CLINICAL LABORATORIES RISK GOVERNMENT ENFORCEMENT ACTIONS FOR COVID-19 TESTING

The Law Offices of Steven Goldsobel regularly represents laboratories and companies specializing in marketing for healthcare providers. While national testing for COVID-19 exposure appears to be the key to reopening the economy, and estimates indicate that U.S labs have performed and processed almost 4 million tests for COVID-19, testing poses its own array of potential compliance concerns and risks, especially since private labs have performed 85% of COVID-19 testing. Accordingly, laboratories providing COVID-19 testing should ensure that their marketing and compensation arrangements comply with the federal Anti-Kickback Statute (AKS) and the Eliminating Kickbacks in Recovery Act (EKRA).

The U.S. Department of Justice (DOJ) remains vigilant in rooting out fraud and abuse associated with the pandemic, and has instructed U.S. Attorneys’ offices across the country to “prioritize the detection, investigation, and prosecution of all criminal conduct related to the current pandemic.” Indeed, the DOJ already has filed an indictment against Erik Santos, the head of a Georgia healthcare marketing company, with steering Medicare patients to testing facilities for COVID-19 in exchange for kickbacks.

While DOJ has long used the AKS to prosecute healthcare fraud violations, it also may use EKRA as a sword to combat COVID-19-related fraud. Under EKRA, which was signed into law in 2018, it is a crime to solicit or receive payment in exchange for referring a patient to a laboratory, to pay or offer any payment to induce someone to make such a referral or to pay or offer any payment in exchange for an individual using a lab.  EKRA also has broader applications than the AKS because EKRA is not limited to services reimbursed by Medicare or other federal healthcare reimbursement mechanisms. In other words, EKRA applies to COVID testing billed to commercial insurers as well as to Medicare, while the AKS only applies to services paid for by federal programs.  Therefore, a lab may be in violation of EKRA while simultaneously complying with the AKS. Therefore, labs must become familiar with the scope and applicability of EKRA to ensure compliance.

Although EKRA provides statutory exceptions, those exceptions do not necessarily follow the AKS safe harbors regarding compensation for marketing. For instance, EKRA does not allow a volume or value-based compensation structure to employees. Thus, common compensation models, such as paying sales employees commission-based compensation, are deemed to be improper kickbacks under EKRA, even though such compensation may be, in certain circumstances, permitted under the AKS.

The expected increases in COVID lab testing may elevate EKRA as a future enforcement tool. As a result, labs must closely evaluate their current compensation models for marketing practices, including any practices related to COVID testing, to avoid any potentially noncompliant methods.