In a Case of First Impression, Circuit Court Affirms EKRA Conviction for Improper Payments to Marketers
2.24.2026
In one of the few prosecutions based on the Eliminating Kickbacks in Recovery Act, and in an even rarer Court of Appeals opinion interpreting the statute, the Ninth Circuit in United States v. Schena,[1] recently affirmed a jury conviction of a laboratory operator based on his improper payments to marketers. The Ninth Circuit held that (1) like the Anti-Kickback Statute, EKRA applies to payments made to marketing agents who act as intermediaries – not just to doctors or providers who interact directly with patients; and (2) although a payment arrangement based on a percentage of the revenue generated by a marketer does not per se violate the law, inducing referrals through undue influence on providers by making false or fraudulent misrepresentations does.
Background of the Eliminating Kickbacks in Recovery Act
The Eliminating Kickbacks in Recovery Act was passed by Congress in 2018 to broaden the prohibition against the payment of kickbacks (or any remuneration) for patient referrals under the Anti-Kickback Statute, which only applies to services covered by federal health care programs such as Medicare and Medicaid. EKRA imposes similar prohibitions to private health insurance plans, but only for certain covered services (i.e., recovery homes, clinical treatment facilities, and laboratories). In relevant parts, legislation penalizes anyone who knowingly and willfully “pays or offers any remuneration (including any 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.”[2] Possibly because of EKRA’s controversial reach into the field of private health insurance – traditionally outside the scope of the Anti-Kickback Statute – federal prosecutions based on EKRA have been few and far between.
The Ninth Circuit’s Interpretation of EKRA
First, the court in Schena rejected the argument that EKRA only applies to payments made to referring doctors or providers who interact directly with patients. Instead, EKRA also applies to payments made to marketing intermediaries even though they do not directly interact with patients, as the statute covers payments made “directly or indirectly” to induce referrals. This reading of EKRA is consistent with case law interpreting the Anti-Kickback Statute on the same issue.[3]
Second, and more importantly, the court interpreted what it means “to induce” a referral under EKRA in the context of payments made to marketers.[4] The court again looked to case law interpreting the Anti-Kickback Statute and held that the term “induce” requires “undue influence” on those who make health care decisions.[5] Simply engaging in advertising activities, where there is no evidence of undue influence on the independent decision to purchase a health care good or service, does not constitute an unlawful inducement under the statute. Though not cited by the court, this interpretation is also consistent with recent Seventh Circuit case law on the same issue under the statute – United States v. Sorensen.[6]
Critically, the court noted that a percentage-based compensation structure for marketers, without more, is not enough “to induce” a referral and does not per se violate EKRA. But where there is evidence of undue influence on the provider –– such as directing marketers to convey false, fraudulent, or misleading representations about the covered medical services – those payments would violate EKRA.
As applied to the facts, the court held there was sufficient evidence to establish undue influence to uphold the EKRA conviction. Specifically, the facts involved percentage-of-revenue-based payments to marketers to sell blood testing services for allergens and COVID-19. The defendant lab operator directed marketers to mislead and deceive doctors about the lab’s blood testing services in an effort to cause them to make referrals to his lab. The defendant also directed marketers to target doctors who were less knowledgeable about allergies and therefore more likely to believe the false claim that the lab’s blood tests were superior to skin tests, and would not understand that it was unnecessary to test for 120 allergens. The marketers also misrepresented the speed and efficacy of the lab’s COVID-19 blood tests compared with the PCR test, and falsely claimed that allergies and COVID-19 symptoms could be confused with one another, so it was necessary to test for both. Further, there was trial testimony that the marketers effectively “controlled” which lab a sample would be sent to. Based on these aggravating facts, the court upheld the defendant’s EKRA conviction for inducing referrals by directing marketers to engage in deceitful conduct that exerted undue influence on the referring providers.
Practical Considerations
Although EKRA remains somewhat controversial due to its broad reach into the realm of private payors, and while some may question EKRA’s validity, this case signals that courts will uphold jury convictions based on EKRA violations. This case also demonstrates that courts are likely to borrow from Anti-Kickback Statute case law when interpreting EKRA, which helps provide future guidance given the dearth of cases (and prosecutions) under EKRA.
Finally, this case provides some assurance that percentage-based payments to marketers, without more, are not per se violations of EKRA (at least in the Ninth Circuit) or the Anti-Kickback Statute (in the Fifth Circuit.)[7] Typically, these types of payment arrangements are disfavored and often targeted by regulators, in part due to the statute’s’ personal services and management contracts safe harbor, which requires that payments not take into account the volume or value of any referrals or business generated.[8] However, compliance with the safe harbor is not required to avoid a violation. Rather, according to Schena, the important question in determining if a payment was made “to induce” a referral is whether there was any undue influence on the independent decision to purchase a health care good or service.
Phillip Kim is an associate attorney in Baker Hostetler LLP’s white collar practice group. Kim’s practice focuses on defending individuals and health care entities against civil and criminal enforcement actions, such as under the False Claims Act and the Anti-Kickback Statute. This article appears in the Health Law Journal, the publication of the Health Law Section. For more information, please visit nysba.org/health.
Endnotes:
[1] 142 F.4th 1217 (9th Cir. July 11, 2025).
[2] 18 U.S.C. § 220(a)(2)(A).
[3] United States v. Shoemaker, 746 F.3d 614 (5th Cir. 2014); United States v. Miles, 360 F.3d 472, 480 (5th Cir. 2004); United States v. Polin, 194 F.3d 863, 866–67 (7th Cir. 1999).
[4] Note, the marketers in Schena were independent contractors, not employees. As such, EKRA’s safe harbor for payments made by “an employer to an employee” did not apply. 18 U.S.C. § 220(b)(2).
[5] United States v. Marchetti, 96 F.4th 818, 827 (5th Cir. 2024); United States v. Shoemaker, 746 F.3d 614 (5th Cir. 2014); United States v. Miles, 360 F.3d 472, 480 (5th Cir. 2004).
[6] 134 F.4th 493, 502 (7th Cir. April 14, 2025) (reversing AKS jury conviction where there was no evidence that marketers subjected physicians to improper influence)
[7] Marchetti, 96 F.4th at 826.
[8] 42 C.F.R. § 1001.952(d); 18 U.S.C. § 220(b)(2).
