On October 24, 2018, Congress enacted a new anti-kickback statute that seemingly eliminates legal protections (i.e., "safe harbors") used by clinical laboratories to market their services. The statute, entitled the Eliminating Kickbacks in Recovery Act of 2018 (or EKRA), was signed into law by President Trump as part of comprehensive legislation designed to address the opioid crisis. EKRA makes it a criminal offense to offer or receive a kickback in an exchange in order to “induce” a referral to a recovery home, clinical treatment facility or clinical laboratory.

EKRA is an “all-payor” statute, which means it applies to services that are paid by commercial insurers in addition to services paid by Medicare and Medicaid. Importantly, EKRA defines payment practices that violate the statute to include compensation to employees or contractors that is based on:

(A) the number of individuals referred to a particular recovery home, clinical treatment facility or 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 recovery home, clinical treatment facility or laboratory.

The significance of this prohibition cannot be overstated. Under the federal Anti-Kickback Statute (AKS), clinical laboratories and other providers are permitted to pay bona fide employees compensation based on revenues generated from their marketing activities (known as “percentage-based compensation”). Further, the OIG has indicated in several Advisory Opinions that providers could pay independently-contracted sales agents percentage-based compensation so long as the arrangement contained adequate safeguards to address so-called “suspect factors” that could give rise to violations of the AKS. (See, e.g., OIG Advisory Opinion 98-10.)

With the enactment of EKRA, however, these compensation arrangements (insofar as they involve clinical laboratories) are seemingly no longer protected.

It is unclear whether Congress or the Attorney General (which will promulgate regulations to implement EKRA) will narrow the scope of the statute to apply only to patient steering activities involving toxicology labs – arguably Congress’ intended target in passing EKRA. Notwithstanding, until further guidance becomes available from the government, clinical laboratories that pay percentage-based compensation to their employed or contracted sales force must reexamine their business arrangements to comply with EKRA.