1) The document summarizes key New Jersey health law developments from 2009, including court decisions, new legislation, and regulatory proposals. 2) It discusses a New Jersey court case finding an MRI facility liable for insurance fraud for billing before becoming licensed, and appellate cases related to PIP arbitration and the Atlantic C-Port elective angioplasty study. 3) New Jersey's legislature passed revisions to the 1991 Codey Law regulating physician referrals to ambulatory surgical centers where they have a financial interest.

1. JAN | 2010
2009 Health Law Year in Review
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2. New Jersey Court Decisions recourse to the courts for discovery materials sought to be used
in a PIP arbitration is inappropriate under the PIP statute, N.J.S.A.
and Cases 39:6A et seq. Such requests, the Court concluded, must instead
be approved by the Dispute Resolution Professionals empowered
to decide PIP arbitration disputes.
New Jersey Court Finds MRI Facility that Billed Before
The decision affirmed the trial court’s dismissal of the plaintiff’s
Licensure Liable under Insurance Fraud Act complaint seeking expansive discovery of an assignee health
service provider for use in PIP arbitrations. The Court held that
In Open MRI of Morris & Essex, LP v. Frieri, a case decided on
petitioning the court, rather than pursuing the PIP arbitration
March 11, 2009, the Appellate Division of the Superior Court
appeals mechanisms, would contravene the Legislature’s express
of New Jersey determined that an MRI facility that billed for
preference for limited judicial oversight of PIP disputes.
services before it became licensed was liable under the New
Jersey Insurance Fraud Prevention Act even though it applied and
New Jersey Attorney General Sues Nonprofit
obtained licensure during a New Jersey Department of Health
Corporation Trustees
and Senior Services amnesty period.
On September 17 2009, the New Jersey Attorney General filed a
,
Appellate Division Affirms Adoption of Rules Authorizing lawsuit against the trustees of Hoboken-based Stevens Institute
New Jersey’s Continued Participation in the Atlantic of Technology (“Stevens”), a nonprofit corporation, its president,
C-Port Trial, Elective Angioplasty Study and the chairman of the board of trustees. The sixteen-count
civil complaint alleges financial mismanagement, excessive
On September 10, 2009, the Appellate Division of the Superior spending of endowment investment gains, improper handling
Court of New Jersey reached a decision in Cooper Univ. Hosp. of specific endowments and investments, failure to properly
v. Jacobs, that upheld the adoption of rules by the New Jersey maintain records and accounts, and excessive compensation of
Department of Health and Senior Services (“DHSS”) at N.J.A.C. the school president. On January 15, 2010, the parties settled.
8:33-3.11(e) (the “Adopted Rules”). The Adopted Rules authorize
New Jersey’s continued participation in the “Atlantic C-Port
Trial, Elective Angioplasty Study, a multi-state demonstration
”
project intended to assess the safety and efficacy of allowing Developments Relating to the
community hospitals without on-site cardiac surgical services to
provide elective angioplasty to their patients (the “Project”).
Codey Law and Garcia Case
Prior to the adoption of the Adopted Rules, a hospital without
on-site cardiac surgical facilities could not perform elective Bill Revising Codey Law Passed into Law
angioplasties. Such a hospital could, however, perform
On March 23, 2009, Senate Bill S787 Senator Richard J. Codey’s
,
emergency angioplasties.
bill revising the 1991 Codey Law, was signed into law (the
2007, the New Jersey Supreme Court held that
In “Law”) by Governor Jon Corzine. The Law modifies the Codey
while termination of the Project would be “unjust and Law in the following ways:
inappropriate, the regulations violated “fundamental
”
principles relating to the regulatory process, and required
”
Practitioners may refer to ASCs. The Law now expressly
provides that a practitioner may refer a patient to an ASC
that the regulations include more details.
or a surgical practice in which the practitioner holds an
a result of the 2007 decision, DHSS proposed new rules
As ownership interest, provided that: (1) the practitioner who
and amendments to rules to implement the Project. DHSS provides the referral personally performs the procedure;
formally adopted the rules on December 17 2007
, . (2) the practitioner’s remuneration as an owner is based
Adopted Rules permit the continued participation by
The on his or her ownership interest and not on the volume of
New Jersey community hospitals in the Atlantic C-Port Trial, referrals; (3) all medical decisions at a facility owned in part by
Elective Angioplasty Study. Of the twelve CN applications non-practitioners are made by practitioners; and (4) disclosure
permitted by the Adopted Rules, only nine CNs have currently of the referring practitioner’s interest is made to the patient in
been issued. writing at or prior to the time the referral is made.
new ASC Licenses. The Law prohibits the New Jersey
No
Appellate Division Rules Insurer Not Entitled to Court Department of Health and Senior Services from issuing any
Ordered Discovery in PIP Arbitration Matter Involving new ASC licenses unless one of the following scenarios
Ambulatory Surgical Center apply: (1) a change of ownership; (2) the relocation of an
ASC within twenty miles or to a “Health Enterprise Zone”
On October 7 2009, in N.J. Mfrs. Ins. Co. v. Bergen Ambulatory
, (provided there is no expansion in the ASC’s scope of
Surgery Ctr., the Appellate Division of the Superior Court of New services); (3) entities that filed architectural plans within six
Jersey (the “Court”) held that an automobile insurance carrier’s months of the effective date of the Bill, by September 17 ,

