On March 23, 2009, revisions were made to the New Jersey anti-self-referral statute (the “Codey Law”), which prohibits New Jersey physicians from referring patients to healthcare services in which the physicians have a significant beneficial interest unless an exception exists. Although heralded as a victory in the wake of Garcia v. Health Net, in which a New Jersey Superior Court held that referrals to ASCs were prohibited by the then-current version of the Codey Law, the so-called “Codey Amendment” contains, among other provisions, a moratorium on the development of new physician-owned ASCs.
A question arises in the amendment’s adoption — will other states in the country follow? The answer to that question may lie in the degree of vigilance exercised by state ASC associations in proactively examining the anti-referral language of their states’ statutes and the ability of those in the ASC industry to capitalize on positive recent events which have occurred with regard to relationships with third-party payors.
As originally enacted, the Codey Law contained a broad prohibition on physician referrals to healthcare services in which such physicians held a significant beneficial interest. Exceptions were permitted for referrals for specific services which did not include referrals for services performed within an ambulatory surgical center. Despite the lack of an express exception applicable to ASCs, physician ownership in New Jersey ASCs proliferated as investors relied upon unpublished and informal guidance given by the Board of Medical Examiners (BME) to a couple of separate projects. This informal guidance indicated that physician owned ASCs would be viewed by the BME as extensions of the physicians’ medical practices. Relying upon such informal guidance certainly involved taking the path of least resistance, as opposed to attempting to effect an amendment to the Codey Law or secure more formal guidance from the BME. Unfortunately, such reliance seems to have been misplaced.
New Jersey has traditionally been an out-of-network (OON) state with ASC providers receiving on average three times the reimbursement for being out-of-network than in-network. Not surprisingly, payors have used various tactics to fight against having to pay the higher OON reimbursement, including (i) filing suit against OON providers asserting claims of insurance fraud under the New Jersey Insurance Fraud Protection Act and tortious interference with contract; (ii) threatening in-network physicians who refer to OON facilities with termination of network provider agreements, (iii) ignoring assignments of benefits and making payment directly to health plan beneficiaries, and (iv) attempting to require OON facilities to provide additional disclosure statements to patients who schedule services there.