Compliance with New Federal EKRA Law Creates Uncertainties in How Clinical Laboratories Pay Commissions to Their Sales Teams

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Vague language and last-minute additions to the federal SUPPORT Act of 2018 with its included EKRA provisions mean big changes to how clinical laboratories can legally compensate sales professionals for referrals
 
Clinical laboratories may be at grave financial risk should they fail to properly comply with the Eliminating Kickbacks in Recovery Act of 2018 (EKRA) provision of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (H.R. 6, aka, SUPPORT Act).
Labs that compensate their sales staff for referrals to recovery homes (aka, sober living houses) and clinical treatment facilities are particularly vulnerable and should carefully examine the wording in the legislation, legal experts warn.
As Dark Daily reported in “Does New Opioid Law Require Clinical Laboratories to Change How They Pay Sales Employees?,” (April 1, 2019), SUPPORT Act legislation aimed at combating the opioid epidemic could hold dire consequences for how medical laboratories operate due to how it expands oversight over a range of common laboratory practices and workflows.
“For sales-driven laboratories who have evolved practices to comply with Anti-Kickback Statute (AKS) requirements, what are now best practices might soon create major concerns regarding laboratory compliance with EKRA [H.R. 6878],” Marty Barrack, Senior Vice President and General Counsel at XIFIN told Dark Daily.
Stiff Penalties Threaten Clinical Laboratories and Pathology Groups
With fines of up to $200,000, 10 years in jail, or both, the new EKRA/SUPPORT Act regulations—passed in October 2018—apply separately from existing federal anti-kickback statute (AKS) regulations. Compliance violations can expose both the laboratory, pathologists, and other individuals to federal prosecution.
“Because this is a criminal statute, some laboratories overlook the fact that felony convictions mean zero payments. This is more than worrying about federal prosecution, it can have a lasting impact on a laboratory’s financials and its reputation,” noted Barrack. “The provisions regarding invoicing will raise concerns with how clinical laboratories bill and write-off co-payments and deductibles in areas previously untouched by AKS requirements.”
Charles Dunham, Health Law Attorney, Corporate and Regulatory Practice, Epstein Becker and Green, P.C., outlined potential payment arrangement concerns at Health Law Advisor, saying, “… 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.”
The National Law Review warns that “With the passage of EKRA, laboratories, clinical treatment facilities, and recovery homes should immediately consider reviewing all financial arrangements with healthcare providers, contractors, and employees who are in a position to generate referrals—including marketing personnel and sales reps.”
They further note, “… Previously compliant payment methodologies structured under the Anti-Kickback Statute’s employment safe harbor (such as paying W-2 employees a volume or value-based commission) are now at risk of violating EKRA.”
Vague Wording in Law Creates Confusion
As covered in the December 3, 2018, issue of The Dark Report, the American Clinical Laboratory Association (ACLA) questions whether—under the new law—laboratories can continue providing phlebotomists or specimen collection devices to physicians’ offices under EKRA. While both scenarios are currently permissible under existing federal AKS regulations, the SUPPORT Act and EKRA do not include language that covers such scenarios.
“Primarily, this language was designed to address potential bad actors working in recovery homes and addiction treatment facilities,” Sharon L. West, Vice President of the ACLA, told The Dark Report. “But then language was added to the bill extending that far beyond treatment facilities to include clinical labs. Now, the new law extends to all payers and all laboratory testing services provided to patients.”
While revisions to or amendment of existing legislation is possible, the terms defined in the existing regulations should concern any medical laboratory offering compensation for the referral of patients for testing.
“The lab industry has some influence to help drive revisions of existing statues. The payer industry also has representation,” Barrack notes. “However, revisions may not proceed as quickly or bring the results some labs expect.”
Understand EKRA and Stay Out of Jail!
It’s critical that all clinical laboratories understand the impact EKRA will have on existing payment agreements, billing practices, and workflows. Non- or incorrect compliance could bring hefty fines—and even jail time!