On July 11, 2025, the Ninth Circuit issued a decision clarifying the scope of Eliminating Kickbacks in Recovery Act (EKRA). In affirming a Northern California-based medical testing laboratory’s convictions under EKRA, the Ninth Circuit provided valuable insight into what constitutes a violation of EKRA, a law that has not historically been subject to many enforcement actions.
Congress passed EKRA in 2018. EKRA, in relevant part, makes it illegal to “pay or offer renumeration … to induce a referral of an individual to a … laboratory.”
In U.S. v. Schena, the Ninth Circuit affirmed Mark Schena’s (the owner of the laboratory) convictions for violating EKRA. Schena’s laboratory conducted blood tests for allergy testing and engaged marketers to promote this service to potential patients. During the COVID-19 pandemic, the laboratory shifted its focus to testing blood for COVID-19 and continued to engage marketers to raise awareness of the laboratory’s capabilities. The Court held that the laboratory’s billing practices violated EKRA because (along with other misconduct) blood samples were tested for both COVID-19 and allergies to inflate collections without a physician order. Further, the allergy tests tested for a full 120-panel of allergens, even though this was not medically necessary in most cases. Marketers promoting the laboratory’s testing were not paid on a salary or given written contracts, instead marketers were paid a percentage of the revenue that they were able to bring in.
The laboratory moved to dismiss the violations of EKRA reasoning that percentage payments were only made to marketing intermediaries and not persons who were directly making referrals to patients (e.g., physicians). The main issues discussed in the decision include: (1) whether EKRA applies to payments made to marketing intermediaries, as opposed to the referring doctors or persons who otherwise interact directly with patients; and (2) if payments made to marketing intermediaries are covered, what it means to “induce a referral” in the context of that type of payment relationship.
On the first issue, the court held that EKRA applies to marketing intermediaries who interface with those who refer services to patients. The court clarified that there is no requirement under EKRA that payment be made to a person who interfaces directly with patients. The court explained that the phrase “to induce a referral of an individual” refers to the ultimate object of the inducement and does not need to directly relate to patient inducement. According to the court, this means “a third party such as a marketer could still induce a patient referral through a doctor or other medical professional.”
Turning to the second issue, the court first clarified that “a percentage-based compensation structure for marketing agents, without more, does not violate” EKRA. In reaching this conclusion, the court pointed out that, at oral argument, “the government itself agreed that a percentage-based payment to a marketer is not per se unlawful under EKRA.”
The court continued that “wrongful inducement exists when a defendant pays remuneration to a marketing agent to have him unduly influence doctors’ referrals through false or fraudulent representations about the covered medical services.” As applied to the facts in Schena, the court held, “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.” Critically, the court acknowledged, “[f]uture cases will be needed to give content to the specific circumstances in which payments to a marketing agent reflect a wrongful effort to unduly influence the decisions of doctors and medical professionals making referrals.”
The case is United States of America v. Mark Schena, United States Court of Appeals for the Ninth Circuit, Case No. 23-2989,and the opinion is available here.
