NEW YORK, July 11, 2025 — A recent Ninth Circuit ruling has significantly broadened the reach of the Eliminating Kickbacks in Recovery Act (EKRA). The court determined that EKRA applies to any payment potentially influencing a referral, even indirectly, and affirmed laboratory operator Mark Schena’s convictions for violating the law due to his percentage-based payments to marketing intermediaries who misled providers.
The court’s decision on July 11, 2025, in United States v. Schena, clarified that EKRA’s prohibitions extend beyond direct payments to referring physicians. This expansive interpretation means even downstream payments designed to encourage referrals now fall under the law’s purview.
EKRA’s Broadening Scope
Enacted in 2018, EKRA prohibits payments made to induce referrals to laboratories or to encourage the use of services from recovery homes, clinical treatment facilities, or laboratories. Unlike the federal Anti-Kickback Statute (AKS), which is limited to federal healthcare programs, EKRA covers services under any health care benefit program operating in interstate commerce. EKRA also offers a narrower safe harbor for employment compensation compared to the AKS, restricting it to payments not tied to referrals, tests, or billings.
EKRA’s safe harbor for employment compensation is only applicable if payments do not vary based on referrals, tests performed, or insurance billings.
Schena Case Details
Mark Schena ran a medical testing laboratory specializing in allergy and COVID-19 antibody tests. Starting in 2020, he paid marketers to promote his lab’s services to medical professionals. Evidence indicated these tests were allegedly unnecessary, costly, and inferior. Schena paid marketers a percentage of the revenue generated from their accounts. His marketers reportedly misled medical professionals to order tests from his labs. Schena was convicted on EKRA violations, conspiracy, and other counts, which he appealed.
Ninth Circuit’s Interpretation
The Ninth Circuit addressed two main points: whether EKRA applies to marketing intermediaries and what constitutes “inducing a referral.”
Payments to Marketing Intermediaries
The court ruled that EKRA’s scope isn’t confined to payments made to those who can directly refer patients or interact with them. Restricting EKRA this way could allow individuals to circumvent the law by using agents to pressure patients. The court concluded that paying a marketer to influence a physician to make a referral, including through marketing efforts, falls under EKRA.
The Ninth Circuit disagreed with a lower court’s finding in S&G Labs Hawaii, LLC v. Graves, which held EKRA didn’t apply when marketing employees interacted with doctors because the client accounts weren’t “individuals” being tested. The Ninth Circuit clarified that “to induce a referral of an individual” means the ultimate target is a person receiving medical services, not necessarily the direct interaction between the payee and patient. This mirrors how courts have interpreted similar provisions in the AKS, recognizing that indirect payments aimed at downstream referrals are illegal.
Wrongful Inducement
The court further examined the meaning of “induce a referral.” While EKRA doesn’t define “induce,” the court drew from criminal law, noting it implies wrongful causation, not just causation. Therefore, a percentage-based compensation structure alone doesn’t automatically violate EKRA; some form of undue influence is necessary.
Drawing parallels to AKS case law, the Ninth Circuit distinguished between standard advertising and exerting undue influence. While not precisely defining “undue influence,” the court found that percentage-based payments to marketers who were directed to mislead referring providers about the necessity or nature of medical services violate EKRA.
Implications for Healthcare Compliance
EKRA’s scope has been a persistent challenge for laboratories and substance abuse recovery providers, particularly concerning sales staff compensation. The lack of clear regulatory guidance and differing court interpretations have added to the confusion. The Ninth Circuit’s decision in Schena provides some clarity by rejecting the narrower view of the S&G Labs Hawaii ruling. However, it also reiterates that not all percentage-based sales compensation is illegal, offering potential comfort to businesses relying on commission structures.
The ruling emphasizes a fact-and-circumstances approach, lacking a simple “bright line test.” Businesses should carefully review their sales compensation models, especially those outside EKRA’s safe harbor. Implementing robust safeguards, ensuring proper sales staff training, and closely managing interactions with referring providers are crucial for compliance.
