of New Jersey ASC operations
By George E. Brandon
News editor/writer
Attorneys representing the New Jersey Association of Ambulatory Surgery Centers, the Medical Society of New Jersey, Orthopedic Surgeons of New Jersey, New Jersey Association of Osteopathic Physicians & Surgeons, New Jersey Academy of Ophthalmologists were considering an appeal after Bergen County Superior Court Judge Robert P. Contillo on Dec. 10 denied motions seeking reconsideration of his decision that self-referrals to ASCs co-owned by physicians violates the Codey Act.
In the meantime, the state Board of Medical Examiners (BME), which licenses physicians to practice in New Jersey, has acknowledged the threat to some 200 ASCs operating in the state from Judge Contillo's ruling. BME launched an emergency rulemaking to address the issue.
In a statement issued Dec. 12, BME members said they were very concerned that the "uncertainty" left in the wake of Judge Contillo's decision "has a significant potential to affect patient access to healthcare services…Were ASCs to close or cut back on the services provided, it is not clear that alternative providers-hospitals or offices-could immediately absorb additional cases, providing timely services." BME said a committee "will propose a rule, by the quickest means available, to implement a reform measure tailored to address this issue."
John D. Fanburg, chair of the Health Law Practice Group of the law firm of WolfBlock Brach Eichler, Roseland, N.J., which is representing the state ASC association, the state medical society and other physician groups with a stake in the controversy, told AORN Management Connections he believes the BME members now recognize that with the number of ASCs already operating in the state, "shutting them down would cause a real access issue" for patients.
In defending themselves against the claim that self-referrals violated the Codey Act, the physician owners of the ASC involved cited a 1997 BME advisory opinion finding that an ASC co-owned by a physician "is merely an extension of his own office" and thus qualifies for a "safe harbor" against federal antikickback laws.
But in its Dec. 12 statement, BME acknowledged "that the health arena has changed substantially since the enactment of Codey Act in 1989," so that the "extension of a medical office" doctrine contained in the 1997 advisory opinion might no longer be appropriate. "In light of these developments, it is time for a clarification of the indicia that an entity should have in order to view it as a 'medical office,' and thus excepted from the self-referral ban of the Codey Act," BME said.
Although he doesn't oppose BME's commitment to update its physician licensing policies in light of the judge's ruling that self-referrals by ASC physician owners do violate the Codey Act, Fanburg said the believes the board members are "getting bogged down in policymaking when they ought to just issue a ruling that it's (self-referrals by physician owners of ASCs) permissible until we think this through.
"From talking to a number of members of the (committee appointed to update BME's policy), it's evident they don't understand the industry," Fanburg said. "There are five or six basic models of ASC ownership in New Jersey, involving relationships between anesthesia groups and ASCs, for example, and relationships involving in- and out-of-network services. There are a whole bunch of issues involved, and there's no hurry to rush to judgment on this without an appropriate fact-finding."
One of the unresolved issues is whether a New Jersey ASC can flout healthcare insurers' policy of requiring patients to pay a "coinsurance" portion of the charge for surgical services when performed in out-of-network facilities, including ASCs.
The case that led to Judge Cantillo's decision arose when insurer Health Net of New Jersey, Inc., charged the physician owners of Wayne Surgical Center committed fraud by accepting as payment in full the assignment of patients' rights to reimbursement from Health Net and not collecting the coinsurance payments that Health Net requires for services performed in out-of-network ASCs or hospitals.
In his ruling, Judge Cantillo noted that, although other states do forbid the practice, New Jersey law does not prohibit ASCs' waiving coinsurance payments from patients. The judge ruled that "no fraud is perpetrated by the failure of (the ASC) to pursue these patients."
Fanburg said he understands that attorneys for Health Net intend to appeal Cantrillo's ruling. He added that he hasn't heard of any attempts by Health Net or other insurers in the state to stop paying ASCs whose owners waive coinsurance requirements for out-of-network patients.
Still, the possibility that insurers could deny payments worries the BME members. "Any effort on the part of insurers to deny claims submitted by physician-owners will likely have a significant impact on the availability of services, representing a potential imminent peril to the public health," BME said in its Dec.12 public statement.
"My advice to my surgery center clients is that it's not permissible to routinely waive (collection from patients of) copays and deductibles unless you advise the insurance companies in advance," Fanburg said. "I don't know whether they all did that in the past, but I believe the association has circulated a memo I prepared on the issue. I also recommended notifying patients and notifying their insurance companies of the referrals (to out-of-network ASCs)."
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