Non-Compliance with California’s Version of the Federal EKRA Law can result in Criminal Convictions and Civil Penalties

Effective October 24, 2018, EKRA was enacted by the US government. EKRA is one of many laws designed to regulate providing kickbacks in return for referring patients. Other referral regulations include the Anti-Kickback Statute and Stark Law. Skilled healthcare lawyers are ready to explain what these laws regulate and the steps doctors, hospitals, nurses, healthcare companies, and others should take to show they are in compliance with these laws.

Failure to comply with federal and California laws can result in the suspension of a medical practice,  criminal conviction, civil fines, the payment of legal fees, and many other penalties. Experienced healthcare lawyers can guide doctors through the referral laws and review how to address potential violations and how to respond to notices of violations.

EKRA is specifically designed to focus on regulating referrals for patients who are being prescribed opioids. Opioids are dangerous drugs that can easily be abused. The new California law now governs many similar referrals and investments on a state level.

Stark Law regulates referrals by doctors to “designated health services” in which the doctor (or someone in the doctor’s immediate family) has a financial stake. The Anti-Kickback Statutes governs referrals for patients who use federal healthcare programs such as Medicare and Medicaid. There are very precise definitions that define what constitutes a referral, a financial interest, a designated health service, and a financial interest or stake. The Stark Law has exemptions that allow for certain types of transactions. In a similar, but not identical way, the AKS has safe harbors that can benefits health providers who do need to invest in offices, equipment, and a range of other medical investments.

EKRA’s key provisions

EKRA applies across state lines. It also applies to transactions with foreign countries. EKRA makes is illegal to:

• Solicit or receive 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
• pay or offer any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in-kind—

1. 1. to induce a referral of an individual to a recovery home, clinical treatment facility, or laboratory; or
   2. in exchange for an individual using the services of that recovery home, clinical treatment facility, or laboratory.

Doctors, clinic, hospitals, and other health providers can be sentenced up to 10 years and ordered to pay fines of up to $200,000 if they are convicted.

There are exceptions to the federal EKRA law that an experienced healthcare referral regulation lawyer can explain. Some of the exceptions to the Eliminating Kickbacks in Recovery Act of 2018 include:

• Discounts and price reductions may be allowed if the health provider obtained the discount through a federal healthcare program – provided other conditions are met
• Payments to employees by an employer may be allowed if employment isn’t conditioned on the number of patient referrals, the number of tests orders, the amounts billed, or other factors.
• Medicare drug discounts if the discount is under the Medicare coverage gap discount program under section 1860D–14A(g) of the Social Security Act.
• Some payments to an agent for personal services or management services that comply with federal laws
• Discounts or waivers specifically detailed in the federal EKRA law
• Some remunerations provided they comply with the Social Security Act
• Any other payment, remuneration, discount, or reduction as determined by the Attorney General, in consultation with the Secretary of Health and Human Services, by regulation.

To show that EKRA has been violated, the government does not need to prove the doctor or health provider had specific intent to violate the law or actual knowledge of the law.

California’s new referral laws

California has its own anti-kickback statute – Business and Professions Code, Section 650. Other relevant kickback and referral laws include:

• California Health & Safety Code, Section (“H&S”) 445, prohibits any person from profiting from referring patients to a physician or clinic for care;
• California Business & Professions Code, Section 2273(a) prohibits the employment of runners, cappers, steerers, or other persons to procure patients.
• The California Attorney General opinions sometimes reference H&S 445 in connection with B&P 650(a) opinions.
• Section 13408.5 of the California Corporations Code prohibits the formation of a professional corporation to cause any violation of law, including prohibitions against fee-splitting and kickbacks.

On January, 29, 2019, the California Health and Human Services Agency, Department of Health Care Services, issued an Information Notice to Department of HealthCare Services (DHCS) licensed or certified alcohol and/or other drug programs (AOD programs) of the passage of SB 1228, which will go into effect on January 1, 2019.”

The Senate Bill, which became law effective the first of January 2019:

“Prohibits licensed and/or certified alcoholism or drug abuse recovery and treatment facilities, owners, partners, directors, employees, and/or shareholders from giving or receiving anything of value for the referral of a person to a substance use disorder (SUD) treatment facility.”

