LEGISLATION

Compliance Alert: New Private-Pay Opioid Law Puts All Drug Addiction & Rehab Labs at Risk of Federal Prosecution

Recent federal legislation addressing the opioid crisis may have unintended consequences on the lab industry. The idea was to allow the feds to prosecute a certain kind of abuse banned by the Anti-Kickback Statute (AKS) even when it doesn’t involve a government health program. The new prosecution authority was intended to apply just to private-pay arrangements involving drug addiction treatment and rehabilitation services. But because of the way it was drafted, the new federal prosecutorial power applies to all private-pay arrangements.

What Happened?
On Oct. 24, 2018, the President signed the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (the “SUPPORT Act”) consolidating several different opioid-related bills. One of those bills, the Eliminating Kickbacks in Recovery Act of 2018 (EKRA), EKRA creates criminal penalties for “patient brokering,” i.e., an arrangement where a third party enrolls an addicted patient into a private health insurance plan and then arranges for that patient to enter a treatment facility or sober home 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 the AKS covers just government programs like Medicare and Medicaid, it can’t be used to prosecute brokering arrangements involving patients with commercial or private-pay insurance. EKRA was intended to close that gap. Specifically, EKRA makes it a federal crime, carrying a fine of up to $200,000 and/or imprisonment for up to 10 years, to knowingly and willfully:

  • Solicit or receive any remuneration for referring a patient to a recovery home, clinical treatment facility or lab; or
  • 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 lab.

EKRA Exceptions

The EKRA ban is subject to exceptions, including for:

  • Certain disclosed discounts under a health care benefit program;
  • Certain payments to bona fide employees and independent contractors (although there are several provisos to this rule and it doesn’t mirror a similar exception in AKS);
  • Payments for services that meet the AKS safe harbor for personal services and management contracts;
  • Certain coinsurance and co-payment waivers and discounts;
  • Certain federally qualified health center arrangements that meet the AKS exception; and
  • Remuneration made pursuant to certain arrangements that HHS deems necessary.

The Law of Unintended Consequences
Letting the feds prosecute kickbacks involving private payers is a big departure and, arguably, an encroachment on the prosecutorial powers of the states which have their own kickback laws. So, the EKRA exception was supposed to be a narrow measure to deal with the opioid crisis. The problem is that EKRA’s language is so broad that it permits prosecution of any lab or non-hospital provider who provides addiction treatment or recovery services, even if the referral in question does not involve addiction treatment and recovery services.

Is This Some Kind of a Bad Joke?
It appears that this hair-raising consequence was unintended. If so, prosecutors may decline to use their new powers in cases not involving addiction and recovery. Better yet, Congress may go back and amend the statute so that it’s more narrowly tailored to addiction treatment or recovery services referrals.

Takeaway: How to Protect Yourself

The problem is that it’s unclear when that will happen—or even whether it will happen at all. So, for now at least, if your lab provides these services, you may now be subject to not just state but also federal prosecution for patient brokerage arrangements even if they don’t involve addiction treatment and recovery services. The good news is that because such arrangements are currently illegal under state laws, your current arrangements and relationships are probably already compliant. Still, the overlap between the AKS and state kickback laws isn’t 100%. Result: Unless and until the EKRA rule is modified or neutered by the Justice Department, you need to vet all your current provider relationships and arrangements for patient brokering risks.

Physician-Owned Labs May Be Especially Vulnerable
Last but not least, the new laws create a compliance risk for physician-owned labs that avoided AKS by structuring referrals so that only non-federally and non-state covered patients are referred. Such safeguards may no longer be enough, and you may need to restructure your arrangements to ensure compliance with the new rules. Given the broad scope of EKRA physician-owned labs need to review and potentially restructure their business arrangements to avoid violating the statute.

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