Sober living homes are receiving more and more regulatory attention from the government. While this benefits the sober living community by removing bad actors and rebuilding our reputation as ethical and effective recovery partners, the changes also mean that responsible sober living home owners and operators need to stay abreast of the changes to ensure that they’re complying with the letter of the law.
ERKA, or the Eliminating Kickbacks in Recovery Act, was originally passed as part of a larger bill, called the SUPPORT Act, by congress in 2018. It builds on previous legislation to address patient brokering and other unethical behavior by addiction treatment and recovery housing providers.
Today, we’ll look at how ERKA is impacting the sober living home community in 2021.
Disclaimer: This post is not legal advice. We’re software developers, medical billing specialists and addiction treatment community advocates, not lawyers. Please speak with your legal team for the most useful insights about staying on the right side of ERKA.
First, What is ERKA?
ERKA stands for Eliminating Kickbacks in Recovery Act. It was designed to target patient brokering and other forms of insurance fraud in which unethical addiction treatment providers and sober living home operators sometimes engage.
What’s illegal under ERKA?
The act targets patient brokering and other practices designed to defraud insurance companies.
In it’s own words, the act bans “solicit[ing] and reciev[ing] remuneration directly or indirectly...for referring a patient...to a recovery home, clinical treatment facility or laboratory.” By the same token, it also bans “pay[ing] or offer[ing] any remuneration” to “induce a referral.”
You can read one of the most relevant sections of ERKA here:
whoever, with respect to services covered by a health care benefit program . . . knowingly and willfully-
(1) solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind, in return for referring a patient or patronage to a recovery home, clinical treatment facility, or laboratory; or
(2) pays or offers any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind-
(A) to induce a referral of an individual to a recovery home, clinical treatment facility, or laboratory; or
(B) in exchange for an individual using the services of that recovery home, clinical treatment facility, or laboratory,
shall be fined not more than $200,000, imprisoned not more than 10 years, or both, for each occurrence.
Translation: Exchanging money, rebates, bribes, kickbacks or any other kind of compensation to put yourself in a position to collect addiction treatment patients’ insurance dollars is illegal.
In the real world, this often looks like patient brokering or receiving money in exchange for funneling patients to a specific drug testing provider.
Unlawful Addiction Treatment Operators Are Definitely Being Prosecuted Under ERKA in 2021
Is ERKA being enforced in 2021?
The answer is a resounding yes.
A 27 year old man in Santa Ana was accused of using a shell company to receive kickbacks in the industry in March 2021. As with all ERKA violators, if he’s found guilty, he faces up to 20 years in prison or a $200,000 fine for each instance of violation. You can read about his case here.
ERKA racked up it’s first guilty plea last year, in 2020. Others soon followed. In that same year, a California CEO ran afoul of ERKA and now faces charges.
Unethical “Medical Directors” and “Marketers” Are a Big No-No Under ERKA
In one case, a physician was listed as a “medical director” for over 50 sober living homes. He wasn’t collecting a large salary at each home. Instead, he was referring his patients - the sober living home residents - for unnecessary drug testing at a lab. For each patient he referred to the lab, he received a kickback. This physician is definitely in trouble with ERKA, but the sober living homes he was doing business with are also at risk, depending on their level of awareness and complicity.
Addiction treatment marketers also need to be careful with ERKA. If your addiction treatment facility pays marketers or recruiters for referrals, it’s likely that you’re not in compliance with ERKA.
The moral of the story? Review all contracts with your legal team before you enter into any relationships with marketers and any other entity that promises referrals.
Understanding ERKA’s “Safe Harbors” Help Sober Livings Homes Stay in Compliance
Not everything is illegal under ERKA. In addition to outlining illegal behaviors, the act specifies certain “safe harbors” for providers to spell out what practices are still allowed.
ERKA allows for the following “safe harbors:”
Price discounts that are properly disclosed
Routine employee compensation that is not based on referrals
Standard Medicare Part D drug discounts
Payments that are already provided for under the Anti-Kickback Statute’s safe harbor for “personal services”
Co-insurance and copay waivers
Payments to federally qualified health clinics
Payments that are outlined under defined or approved alternative payment plans
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