Welcome to Spodek Law Group. Our goal is to give you the reality of EKRA prosecutions - not the sanitized overview you find on compliance websites, not the vague warnings in industry newsletters, but the actual truth about what happens when federal prosecutors decide your compensation arrangements violate the Eliminating Kickbacks in Recovery Act.
If you are reading this at midnight because you received a target letter, because federal agents showed up at your facility, or because a business partner just got indicted - you need to understand something immediately. The arrangements you thought were legal under the Anti-Kickback Statute may have been federal felonies since October 24, 2018. And unlike other healthcare fraud laws, EKRA offers almost no path to civil resolution. Its criminal prosecution or nothing.
That distinction matters more then you realize right now.
What EKRA Actually Prohibits (And Why Your Current Structure Probably Violates It)
Congress passed EKRA in 2018 as part of the SUPPORT Act, ostensibly to combat "patient brokering" - the practice of literally selling addicted patients to treatment centers for cash. The horror stories were real. People with substance use disorders were being treated as commodities, shuttled between facilities based on who paid the highest referral fee.
But heres the thing. The statutory language Congress actually wrote goes far, far beyond patient brokering. EKRA makes it a federal crime to pay or receive any remuneration to induce a referral to a recovery home, clinical treatment facility, or laboratory. Any remuneration. Any inducement. Any referral.
What does "induce" mean under EKRA? After the Ninth Circuit's 2025 ruling in United States v. Schena, it means basicly anything that could influence a referral decision, even if the person recieving payment never directly interacts with patients. The court held that payments to marketing intermediaries - people three handshakes removed from actual patient care - can trigger EKRA liability.
Think about what that means for your operation. Your marketing company gets paid based on patient admissions. Your intake coordinator gets bonuses when census is high. Your physician outreach representative earns commission on referral relationships. Every single one of those arrangements, structures your probably using right now, may constitute federal felonies carrying 10 to 20 years imprisonment per violation.
Thats not hyperbole. Thats the statute.
The Employment Safe Harbor That Dosent Exist
Heres were most treatment center owners and lab operators make there fatal mistake. They assume that because the Anti-Kickback Statute has an employment safe harbor, EKRA must have one too. After all, how could Congress criminalize paying W-2 employees?
But EKRA's employment exception is fundamentally different from AKS. Under the Anti-Kickback Statute, you could pay bona fide employees volume-based or value-based compensation. Sales people could earn commissions tied to referrals. Marketing staff could get bonuses based on patient census. As long as they were actual W-2 employees, not independant contractors, the arrangement was explicitly protected.
EKRA eliminated that protection. Look at the actual statutory language. The only employment arrangements EKRA protects are those where compensation is NOT determined by, and does NOT vary by, the number of individuals referred, the number of tests or procedures performed, or the amount billed or recieved.
Let that sink in. If your employee's pay varies at all based on referral volume - even if there a full-time W-2 employee with benefits and a base salary - that variable component violates EKRA. The quarterly bonus tied to census? Violation. The commission structure for your lab sales team? Violation. The performance metrics that include referral numbers? Violations.
What was perfectly legal on October 23, 2018 became a federal felony on October 24, 2018. And if you've been running your operation the same way since then, youve been commiting federal crimes for six plus years without knowing it.
OK so you might be thinking the government would have warned you. They would have issued guidance. They would have given the industry time to restructure. But heres the kicker - the DOJ and HHS have issued absolutly no compliance guidance since EKRA was enacted. None. Zero. The statute has been in effect for over six years and the federal goverment has provided no clarity whatsoever on what arrangements are permissable.
This isnt an oversight. Its prosecutorial strategy.
How the Ninth Circuit Made Everything Worse in 2025
The July 2025 ruling in United States v. Schena fundamentaly expanded EKRA's reach in ways the treatment and lab industry hasnt fully absorbed yet.
Mark Schena operated clinical laboratorys. He paid marketing intermediaries percentage-based compensation to bring in referrals. Those intermediaries then provided what the court called "misleading information" to referring physicians. The question was wheather Schena could be held liable under EKRA for payments to middlemen who never directly controlled patient referrals.
