Navigating the Evolving Landscape of the Eliminating Kickbacks in healthcare Act (EKRA) – A Deep Dive into the Schena Ruling
The healthcare industry has been grappling wiht the complexities of the Eliminating Kickbacks in Healthcare Act (EKRA) since its inception. Recent court decisions, notably the Ninth Circuit’s ruling in Schena, are providing crucial, though nuanced, guidance. This article breaks down the implications of Schena for laboratories, substance abuse recovery providers, and anyone utilizing sales teams to generate referrals. We’ll explore what this means for your compliance program and how to proactively mitigate risk.
Understanding the Core of EKRA
EKRA, codified in 18 U.S.C. § 220(a)(2)(A), prohibits anyone from knowingly offering or paying remuneration to induce the referral of laboratory or other medical services payable by federal healthcare programs like Medicare and Medicaid. The law aims to prevent improper influence on healthcare decisions. However, interpreting what constitutes an illegal “inducement” has been a meaningful challenge.
The Schena Case: A turning Point
The Schena case addressed a critical question: dose EKRA apply to payments made to marketing intermediaries? Previously, the S&G Labs Hawaii court held that EKRA required a direct connection between the payment and the patient referral. The Ninth Circuit emphatically rejected this narrow view.
Here’s what Schena clarified:
Indirect Referrals are Covered: The Ninth Circuit persistent that “inducing a referral of an individual” doesn’t require direct interaction between the payer and the patient. The focus is on inducing the referral itself, even through intermediaries. This aligns EKRA more closely with the Anti-Kickback Statute (AKS), where indirect payments designed to generate downstream referrals are routinely scrutinized.
Wrongful Inducement is Key: Simply causing a referral isn’t enough to violate EKRA. The court emphasized that “induce” implies wrongful causation – meaning undue influence. Standard advertising or legitimate business development activities aren’t automatically problematic.
Percentage-Based Compensation Isn’t Inherently Illegal: The court acknowledged that percentage-based compensation structures, common for sales teams, aren’t per se violations of EKRA. However, the context matters significantly.
What Constitutes “Undue influence”?
The Ninth Circuit didn’t provide a precise definition of “undue influence,” but it did draw a line. Percentage-based payments to marketers who actively mislead referring providers about the necessity or nature of medical services do violate EKRA. Essentially, if your sales team is incentivized to misrepresent services to generate referrals, you’re on dangerous ground.
Implications for Your Healthcare Compliance Program
The Schena decision offers both reassurance and a call to action. It’s reassuring because it confirms that not all commission-based compensation is automatically illegal. However, it’s a call to action because it underscores the need for a robust compliance program.
Here’s how to strengthen your approach:
Review Compensation Structures: Carefully evaluate any compensation models tied to referrals, particularly those involving marketing intermediaries or sales staff.
Focus on Training & Oversight: Invest in comprehensive training for sales teams. Ensure they understand EKRA and AKS requirements, and emphasize ethical sales practices. Regularly monitor their interactions with referring providers.
Document Everything: Maintain detailed records of sales team activities, compensation arrangements, and training programs. This documentation is crucial in demonstrating a good-faith effort to comply with the law.
Implement Safeguards: Consider implementing safeguards like pre-approval processes for marketing materials, scripts for sales calls, and regular audits of referral sources. Seek Legal Counsel: Given the complexity of EKRA, consulting with experienced healthcare legal counsel is highly recommended. They can help you assess your specific risks and develop a tailored compliance strategy.
Bridging the Gap: Schena and Prior Disagreements
The Schena ruling resolves a split in the courts, overturning the more restrictive interpretation of EKRA established in S&G Labs Hawaii. this provides a more unified legal framework, but the lack of formal agency guidance (regulations or official interpretations from