Section Spotlight
OIG Advisory Opinion Cautions Against 'Surgeon Deals' in Neuromonitoring
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Rich Vogel, PhD, DABNM, FASNM Co-Chair, NASS Section on IONM
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Eric D. Fader, JD Partner, Health Services Practice Group, Rivkin Radler LLP
On August 18, 2023 the US Department of Health and Human Services’ (HHS) Office of Inspector General (OIG) published an advisory opinion1 warning that a common arrangement under which surgeons profit from referrals of their patients for intraoperative neuromonitoring (IONM) services can violate the federal Anti-Kickback Statute (AKS). The advisory opinion follows a recent Department of Justice investigation of certain industry players. Frequently, when hospitals and ambulatory surgery centers (ASCs) do not have an internal IONM program, they outsource to a private provider. These “technical services companies” contract with hospitals to 1) perform the technical component of IONM through their employed neuromonitorists, and 2) arrange for the interpretation of IONM with neurologists who are often either independent contractors or employees of a separate physician practice that has an agreement with the IONM company. Postoperatively, the IONM company bills the hospital or ASC for the technical component, and the neurology practice bills the insurance company or the patient for the professional component. In the arrangement described in the advisory opinion, a surgeon or surgical group would form and own a shell company—often at the suggestion and/or with the assistance of an established IONM company—to ostensibly provide IONM services for the surgeon’s own surgical cases. But the shell company would then contract with the IONM company to perform the actual services (ie, administrative, billing and collection services, providing the neuromonitorist, and arranging for the services of the neurologist). The services provided by the company would constitute all of the day-to-day requirements for appropriate IONM. Thus, the surgeon-owned entity would not need to hire any dedicated employees because the IONM company and the neurology practice provide all necessary services.
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The revenue components for the surgeon-owned shell company are from billing a “technical fee” to the hospital, and a “professional fee” to the insurance carrier. The only company expenses are the nominal fees it pays to the IONM company for the neuromonitorist and “management services,” and to the neurology practice for providing the neurologist. The surgeon-owned company’s profits, which can be considerable, are simply the difference between these expenses and the revenues it obtains from billing insurance carriers. Due to the strict laws against self-referrals and kickbacks and government sponsored programs, billing for Medicare, Medicaid, and replacement plans is carved out and handled by the IONM company and/or neurology practice directly. Thus, under the scenario described by the OIG, when IONM is needed, the surgeons would essentially refer any Medicare or Medicaid patients directly to the neuromonitoring company – in which they have no ownership – and all their patients who have commercial insurance would be referred to the surgeon-owned entity, which then in effect “subcontracts” with the same neuromonitoring company. Several variations of these “surgeon deals” have proliferated over the past 8-10 years, and comprise the primary business model of a handful of IONM companies in certain parts of the country. The scenario in the advisory opinion outline is just one of these variations. The advisory opinion stated that the arrangement has many of the characteristics of “suspect contractual joint ventures,” about which the OIG has had longstanding concerns. The surgeon would not incur any expense other than the formation of the shell company, and would provide only a stream of patient referrals. The established IONM company, on the other hand, would do all the work and, in competition with its own usual business model, allow the IONM services to be billed to third-party payors through the surgeon’s shell company so that profits would flow to the surgeon. To the extent that the patients referred to the shell company have their care reimbursed by federal health care programs (including Medicare, Medicaid, and replacement plans), this arrangement will violate the AKS. The advisory opinion noted that the opportunity to profit from their own referrals could “corrupt the surgeon owners’ medical decision-making and result in overutilization or inappropriate utilization of IONM services.” The surgeons’ referral of federal program patients to their own separate entity most likely also violates the federal Stark Law, but the Stark Law is outside the subject matter scope of OIG advisory opinions. In order not to violate the AKS, IONM companies that enter into “surgeon deals” must ensure that federal health care program patients are not referred to the surgeon-owned companies. Generally, it has been common practice to “carve out” these patients to ensure that the IONM service is not billed through the surgeon-owned shell company in order to avoid violating the AKS. However, while some IONM companies that enter into these arrangements continue to accept referrals of federal program cases directly from the surgeon owners, bypassing the surgeons’ newly formed entities, the advisory opinion confirms OIG’s prior view that this is also unlawful. Because the financial arrangements between the established IONM company and the surgeon-owned company are all intertwined, even though the federal and nonfederal cases are supposedly kept separate, the revenues from these cases can be viewed as mixed together.
