OIG Rejects the Formation and Operation of Surgeon-Owned IONM Businesses

August 29, 2023

The US Department of Health and Human Services (HHS) Office of Inspector General (OIG) recently evaluated the risks associated with certain intraoperative neuromonitoring (IONM) services arrangements in its release of Advisory Opinion No. 23-05. OIG concluded that arrangements involving an IONM service provider’s assistance to surgeons in the formation and operation of turnkey surgeon-owned entities for the provision of IONM services would generate prohibited remuneration under the federal Anti-Kickback Statute (AKS).


By observing a patient’s neurological functioning during surgery, IONM services are used to monitor at-risk neurological structures over the course of various surgical procedures. The technical component of IONM services involves the setup of IONM equipment by a neurophysiologist, while the professional component involves the real-time monitoring of IONM test results during surgery by a neurologist, often remotely.

IONM services can be offered through independent IONM service providers that contract with hospitals and ambulatory surgery centers (ASCs) to provide both the technical and professional components of the services.

The requestor from AO No. 23-05 contracts with hospitals and ASCs to perform the technical component of IONM services through its employed neurophysiologists and arranges for the professional component of the services through neurologists who are engaged through a physician practice that has a management services agreement with the requestor (the Neurology Practice). The requestor’s business receives referrals from surgeons for IONM services.

Once the IONM services are requested, the requestor schedules one of its employed neurophysiologists to perform the technical component of the IONM service and arranges for the Neurology Practice to assign a neurologist to perform the professional component of the service. The requestor bills the referring hospital or ASC for the technical component of the service, while the Neurology Practice bills the patient or insurer for its professional services.

The requestor asked OIG to opine on another business proposal under which the requestor would provide assistance to referring surgeons with the formation and operation of turnkey entities owned by such surgeons to perform IONM services. Under this business proposal, the referring surgeons would organize a new legal entity to provide IOMN services. However, the new entity would furnish the IOMN services through contractual arrangements with the requestor and the Neurology Practice.

More specifically, the requestor would perform the day-to-day business operations of the entity under a billing services agreement with the requestor for administrative services. Separately, the new entity would contract with the Neurology Practice for neurologist and neurophysiologist services, noting that the neurophysiologists would be leased from the requestor to the Neurology Practice.

The new entity would bill the hospital or ASC for the technical component of the IONM service and separately bill the patient or insurer for the professional component. The requestor and the Neurology Practice would not have an ownership interest in the new entity.

Under the proposed arrangement, the surgeon owners of the new entity would receive distributions of the entity’s profits as a return on their investment. Those distributions would be based in large part on the difference in fees paid to the requestor and Neurology Practice under their respective service agreements and the reimbursement received from patients or insurers.

According to the requestor, those differences would be substantial because the Neurology Practice would charge the new entity less than it could bill a third-party payor for the same professional service in order to remain competitive among peer IONM companies offering surgeons similar services.

Additionally, the surgeon owners would refer their own patients to the new entity for IONM services. While the requestor indicated that it would attempt to prohibit referrals of federal health care program (FHCP) beneficiaries, patient referrals would be under the sole discretion of the surgeon owners. Even if the surgeon owners did not refer FHCP patients to their own IONM entity, these patients would likely be referred directly to the requestor.


OIG concluded that the risk of fraud and abuse under this proposed arrangement was not sufficiently low under the AKS for OIG to issue a favorable opinion. Specifically, OIG found that the arrangement would involve several forms of remuneration that may induce the surgeon owners to make referrals for IONM services payable under FHCPs, including the following:

  • Discounts under the personal services agreement provided by the Neurology Practice to the new entity
  • The opportunity for the new entity to generate profits based on the difference in fees paid to the requestor and the Neurology Practice under their respective service agreements and the reimbursement received from patients or insurers
  • The returns on investment interests dispersed from the new entity to the surgeon owners

According to OIG, none of the listed forms of remuneration qualify for safe harbor protection.

Additionally, OIG expressed concerns that the proposed arrangement would enable the requestor to indirectly pay the surgeon owners a share of the profits from referrals for IONM services that could be reimbursable by an FHCP. As support, OIG reemphasized its Special Advisory Bulletin on contractual joint ventures.

In relevant part, the Special Advisory Bulletin explains that OIG finds contractual joint ventures problematic where a healthcare provider is expanding into a related line of business in order to provide a new item or service to the provider’s existing patient population, including arrangements where the physician owners of the new business contract out substantially the entire operation of the new business in exchange for the return of the profits of the business.

Much like the arrangement described in the Special Advisory Bulletin, OIG found that the requestor’s proposed new business model could be used as a vehicle to induce referrals of FHCP beneficiaries from both the surgeon owners to the new entity and from the surgeon owners to the requestor and Neurology Practice.


Another significant concern regarding the provision of IONM services is that overuse of monitoring services leads to unnecessary and excessive—or even surprise—billing, as bills for neuromonitoring services can total nearly $100,000 when provided by an out-of-network basis. While OIG’s opinion only addresses a relatively narrow business arrangement, companies providing IONM services have faced heightened scrutiny under the False Claims Act (FCA) for many years.

As one example of FCA settlements involving IONM service providers, in 2010 a Maryland IONM services company agreed to pay $2.7 million to resolve allegations that it had submitted false claims to the Medicare program in violation of the FCA. In this instance, the IONM entity’s physicians would allegedly (1) individually bill Medicare for remote monitoring services that were being provided to multiple patients simultaneously and (2) bill Medicare for the entire duration of the operation wherein IONM services were provided as opposed to only the portion of the operation when monitoring was being performed.


Requestors seeking OIG Advisory Opinions typically know in advance if OIG intends to issue a favorable or unfavorable Advisory Opinion, and they can withdraw the request before the OIG issues an unfavorable Advisory Opinion. When a requestor receives an unfavorable Advisory Opinion, it usually wants to send a message to the market that a potential competitor’s business model can create AKS risks.

Indeed, OIG explained in AO 23-05 that the requestor’s existing surgeon clients are continually approached by other IONM companies that are encouraging surgeons to enter into arrangements similar to the one proposed by the requestor. A query remains of whether AO 23-05 will accomplish the requestor’s objective or whether surgeons who can profit from the provision of IONM services will ignore OIG’s admonitions. 


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