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EKRA: Laboratories, Treatment Homes and Clinical Treatment Centers Now Face Increased Enforcement and Penalties for Kickback Tainted Claims that are Reimbursed by Private Payors.

(December 3, 2018): On October 24th, 2018, President Trump signed into law the “Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act.” This bi-partisan legislation is intended to address a number of the fraudulent and abusive business practices currently employed by unscrupulous substance abuse treatment providers in this segment of the market. This legislation effectively amplifies existing anti-kickback measures to better cover schemes involving private insurance. While the aim of widespread expansion of enforcement is to combat opioid and other substance abuse, the implications of many provisions are far reaching.  One particular provision with far reaching consequences is Subtitle J, also known as the “Eliminating Kickbacks in Recovery Act (EKRA).  This article examines SUPPORT and EKRA in more detail and discusses its impact on laboratories, treatment homes and clinical treatment centers.  It also reviews the broader impact of this legislation on providers that were not expressly specified in the Acts.

I. Background of the Problems Leading up to the Passage of the SUPPORT and EKRA Acts:

Despite the fact that progress has been made in recent years, our country is still grappling with an Opioid Epidemic. In 2017, 11.4 million Americans misused opioids.  It is estimated that 2.1 million of these individuals are addicted to opioids.[1] Approximately 42,249 Americans died of an opioid overdose with over a third of opioid overdoses being from commonly prescribed opioids. Understandably, both federal and state legislatures have repeatedly enacted measures aimed at curbing the illegal diversion of prescription opioids and the misuse of these drugs.  Adding insult to injury, the government has found that highly vulnerable, opioid addicted individuals are being taken advantage by unscrupulous health care providers and suppliers. Addiction and substance abuse treatment is big business. It has been estimated that addiction treatment industry alone is estimated to be worth $35 Billion.[2]  When you consider the fact that a 30-day substance abuse treatment regimen typically costs between $15,000 – $26,000, it is easy to see why the industry has attracted individuals that are willing to employ improper marketing and business schemes in order to maximize profits.  A number of these improper practices have resulted in health care fraud, waste, abuse and even the death of the patients under the care of these treatment centers.[3]  The passage of the SUPPORT and EKRA Acts are merely the latest steps taken by the government to prevent abusive business practices by laboratories, treatment homes and clinical treatment centers.

II. EKRA is Intended, in Part, to Curb Improper and Abusive Patient Brokering Practices by Opioid and Substance Abuse Treatment Providers:

Simply put, “Patient Brokering” occurs when an addiction or substance abuse treatment center or provider pays (or provides some other type of remuneration) to a third-party for referring, directing or otherwise channeling a patient to their treatment facility, center or clinic.  It is one of the primary improper business practices that has resulted in the abuse of patents suffering from opioid and substance abuse addiction. This type of scheme not only wastes money by rewarding the broker, but it also drives up costs and can result in underfunded, substandard care.  Notably, patient brokering does not just occur in connection with provider-patient residential treatment care.

A. Patient Brokering Involving Individuals Covered by Medicare or Medicaid.

Regardless of the provider type or treatment setting, when associated with care reimbursed by Medicare or Medicaid, improper patient brokering may constitute a violation under the Federal Anti-Kickback Statute.  As the Federal Anti-Kickback Statute provides under 42 U.S.C. § 1320a-7b(b):

“(1) Whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind— 

(A) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program,[4] or

(B) in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program, shall be guilty of a felony and upon conviction thereof, shall be fined not more than $100,000 or imprisoned for not more than ten years, or both.  

(2) Whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person

(A) to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or

(B) to purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program, shall be guilty of a felony and upon conviction thereof, shall be fined not more than $100,000 or imprisoned for not more than ten years, or both.”  Emphasis Added.

As 42 U.S.C. § 1320a-7b(b) reflects, violations of the Anti-Kickback Statute involving Medicare, Medicaid and other Federal health care programs can result in a maximum penalty $100,000 and 10 years imprisonment.[5]  As discussed below, the potential penalties and period of imprisonment for kickback violations in connection with recovery home, clinical treatment facilities and laboratories claims submitted to private payors are considerably higher.

B. Patient Brokering Involving Individuals Covered by Private Payor Insurance.

Under the SUPPORT Act, kickback violations committed in connection with private payor claims are a criminal violation under EKRA. As the title suggests, this legislation addresses patient brokering and other kickback schemes by expanding liability and raising the maximum penalties for kickbacks. An offense under this provision is described as;

“(a) Offense — Except as provided in subsection (b), whoever, with respect to services covered by a health care benefit program, in or affecting interstate or foreign commerce, knowingly and willfully—

(1) solicits or receives 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

(2) pays or offers any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind—

(A) to induce a referral of an individual to a recovery home, clinical treatment facility, or laboratory; or

(B) in exchange for an individual using the services of that recovery home, clinical treatment facility, or laboratory…” Emphasis Added.

Under EKRA, the maximum penalties for illegal remunerations paid by recovery homes, clinical treatment facilities, or laboratories in an effort to induce referrals can result in penalties of $200,000 and 20 years of imprisonment per occurrence.[6] In enacting EKRA, the government’s clear intention is to take more aggressive action against patient brokering in the context of the opioid crisis and will likely have far reaching and possibly unintended implications.

V. Laboratory-Related Violations of EKRA:

EKRA specifically targets recovery homes, clinical treatment facilities, and laboratories that participate in illegal remuneration schemes. The definition of each is significant to the applicability of this provision:

Recovery Home: “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.”

