Addressing EKRA Sales Force Compensation Mandates to Improve Both Compliance and Profitability

EKRA – Eliminating Kickbacks in Recovery Act – is a relatively new law that has some important implications for all diagnostic laboratories, and not just toxicology labs, which precipitated the legislation. Passed in October 2018, it was widely understood the law was intended to combat the opioid crisis. Recently, due in part to COVID-19 and government concerns over fraud and abuse, there has there been growing awareness that EKRA’s impact is much more wide-ranging. Written in a broad manner, the law expands enforcement flexibility on anti-kickback scenarios from governmental insurers all the way to private health plans, and also contains fewer exemptions than the Anti-kickback Statute (AKS), and the maximum financial penalty under EKRA is twice that of AKS. Moreover, while the Department of Justice has relied heavily on the AKS since the advent of COVID-19, it has also shown increasing interest using EKRA to combat fraud.

One of the most onerous provisions that concern lab managers most is EKRA’s requirement for labs to alter substantively the manner in which their sales teams are compensated by prohibiting remuneration for referrals. Whereas in the past, business practices such as paying sales commissions to marketing personnel based on volume or revenue were commonly accepted and not prohibited under the Anti-kickback Statue, these activities are now suspect under EKRA. EKRA is also applicable irrespective of medical business operations or private vs. government payor, so while its original aim was opioid abuse, its practical application touches all laboratories.

Even as the industry has known for years that commission-based compensation for contracted sales staff is inadvisable and fails the anti-kickback standards that prohibit knowingly and willfully making a payment to induce patient referrals or generate business in connection with any governmental health care program, EKRA takes this a step further to prohibit commissions for salaried salespeople based on the dollar value or volume of tests a physician, clinic, or other provider sends – even if this has always been the industry standard for sales compensation in the laboratory space and even if the lab in question does not specialize in drug testing. Under EKRA, employee compensation can no longer vary by:

• Number of individual referrals
• Number of tests or procedures performed
• The amount billed to or received from the payor for referred individuals

A Positive Outcome

Although it is difficult to make significant structural changes to the compensation structure while remaining competitive in the marketplace, becoming compliant with EKRA could have an unexpected upside for some laboratories. Labs may find that re-evaluating their compensation structures lead to new, valuable insights about their business.

Volume is not always, or even usually the best way to influence desired outcomes in the sales process. Focusing on volume (quantity ordered or dollars collected) alone can lead to making suboptimal decisions. For instance, perhaps a clinic sends a high volume of tests and generates significant revenue, appearing to be an excellent client. But what if half of those referrals don’t include prior authorization and medical necessity documentation? The subsequent reimbursement difficulties and costs incurred in trying to obtain the necessary information directly impacts the profitability of the lab. Delving into business analytics and looking closely at the ordering patterns and test complexity as well as the billing mix – whether it’s government or private, in network or not – provides insights that may be used to guide the structure of sales commissions. In some ways, compensating salespeople based on volume is simply an easy lever to pull in a data deficient environment, but it’s clearly not the most effective lever and with EKRA it may no longer be legal.

Alternative Solutions

It is possible for laboratories to structure compensation arrangements that don’t focus on testing volume or revenues, but rather on the education of providers to maintain consistency with standards of established medical practice as also reflected in payor coverage criteria. Relevant criteria might include the number of visits to an account, duration of the client relationship, or the number or types of clients the salesperson has introduced. Incentives based on activities designed to improve ordering quality by developing tools for the provider to easily ascertain patient cost share, coverage and billing requirements in a manner that optimizes administrative efficiencies for both the provider and the lab are not prohibited and have the obvious benefit of improving clean claim submission and reimbursement. Examples include incentives for ensuring proper client setup and education and encouraging submission of all necessary diagnostic, demographic, and insurance information. Whatever the program structure, it’s critical for labs to follow the legal advice of their attorneys when it comes to issues of compliance, whether with EKRA or other federal regulations.

How XiFin Can Help

A crucial element in structuring a compensation plan — and in making laboratory business decisions in general — is access to consistent, timely, and accurate information. XiFin Advanced Analytics provides the operational performance metrics and test-level data exploration that laboratory executives need to understand their business and structure a compliant compensation plan that also supports the business. The following examples provide more details about the importance and benefits of test level analysis, error processing monitoring, and use of automation and engagement tools, all of which can inform an EKRA-compliant program.

Test Level Analytics

Understanding the health of client business is key to success. Relevant metrics could include ordering patterns, ordering quality, adoption of automation and its impact on reduction of cost and improved outcomes.

The Test Level Analysis dashboard, for instance, provides executives with a summary view of the ordering pattern of tests based on units and/or sales. The dashboard helps identify trends, analyze specific ordered tests, and view which tests are the most profitable. Paired with client-level ordering patterns, the information can be used to determine which tests a lab should add to their test directory.

Error Analytics

XiFin’s Error Processing Analysis dashboards detect the most common errors and enable lab managers to identify certain errors associated with required prior authorization to determine how often those errors occur, how long it takes to correct, and what is paid after the error is fixed. The dashboard also provides a means to measure the efficiency and effectiveness of human vs automated error correction. An upward trend of system-fixed errors could indicate the effectiveness of automated workflows, which reduce the need for manually fixing errors and thus reducing labor costs devoted to such tasks.

Automation/Engagement Analytics

Client portals are an important means for educating clients on requirements to process a clean claim and how to efficiently provide complete and accurate billing information as well as facilitating a streamlined method for collecting additional information requested by the payor on the backend. XiFin’s Client Portal Analysis dashboards enable executives to keep tabs on the success of their portal programs.

The XiFin Client Portal Analysis dashboard provides laboratories with insight into how their clients are utilizing the Client Portal. For example, it shows which clients are fixing errors using the automated process offered through the Client portal, and which need additional advocacy on the importance and benefits of utilizing the portal to fix their own errors. Increased Client Portal usage translates to reduced laboratory labor efforts on these tasks.

In order to design a compliant, objective, and pragmatic compensation plan, labs need actionable information and systems. XiFin’s Advanced Analytics empowers executives and lab managers with information that can help focus on meaningful business metrics that lead to better business practices for both the lab as well as their provider clients. XiFin works as a partner to help labs leverage their vast data resources to improve business processes in ways that improve efficiency and reimbursement, and to make program decisions that provide financial integrity and improve profitability.

While redesigning a compensation program can help laboratories avoid running afoul of EKRA, AKS and other regulatory mandates, it can also help focus attention on business performance optimization and ways to ensure strong, lasting relationships with providers. The key is actionable information, such as that provided by XiFin’s Advanced Analytics.

Resources

The National Law Review

K&L Gates

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