The Ninth Circuit said yes. Absolutley yes.
The court adopted what prosecutors call the "downstream inducement" theory. It dosent matter if the person your paying has direct authority to refer patients. It dosent matter if there three intermediaries between your payment and the actual referral. If your payment could have the effect of inducing referrals - even indirectly, even through a chain of relationships - EKRA applies.
As Todd Spodek often explains to clients facing EKRA investigations, this ruling transformed the liability landscape overnight. Before Schena, you might have argued that payments to marketing companies were one step removed from actual referrals. After Schena, that arguments dead. Your payment to ANY intermediary in the referral chain creates potential felony exposure.
And Schena wasnt even about treatment centers. It was about clinical laboratorys. The implications for addiction treatment facilitys, which rely even more heavily on marketing relationships, are staggering.
The All-Payer Problem Nobody Warned You About
Heres another critical difference between EKRA and the Anti-Kickback Statute that catches people completly off guard. The AKS only applies to referrals involving federal healthcare programs - Medicare, Medicaid, Tricare. If your dealing exclusively with private insurance or cash-pay patients, the AKS dosent reach you.
EKRA has no such limitation.
The statute applies to any "health care benefit program," which includes private commercial insurance, self-funded employer plans, and arguably even cash-pay arrangements where patients are subsequently reimbursed by insurers. The expansion is staggering. Arrangements that might have been perfectly legal because they only involved privately insured patients are now federal crimes under EKRA.
This matters enormously for the addiction treatment industry, where private insurance - particularly out-of-state PPO plans - has historicaly been the primary revenue source. Many treatment centers deliberatly focused on private-pay patients precisly to avoid AKS exposure. They thought they were being conservative. They were actualy walking into a different trap.
Consider the treatment center that only accepts Blue Cross or Aetna patients, never Medicare or Medicaid. Under AKS analysis, there marketing arrangements wouldnt implicate federal law at all. Under EKRA, every single referral-based payment becomes a potential federal felony.
The DOJ has been explicit about this in prosecutions. Multiple EKRA cases have involved exclusively private insurance claims. The prosecutors arent confused about the scope of the statute. There using it exactly as written - to reach conduct that AKS couldnt touch.
Laboratory Testing: The Hidden Landmine
Most treatment center owners think of EKRA as primarily affecting there patient referral arrangements. They focus on marketing companies, sober living relationships, and patient recruitment. What they miss is the laboratory relationship that may be there most dangerous exposure.
Clinical laboratorys - particularly toxicology labs that perform urine drug testing - are deeply integrated into addiction treatment. Treatment centers refer patients to labs. Labs bill insurance. And the financial relationships between centers and labs have historicaly involved volume-based arrangements that EKRA explicitly prohibits.
The dynamics work like this. Labs compete for treatment center referrals. To win that business, labs offer various inducements - free supplies, "consulting" fees, percentage-based rebates, or employment arrangements for treatment center staff who "help coordinate" testing. Under the old AKS framework, these arrangements might have been structured to fit within safe harbors. Under EKRA, most of them are now criminal.
The Schena case was specificaly about laboratory conduct. And the governments theory in that case - that payments to intermediaries can create liability even when the payment recipient dosent directly control referrals - has devistating implications for lab-treatment center relationships.
If your treatment center has any financial arrangement with a laboratory that varies based on test volume, referral numbers, or billing amounts, that arrangement may violate EKRA. And both sides - the lab paying and the treatment center receiving - face criminal exposure. Its a felony to pay the kickback. Its also a felony to receive it.
What the Sober Homes Initiative Actualy Does
In 2020, the Department of Justice created something called the "Sober Homes Initiative" specificaly to find and prosecute EKRA violations. This wasnt a general healthcare fraud task force. It was designed to target the addiction treatment industry.
