Key Takeaways
- DOJ’s takedown resulted in federal criminal charges against 15 defendants, with nearly $2 billion billed to government and private payors, in cases involving alleged substance abuse treatment fraud, illegal kickbacks, medically unnecessary surgical procedures, hospice fraud, and pharmacy prescription fraud.
- Two cases charged five defendants with EKRA violations, among other crimes, involving $1.6 billion in private health insurance claims – the largest EKRA prosecution since the law was enacted in 2018.
- The massive dollar amounts and scope of these recent EKRA charges may inspire future EKRA investigations and prosecutions in other districts.
On October 22, 2026, the Department of Justice (DOJ) announced a sprawling health care fraud takedown in Los Angeles, California, encompassing nearly $2 billion in alleged fraudulent claims. Most notably, the takedown included criminal charges under the Eliminating Kickbacks in Recovery Act (EKRA) related to $1.6 billion billed to private health insurers for allegedly fraudulent substance abuse treatment. The DOJ describes these EKRA charges as “the largest sober home fraud scheme the Department has ever prosecuted.”
Specifically, in United States v. Young, et al., No. 2:26-cr-00670 (C.D. Cal. Oct. 21, 2026), the owners of several substance abuse treatment facilities allegedly directed patient recruiters, so-called “body brokers,” to target vulnerable populations (e.g., individuals who were homeless, in poverty, or attending substance abuse support groups) to lure them into the facilities. The recruiters allegedly offered prospective patients kickbacks in the form of money, free flights, hotel stays, cars, gift cards, controlled substances, and illegal drugs. Patients with high-reimbursing insurance policies allegedly received more luxurious accommodations and inducements. In some instances, prospective patients were allegedly hired as employees to disguise kickbacks paid to them as salaries. The defendants allegedly recycled patients through different facilities to continue billing their insurance, regardless of whether treatment was medically necessary or even provided. The DOJ alleges $1.6 billion was fraudulently billed to private insurance companies in violation of EKRA; the defendants were also charged with wire fraud, money laundering, conspiracy, and health care fraud.
Similarly, in United States v. Maldinich, No. 8:26-cr-00121 (C.D. Cal. Oct. 14, 2026), a patient recruiter was charged under EKRA for receiving illegal kickbacks in exchange for referring patients to substance abuse treatment facilities that billed private insurance plans.
EKRA’s Background and Recent Developments
EKRA generally prohibits the payment or receipt of any remuneration (e.g., kickbacks, bribes, or rebates) to induce patient referrals. Importantly, EKRA applies to commercial health insurance claims, but only for certain covered services (recovery homes, clinical treatment facilities, and laboratories). When first enacted in late 2018, EKRA was somewhat controversial due to its broad reach into the field of private health insurance – an area not covered by the Anti-Kickback Statute (AKS). Although prosecutions under EKRA were slow to start, a series of EKRA cases were filed in 2025, potentially signaling future EKRA actions, as we observed in a prior alert.
Additionally, on September 25, 2026, the DOJ denied a petition submitted in September 2024 by the American Clinical Laboratory Association (ACLA) asking DOJ to expand EKRA’s employee safe harbor to permit variable compensation arrangements, specifically where the employee does not knowingly provide false or misleading information to providers or patients. EKRA’s current safe harbor does not permit employee payments that vary based on the number or value of referrals, making it arguably more stringent than the AKS’s employee safe harbor. The DOJ denied ACLA’s petition, interestingly enough, just one month before announcing its $1.6 billion EKRA prosecution. Given that DOJ’s recent EKRA prosecution alleged that patients were hired as employees to disguise kickbacks paid to them as salaries, DOJ’s denial of the request to expand EKRA’s employee safe harbor does not seem coincidental.
In denying the request, DOJ reasoned that EKRA applies more broadly than situations involving fraud, citing to last year’s Ninth Circuit decision in United States v. Schena, 142 F. 4th 1217, 1226 (9th Cir. 2025), as support. 91 F.R. 60,905, 60,907-09 (Sept. 25, 2026). DOJ explained that EKRA’s legislative purpose is also aimed at preventing financial incentives that could compromise patient care, deprive patients of choice, and lead to unfair competition, overutilization, unnecessary testing, and increased health care costs. Id. While citing with approval to Schena for the notion that fraud is not necessary (but it is sufficient) to violate EKRA, DOJ’s denial interestingly omits any reference to the recent and noteworthy dicta in Schena that percentage-based marketing arrangements, without more, do not per se violate EKRA. Instead, DOJ’s denial cites all the way back to a 1998 Advisory Opinion (No. 98-10), noting that certain percentage-based marketing arrangements appear associated with program abuse. This may signal DOJ’s disapproval of Schena’s dicta and a willingness to litigate the issue further, in the Ninth Circuit or elsewhere. As a practical matter, however, Schena’s dicta may have limited application, as it is rare to see litigated fact patterns with purely percentage-based compensation arrangements and no other aggravating facts.
The DOJ also noted in its denial that EKRA has been in effect for almost eight years (since October 24, 2018), and thus businesses have had ample time to adapt their practices and compliance programs to align with EKRA’s requirements. This could also portend additional EKRA enforcement actions.
Other Cases Included in the Takedown
The takedown also included cases involving: $134 million in Medicare claims for allegedly fraudulent arterial surgical procedures that resulted in injury to patients, and allegedly offering kickbacks to beneficiaries in the form of free transportation, groceries, household goods, gift cards, and utility bill payments (United States v. Tabaie, et al., No. 2:26-cr-00668 (C.D. Cal. Oct. 20, 2026)); over $138 million in Medicare claims for hospice fraud schemes where patients allegedly were not terminally ill (United States v. Jimenez (C.D. Cal. 2026); United States v. Keech, No. 2:26-cr-00652 (C.D. Cal. Oct. 14, 2026); and United States v. Raffi, No. 2:26-cr-00663 (C.D. Cal. Oct. 19, 2026)); and $270 million in Medi-Cal claims for allegedly fraudulent and medically unnecessary prescriptions (United States v. Mareik, No. 2:26-mj-03520 (C.D. Cal. Jun. 12, 2026)). These cases charged health care fraud and AKS violations, as they involved government payors.
Implications
The recent $1.6 billion EKRA indictment marks the largest and most significant EKRA prosecution ever. The sprawling nature of the alleged criminal activity and eye-popping dollar amounts involved seem likely to inspire other districts to follow suit, particularly in light of the Ninth Circuit’s affirmation of an EKRA conviction last year in Schena. Additionally, the DOJ’s recent regulatory activity declining the laboratory industry’s request to expand the employee safe harbor has reaffirmed DOJ’s stance against variable compensation, even in the absence of aggravating factors.
Given these developments, businesses, providers, and marketers in the substance abuse, laboratory, and recovery home sectors should reexamine their business models, compensation arrangements, and compliance programs, as EKRA investigations and prosecutions are on the rise and effective EKRA compliance may require more than simply complying with the AKS.
