In a matter of first impression, the Ninth Circuit Court of Appeals interpreted the scope of the 2018 Eliminating Kickbacks in Recovery Act (EKRA) in the context of a lab operator who allegedly paid marketers to induce referrals for “medically dubious allergy tests.” United States v. Schena, No. 23-2989, slip op. at 4 (9th Cir. July 11, 2025). As relevant here, EKRA penalizes anyone who “knowingly and willfully . . . pays or offers any remuneration (including kickback, bribe, or rebate) directly or indirectly, overtly, in cash or in kind . . . to induce a referral of an individual to a recovery home, clinical treatment facility, or laboratory.” 18 U.S.C. § 220(a)(2)(A). EKRA is a relatively new statute, and the Schena opinion is the first time a federal appellate court has rendered an interpretation.
In our May 2025 client alert, we discussed two defense-friendly Anti-Kickback Statute (AKS) and False Claims Act (FCA) opinions, which narrowed the scope of advertising and marketing conduct that runs afoul of the AKS. While both the AKS and EKRA criminally punish paying remuneration for inducing referrals for certain medical services reimbursed by federal health care programs (e.g., Medicare, Medicaid, TriCare), a key difference is that EKRA is not limited to federal health care programs; EKRA’s prohibitions extend to referring patients for specific covered services reimbursed through private health insurance or self-pay. An EKRA conviction can carry up to 10 years’ imprisonment, up to a $200,000 fine, or both, for each occurrence. 18 U.S.C. § 220(a). Schena illustrates how, in certain circumstances, payments to marketing intermediaries for lab referrals can lead to criminal EKRA liability.
Key Takeaways
- Payment to marketers, or other intermediaries, that tracks to referral volumes can violate EKRA. There is no requirement that payments be made to a physician or other healthcare provider who interfaces directly with patients.
- A percentage-based compensation structure for marketers is not a per se EKRA violation. However, percentage-based payments made to marketers who are directed to mislead medical decisionmakers about the nature of and need for the covered service would violate EKRA.
- Borrowing from criminal law and AKS precedent, to “induce a referral” under EKRA means “wrongful causation” or “undue influence”—e.g., where, in Schena, a marketer effectively takes over the clinical decision-making role of the referring physician, payment to the marketer constitutes “induc[ing] a referral.”
The defendant in Schena operated a lab focused on blood tests for allergies and, later, for COVID antibodies. He was convicted of one count of conspiracy to violate EKRA and two counts of substantive EKRA violations, among other healthcare and securities fraud offenses, and sentenced to eight years’ imprisonment and ordered to pay more than $24 million restitution for billing more than $77 million to public and private insurers for allegedly unnecessary tests (for which insurers paid only around $2.7 million because many claims were denied or paid at lower rates). The evidence presented to the jury at trial showed that (i) defendant directed marketers to misrepresent to physicians who did not have allergy testing expertise that these blood tests were more accurate than and superior to industry-standard allergy and COVID tests, with the goal of inducing referrals, and (ii) marketers were paid a percentage of the revenue they brought in. Before trial, the district court had denied defendant’s motion to dismiss the EKRA counts, rejecting the argument that his conduct did not violate EKRA as a matter of law where the payments were made only to marketing intermediaries, not to the doctors making lab referrals. See Schena, slip op. at 5-8.
On appeal, the Ninth Circuit considered (a) “whether EKRA applies to payments made to marketing intermediaries, as opposed to the referring doctors or persons who otherwise interact directly with patients”; and (b) if so, “what it means to ‘induce a referral’ in the context of that type of payment relationship.” Id. at 10. The court concluded that, “at a minimum, when percentage-based payments are made to marketing agents who are directed to mislead those making the referrals about the nature of and need for the covered medical services, those payments would violate EKRA.” Id. at 18. The court did not, however, elaborate on other scenarios that could violate EKRA, noting that the instant case represented a “sufficient” but “not a necessary set of circumstances for establishing undue influence.” Id. at 18-19.
To interpret the meaning of “induce a referral” in the EKRA context, the Ninth Circuit turned to AKS jurisprudence. The Schena court analyzed many of the same cases as the Seventh Circuit in United States v. Sorenson—a criminal AKS case covered in our May 2025 client alert. Compare Schena, slip op. at 16-18, with United States v. Sorenson, 134 F.4th 493, 500-02 (7th Cir. 2025). In overturning the lower court’s conviction, the Sorenson court identified a narrow circumstance (not present in that case) in which a non-physician could exert such influence over the medical decisionmaker as to render the physician’s signature merely a rubber stamp. In Schena, the Ninth Circuit—without citing Sorenson—determined that it was confronted with this type of narrow circumstance in which the marketing intermediary effectively took over the role of the referring physician, such that payments to the marketer induced the referrals.
Schena and Sorenson demonstrate that EKRA liability, like AKS liability, turns on the specific facts of each case. As EKRA caselaw develops, practitioners should expect courts to continue to look to AKS precedent for guidance. In the meantime, as Schena cautions, “companies and marketing agents seeking to steer clear of EKRA may consider whether it is preferable to structure their compensation arrangements in accordance with the statute’s safe harbor.” Schena, slip op. at 18 (citing safe harbor where “payment is not determined by or does not vary by—(A) the number of individuals referred . . .; (B) the number of tests or procedures performed; or (C) the amount billed to or received from . . . the health care benefit program,” 18 U.S.C. § 220(b)(2)).