Clinical laboratories need to review how they compensate sales personnel following the passage of the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”) (Section 8122 of the SUPPORT Act) which is effective as of October 24, 2018.  The SUPPORT Act is a combination of more than 70 bills aimed at fighting the opioid epidemic, with EKRA intended to address patient brokering in exchange for kickbacks of individuals with substance abuse disorders.  However, as written, EKRA is far more expansive.

EKRA adds an all payor (public and private) anti-kickback rule to the health care fraud laws concerning improper remuneration for patient referrals to, or in exchange for an individual using the services of, a recovery home, clinical treatment facility or clinical laboratory.  This broad language enables the federal government to monitor provider arrangements intended to generate business for any laboratory services, not only those related to individuals in treatment for substance abuse disorders, payable by a federal health care program (“FHCP”) or commercial health insurer.

The prior version of the bill entitled “Opioid Crisis Response Act” (passed in the Senate on 9/17/18) did not include EKRA provisions, and it appears that laboratories were thrown into EKRA at the last minute, as multiple House bills proposing the addition of EKRA to the SUPPORT Act did not include laboratories.  Congressman Pallone expressed his concerns with EKRA in that “[i]t did not go through regular order and was not properly vetted . . . it was added at the very last minute . . .”  He further states that: “multiple stakeholders have raised concerns that the language does not do what we think it does. It may have unintended consequences.”  This is evident in our review and analysis of the EKRA provisions.

With regard to payment arrangements with sales personnel, one statutory exemption provides that compensation paid to both W-2 employees and 1099 contractors would not violate EKRA if the payment is not determined by or does not vary by:

  • the number of individuals referred;
  • the number of tests or procedures performed; or
  • the amount billed or received

By inclusion of the statutory exemption in EKRA, Congress indicates that payments to any employee or contractor related to the business they generate is prohibited unless the laboratory can meet the specific criteria under the three-prong exception.

As a comparison, the federal Anti-Kickback Statute (“AKS”)[1] prohibits improper remuneration “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.  We know that the Office of the Inspector General (“OIG”) for the Department of Health and Human Services imposes a broad interpretation of the AKS (especially the phrase “arranging for or recommending”) and has taken the position that a pure marketing relationship to generate FHCP business could be a violation of the AKS.  However, compliance with the regulatory criteria under the Bona Fide Employee safe harbor[2] has been heavily relied upon in the health care industry to permit commission-based payments to sales personnel based on FHCP business they generate.[3]

On its face, EKRA would seem to make such commission-based payments to W-2 sales personnel, otherwise permissible under the AKS safe harbors, a criminal act that can carry up to $200,000 in fines and imprisonment up to (10) years for each occurrence.  However, Congress includes an exemption provision that states: “[t]his section shall not apply to conduct that is prohibited under section 1128B of the Social Security Act (42 U.S.C. 1320a–7b) [Anti-Kickback Statute].”  We are uncertain why Congress used the term “prohibited” instead of “not prohibited” or “permitted” in this provision.  This may have been a mere drafting error, but CMS will need to clarify whether it believes payments to sales personnel permitted under a AKS safe harbor are now prohibited by EKRA.  If that is the case, then the exemption should apply to the business generated by W-2 sales personnel for all payors (public and private) under EKRA.

Prior enforcement actions illustrate that the federal government takes the position that sales personnel can be deemed to induce patient referrals in violation of the federal AKS; however, to our knowledge this position has not been fully litigated and we do not believe this is a strong position.  Generally, sales personnel are in a position to solicit referrals and promote laboratory services but are not in a position to make a patient referral; exert undue influence on medical decision-making; or control an individual’s election of a laboratory service.  This distinction should be relevant to a criminal or civil prosecution; especially in the context of laboratory services where coverage requires an order by a physician or other authorized person.

Notwithstanding the above, EKRA would appear to permit a payment arrangement with sales personnel similar to the type that meets the criteria of the Personal Services and Management Contract safe harbor under the AKS.[4]  That safe harbor permits payments to sales personnel if the compensation is fixed in advance and not determined by the volume or value of the FHCP business they generate, which means commission-based payments do not qualify since there would be a nexus between the compensation and volume or value of business they generate.[5]

Finally, Congress does not address whether intent requires actual knowledge of the statute or specific intent to commit a violation, which is the standard in most criminal laws.  Multiple House bills proposing the addition of EKRA to the SUPPORT Act included intent language that did not ultimately make it into EKRA (“Neither actual knowledge of this section nor specific intent to commit a violation of this section shall be an element of an offense under this section.”)[6].  CMS will need to provide clarity.

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[1]  42 U.S.C. § 1320a-7b(b)(1)

[2] 42 C.F.R. §§ 1001952(i)

[3] 54 Fed.Reg. 3088, 3093 (1989)

[4] 42 C.F.R. §§ 1001952(d)

[5] See 64 Fed.Reg. 36360; OIG Advisory Opinion No. 98-10.

[6] See H.R. 6878 (Sept. 25, 2018).

