EKRA Compensation Related Changes

 

While EKRA addresses a significant concern in the substance abuse treatment industry, EKRA’s broad anti-kickback prohibition appears to exceed its underlying legislative intent to prohibit illicit referrals of substance abuse patients. It raises significant questions regarding the applicability of EKRA to unrelated arrangements in the healthcare industry that could otherwise be structured to comply with existing federal law. But the language was added to the bill extending beyond treatment facilities to include clinical labs. Now, the new law extends to all payers and all laboratory testing services provided to patients. All clinical laboratories must understand the impact of EKRA on existing payment agreements, billing practices, and workflows. Non- or incorrect compliance could bring hefty fines—and even jail time.

Mostly, we have not received any reports that the large national clinical laboratory companies have changed their sales compensation programs related to EKRA. This includes no one changing from measuring against revenue to units or cash collected.  However, we present below several companies that have made changes:

Company A

Company A is a life sciences company focused on generating genomic insights for infectious diseases with a non-invasive test that helps clinicians make rapid treatment decisions.

Their representatives earn an average of $120,000 base salary. Their variable quarterly compensation program is $20,000 per quarter. The plan is not tied to any account revenue or unit volume. It is measured against the representative’s total business book for the prior year.

Company B

Is a CLIA laboratory that offers infectious disease testing. By providing expert treatment options, including an emphasis on antibiotic stewardship, they help physicians offer better patient care.

At this time, Company B has not made any changes to its sales compensation plans. They are taking a wait and look at what other companies are doing before considering any changes. The current commission plan pays 8% for new business and 4% for residual business.

 

Company C

As an innovative biotechnology company, they are actively working to fulfill the promise of precision medicine through unique platforms to help patients with cancer and other complex diseases.

Their sales compensation plan has been restructured to reward their representatives quarterly, measured against goals for the entire region and specific corporate goals.

Company D

Company D provides comprehensive anatomic, clinical, and molecular pathology testing services.

Company D pays sales representatives 8% on all AP and 6% on all clinical for a rolling 12 months. In addition to new sales, they pay a residual 2% on all accounts.

Company E

Company E is a privately held company providing diagnostic oncology and genetic tests to clinicians.    

Presently Company E has made no decisions to change its sales compensation plan. They may likely be currently assessing changes that would be implemented at the start of 2020.

Company F

Company F’s pathologists are board-certified, Fellowship-trained, and sub-specialized in molecular, dermatopathology, urology, gynecologic, and gastrointestinal pathology.

Company F’s sales organization is one of the highest compensated in the industry. In addition to high base salaries, they make an 11% bonus for new sales for 12 rolling months. And for existing accounts, they make a 3% residual bonus.

The Top Tier National Laboratories

As mentioned above, none of the largest national diagnostic reference laboratories have divulged any changes to their sales compensation plan related to EKRA legislation. It is felt they are addressing this as we enter Q1 and likely revised plans launched in 2020.

Summary

Only two of the seven companies we interviewed have taken steps to become EKRA compliant.  (one of them was a start-up, and this was their first pay plan)

Closing Remarks

Since the first quarter of 2020 is rapidly approaching, it is felt that some companies in the diagnostic reference laboratory sector will use that time to draft changes to their sales compensation programs to ensure they are compliant with the EKRA legislation. However, some companies will wait to see what the top-tier national labs will do before they make any changes. The variable compensation portion for sales representatives counts for a large part of their total compensation. Over time, history shows change potentially being considered; if they significantly reduce their income, they will destabilize the sales organization. Any change viewed by the sales staff as detrimental to their income will result in possible high turnover rates. Top producers will likely be the first to leave. The added exposure to the company, with loss of both revenue and profit, plus the added recruiting costs, can be significant. Changes to sales compensation always require careful designing, implementation, and communication planning.