Here are excerpts from an interesting release by the New Jersey Board of Medical Examiners as a follow-up to the Codey Case. I thank Mike Schaff, a leading N.J. and national healthcare lawyer, for sending it along to the Becker's ASC Review.

At its regularly scheduled meeting on Dec. 12, the N.J. Board of Medical Examiners reviewed the recent decision in Garcia v. HealthNet and Wayne Surgical Center and entertained application from the Medical Society of New Jersey and other physician organizations seeking he issuance of a Special Advisory Opinion. The Board also heard public comments from a number of interested persons, including representatives of physician groups and two insurers (HealthNet and Allstate). The Board notes that earlier this week, Judge Contillo denied the application request to intervene in the case, on the grounds that the applicant interests were ably represented in the litigation and, in any event, his earlier ruling was intended to affect only the rights of the parties before him.

It is clear from Judge Contillo's decisions of Nov. 20 and Dec. 10 that, based on the record before him, he did not view Wayne Surgical Center as a medical office within the meaning of the term as it appears in NJSA 45:9-22.5. He has noted that the facility was at a different location from the other medical offices maintained by the doctors, the doctors did not control the personnel, and different bills were generated for the professional services rendered and for the facility fees. He distinguished the case before him from a situation addressed in a 1997 letter of the board, suggesting that were an ambulatory surgical center in a joint-venture with a hospital, there might be a different outcome.

The Board recognizes that the healthcare arena has changed substantially since the enactment of the Codey Act in 1989. At the outset, the Board was asked to review business structures in which several physicians pooled their capital to establish an additional practice site at which they could perform services integral to their area of practice. The model then presented appeared to easily resemble a medical office. In the absence of any statutory provision barring physicians from maintaining multiple offices, the Board has always ... [made] certain that it is the doctor himself or herself who is performing the service and a bill is being generated in the name of the practice. The 1997 letter expressly reflected the Board's expectation that the facility fees involved would be nominal. ... [B]ased on the statements before the Board today, there may be ASCs in current operation where a physician investor refers a patient for the performance of surgery by another doctor who may or may not be an investor. To date, the Board has viewed the medical office exception applicable to such situations. Further, based on the statements provided to the Board today and Judge Contillo's observations, the facility fees that may be involved are not nominal. In light of these developments, it is time for more 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. While Judge Contillo found it compelling that the center at issue was in a different location, that the doctors did not employ the personnel directly, and that separate bills were generated, we do not see these criteria as dispositive in all cases.

We are ... very concerned that the uncertainty that the applicant has described as more fully documented in the certifications -- presented in support of its motion to intervene before Judge Contillo -- has a significant potential to affect patient access to healthcare services. Judge Contillo has acknowledged the positive benefits of such centers and the important role they play in the delivery of healthcare in New Jersey. 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. 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. As such, the Board will undertake an effort to pursue an emergency rule defining a medical office for purposes of Codey Act.

The judge, using the Codey Act as a basis for his decision, in a part of a legal opinion focused principally on out-of-network issues, reasoned that the existing physician self-referral law technically makes a referral by a surgeon owner to an outside ASC unlawful. Here, the Board has decided that it will study and issue an emergency position and opinion on this shortly. It makes some efforts in this initial release to distinguish its view from that of the judge. This is positive for ASCs. That stated, the Board does not here go as far as to say ASC structures are all fine, and tends to speak negatively regarding indirect referrals and out-of-network (which often means very high rates of payment).

However, the Board does note that the concept of the facility doing its own billing as opposed to the practice itself seems like a proper practice. It may end up with a ruling similar to other states, where a physician who directly performs a procedure is permitted to invest and refer if he performs the case. The big questions as to the Board's final issuance may revolve around how the opinion impacts the ability to have non-physician partners or management company partners, how it impacts under-development facilities, and whether it comments on out-of-network or high fees.

To see a full copy of the statement issued by the New Jersey Board of Medical Examiners, please visit www.BeckersASC.com.

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