The initiative focuses on what DOJ calls "fraud schemes in the substance-abuse-treatment industry." But look at what that actualy means in practice. There hunting for patient brokering arrangements - which sounds reasonable until you realize how broadly "patient brokering" gets defined in EKRA prosecutions.
Any payment connected to a referral can be characterized as patient brokering. Marketing fees? Patient brokering. Referral bonuses? Patient brokering. Revenue-sharing with sober living homes? Patient brokering. The statutory language dosent distinguish between genuine corruption and standard business development practices.
The Sober Homes Initiative has dedicated resources and dedicated prosecutors. They have experience with EKRA cases and established theories of liability. When they open an investigation, there not starting from scratch. There applying frameworks theyve already used to secure convictions.
This means EKRA enforcement isnt random or reactive. There is an organized federal effort specificaly designed to identify and prosecute treatment industry participants. If your compensation structures have referral-based components, your a potential target for an initiative that exists precisly to find people like you.
188 Months: What Federal Sentences Actualy Look Like
Lets talk about what happens when EKRA prosecutions succeed.
In 2021, federal prosecutors in the Southern District of Florida convicted several operators of addiction treatment facilitys after a seven-week trial. The charges included health care fraud, wire fraud, Anti-Kickback violations, and EKRA violations. The EKRA counts were specificaly for paying kickbacks to patients and accepting kickbacks from testing laboratorys.
The co-owner recieved 188 months in federal prison. Thats 15.6 years. Not probation. Not house arrest. Not a fine and community service. Federal prison for over a decade and a half.
The CEO recieved 97 months. Eight years.
These werent drug traffickers or violent criminals. They were healthcare business owners whose compensation arrangements crossed lines that, frankly, most of the industry still dosent fully understand.
In another case, a New Jersey physician pleaded guilty to EKRA conspiracy for paying a marketing company a per-patient fee for referrals. The fee structure was identical to what most treatment centers use - pay the marketing company when a patient actually admits. He recieved 15 months federal prison.
The first-ever EKRA conviction was even more sobering. Theresa Merced was an 80-year-old office manager at a substance abuse treatment clinic in Kentucky. She solicited approximatly $12,000 in kickbacks from a lab CEO in exchange for urine test referrals. Twelve thousand dollars. For that, she recieved five months in federal prison followed by five months of home detention.
The DOJ prosecuted an 80-year-old woman for $12,000. Think about that when your considering wheather they would actualy come after you.
Notice the pattern in these sentences. Nobody got probation. Nobody got fines only. Every single EKRA conviction has resulted in actual incarceration. Federal prosecutors dont bring these cases to slap peoples wrists. They bring them to put people in prison.
And these arent isolated examples. Since the Sober Homes Initiative launched, EKRA prosecutions have been accelerating. The infrastructure for enforcement exists. The legal theories have been tested and validated through convictions. The only question is whos next.
Understanding the "Knowing and Willful" Defense
Before we talk about the cooperation trap, you need to understand the most important element of any EKRA defense: the mens rea requirement.
EKRA requires that the defendant act "knowingly and willfully." This means prosecutors must prove you knew what you were doing constituted a violation of federal law. Not just that you knew you were making payments. Not just that you knew the payments were connected to referrals. But that you understood those payments violated EKRA specificaly.
This is your most powerfull potential defense, but its also incrediably fragile.
The complete absence of regulatory guidance from DOJ and HHS for over six years creates a genuine argument that nobody could have "knowingly" violated a law that the regulators themselves havent explained. When the government provides no clarity on what arrangements are compliant, how can anyone "willfully" violate standards that dont exist?
This argument has real force. Defense attorneys have used it effectivley to negociate better outcomes and in some cases to avoid prosecution entirely. But it requires carefull handling. Any evidence that you understood the arrangements were questionable, that you sought legal advice about EKRA, that you discussed "compliance" concerns internally - all of that undermines the mens rea defense.
Which brings us to the cooperation trap.
The Cooperation Trap Most Defendants Walk Into
Heres the part nobody talks about until its to late.
