HHS Neuromonitoring Advisory May Have Broad Relevance

September 7, 2023 | By Mary Kohler in Law360

You start a wildly profitable business. Competitors flock. Some take a more aggressive legal position, sacrificing profits to gain an unfair edge. Maybe you don't like the risk. Perhaps you hate losing margins. Do you hold your breath and follow suit? If not, how hard would you fight to keep what you've built?

These questions lurk in the wake of the U.S. Department of Health and Human Services Office of Inspector General's most recent advisory opinion, AO 23-05.[1]

OIG advisory opinions analyze transactions under federal health care laws, including the Anti-Kickback Statute, or AKS, and the Civil Monetary Penalty Law.

AO 23-05 involves intraoperative neuromonitoring, or IONM. The opinion was requested by a company, whose name was redacted, that provides the service. It asked the OIG to bless its proposal to meet a competitor's business model by allowing surgeons to own a portion of IONM delivery.

The OIG said no. In doing so, it cited a 20-year-old advisory bulletin that warns of problematic joint venture, or JV, arrangements.[2] The question now is whether this seemingly limited opinion has broader relevance for more contemporary structures, like telemedicine and digital health.

The Lucrative World of IONM

Surgery requires a coordinated team. When a procedure might injure the patient's central nervous system, IONM can help. IONM involves a skilled on-site technician and a neurologist who monitors the patient remotely.

IONM affects outcomes. One wrong cut, and the patient suffers lifelong impairment.

IONM is also lucrative. Reimbursement far exceeds its relatively low delivery cost. Naturally, this attracts investors — from private equity to the surgeons who see it day to day.

The Requestor and the Ask

The image below shows how the proposal would change the company's business model. The surgeons would establish and own a new company, which we'll call Newco. The company would create a turnkey operation, and both it and the practice would deeply discount their fees to Newco. The proposal allows the surgeons — who decide whether a patient needs IONM — to become the IONM provider and capture the profits.

IONM Company's Delivery Model & Proposed Changes

The OIG acknowledged the intense competitive pressures. And the company promised only to pursue the proposal when it fears losing business. The proposal would not involve federal program patients.

But requesting the OIG's advice on a competitor's arrangement puts the requestor — and the ask — in a unique posture. Someone who genuinely wants an arrangement defends it. The OIG's fact-rich opinions typically reflect the requestor's compelling arguments. AO 23-05 is comparatively lean.

Also, someone with skin in the game usually withdraws their request before the OIG issues a negative opinion.

Follow the Money

The OIG looks for remuneration flowing among the parties and payors. It evaluates whether incentives might harm federal programs or compromise medical decision making. OIG found three remuneration streams.

Two of these — discounted fees paid by Newco and the surgeons' investments — might qualify for safe harbor protection. Safe harbors are narrowly defined arrangements that would trigger AKS, but that the OIG considers low risk.

Many lawyers might end the analysis there. But the OIG's third remuneration stream is the rub.

The OIG leaned in on the opportunity for Newco to profit from the spread between the deeply discounted fees it pays and the significantly greater reimbursement it receives. Because no safe harbor applies, the OIG analyzed the proposal as a whole.

A Host of Fraud and Abuse Risks

The OIG identified several concerns. These include surgeons steering patients to Newco, unfair competition, over-utilization and increased federal health program costs.

Notably, two IONM trade associations adopted a relevant position statement.[3] The

statement frowns on surgeon ownership of IONM. It cites potential overutilization and substandard patient care.

The OIG did not reference the statement. Instead, it said the proposal would accomplish indirectly what the parties could not do directly. That is, the proposal adds nothing new. It only allows the existing players to share their profits with the surgeons.

AO 23-05 underscores the OIG's distrust of tortured AKS analyses. Even if safe harbors protect several components, the OIG may still criticize the overall arrangement. According to the OIG, contractual parties' economic interests can become so aligned that their relationship effectively becomes a joint venture.

OIG: We've Been Here Before

The OIG analyzed the proposal under its 2003 special advisory bulletin and found several suspect characteristics. The 2003 bulletin describes a scenario in which a health care provider captures a new line of business from someone who would otherwise compete. It finds AKS risk where a provider's new business has no operations but profits from the reimbursement — in other words, Newco.

