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Covid-19 may have awoken a sleeping bear

Nelson Mullins’ Bart Daniel and Elle Klein warn coronavirus labs to beware potential fraud prosecutions under new federal laws

Although the federal government may have relaxed healthcare regulations amid the pandemic in an effort to quickly respond to the growing number of Covid-19 cases, enforcement agencies have not relaxed at all. In fact, they have done just the opposite. 

With the federal government spending millions of dollars in support of Covid-19 testing and countless other funds in the fight against the novel coronavirus, it is no surprise that both federal and state authorities are turning their efforts toward combatting fraud related to the disease and those seeking to exploit and profit from the pandemic. The US Department of Justice (DoJ), US Attorneys’ Offices, and State Attorneys General are at the forefront of these efforts. For example, the DoJ has instituted a Coronavirus Fraud Coordinator at each US Attorney’s Office across the country. 

The DoJ has already begun filing health care fraud and kickback cases tied to shady practices related to the pandemic. For example, on April 28, 2020, the US Attorney’s Office for the Eastern District of Michigan charged a doctor for his alleged role in a health care fraud scheme which involved submitting false claims to Medicare for services which were never rendered. Specifically, the physician allegedly submitted false and fraudulent claims for high-dose intravenous vitamin C infusions to patients at risk of contracting Covid-19, especially those working on the frontlines, and to those who tested positive for the virus.

This increased oversight comes undoubtedly as a response to the exponential boom in Covid-19 testing and prevention. As of early May 2020, over 7 million Covid-19 tests have been taken in the US. Now, more and more people are submitting themselves to serology tests to determine if there are antibodies in the bloodstream indicating they were recently infected with the virus. With the increase in government watch coupled with the increase in virus-related testing, clinical laboratories providing Covid-19 test analysis must be cognisant that their marketing and compensation arrangements do not run afoul of the federal Anti-Kickback Statute (AKS) and the Eliminating Kickbacks in Recovery Act (EKRA).

Potential for enforcement

Those who regularly practice in the healthcare industry are familiar with the AKS, which criminalises fraudulent conduct and kickbacks or patient referrals where a claim for payment is submitted to a government program. However, a lesser-known, but potentially as troublesome means of enforcement is 2018’s EKRA. 

EKRA was passed as part of the larger Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act. It was primarily enacted to target abuses arising from the opioid epidemic. However, due to the broad statutory language, EKRA has the potential of having a much wider reach, especially when it comes to laboratories. 

EKRA prohibits soliciting, receiving, offering or paying ‘remuneration (including any kickback, bribe or rebate)’ in return for referrals to, or in exchange for using the services of, a ‘recovery home,’ ‘clinical treatment facility’, or ‘laboratory.’ Specifically, EKRA provides that: 

(a) Offence. – 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 wilfully –

(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 … shall be fined not more than $200,000, imprisoned not more than 10 years, or both, for each occurrence.

Under EKRA, ‘health care benefit program’ includes ‘any public or private plan or contract affecting commerce, under which any medical benefit, item, or service is provided to any individual, and includes any individual or entity who is providing a medical benefit, item, or service for which payment may be made under the plan or contract.’ 

Through this broad definition of ‘health care benefit program’ EKRA applies to all payors, both private and public. This is in stark contrast to the AKS, which applies only to services paid for by federal programs. Therefore, a laboratory conducting virus or serology test analysis could be in violation of EKRA for receiving remunerations for referrals, even if the payments are coming from private insurance companies or from the patient themselves (out-of-pocket). This means that the vast majority, if not all, of Covid-19 virus and serology testing are likely subject to EKRA.

Further, while the definitions for ‘clinical treatment facility’ and ‘recovery home’ specifically reference substance use, ‘laboratory’ does not. ‘Laboratory’ is defined to mean ‘facility for the biological, microbiological, serological, chemical, immuno-haematological, haematological, 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.’ 

Based on this broad definition, both Covid-19 virus test analysis providers, as well as serological test analysis providers, would fall within the purview of EKRA. Therefore, EKRA may be implicated in all referrals for laboratory tests, regardless of whether the tests relate to substance abuse testing or treatment. 

Like the AKS, EKRA statutorily provides for a number of exceptions. However, EKRA’s eight statutory exceptions and ‘safe harbours’ are more limited in number and scope than the AKS’s in some instances. 

For example, under EKRA, a laboratory may not pay sales or marketing employees if such payments ‘vary by: 

(A) the number of individuals referred to a particular… laboratory; 

(B) the number of tests or procedures performed; or 

(C) the amount billed to or received from, in part or in whole, the health care benefit program from the individuals referred to a particular… laboratory.’ 

This is unlike the AKS, which generally exempts commissions/payments to bona fide employees of a lab. Therefore, generally accepted clinical laboratory business practices – such as paying sales employees on commission – arguably fall within the scope of EKRA’s remuneration prohibition.

A wide-reaching net

The government has not yet frequently utilised EKRA as a means of fraud prosecution. This is likely due in part to the fact that it was enacted in late 2018 and is still relatively new. Although the government has not regularly relied on EKRA as a means of prosecuting fraud, there is no time like the present for the government to tap into this under-utilised enforcement mechanism given the government’s heightened focus on healthcare providers and the increase in virus and serological testing in relation to Covid-19. Further, there will likely be a drastic uptick in EKRA claims when, not if, aggressive regulators’ counsel begin to capitalise off of the broad language of the Act. 

Knowing this, laboratories and other covered providers need to be aware of EKRA and its broad prohibitions when engaging in sales and marketing of their services. All potentially covered providers need to evaluate: 

  1. whether their services are covered by EKRA; 
  2. whether any of EKRA’s exceptions are applicable to their organisation; and 
  3. the compensation arrangements for their employees and outside vendors as they could be scrutinised and possibly considered payments for referrals under EKRA. 

Additionally, they need to re-familiarise themselves with the AKS and other applicable state anti-kickback laws to ensure they are complying with all potential enforcement opportunities. It is a matter of time before we see fraud prosecution through EKRA, and providers need to safeguard themselves from getting trapped in EKRA’s wide-reaching net. 

Bart Daniel is a partner and Elle Klein an associate at Nelson Mullins Riley & Scarborough