New OIG Advisory Opinion Reinforces OIG’s Stance Against Turnkey Contractual Joint Ventures

By: Jessie Bekker, Burr & Forman LLP

The Office of Inspector General (“OIG”) has issued a new opinion with a familiar message cautioning providers against entering into suspect contractual joint ventures.

The OIG’s latest Advisory Opinion examined the Anti-Kickback Statute’s application to an arrangement related to the provision of intraoperative neuromonitoring (“IONM”) services (the “Proposed Arrangement”). As of the date of the Opinion, the requesting entity, an IONM provider, contracted with hospitals and surgery centers to provide the technical component of IONM services, which consisted of one of its neurophysiologists assisting during a surgery with the placement and operation of the IONM equipment. The IONM provider would arrange with a physician practice (“Practice”) to perform the personal component: remote monitoring by a neurologist of the IONM test results. The IONM provider billed its technical component services to the hospital or surgery center; the Practice billed the professional component to patients and their insurers. However, as competition grew fiercer, the IONM provider found itself at risk of falling behind its competitors who offered surgeons more lucrative opportunities, precipitating the Proposed Arrangement.

The Proposed Arrangement

Under the Proposed Arrangement, the IONM provider would assist a group of surgeons working for the hospitals and surgery centers with which the IONM provider contracted in creating a new IONM company (“NewCo”). The surgeon owners would own all of the interests in NewCo, which would contract with the existing IONM provider to provide all billing and collection services. NewCo would then contract with the Practice to provide the professional component of IONM services to NewCo’s clients. Under an agreement with the existing IONM provider, the IONM provider would supply NewCo with all of the day-to-day services, such that NewCo likely would not need to hire any of its own employees. NewCo – not the IONM provider – would contract with hospitals and surgery centers, receiving referrals for services from the surgeon owners, and would bill both the professional and technical components of the services. NewCo would compensate the IONM provider and Practice for their services through a fee, but the IONM provider anticipated NewCo’s profits would be substantial. In essence, NewCo would act as a competitor to the IONM provider with which it contracted, disrupting the IONM provider’s anticipated profits.

Analysis

Generally speaking, the Anti-Kickback Statute (the “AKS”) prohibits the knowing and willful offering, payment or receipt of remuneration to induce, or in return for, the referral of an individual to a person for any item or service reimbursable by a federal health care program, like Medicare or Medicaid. The statute is intent-based and prosecutes a violation criminally. Violations constitute felonies punishable by fines and imprisonment.

OIG has long expressed its disfavor toward contractual joint ventures that exhibit certain factors pointing to their suspect nature. A contractual joint venture exists where a health care provider in one line of business (e.g., Practice) expands into a related line of business (e.g., IONM) by contracting with an existing provider of the related line of business (e.g., IONM provider) in order to provide the new related line of business to the health care provider’s patients without any substantial risk to the health care provider. The Proposed Arrangement, according to OIG, would “present a host of risks of fraud and abuse under the [AKS], including patient steering, unfair competition, inappropriate utilization, and increased costs to Federal healthcare programs.” OIG pointed to several risks raised by the Proposed Arrangement, specifically, that it could result in inappropriate steering of referrals from the surgeon owners to NewCo, the IONM provider, and the Practice of federal health care program business. Certain specific factors led OIG to its conclusion, including that the surgeon owners, as a result of contracting out its day-to-day operations to the IOMN provider, would have no real financial risk while reaping the benefits of the IOMN services provided. Additionally, both the Practice and IOMN provider are established entities that would effectively be forced to compete with themselves as a result of the Proposed Arrangement. Moreover, because the surgeon owners would have a vested interest in NewCo’s success, the OIG concluded that there would be a risk that the surgeon owners would only refer business to NewCo, the IOMN provider and the Practice in order to benefit from the billing opportunity for those services. Accordingly, OIG concluded that the Proposed Arrangement would risk violating the AKS.

Takeaways

The OIG Advisory Opinion highlights its longstanding concern with suspect contractual joint ventures and acts as a reminder to physicians venturing into new business lines of the risk factors that may implicate the AKS. The Advisory Opinion, just like all Advisory Opinions, is applicable only to its specific facts and should not be relied upon as definitive authority in determining the risk under the AKS of any other arrangement.

OSHA Issues COVID-19 Emergency Temporary Standard (ETS) for the Healthcare Industry

The Occupational Safety and Health Administration (OSHA) issued an Emergency Temporary Standard (ETS) for the healthcare industry on June 21, 2021.[1]

The Occupational Safety and Health Act (“the Act”) passed in 1970 and created OSHA to administer the Act. It has been thirty-eight years since OSHA issued its last ETS. That ETS was issued in 1983, covered asbestos, and was eventually struck down by a federal court.

The Act generally covers most employers, with some specific employers, such as “State(s) and political subdivision of a state,” being specifically excluded from OSHA’s jurisdiction.[2]  OSHA determined that COVID-19 causes health care industry employers and their employees to be in “grave danger,” which is the legal requirement allowing OSHA to issue an ETS.  Along with the ETS, OSHA issued General COVID-19 Guidance to most other workplaces, which followed the CDC’s guidance on COVID-19 in the workplace.  

The ETS generally applies to any workplace where employees provide healthcare services or healthcare support services, except for some specific exclusions such as retail pharmacies; home health care settings where all non-employees are screened prior to entry; healthcare support services not performed in a healthcare setting (e.g., off-site laundry); and telehealth services performed outside of a direct patient care setting.  Other exemptions include allowing employees to work from home and exemptions for those employees who cannot be vaccinated because of medical or religious reasons. One exemption could possibly apply to some physicians’ offices.  This exemption reads in full, “Non-hospital ambulatory care settings where all non-employees are screened prior to entry and people with suspected or confirmed COVID-19 are not permitted to enter those settings.”[3] More on this later.

