Q. What is the Codey law and how does it affect ASCs?
John Fanburg: The Codey Law is the State of New Jersey’s version of the federal Stark Law. Stark prohibits a physician from referring a Medicare patient to an entity if that physician has a financial relationship with that entity, but Stark does provide for some exceptions.
The Codey Law takes Stark two steps further. First, it expands its reach beyond Medicare to private-pay patients. Second, it severely limits Stark’s exceptions, which could have grave implications for ASCs everywhere.
The exact nature of Codey has gone through several permutations since the law was first enacted in 1989. For about two decades, New Jersey ASCs lived in an uneasy coexistence with Codey, thanks to amendments and interpretations of the law. But those happier times have come to an end with the state court decisions, Garcia v. Health Net of New Jersey and Health Net of New Jersey v. Wayne Surgical Center, which severely limit exemptions to Codey.
This March, the legislature passed the Codey Law amendments, which somewhat softened the blow of the court decisions. The amendments made it safe once again for surgeons to refer patients to existing ASCs, but it imposed a moratorium on new ASCs. New licenses are limited to ASCs that change ownership or relocate and to joint ventures with New Jersey hospitals or medical schools.
Q: What significance does the Codey Law have to ASCs outside of New Jersey?
JF: The Codey Law and its recent amendments send a signal to other states that they can tighten ASC regulations beyond what Stark requires. For instance, the legislature in Washington State has been considering a proposal similar to the New Jersey Law. Though this bill would not be quite as onerous as Codey, it demonstrates that state legislatures do have an interest in this.
Q: Insurance companies in New Jersey have taken a particularly aggressive stance against ASCs. How is that playing out?
JF: Private insurers want to pay Medicare rates for ambulatory surgery, but these rates are too low. Hospitals accept these low rates because they can shift losses from ambulatory surgery onto other services, making ambulatory surgery a kind of “loss leader” for them. But an ASC has nowhere to shift costs. The only way for ASCs to survive is to remain out-of-network, which is common in many states.
Q: New Jersey payors have been attacking ASCs’ out-of-network status on several fronts. Can you describe what is going on?
JF: This summer, Horizon Blue Cross and Blue Shield began selling a small business health plan that limits payments for out-of-network ASC services to just $2,000 per person per year. We’ll have to see if that sticks.
Meanwhile, ASCs are under attack for waiving co-pays for out-of-network patients. Since the patient has to pay a higher premium to be covered for out-of-network services, waiving the co-pay is an important option, especially when the recession makes it more difficult for patients to afford surgery. It eases the patient’s financial burden.
Horizon has been throwing surgeons who waive co-pays out of their network. While these surgeons are out-of-network for their ASC services, they remain in-network for their practice services. This year, Horizon terminated 17 physicians for referring patients to an out-of-network facility.
The Association intends to draft a bill to prevent health plans from terminating physicians for waiving co-pays. The bill might also require that the insurer pay the out-of-network rate.
Learn more about the New Jersey Association of Ambulatory Surgery Centers.