Clinical Treatment Facility: “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.”

Both of these definitions make sense in the context of this bill’s intentions. However, the definition of laboratory is not included, but rather cites the definition of a laboratory laid out in 42 U.S.C. § 263a(a):

Laboratory: “As used in this section, the term “laboratory” or “clinical laboratory” means a facility for the biological, microbiological, serological, chemical, immuno-hematological, hematological, biophysical, cytological, pathological, or other examination of materials derived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of any disease or impairment of, or the assessment of the health of, human beings.”           

Unlike the definitions of the terms “recovery home” and “clinical treatment facility,” the definition of “laboratory” is not confined to the provision to opioid or substance-use related matters. As a result, all health care providers, not merely recovery homes and clinical treatment facilities, who utilization or laboratory services need to ensure that their business relationships with laboratories do not violate EKRA.  As one study found, 29% of outpatient encounters typically result in the performance or ordering of laboratory tests.[7]  Several outpatient specialty areas that are likely to receive considerable scrutiny include:

Pain Management Physicians and Clinics: Pain management physicians, nurse practitioners (NPs) and physician assistants (PAs) heavily rely on laboratory testing in their management of pain patients.  Notably, a number of professional organizations, including the Centers for Disease Control and Prevention (CDC) have issued written recommendations on the use of urine drug tests and other laboratory tests that should be used to monitor a patient’s compliance.  Such tests also serve to identify potential instances of pain medications.

Endocrinology Physicians and Clinics:  Endocrinologists are often involved in determining the diagnosis and treatment of a patient’s endocrinological problem.  This may involve the measurement of various hormones in a patient’s body, a determination of whether a patient’s endocrine glands are properly working, or an assessment of other of hormonal-related conditions.  Understandably, in the course of their work, endocrinologists rely heavily on diagnostic laboratory tests.  Some examples of these tests include: (1) ACTH Stimulation Tests, (2) 24-Hour Urine Collection Tests, (3) CRH Stimulation Tests, (4) Oral Glucose Tolerance Tests, and (5) TSH Blood Tests.

Allergists / Immunologists and Associated Clinics:  Allergists / Immunologists manage both pediatric and adult patients with a variety of medical problems.  These include, but are limited to diseases of the respiratory tract, allergic diseases of the eye and skin, adverse reactions to foods and other agents, and diseases of the immune system.  There are often extensive laboratory tests ordered in connection with these medical conditions.

VI. Non-Laboratory Related Violations of EKRA:

ALL health care providers (not merely recovery homes and clinical treatment facilities) must exercise great care before entering into a business relationship, regardless of whether the care provided is covered by Medicare, Medicaid or a private payor.  It is important to keep in mind that improper business relationships (in this case, kickbacks), can take many forms. The following business relationships may be a violation of the Federal Anti-Kickback Statute (when dealing Federal health care programs) or EKRA (when dealing with private payors):

  • Entering into a business relationship with a marketing company whose job it is to steer or direct patients to a recovery home or clinical treatment center. In recent years, a number of improper relationships have been identified in connection with online marketing companies. Does the business relationship you are contemplating qualify for coverage under a Safe Harbor?
  • A continuing concern of the government involves lease arrangements with actual or potential referral sources.
  • Serving as a medical director to a laboratory to whom a provider makes patient referrals.
  • Serving as a consultant to a recovery home or clinical treatment center to whom the health care provider refers patients.
  • While old school dine and dash approaches may be gone, bringing lunch and other goodies to a practice or office is still both commonplace and potentially problematic.
  • Participating in a sham arrangement where the provider receives a loan, research grant, speaking fees, etc. from a recovery home or clinical treatment center to whom the provider makes referrals.
  • Acquiring or having a financial interest in a recovery home or clinical treatment center (or a related entity) to whom a health care provider sends referrals.
  • Accepting or soliciting any type of remuneration (something of value), such as a gift card, sporting event tickets or liquor, from representatives of a recovery home or clinical treatment center to whom the health care provider sends business.

Robert W. Liles serves as Managing Partner at the health law firm, Liles Parker, Attorneys and Counselors at Law.  Liles Parker attorneys represent health care providers and suppliers around the country in connection with UPIC audits, ZPIC audits, OIG audits and DOJ investigations.  He also advises health care providers in connection with the Federal Anti-Kickback Statute and EKRA.  Are you currently being audited or under investigation?  We can help.  For a free initial consultation regarding your situation, call Robert at: 1 (800) 475-1906.

[1] https://www.hhs.gov/opioids/sites/default/files/2018-09/opioids-infographic.pdf

[2] https://www.forbes.com/sites/danmunro/2015/04/27/inside-the-35-billion-addiction-treatment-industry/#3d256aaf17dc

[3] https://www.nbcnews.com/feature/megyn-kelly/florida-s-billion-dollar-drug-treatment-industry-plagued-overdoses-fraud-n773376

[4] Under 42 USC § 1320a-7b(f), the term “Federal health care program” is defined as:

(1) any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government (other than the health insurance program under Chapter 89 of Title 5); or

(2) any State health care program, as defined in section 1320a-7(h) of this title.

[5] This penalty is not even a year old, as it was updated from a maximum penalty of $25,000 and 5 years of imprisonment via Section 50412 of the Bipartisan Budget Act of 2018.

[6] https://www.congress.gov/bill/115th-congress/house-bill/6/text#toc-HB10AD8D0FD9C456F81EE0083634020CB

[7] http://jalm.aaccjnls.org/content/jalm/1/4/410.full.pdf

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