It is clear that the ETS generally applies to physicians’ offices, as physician’s offices are used as examples in various parts of the ETS.[4]  However, employers with 10 or fewer employees have fewer requirements under the ETS.  For example, employers with more than 10 employees must have a written COVID-19 plan for each workplace. Employers with 10 or fewer employees must have COVID-19 plans, but the plan is not required to be in writing. OSHA’s plan is to include updates to the ETS as needed.  

The ETS covers the following subjects, as they relate to employment activities of health care workers in the health care industry:

COVID-19 Plan

Patient screening and management

Respiratory protection

Training

Ventilation of rooms and buildings

Health screening and medical management

Physical barriers

Physical distancing

Hand hygiene and cleaning

Record keeping

Reporting

Following is a brief discussion of each of the ETS requirements.

COVID-19 Plan.

Employers must have a plan to minimize the transmission of COVID-19 in the health care workspace.  Employers with more than 10 employees must have a written COVID-19 Plan.

Patient Screening and Management.

In settings where direct patient care is provided, employers must limit and monitor points of entry, screen and triage all non-employees entering the setting, and implement other patient management as necessary, including developing and implementing procedures regarding standard transmission-based precautions.

Respiratory Protections.

Employers must provide the personal protective equipment (PPE) necessary to protect employees, at no cost to the employees.

Training.

Employers must ensure and document that each employee receives training on the ETS, in a language and at a literacy level the employee understands.  Training should include various topics pertinent to COVID-19 safety measures, such as COVID-19 transmission and employer policies and procedures regarding COVID-19 transmission.

Ventilation of Rooms and Building.

HVAC systems should be operating at maximum efficiency, per the manufacturer’s recommendations.  Air filters that remove particles and aerosols that can transport the COVID-19 virus should be used where the HVAC system can accommodate the filters.

Health Screenings and Management.

All employees must be screened every day they work in a health care setting.  This can be accomplished by the employees answering questions before entering the workplace, or by the employee self-evaluating prior to entering the workplace. Where appropriate, employees must be kept from the workplace or removed from work (e.g., an employee develops a fever, cough and loss of the sense of taste while at work and is asked to leave). Employees must be informed of possible COVID-19 exposures (e.g., told of an employee (without giving their name) who has developed fever, cough and loss of the sense of taste at work, and is sent home). There are mandatory paid leave provisions for employees who develop COVID-19, or who must stay out of work because of a COVID-19 exposure, which are in addition to other employee paid leave provisions already in place for employers. Employees must be paid for the time they take while at work to be vaccinated against COVID-19, and for the day after receiving a vaccination, where there is a physical reaction to the vaccine.  

Physical barriers.

These include Plexiglas barriers when patients initially check in the office and between workers who must work at specific locations (e.g. computer billing) most of their workday.

Physical Distancing.

This is also referred to as “social distancing.”  Where there is room, employees should maintain at least six feet of distance between themselves and other employees (e.g., employee break rooms).

Hand Hygiene and Cleaning.

Hand hygiene and cleaning work together to reduce the spread of the COVID-19 virus. Offices and clinical spaces should be cleaned at least daily, and handwashing should occur between patient encounters.

Record Keeping and Reporting.

For employers covered by OSHA standards, there are already record-keeping requirements in place. Additional record-keeping and reporting are added by the ETS for employees who test positive for COVID-19 and employees who die because of a COVID-19 infection. Employers with more than 10 employees must keep a log of any employee diagnosed with COVID-19, whether or not the infection arose because of an occurrence at work.

This article began with an introduction to one of the exemptions that could possibly keep a physician’s office from having to comply with the ETS. That exemption reads “Non-hospital ambulatory care settings where all non-employees are screened prior to entry and people with suspected or confirmed COVID-19 are not permitted to enter those settings.”[5] Those physician’s offices that could operate under this provision — no suspected or confirmed COVID-19 patients or employers are allowed to enter the office — would be able to operate as they have in the past in regard to OSHA requirements. However, there are legal pitfalls with using this exemption to avoid compliance with the ETS.  For example, many surgeries require office follow-up. If a surgeon refused to see a patient who developed COVID-19 after surgery, but before the office follow-up, the patient could make a claim of abandonment.  There are other risks with this course of action, and many physicians could ill afford to refuse to see patients “suspected” of having COVID-19.  There may be ways to stay within the exemption; however, careful thought will need to be given for each patient in a similar situation. For instance, perhaps the post-surgery patient could be seen in a hospital ER, or evaluated/examined through a telehealth appointment, rather than in the surgeon’s office.  

Conclusion.

As is often the case, the ETS has been issued almost beyond the point of usefulness. Physician offices, health care facilities, and other health care providers are going on two years of their response to the COVID-19 pandemic. To mandate changes to their well-established COVID-19 precautions at this time is disruptive, to say the least; and it places additional administrative burdens on employers subject to OSHA, without adding much, if any, additional value. Nevertheless, physician’s offices and others are well-advised to take the ETS seriously because it will likely be the subject of complaints, investigations, and audits by OSHA. OSHA investigates complaints of violations of federal law based upon anonymous employee complaints and random “audits” of employer compliance and has indicated it will enforce the ETS using both of these methods.

[1] Occupational Exposure to COVID-19; Emergency Temporary Standard, 86 Fed. Reg. 32376, available at https://www.federalregister.gov/documents/2021/06/21/2021-12428/occupational-exposure-to-covid-19-emergency-temporary-standard.

[2] 29 U.S.C. § 652(5). 

[3] 29 C.F.R. § 1910.502(a) (2) (iii).

[4] 29 C.F.R. § 1910.502(a), n. 2.

[5] 29 CFR Section 1910.502(a) (2) (iii).