On June 25, 2018, the Office of the Inspector General of the Department of Health and Human Services (“OIG”) published Advisory Opinion 18-05, allowing a nonprofit medical center to provide or arrange for certain support services for individuals who care for adults with chronic medical conditions (the “Opinion”).  The Opinion is significant because it helps to define the limits of recently enacted exceptions to the Civil Monetary Penalties Law (“CMP Law”).  In addition, the Opinion follows other recent guidance and regulations promulgated by OIG and the Centers for Medicare and Medicaid Services that demonstrate a trend toward permitting providers to offer various forms of caregiver assistance, including Advisory Opinion 09-01 (regarding complimentary local transportation provided by a skilled nursing facility to friends and family of residents of the facility) and Advisory Opinion 11-16 (regarding a hospital’s provision of free transportation, lodging, meals and other items and services to patients and their family members).

As described in the Opinion, the requestor is a nonprofit hospital that established a center to provide various forms of assistance to caregivers (the “Center”).  The Center is funded by a foundation affiliated with the hospital and primarily staffed with unpaid volunteers.  The Center provides, either directly or via collaborations with other local nonprofit organizations, a variety of free and fee-based services, for example:

Free Services

  • Resource library,
  • Educational sessions,
  • Support groups,
  • Respite care during Center-sponsored activities attended by caregivers, and
  • Equipment lending program.

Fee-Based Services

  • Massage therapy,
  • Low-cost ride-share programs, and
  • Additional respite care resources.

If caregivers require financial assistance for the Fee-Based Services, then volunteers of the Center connect the caregivers to financial assistance resources in the community.  If additional financial assistance is required, then volunteers provide the caregivers with the hospital’s application for financial assistance.

OIG indicated that the services provided by the Center implicated both: (1) the Anti-kickback Statute (“AKS”) – which prohibits offering “remuneration” to induce the referral of items or services reimbursable by a federal healthcare program, and (2) the CMP Law – which prohibits offering “remuneration” to a Medicare or State health care program beneficiary that is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier.  With respect to the CMP Law, OIG discussed the potential applicability of two exceptions that were created under the Affordable Care Act and further clarified by OIG in regulations promulgated in 2016 – the “Promotes Access to Care Exception” and the “Financial Need-Based Exception.”

The “Promotes Access to Care Exception”[1] permits the provision of remuneration that promotes access to care and poses a low risk of harm to patients and federal health care programs.  OIG has interpreted this exception to apply to items or services that improve a beneficiary’s ability to obtain items and services payable by Medicare or Medicaid, and pose a low risk of harm to Medicare and Medicaid beneficiaries and the Medicare and Medicaid programs by –

  1. being unlikely to interfere with, or skew, clinical decision making,
  2. being unlikely to increase costs to federal health care programs or beneficiaries through overutilization or inappropriate utilization, and
  3. not raising patient safety or quality-of-care concerns.

The “Financial Need-Based Exception”[2] permits the provision of items or services for free or less than fair market value if the items or services:

  1. are not advertised,
  2. are not tied to the provision of other reimbursable items or services,
  3. are reasonably connected to the medical care of the individual, and
  4. are provided only after a good faith determination that the recipient is in financial need.

OIG ultimately determined that the services provided by the Center did not satisfy the requirements of either CMP exception.  For purposes of the Promotes Access to Care Exception, OIG reasoned that the services did not improve a beneficiary’s ability to obtain items and services payable by Medicare or Medicaid.  For purposes of the Financial Need-Based Exception, OIG reasoned that the services were not reasonably connected to the caregivers’ medical care, even though OIG conceded that the Arrangement related to the caregivers’ general health and well-being. For similar reasons, the OIG found that none of the AKS safe harbors would apply to protect the services provided by the Center.

Although no CMP exceptions or AKS safe harbors applied, OIG nonetheless concluded that it would not impose administrative sanctions on the hospital because the following safeguards were present:

  1. The services provided by the Center are not tied to federally reimbursable services, and the Center does not recommend any particular service providers. Therefore, there is a low risk that the Free or Fee-Based Services would influence a caregiver (or the care recipient) to choose the hospital for federally reimbursable services.
  2. The services are available to all caregivers regardless of insurance or health care provider.
  3. Financial assistance is awarded on the basis of objective, standardized financial criteria.
  4. The hospital does not actively market the services or the Center in the community or in the media – all promotion is done through the hospital’s own websites and brochures.
  5. Center volunteers direct caregivers to their own providers for any medical services and provide caregivers with a list of all known providers of non-medical services in the area.
  6. The Center’s operations are unlikely to increase costs to federal health care programs because the Center’s staff is comprised of unpaid volunteers, and all of the Center’s operating costs are funded by private donations.

Advisory Opinions 18-05, 09-01, and 11-16 each demonstrate that there is a growing need for various forms of caregiver support.  In fact, in its request for the Opinion, the hospital cited to a report from the National Alliance for Caregiving and AARP Public Policy Institute called Caregiving in the U.S. 2015, which found that many caregivers suffer from physical and financial strain as a result of caring for individuals with chronic conditions, and such caregivers could benefit from various educational and support services.  Thus, providers are beginning to develop programs to address the needs of caregivers, in addition to patients.

Although this Opinion acknowledges that there are limitations to the safe harbors and exceptions that may be used to protect caregiver arrangements from regulatory scrutiny, the Opinion nevertheless demonstrates that providers may still offer certain benefits to caregivers without violating AKS and the CMP Law if appropriate safeguards are in place.

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[1] 42 U.S.C. 1320a–7a(i)(6)(F) and 42 C.F.R. 1003.110(6)

[2] 42 U.S.C. 1320a–7a(i)(6)(H) and 42 C.F.R. 1003.110(8).