A New Jersey trial judge’s ruling is sending ripples throughout the state’s medical community for its contention that the physician-owners of an ambulatory surgery center are in violation of the state’s Codey Act, which prohibits self-referral. The ruling also found the physician-owners of that ASC, Wayne (N.J.) Surgical Center, not guilty of insurance fraud.
Healthcare lawyers are struggling to figure out what impact the ruling will have and how any sort of appeal could be structured because, after all, the physicians were victorious. “There is no problem, we won the case,” said Neil Prupis, with West Orange, N.J.-based Lampf, Lipkind, Prupis & Petigrow, and the attorney for the owners of the surgery center. The case “is being misinterpreted and misunderstood. If a surgery center is not properly structured, one trial judge has ruled that an insurance company doesn’t have to pay. This is not over.”
In their defense, the doctors relied heavily on adherence to a November 1997 medical board advisory opinion that ASCs can be an extension of a physician’s office. But in his 31-page ruling, Chancery Judge Robert Contillo wrote that “hospital affiliation was an important component of the board’s reasoning.” And at the Wayne facility, he added: “Clearly, the physician-investors have a financial incentive to refer their patients to their center.”
While Prupis’ clients may have won, the New Jersey Association of Ambulatory Surgery Centers is concerned that insurance companies will use the ruling to deny payment to physician-owned facilities, and it is looking for the State Board of Medical Examiners to issue a strong statement when it meets on Dec. 12. “We would like the board to ... say that they didn’t find physician ownership in violation of the Codey Act,” said John Fanburg, an attorney for Wolf, Block, Schorr and Solis-Cohen on behalf of the association.
Larry Downs, general counsel for the Medical Society of New Jersey, said the most important thing is to maintain surgery centers as an option for patients. “If these alternatives are closed off, it’s a significant public policy issue,” he said, noting that ASCs are also subject to a 3.5% gross receipts tax (up to $200,000), which helps cover the costs of hospital charity care.