"The advisory opinion stated that the arrangement has many of the characteristics of 'suspect contractual joint ventures,' about which the OIG has had longstanding concerns."
The OIG is keenly aware of this issue. In a 2012 advisory opinion2, it said: “The OIG has a long-standing concern about arrangements under which parties ‘carve out’ Federal health care program beneficiaries or business generated by Federal health care programs from otherwise questionable financial arrangements. Such arrangements implicate, and may violate, the anti-kickback statute by disguising remuneration for Federal health care program business through the payment of amounts purportedly related to non-Federal health care program business.” The American Society of Neurophysiological Monitoring (ASNM) has been aware of these surgeon deals in IONM for years: the society published a position statement in 20183 denouncing these practices. In particular, the ASNM states, “kickbacks and self-referrals create the potential for overutilization and substandard patient care when a physician/surgeon refers a case to an IONM provider based on financial considerations. The ASNM does not condone kickback arrangements, irrespective of whether or not 1) patients give informed consent for their health care provider(s) to engage in these practices, and 2) the kickback arrangement is technically considered legal in any state or jurisdiction.” In publishing this position statement, the ASNM was responding—at least in part—to the New Jersey state legislature which provided a carve-out to the state’s general self-referral prohibition to permit IONM self-referrals.4 This carve-out was created in response to certain neurosurgeons’ yet-to-be substantiated argument that they needed their own neuromonitorists for the most dangerous of neurologic surgeries because there was a shortage of qualified personnel. Currently, New Jersey permits self-referral for “medically-necessary intraoperative monitoring services rendered during a neurosurgical, neurological, or neuro-radiological surgical procedure that is performed in a hospital.” Despite the wording in the law, it is widely believed that self-referral arrangements abound in basic neuro- and orthopedic surgeries, as well as surgeries performed in ASC as well as in hospitals. In addition to the self-referral and kickback issues, surgeon-owned shell companies, and those established IONM companies that deal with them, are also often viewed as more likely to bill excessive amounts to third-party payors for the professional component of IONM—one of the now widely recognized abuses that the federal No Surprises Act was designed to remedy. In short, all of these issues are now on the government’s radar, and the first warning has been issued. In light of recent federal scrutiny and the anticipated attention that will likely follow, surgeons who are involved in these deals with IONM companies would be well advised to seek expert legal advice to mitigate their regulatory enforcement risk.
References
- HHS-OIG (2023). Advisory Opinion 23-05. Online: https://oig.hhs.gov/compliance/advisory-opinions/23-05/. Accessed August 29, 2023.
- HHS-OIG (2012) Advisory Opinion 12-06. Online: https://oig.hhs.gov/documents/advisory-opinions/642/AO-12-06.pdf. Accessed August 29, 2023.
- ASNM (2018). Position Statement: Business Practices in Neuromonitoring. Online: https://asnm.org/wp-content/uploads/2023/05/BusinessPractices2018.pdf. Accessed August 29, 2023.
- NJ Rev Stat x 45:9-22.5 (2017). Online: https://law.justia.com/codes/new-jersey/2017/title-45/section-45-9-22.5/. Accessed August 29, 2023.
- Kohler M. HHS Neuromonitoring Advisory May Have Broad Relevance. 2023. Online: https://www.kohlerhealthlaw.com/post/hhs-neuromonitoring-advisory-may-have-broad-relevance. Accessed March 10, 2024.
Author Disclosures
R Vogel: Board of Directors: American Board of Neurophysiologic Monitoring (Nonfinancial, Examiner for Board), American Society of Neurophysiological Monitoring (Nonfinancial, President (2019-2020); Incoming President-Elect (2023)); Scientific Advisory Board: Nervio (Future Compensation Expected, stock options, travel expense reimbursement); Trips/Travel: Neurophysiology Services Australia (B, Travel Expense Reimbursement).
ED Fader: Nothing to disclose