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Paul Zimmerman
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EKRA Put to the Test Yet Again

Michelman & Robinson recently posted a blog about two Californians (a medical doctor among them) and three others (one from New Jersey and two Marylanders), all of whom admitted to their part in a conspiracy—in violation of the Eliminating Kickbacks in Recovery Act of 2018 (EKRA)—that involved multiple layers of kickbacks. EKRA enforcement continues with the indictment last month of the Chief Executive Officer of a Costa Mesa-based substance abuse treatment and counseling center.

The latest EKRA action is particularly interesting because it involves what was likely intended to be a safe harbor marketing services agreement between the facility in Costa Mesa and a marketer—an agreement that the government characterizes as a “sham.”

This is the first known criminal charge to test the “personal services arrangements and management contracts” safe harbor of EKRA. According to the Indictment filed on September 16, the Costa Mesa center paid the marketing company a bi-monthly flat fee to bring detox-eligible patients in the door. The Indictment does not specify the terms of the agreement or other factors relevant to the application of the safe harbor. That being said, the contract between the Costa Mesa facility and marketing firm—as described in the Indictment—looks to be consistent (at least on its face) with some of the EKRA safe harbor requirements, though the actions as alleged against the Costa Mesa CEO may serve to undercut the agreement.

For providers and marketers in this space, especially those that have attempted to restructure their marketing contracts in order to comply with EKRA, this most recent EKRA case should be top of mind. Bottom line: if the indictment against the Costa Mesa CEP serves to reduce the scope of personal services arrangements and management contracts otherwise in line with existing safe harbor requirements, those attempting in good faith to comply with EKRA might suddenly find themselves in jeopardy for actions taken before this new wave of enforcement became public.

M&R will continue to monitor this criminal action going forward.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.