The first enforcement under the Eliminating Kickbacks in Recovery Act (EKRA) was announced on January 10, 2020. EKRA is part of the Substance-Use Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act. EKRA is an all-payor statute and prohibits the knowing and willful:
- solicitation or receipt of any remuneration directly or indirectly, overtly or covertly, in cash or in kind, in return for referring a patient to a recovery home, substance abuse clinic, or clinical laboratory; or
- paying or offering any remuneration directly or indirectly, overtly or covertly, in cash or in kind, to induce a referral of an individual to a recovery home, substance abuse clinic, or laboratory; or in exchange for an individual using the services of the recovery home, substance abuse clinic, or clinical laboratory.
EKRA is a relatively new federal criminal law that mirrors but differs from the federal Anti-Kickback Statute. While EKRA is of broader applicability being an all-payor statute, in some respects, EKRA is also much narrower than the AKS; EKRA applies to specific entities, such as clinical laboratories, and has narrower safe harbors.
The announcement on January 10, 2020 reflects the first prosecution of a classic case in the sense that it specifically addressed kickbacks between a substance abuse clinic and a clinical laboratory.
Theresa C. Merced worked as the manager of St. John Neumann’s Extended Hours clinic, a substance abuse clinic, in Kentucky. Her husband also worked there as a physician. Between December 13, 2018 and August 15, 2019, Ms. Merced was involved in illegal referrals of urine drug testing to a clinical toxicology laboratory. The plea agreement states that Theresa Merced solicited cash and in-kind kickbacks, asked the laboratory to hire five employees for the clinic, and sought the payment of utilities by the laboratory in exchange for referring urine drug testing to the laboratory. The government also alleged that Ms. Merced knew the arrangement was illegal given her subsequent phone calls with the laboratory’s CEO seeking him to be discreet because she did not want “to be in trouble with the law.” U.S. v. Theresa C. Merced, 5:20-cr-00006-DCR, ¶5(b).
The laboratory also paid Theresa C. Merced $4,000 on August 15, 2019, alleged to be part of a larger $14,000 payment, and agreed to hire five employees to work at the clinic. Id. at ¶5(c).
On September 12, 2019, Theresa Merced lied to the Kentucky Attorney General’s Office Medicaid Fraud Control Unit and an agent with the United State Department of Health and Human Services, Office of Inspector General when interviewed about the $4,000 check. Id. at ¶5(d). She denied seeing the check and blamed her husband, stating that he “was careless with money and that, in anticipation of an upcoming vacation, he probably borrowed the money” from the laboratory CEO. Id. Ms. Merced then called the laboratory CEO and stated that she told him that she was concerned about the investigation from the agents and explained away the check as a loan. The laboratory CEO stated that his books and the memo line reflected rent but he agreed to alter the internal accounting records to show “rent/loan”. Id. at ¶5(e).
Ms. Merced is the first to be publicly indicted and plea guilty to a violation of EKRA. She pleaded guilty to one count of violating EKRA, one count of making false statements and one count of attempted tampering of records. Under the United States Sentencing Guidelines, it is recommended that the base offense level for the violation of EKRA is level 8 and should be increased by 2 levels given the amount of the bribes. Sentencing is scheduled for May 1, 2020.
This case demonstrates the breadth of EKRA and its all-payor statute applicability. The case lacked specifics regarding the payor, but interestingly, no counts were pled under the AKS. It is clear that the DOJ is viewing EKRA as a potent tool to combat fraud and abuse that they see in the laboratory industry.
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