The Eliminating Kickbacks in Recovery Act: An Unprecedented Expansion of Anti-kickback Liability to Private-Pay Referrals?

Bass, Berry & Sims PLC

Bass, Berry & Sims PLC

A recent piece of federal legislation intended to address the opioid crisis across the United States may have some unintended consequences. In attempting to prohibit “patient brokering” in the narrow context of addiction treatment and recovery centers, Congress may have unwittingly passed an unprecedented expansion of federal prosecutorial authority over payment arrangements between providers and referral sources for private-pay patients. For the reasons discussed in this blog post, any individual or entity who provides services relating to addiction treatment or recovery (as well as all clinical laboratories, regardless of whether they provide any addiction treatment or recovery services) should examine their arrangements with all referral sources for private-pay patients, even those who do not refer patients for addiction treatment or recovery services.

On October 24, 2018, the President signed into law the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act (the “SUPPORT Act”), as discussed here. The SUPPORT Act consolidated a number of opioid-related bills, including the Eliminating Kickbacks in Recovery Act of 2018 (EKRA), which was intended to address the problem of “patient brokering” in the context of treatment centers and sober homes.

The Problem:  Patient Brokering

In the context of addiction treatment facilities and sober homes, “patient brokering” refers to instances where a third party enrolls an addicted patient into a private health insurance plan and then arranges for the addicted patient to enter a treatment facility or a sober home (often in another state) in exchange for a kickback payment. The sober home or treatment facility then bills the insurance company for treatment services, which often are of substandard quality or never provided at all.

Because patient brokering typically involves patients with commercial or “private-pay” insurance, the Anti-kickback Statute (AKS) is generally not available to prosecute the practice since it does not involve federal healthcare dollars. EKRA is intended to patch this “gap” in the law to permit federal prosecutors to bring charges in connection with any patient whose care is paid for by a private-pay insurer.

The Solution: A Private-Pay Anti-Kickback Statute

In an effort to address the issue of patient brokering, EKRA makes it a federal crime (punishable by a fine of up to $200,000, imprisonment for up to 10 years, or both) to knowingly and willfully: (1) solicit or receive any remuneration in return for referring a patient to a recovery home, clinical treatment facility, or laboratory; or (2) pay or offer any remuneration either to induce such a referral or in exchange for an individual using the services of a recovery home, clinical treatment facility, or laboratory. This criminal prohibition is subject to seven statutory exceptions, including discounts passed along to the payers, wage payments that do not take into account the volume or value of referrals, payments under personal services and management agreements, and good-faith, non-routine waivers of copayments.

Since the insurance claims covered by EKRA do not involve submission of claims for payment to the federal government, it is not immediately clear that EKRA liability will give rise to liability under the False Claims Act, as the AKS does.

EKRA’s Ambiguities and Overbreadth

While practitioners familiar with the AKS will recognize many of the phrases and exceptions incorporated into EKRA, the language used to define the scope of this new private-payer liability leaves significant ambiguity with respect to prosecutors’ ability to charge providers. The statute applies to referrals to clinical treatment facilities, recovery homes, and laboratories even if the referral does not involve addiction treatment or recovery services. The statute’s applicability is only limited by the definitions of the phrases “clinical treatment facility,” “recovery home,” and “laboratory.” No other element of the statute limits its applicability to the context of addiction treatment and recovery services.

EKRA adopts the same definition for “laboratory” as the statute governing federal licensure of clinical laboratories. Under that definition, EKRA liability could extend to any clinical laboratory, regardless of whether the laboratory provides services related to addiction or recovery services. Similarly, because EKRA defines “clinical treatment facility” to include any entity that “provides detoxification, risk reduction, outpatient treatment and care, residential treatment, or rehabilitation for substance use,” any non-hospital medical provider that provides any type of addiction treatment or recovery services (even if only a very small part of their service offerings) may be subject to prosecution for payments to referral sources for private-pay patients, even if those payments do not relate to the provision of such services.

At base, EKRA seeks to impose criminal liability for conduct similar to the conduct targeted by the AKS – that is, illicit schemes to pay or solicit payment for patient referrals – in the context of addiction treatment and recovery services. However, EKRA’s broad language may well permit federal prosecutors to bring charges based on remuneration provided in exchange for referral to any laboratory or any non-hospital provider who provides addiction treatment or recovery services, even if the referral does not involve addiction treatment and recovery services. Accordingly, entities or individuals providing such services (even as a minor part of their service offerings) as well as all clinical laboratories should evaluate their relationships and arrangements with all referral sources for private-pay patients to ensure that they do not involve any exchange of remuneration in exchange for patient referrals.  While prosecutorial discretion may ultimately prevail or Congress may amend the statute so that it is more narrowly tailored to referrals for addiction treatment or recovery services, covered providers should guard against the risk of criminal liability until any such change is made.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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