When EKRA investigations begin, the instinct is to cooperate. Answer questions. Provide documents. Explain that your arrangements were standard industry practice, that everyone does it this way, that you had no intent to violate the law.
That instinct will destroy you.
Every statement you make to federal agents becomes evidence. Every document you voluntarily produce expands there understanding of your compensation structure. Every explanation you offer about "industry standard" practices confirms that you knew how the arrangements worked - undercutting the defense that you lacked the knowledge required for criminal liability.
At Spodek Law Group, we've seen this pattern repeatedly. Business owners trying to be helpful end up building the prosecutions case for them. They think there explaining away the problem. There actualy confirming the elements of the crime.
Heres the reality. EKRA requires "knowing and willful" conduct. If you can credibily argue you didnt understand the law prohibited your arrangements - especialy given the complete absence of regulatory guidance - you have a defense. But once you start explaining how your compensation structure works, your demonstrating knowledge. Once you admit the arrangements were intentional business decisions, your demonstrating willfulness.
Stop talking to federal agents without an attorney present. Full stop. No exceptions. The short-term discomfort of appearing uncooperative is infinitley preferable to the long-term catastrophe of incriminating yourself.
Why DOJs Silence Is Your Biggest Problem
For over six years, the Department of Justice and Health and Human Services have had statutory authority to issue guidance on EKRA compliance. They could clarify what compensation structures are permissable. They could define safe harbors beyond the narrow statutory exceptions. They could give the industry a roadmap to compliance.
They have done none of this.
The S&G Labs Hawaii case in 2021 noted this exact problem - the court observed that healthcare providers have been left "wondering what they need to do to avoid liability" because regulators have provided no clarity. That was three years ago. Still nothing.
This isnt bureaucratic inertia. Its deliberate prosecutorial advantage. The vaguer the standards, the more discretion prosecutors have. When nobody knows what compliant looks like, everything becomes potentially non-compliant. The DOJ can pick there targets and construct there theories of liability without any regulatory framework constraining them.
What does this mean for you? It means compliance consulting is largely theater. You can pay lawyers and consultants to restructure your arrangements, but nobody can guarantee your safe. The statute is broad, the case law is expanding, and the regulators refuse to provide guidance.
Your either operating within a zone of potential criminal liability or your not in this industry at all. Those are the options.
What a Federal EKRA Defense Actualy Requires
If your reading this because EKRA enforcement has already touched your operation - target letter, grand jury subpoena, agent contact, business partner indictment - the calculus has changed. Your not in compliance planning mode anymore. Your in criminal defense mode.
Todd Spodek has handled these cases. He understands the specific dynamics that differentiate EKRA prosecutions from other healthcare fraud matters. The absence of safe harbors. The aggressive "downstream inducement" theories. The complete lack of regulatory guidance that undercuts prosecutorial claims of "willfulness."
EKRA defense requires immmediate action on multiple fronts. Document preservation, but strategically - your dont want to be producing materials that strengthen the governments case. Employee interviews, but carefully - you need to understand what people will say before prosecutors talk to them. Compensation structure analysis, but with privilege protections - you need honest assessment without creating a roadmap for the prosecution.
Most importantly, you need a defense team that understands how to leverage EKRAs biggest weakness: the knowing and willful standard. When the goverment provides zero guidance on compliance, when an entire industry operates the same way, when sophisticated operators with compliance counsel structure arrangements that prosecutors later claim are criminal - the argument that you "knowingly" violated the law becomes much harder for the prosecution to make.
But that defense requires careful construction. Every statement, every document production, every strategic decision either builds or undermines that argument. The wrong move in the first week can foreclose defenses that would otherwise have been availible.
The clock started when you learned about this investigation. The window for protective action is limited. The difference between 188 months and dismissal often comes down to decisions made in the first days and weeks.
Call Spodek Law Group at 212-300-5196.
The DOJ has been building EKRA cases for six years. They have prosecutors who specialize in these matters. They have the Sober Homes Initiative specificaly hunting for violations. They have unlimited resources and unlimited time.
You have this moment. Use it.
