chevron-down Created with Sketch Beta.

ABA Health eSource

Health eSource | November 2023

The Risks of IONM: OIG Quashes an Attempt to Capture the Technical Component in Intraoperative Neuromonitoring

Bruce F Howell

Summary

  • An analysis of the Proposed Arrangement and whether it would pass scrutiny under the Anti-Kickback Statute.
  • Requestor’s Proposed Arrangement includes the formation and operation of a turnkey entity that would perform IONM services (“Newco”) and that would be owned by such physicians (“the Surgeon Owners”).
  • The OIG concluded, in part, that no safe harbor existed for the individual streams of remuneration.
The Risks of IONM: OIG Quashes an Attempt to Capture the Technical Component in Intraoperative Neuromonitoring
LifestyleVisuals via Getty Images

Jump to:

Access the audio version of this article

On August 18, 2023, the Office of Inspector General of the Department of Health and Human Services (OIG) issued Advisory Opinion 23-05, which deals with investment arrangements that involve physician investors in entities that provide interoperative neuromonitoring (IONM) services. IONM is a group of procedures that provide neurological information to physicians while performing surgeries. It is used to observe a patient’s neurological functions during certain surgeries in which the patient’s neurological structures are at risk. Through the use of remote wireless sensors, information concerning the neurological status of the patient is sent to a computer and can be quickly relayed to the surgeon. One of the common uses of this science is in spinal surgery, where constant, current neurological information is essential.

IONM services have a technical component and a professional component. The technical component involves a neurophysiologist, located in the operating room of a hospital or ambulatory surgical center (ASC) while a surgery takes place, setting up the IONM equipment and ensuring it works properly. The professional component involves a technician in the surgery suite or operating room and a neurologist, typically located in a remote location, monitoring the test results and waveforms generated by the IONM equipment during the surgery in real time using a dedicated internet connection.

The fact that IONM involves a technical component makes it attractive for investment by surgeons. In the facts presented to the OIG for the Advisory Opinion, the OIG explained the arrangement as follows:

“Requestor contracts with various hospitals and ASCs under an IONM services agreement to: (i) perform the technical component of IONM services for surgeries at such facilities through its employed neurophysiologists; and (ii) arrange for the performance of the professional component of IONM services for the same surgeries through neurologists employed or engaged as independent contractors by [redacted], a physician practice that has a management services agreement with Requestor (Practice). Specifically, when surgeons wishing to schedule IONM services for one of their surgical cases at a hospital or ASC make a referral to Requestor for such services, they first contact Requestor. Requestor then schedules one of its neurophysiologists to perform the technical component for the surgery and contacts Practice to arrange for Practice to assign a neurologist to perform the professional component for the surgery. Generally, Requestor bills the hospital or ASC for the technical component, and Practice bills the surgical patient or insurer, as applicable, for the professional component.

The Requestor of the Advisory Opinion asked if the following arrangement would pass scrutiny under the Anti-Kickback Statute (AKS):

Under the Proposed Arrangement, Requestor proposes to assist physicians who perform surgeries for which IONM is used, and who currently make referrals to Requestor for IONM services, with the formation and operation of a turnkey entity that would perform IONM services (“Newco”) and that would be owned by such physicians (“the Surgeon Owners”). Neither Requestor nor Practice would have an equity interest in Newco. The Surgeon Owners would be responsible for forming Newco and for preparing Newco’s internal governance documents. While the Surgeon Owners ultimately would set the terms of their respective investment interests in Newco and the methodology for the distribution of Newco’s profits amongst themselves, Requestor anticipates that the Surgeon Owners would receive distributions of Newco’s profits in return for their investment interests in Newco.

After formation, the Surgeon Owners would have limited participation in Newco’s day-to-day business operations and would instead contract with Requestor and Practice for the performance of these operations through the following contracts:

  • Pursuant to a billing services agreement between Requestor and Newco, Requestor would provide to Newco billing, collection, and certain other administrative services in exchange for a fee from Newco (the “Billing Services Agreement”).
  • Pursuant to a personal services agreement between Practice and Newco, Practice would provide to Newco the services of its neurologists and the services of neurophysiologists (which Practice would lease from Requestor under the management services agreement between Requestor and Practice) in exchange for a fee from Newco (the “Personal Services Agreement”).

Requestor certified that the services provided by Requestor and Practice under these contracts would constitute virtually all of the day-to-day requirements of an IONM business. Requestor does not expect that Newco would need to hire any dedicated employees because Requestor and Newco would provide all necessary services for Newco.

