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HHS-OIG Issues Advisory Opinion to Chill IONM Billing Arrangements


The HHS-OIG has called into question a spate of intraoperative neuromonitoring arrangements in Advisory Opinion 23-05, issuing an opinion that anyone considering a similar arrangement should consider carefully. The OIG has long been suspicious of "contractual joint ventures"--ventures where, in various forms, physicians typically form some kind of billing company in which the physicians are able to bill for--and profit from-- services that they otherwise wouldn't traditionally perform. In so doing, these physician-owned companies usually contact a subject matter expert for management services. Such ventures have shown up in many services over the years, such as physician-owned pharmacies, physician-owned medical device suppliers, and of recent note, physician-owned intra operative neuromonitoring (IONM) companies.

IONM is a service in which a patient's neural pathways are monitored during neurosurgery. There is both a technical portion of the service involving placing the equipment in the OR and a professional portion, usually done remotely, involving the actual monitoring and interpretive services. Historically, these services have been performed by specialized IONM companies and neurology practices. More recently, numerous arrangements have arisen that would allow physicians to own and bill for some or all of the IONM services and to contract with a management company that does tasks like manage billing and manage contracting with the remote neurologist. The management company receives a management/administrative fee, while the physician-owners receive the remainder of the professional and/or technical fee, depending on the arrangement. 

In Ad-op 23-05, the Requestor was an IONM company that had historically performed and billed for the full slate of IONM services but more recently had considered entering into these management arrangements with physicians hoping to set up their own billing companies. The Requestor told OIG that it was being pressured to do this because otherwise its physician clients would leave and go elsewhere to other companies that would manage their services. In this respect, this opinion is highly interesting because the Requestor seemed to be hoping for a negative opinion, or at least not opposed to it. The Requestor makes much more when it performs the entire IONM service. It actually loses money by entering into management contracts with physician-owned IONM billing companies. By obtaining a negative advisory opinion, the Requestor may be able to chill such operations significantly and return to its higher operating margins.

In this case, the OIG did issue a negative advisory opinion. It found that "The Proposed Arrangement would implicate the Federal anti-kickback statute. It would involve several forms of remuneration, including, but not limited to: (i) discounts under the Personal Services Agreement provided by Practice to Newco; (ii) the opportunity for Newco to generate a profit through the difference between the fees paid by Newco to each of Requestor and Practice under the services agreements and the reimbursement Newco would receive for such services from third parties; and (iii) returns on investment interests in Newco to the Surgeon Owners. These streams of remuneration could induce the Surgeon Owners to make referrals of IONM services for which payment could be made by a Federal health care program. the arrangement presented a high risk of fraud and abuse."

The OIG then noted that there is no Anti-Kickback statute safe harbor that would protect the arrangement. It then noted that there is a significant risk for fraud and abuse under the arrangement. When analyzing contractual joint ventures the OIG often uses the same buzzwords: "the Proposed Arrangement could enable Requestor and Practice to do indirectly what they could not do directly: pay the Surgeon Owners a share of the profits from their referrals for IONM services that could be reimbursable by a Federal health care program." The OIG found here that the described IONM arrangement exhibited many concerns identified in its special fraud alert on contractual JVs:

  1. It could induce referrals;
  2. The physician's financial risk would be minimal because the physician is in a self-referral position;
  3. The physicians would be expanding into a related line of business that is dependent on their own referrals. Finally, although the physician owners typically attempt to carve out federal patients, the OIG has historically rejected this promise, as it did here.

The Requestor in this opinion seemed to want a "bad" opinion. The facts it described seemed almost intent on inducing a negative opinion. For example, the Requestor stated that it only entered into such arrangements when the physicians were otherwise threatening to stop using Requestor for IONM services. It further represented that "as a practical matter" it would not be able to enforce a federal patient carve-out. For this reason, there may be ways to set up these arrangements compliantly. For example, a company that does not directly provide any IONM services but that only provides management services could be in a better position.

Nevertheless, the advisory opinion should have the effect that the Requestor seems to hope: to chill many similar IONM management arrangements, or at least cause IONM companies and physicians to exercise much more caution in setting up compliant arrangements.

The Proposed Arrangement would present a host of risks of fraud and abuse under the Federal anti-kickback statute, including patient steering, unfair competition, inappropriate utilization, and increased costs to Federal health care programs. Based on the facts presented here, we are unable to exclude the possibility that the Proposed Arrangement could enable Requestor and Practice to do indirectly what they could not do directly: pay the Surgeon Owners a share of the profits from their referrals for IONM services that could be reimbursable by a Federal health care program. As stated above, the Proposed Arrangement would exhibit many attributes of problematic contractual joint ventures, about which OIG has longstanding and continuing concerns.