SB 1228 specifically states that it was enacted to respond to the growing opioid addiction crisis. Opioid abuse claimed 1,925 California lives in 2016. Opioid overdoses are one of the top 20 causes of death in California. The desperation many people who are addicted is fueling a surge in patient brokering or patient trafficking, where unscrupulous services refer people with substance use disorders to programs that are inappropriate for their needs in order to gain access to insurance payments.

The aim of SB 1228 is to put the safety of patients in recovery first. That’s why the penalties for violations are so high.

SB 1228 provides that the following people can’t receive any form of remuneration in return for referring a patient in alcohol or drug recovery:

1. An alcoholism or drug abuse recovery and treatment facility licensed under this part.
2. An owner, partner, officer, or director, or shareholder who holds an interest of at least 10 percent in an alcoholism or drug abuse recovery and treatment facility licensed under this part.
3. A person employed by, or working for, an alcoholism or drug abuse recovery and treatment facility licensed under this part, including, but not limited to, registered and certified counselors and licensed professionals providing counseling services.
4. An alcohol or other drug program certified by the department in accordance with the alcohol or other drug certification standards established pursuant to Section 11830.1.
5. An owner, partner, officer, or director, or shareholder who holds an interest of at least 10 percent in an alcohol or other drug program certified by the department in accordance with the alcohol or other drug certification standards established pursuant to Section 11830.1.
6. A person employed by, or working for, an alcohol or other drug program certified by the department in accordance with the alcohol or other drug certification standards established pursuant to Section 11830.1, including, but not limited to, registered and certified counselors and licensed professionals providing counseling services.

The House Bill. The information notice also notifies DHCS licensed and/or certified alcoholism or drug abuse recovery and treatment facilities of the passage of this law. As a result of the House Bill, the federal Eliminating Kickbacks in Recovery Act of 2018 (enacted October 24, 2018) is now also state law.

Examples of transactions that will violate the new Senate law.

An experienced healthcare compliance lawyer can explain how the Senate’s new bill differs and is similar to the federal and state EKRA laws. Some examples of conduct that can lead to criminal or civil charges in California for health providers, under the Senate version, include:

• Soliciting or receiving 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 to a licensed and/or certified alcoholism or drug abuse recovery and treatment facility. This provision is very similar to the federal EKRA law.
• Any form(s) of commission or bonus paid to treatment facilities, owners, partners, directors, employees, and/or shareholders in exchange for a client referral to a licensed and/or certified alcoholism or drug abuse recovery and treatment facility.
• Any form(s) of tangible or intangible compensation provided to a client for referral to a licensed and/or certified alcoholism or drug abuse recovery and treatment facility. This includes recruitment and payments to potential clients at Alcoholics Anonymous meetings, Narcotics Anonymous meetings, and any other recovery meetings.
• Providing remuneration to any call center and/or company in exchange for a client referral.
• Selling potential client information to bidders in order for the bidder to secure a potential client’s enrollment at a licensed and/or certified alcoholism or drug abuse recovery and treatment facility.

Additional penalties for violating the new state laws

The State Department of Health Care Services has the authority to investigate violations. Health providers who violate the new Senate law can suffer the following penalties:

• Assessment of a civil penalty of up to $2,000 against a licensed and/or certified alcoholism or drug abuse recovery and treatment facility for each occurrence of a violation of section 11831.6;
• Suspension of an alcoholism or drug abuse recovery and treatment facility’s license or certification
• Revocation of an alcoholism or drug abuse recovery and treatment facility’s license or certification;
• Denial of any new application for licensure for a period of five (5) years from when the applicant is found to have violated HSC 11831.6;
• Denial of an extension of the licensing period;
• Denial of any applications for modification to a license;
• Suspension of the registration or certification of a counselor or;
• Revocation of the registration or certification of a counselor.

These penalties are in addition to any violations of the newly enacted California House version of EKRA, the federal EKRA law, Stark Law, the federal AKS statute, and the other California referral laws.

The Senate and House of California have both passed laws that apply or enhance the federal EKRA law to California. These laws were enacted due to the ever-worsening opioid addiction overdose crisis. The increased number of deaths is forcing the state government to aggressively review the rules and regulations for referring alcohol and drug recovery patients to medial providers. Senate Bill 1228 prohibits referrals from a many types of people and entities that work with recovery and treatment centers.

The House Bill codifies the federal version of EKRA to the state of California.

Contact the EKRA and state anti-kickback regulation lawyers at Cohen Healthcare Law Group, PC if you have questions regarding a marketing arrangement that involves recovery home, clinical treatment facility, or laboratory.