Newco would contract with various hospitals and ASCs under an IONM services agreement that would govern Newco’s provision (or arranging for the provision) of the technical and professional components of IONM services for surgeries at such facilities. Generally, Newco would bill the hospital or ASC for the technical component and would bill the surgical patient or insurer, as applicable, for the professional component. Although Newco’s billing would be handled by Requestor under the Billing Services Agreement, Requestor would take direction from the Surgeon Owners regarding the amounts to be billed for services.

Requestor certified that it would enter into the Proposed Arrangement for competitive reasons because existing surgeon clients of Requestor are continually approached by other IONM companies that are encouraging the surgeons to enter into similar arrangements, and Requestor seeks to retain business from its existing surgeon clients that otherwise would be lost to these competing IONM companies. Requestor further certified that it would adopt the Proposed Arrangement only as required in specific situations where its existing surgeon clients wish to own their own IONM company and may not continue to do business with Requestor otherwise.

Although Newco would pay a fee to Requestor under the Billing Services Agreement and would pay a fee to Practice under the Personal Services Agreement, Requestor anticipates that Newco would achieve substantial profits from the Proposed Arrangement (i.e., the difference in fees paid to Requestor and Practice under the services agreements and reimbursement received from would achieve substantial profits from the Proposed Arrangement (i.e., the difference in fees paid to Requestor and Practice under the services agreements and reimbursement received from third parties) and anticipates that Requestor and Practice would earn substantially less profits under the Proposed Arrangement than under their current business model. This is primarily because, as Requestor certified: (i) reimbursement for the professional component of IONM can far exceed the cost of providing the service and (ii) Practice would charge Newco less than it could bill a third-party payor for the same services under Requestor’s and Practice’s current business model, because competing IONM companies marketing similar arrangements to surgeons have aggressively discounted their charges for such services.

Under the Proposed Arrangement, the Surgeon Owners would refer the patients of their own surgical practices to Newco for IONM services when a surgery requires IONM, as determined in the discretion of the referring surgeon. Requestor certified that it would attempt to ensure that the Surgeon Owners would not refer their federal healthcare program surgical patients to Newco for IONM services. However, as a practical matter, Requestor certified that it would not be able to enforce restrictions regarding where the Surgeon Owners refer their patients for IONM services. Although Newco’s billing would be handled by Requestor under the Billing Services Agreement, a patient’s insurance carrier may not be known at the time the IONM services would be scheduled, and IONM services reimbursable by a federal healthcare program could be performed and billed through Newco unintentionally from time to time. Requestor certified that, if the Surgeon Owners do not refer their federal healthcare program patients to Newco for IONM services, it is likely that the Surgeon Owners would instead refer these patients directly to Requestor (for the technical component of IONM) and Practice (for the professional component of IONM.”)

Discussion and Analysis

The OIG made quick work in analyzing the proposed arrangement. First, the OIG stated that, even though the major portion of the proposed arrangement would be a “carve out,” the Requestor could not guarantee that physicians might use this arrangement for Medicare patients. If so, potential remuneration could be involved in discounts, a profit delta of fees paid by Newco to each of the Requestor and Practice under the services agreement and reimbursement and returns on investments in Newco by the Surgeon Owners. These factors would create inducement.

In addition, the OIG concluded that no safe harbor existed for the individual streams of remuneration.

Next, the OIG considered the Proposed Arrangement as a whole and, based upon OIG, Special Fraud Alert: Joint Venture Agreements (1989) and OIG Special Advisory Opinion: Contractual Joint Ventures (2003), the OIG concluded that (1) the Surgeon Owners might use the Proposed Arrangement as (1) a vehicle to induce referrals to Newco and (2) to induce referrals to Requestor and Practice.

It is apparent that the OIG was concerned about the possibility of abuse of the Proposed Arrangement even though the documents might be compliant. Thus, once again, it is not just the structure of arrangements but also the performance of the parties in the arrangements that must be examined. This Advisory Opinion makes it very clear that the OIG is examining both aspects.

Conclusion

IONM is a useful science for both surgeons and patients, and has been around for quite some time, going back perhaps 20 years. There have been arrangements set up with surgeons in the past and may still be extant. It is imperative in light of this Advisory Opinion that both participants in such arrangements and lawyers involved in the same to examine the structure and performance of these arrangements and make corrections where needed.

    Author