Not all contractual JVs are problematic. Perhaps the OIG would have seen things differently had Newco been a bona fide operation with employees, equipment and a broad geographic reach. But the proposal sets it up as a veritable shell.

As a result, the OIG identifies profit-sharing as the driving force. And it sees the incentives potentially corrupting the surgeons' medical decision making. Rather than introducing a new competitor, the proposal reimagines an existing system that cuts the surgeons in and ties up their referrals.

But Wait, Aren't Federal Health Program Patients Carved Out?

Even though the proposal excludes federal program patients, the OIG finds it uncompelling. First, the agency dislikes carve-outs as a fix for AKS risk. Also, the company and practice will still serve the surgeons' federal program patients when Newco can't. So, the OIG says the proposal could disguise prohibited remuneration.

Separately, the OIG observed federal program patients can still slip through because insurance is not always settled before surgery. But given the realities of payment uncertainty, most providers hustle to solidify coverage up front.

Still, the OIG's viewpoint resonates. People can be tempted to say "let's just carve out federal patients" without appreciating operational impacts. Policies must be clear and supported by training and controls. Employees need to internalize the position and make the right calls on iffy questions. The oversight burden is heavy. And given the OIG's views, the decision can still carry risk even if execution is flawless.

What's Next?

Negative OIG opinions sometimes provide little insight. Yes, the company probably got what it wanted — a tool to defuse an uncomfortable situation. But the OIG shooting down a shell arrangement is nothing new.

Still, the OIG's resurrection of JV concerns could be a harbinger. JVs haven't been a frequent theme in the OIG's more recent opinions. But several conditions may point toward their reappearance.

Digital health is disruptive. Technology advances change delivery models. See telemedicine and countless other types of remote monitoring. And consider how AI-guided surgery will affect the way procedures are performed and paid for. The structure the OIG analyzed in 23-05 can arise in a variety of settings that involve multiple providers.

Doctors see opportunities. For those on the ground, health care opportunities abound. Plus, payors continue to squeeze reimbursement, and professionals now fear AI is coming for their jobs. Naturally, these forces will prompt providers to think more creatively.

Venture capital is drying up. Assuming current trends continue, alternative funding models will no doubt emerge.

The FTC is stepping up enforcement. The OIG doesn't often raise unfair competition. But the Federal Trade Commission's ambitious agenda has been giving the issue airtime.

Moving Forward

The OIG's JV concerns should be on the issue-spotting checklists for digital health arrangements involving providers.

Yes, other issues often take a front seat. Evolving U.S. Food and Drug Administration regulation and growing concerns about privacy and data have lately overshadowed AKS risk. Plus, AKS is sometimes counterintuitive. And it can be hard to explain to the uninitiated, like software developers and engineers. But it still must be managed.

Pay attention to the OIG's 2003 bulletin. It's old. And it aims at other industries. But it still outlines the OIG's ongoing concerns, including:

New Line of Business: Providers expand into a new line of business that serves the provider's existing patients.

Captive Referral Base: The new business serves the provider's patient base exclusively or predominantly.

Little or No Bona Fide Business Risk: The provider primarily contributes referrals, while operations are delegated to the JV partner.

Status of the JV Partner: The JV partner would otherwise compete with the JV, i.e., it could provide the services, and bill for them, in its own right.

Scope of Services Provided by the JV Partner: The JV partner's key services include day-to-day operation, billing, equipment, employees, office space and training.

Remuneration: When viewed as a whole, the JV's practical effect gives the provider an opportunity to bill for business otherwise owned by the JV partner.

Exclusivity: This may take the form of a noncompete or other arrangement.

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Mary Kohler is founder and principal at Kohler Health Law, PC.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] U.S. Dept. of Health and Human Services, Office of Inspector General, OIG Advisory Opinion No. 23-05, Issued Aug. 15, 2023.

[2] U.S. Dept. of Health and Human Services, Office of Inspector General, Special Advisory Bulletin, Contractual Joint Ventures, Issued Apr. 23, 2003.

[3] American Society of Neurophysiological Monitoring, Position Statement, Business Practices in Neuromonitoring, Issued Mar. 15, 2018.