether the lab performs toxicology testing or treats addiction.
How Does EKRA Differ From the Federal Anti-Kickback Statute (AKS)?
Healthcare operators frequently assume that if a marketing structure or sales contract complies with the federal Anti-Kickback Statute (AKS), it is automatically protected. This is a dangerous misconception.
|
Feature |
Federal Anti-Kickback Statute (AKS) |
Eliminating Kickbacks in Recovery Act (EKRA) |
| Payer Reach | Applies exclusively to federal healthcare programs (e.g., Medicare, Medicaid, TRICARE). | Applies to all healthcare benefit programs, including private commercial insurance and self-pay. |
| Covered Entities | Covers virtually all healthcare providers, suppliers, and referring practitioners. | Targets Recovery Homes, Clinical Treatment Facilities, and Clinical Laboratories. |
| Employee Exception | Allows W-2 employees to receive commission/volume-based compensation for business generation. | Narrower Exception: Prohibits W-2 employee pay from varying based on referral numbers, test volume, or amounts billed. |
What Are the Statutory Exceptions to EKRA?
Unlike the AKS, which contains extensive regulatory "safe harbors," EKRA relies on eight narrow statutory exceptions set forth directly in 18 U.S.C. § 220(b):
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Discounts: Properly disclosed price reductions or discounts obtained by healthcare providers.
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Bona Fide Employees and Independent Contractors: Wages paid to W-2 employees or 1099 contractors, provided compensation does not vary based on the number of individuals referred, tests performed, or amounts billed.
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Personal Services Contracts: Payments made under personal services and management contracts that satisfy specific criteria parallel to AKS safe harbor standards.
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Coinsurance & Copay Waivers: Certain non-routine, good-faith copay waivers or discounts provided without advertising.
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Alternative Payment Models: Remuneration tied to care coordination or value-based care arrangements created by HHS.
Hypothetical Scenario: Commission-Based Sales Reps Under EKRA
The Setup
Apex Diagnostics, a clinical reference laboratory in California, hires an experienced W-2 sales representative, Sarah, to market its toxicology and routine blood testing services to local physician practices. Under her employment agreement, Sarah receives a base salary plus a 10% commission on the gross billing value of all lab orders generated by the doctor's offices she onboarded.
The Compliance Risk
Under the Anti-Kickback Statute (AKS), paying a bona fide W-2 employee a volume-based commission is protected under the AKS employee exception. However, because Apex Diagnostics is a clinical laboratory accepting private commercial insurance, EKRA applies.
The Result
Because Sarah's commission varies directly based on test volume and total amounts billed, the arrangement fails EKRA's narrower employee exception. Both Apex Diagnostics and its executive team face potential criminal investigation under 18 U.S.C. § 220, even though the arrangement was designed around traditional Medicare/AKS rules.
What Are the Criminal Penalties for EKRA Violations?
Enforcement of EKRA is carried out by the U.S. Department of Justice (DOJ). Criminal sanctions for violating 18 U.S.C. § 220 include:
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Fines: Up to $200,000 per violation.
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Imprisonment: Up to 10 years in federal prison per count.
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Collateral Sanctions: Mandatory exclusion from federal healthcare programs, revocation of professional licenses, and asset forfeiture.
Frequently Asked Questions (FAQs)
Does EKRA apply to my laboratory if we do not perform drug testing or treat addiction?
Yes. Although EKRA was created as part of opioid crisis legislation, the statutory language defines "laboratory" broadly under the Clinical Laboratory Improvement Amendments (CLIA). It applies to all clinical laboratories, regardless of the types of tests performed or patient populations served.
Can we pay independent 1099 marketing reps a percentage of collected revenue under EKRA?
No. Paying independent 1099 marketing contractors on a commission, percentage, or per-referral basis violates both EKRA and the Anti-Kickback Statute. EKRA requires that independent contractor compensation be fixed at fair market value and completely independent of referral volume or billing totals.
How does EKRA impact commercial private insurance claims?
Unlike the Anti-Kickback Statute (which only applies to federal health programs like Medicare and Medicaid), EKRA extends to all healthcare benefit programs. This means paying or receiving kickbacks for commercial insurance claims, private health plans, or self-pay patients is a federal crime.
Are volume-based bonuses ever allowed for W-2 sales staff under EKRA?
In most circumstances, volume-based bonuses for marketing staff at covered facilities fail EKRA's strict employee exception. Compensation structures for sales staff must be structured using fixed salaries, non-referral performance metrics (such as hours worked or administrative milestones), or verified Fair Market Value (FMV) benchmarks that do not track patient counts, test counts, or revenue generated.
What intent is required for a criminal conviction under EKRA?
To secure a conviction under 18 U.S.C. § 220, federal prosecutors must prove that a defendant acted "knowingly and willfully". This means the individual or business entity knew their conduct was unlawful when offering, paying, soliciting, or receiving the prohibited remuneration.
How Eisner Gorin LLP Can Help You
Navigating the intersection of EKRA, the Anti-Kickback Statute, and state patient-brokering laws requires proactive legal analysis. Our legal team assists healthcare entities, laboratories, and addiction treatment providers with comprehensive compliance strategies:
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Sales & Marketing Compensation Audits: Reviewing internal sales contracts, employee compensation plans, and 1099 vendor agreements to ensure full compliance with EKRA's statutory exceptions.
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Unified Compliance Program Development: Structuring custom Healthcare Fraud, Waste, and Abuse (FWA) compliance policies that simultaneously address Medicare/AKS rules and private-payer EKRA requirements.
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Fair Market Value (FMV) & Personal Services Review: Drafting compliant management, personal services, and administrative agreements that eliminate referral-based liability.
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Federal Defense & Subpoena Response: Representing healthcare organizations, lab executives, and providers facing DOJ investigations, OIG subpoenas, or civil investigative demands under 18 U.S.C. § 220.
The federal criminal defense attorneys at Eisner Gorin LLP can help you. Schedule your consultation by calling (818) 781-1570 or filling out the contact form. Our law firm is based in Los Angeles.
