Update on EKRA Statute: Insights from the Ninth Circuit’s Opinion in United States v. Schena

The recent opinion issued by the Ninth Circuit Court in United States v. Schena marks a significant moment in the interpretation of the Eliminating Kickbacks in Recovery Act (EKRA), particularly in relation to marketing arrangements in healthcare. This ruling holds critical implications for how marketers are compensated and how patient referrals are managed within the healthcare framework.

Key Takeaways from the Court’s Decision

Percentage-Based Compensation Not a Per Se Violation

One of the most notable points from the Ninth Circuit’s decision is its stance on percentage-based compensation to marketers. The court held that such arrangements are not inherently violative of EKRA. This conclusion aligns with precedents established in cases involving the Anti-Kickback Statute (AKS), where the structure of a marketing contract alone is inadequate to establish a violation. At oral arguments, the government even acknowledged that a percentage-based payment does not automatically constitute a breach of EKRA.

Deceptive Conduct as a Trigger for Violations

However, the court was clear that while percentage-based compensation is permissible, the context in which it operates is paramount. Specifically, if marketers engage in deceptive conduct intended to influence patient referrals unduly, they can indeed cross the line into EKRA territory. In the Schena case, evidence surfaced showing that marketers were instructed to mislead physicians regarding the necessity and nature of the lab’s testing services, thereby exercising undue influence over referral decisions. Such practices were deemed to constitute prohibited inducement under EKRA.

Clarification of What Constitutes Improper Influence

Importantly, the Ninth Circuit emphasized that not all influence is inappropriate. It’s essential to distinguish between ethical marketing practices and those that mislead medical professionals. The court articulated that an improper influence emerges when marketers deceive healthcare providers in a way that effectively directs patient referrals. This nuanced understanding is pivotal for stakeholders within the healthcare marketing sphere.

Implications for Healthcare Marketers

The implications of this ruling for healthcare marketers are profound. It reaffirms the legality of commission-based W-2 agreements,  within the framework of the Bona Fide Employee AKS Safe Harbor,  simultaneously highlighting the responsibility of healthcare marketing professionals to engage in ethical practices. Here are a few takeaways for compliance moving forward:

1. Training on Ethical Marketing Practices: It is crucial to implement robust training programs to ensure that marketers understand what constitutes deceptive conduct. This training should reinforce the importance of transparency and honesty in all interactions with healthcare providers.

2. Vigilance in Referral Practices: Marketers must be vigilant about how they influence referral patterns. Achieving a balance between persuasive marketing and undue influence will be essential to maintaining compliance with EKRA.

3. Internal Audits and Compliance Reviews: Regular audits of marketing practices may be beneficial to identify any potential areas of concern before they escalate into legal issues.

4. Documentation of Marketing Strategies: Clear documentation of marketing strategies and communication methods will not only streamline processes but also provide a safeguard if practices are ever called into question.

Conclusion

The Ninth Circuit’s opinion in United States v. Schena serves as a pivotal guidance point for the healthcare marketing landscape under EKRA. While percentage-based payments remain permissible, the overarching principle remains: marketers must avoid deceptive practices that sway referral decisions. As the landscape continues to evolve, staying informed and compliant with EKRA will be critical for those operating within the healthcare industry.

This ruling invites all stakeholders to reflect on their marketing practices and underscore the necessity for ethical conduct in every aspect of patient interaction and referral strategy. By maintaining this focus, organizations can not only ensure compliance with EKRA but also foster trust and integrity in their marketing endeavors.