3. 2009; (4) entities that are owned in whole or in part by a New the time the ASC submitted the claims to Health Net, it did not
Jersey hospital; or (5) entities that are owned in whole by a know whether or not it would pursue collection of a particular
medical school. patient’s co-insurance obligation. The Appellate Division further
New Surgical Practices. Further, only existing unlicensed
No noted that there is no statute, regulation or regulatory directive
surgical practices, as well as those that: (1) change ownership; in New Jersey barring the waiver of a contractual right to collect
(2) had construction plans filed by September 17 2009; or
, co-insurance.
(3) relocate within twenty miles or to a “Health Enterprise
Zone” (provided there is no expansion in the surgical practice’s
scope of services) will qualify for registration. New Law Passed in New Jersey
Exceptions for Lithotripsy and Radiation Oncology Relating to Medical Errors
Abolished. Finally, the Law abolishes the current Codey
Law exceptions for lithotripsy and radiation oncology unless
the interest was held prior to one year following the effective On August 31, 2009, Governor Jon S. Corzine signed Senate Bill
date of the Law and the practitioner discloses the ownership S2471, the New Jersey Adverse Event Reporting Act (the “Act”),
interest in writing. into law. The Act, which will become effective on February 27 ,
2010, (1) requires the Department of Health and Senior Services
Change in Notice Requirements under New Jersey’s to publicly report certain patient safety indicators by hospital on
Codey Law an annual basis; and (2) prohibits hospitals from billing a patient
or a third party for hospital-acquired conditions, based on a list of
Revisions to the Codey Law, effective as of March 23, 2009, conditions set by the Centers for Medicare & Medicaid Services.
include new disclosure requirements by practitioners who
refer patients for a health care service in which they have a
financial interest:
Proposed New DHSS Rules
Financial Interest. A referring practitioner must provide
written disclosure to a patient, at or prior to the time that the Concerning Collection Stations
referral is made, of any significant financial interest held by
the practitioner in the practice or facility where the health
On October 19, 2009, the New Jersey Department of Health
care service would be performed. A copy of this disclosure
and Senior Services proposed new rules that would continue
must also be posted in a conspicuous public place in the
to permit clinical laboratories to operate collection stations in
practitioner’s office.
physician offices, but would prohibit the payment of rent, sharing
Choice of Providers. A patient must be notified that he or of employees or performing or offering other goods or services
she may seek treatment at a health care service provider of by the clinical laboratory. The proposed rules would additionally
his or her choosing and informed that a listing of alternative impose requirements on independent collection stations.
health care service providers may be found in the classified
section of the telephone directory.
Out-Of-Network. A patient must be notified when a facility
is not a participating provider under the patient’s insurance
New Jersey Department of
carrier and that part or all of the upcoming procedure will be Banking and Insurance
considered “out-of-network. ”
Appellate Division Affirms Garcia Decision Proposed DOBI Rules Seek to Regulate Managed
Care Provider Networks
In a decision issued on November 17 2009, in Garcia v. Health
,
Net of New Jersey, Inc., the Appellate Division of the Superior On June 15, 2009, the New Jersey Department of Banking
Court of New Jersey (the “Appellate Division”) upheld the and Insurance (“DOBI”) proposed new rules that seek to limit
trial court decision which found that physicians’ referrals to insurance carriers with respect to how network contracts are
negotiated with health care providers. As of this date, no further
an ambulatory surgical center (“ASC”) in which they held an
action has been taken. The proposed rules would affect the
ownership interest did not violate the New Jersey Insurance
negotiation of terms within the ambit of credentialing, pre-
Fraud Prevention Act.
certification, fee schedules, and claim denials, and include the
The Appellate Division also affirmed the trial court decision that following proposed provisions:
the ASC did not knowingly submit false and misleading claims
Insurance carriers must complete the provider credentialing
to Health Net when it failed to pursue the collection of patients’
process within ninety days.
co-insurance obligations because the ASC routinely had patients
sign a form stating that they would pay co-insurance and at Insurance carriers will be required to deliver to prospective
providers, twenty days before entering into any agreements

4. with such providers, a complete “provider-specific” or requirement that insurers maintain their decision
The
“specialty-specific” fee schedule for the carrier’s health point review plan on the Internet would be removed
benefits plan. because DOBI does not have the resources to keep the
listings current.
Provider-specific fee schedules will be required to be
negotiated between the carrier and provider.
Proposed Amendments to the Prompt Payment of
Specialty-specific fee schedules, on the other hand, may be Health Claims Regulations
established by the carrier without any negotiations with the
provider, but shall have a maximum term of one year. On July 20, 2009, DOBI proposed to amend its rules governing
the prompt payment of health claims to track the language of
Agreements may not include “most-favored nation” clauses
HCAPPA. As of this date, no further action has been taken.
or mandatory binding arbitration clauses.
Currently, when missing information or documentation is a
schedules, both provider-specific and specialty-specific,
Fee
reason for denying or disputing a claim, the notice must identify
must be included in the final agreement.
with specificity the additional information or documentation
agreements must identify all preferred provider
All that is required and the carrier must engage in a good faith
organizations, organized delivery systems, and other effort to expeditiously obtain such additional information or
entities, from which carriers lease networks and to whose documentation by, among other things, telephoning the provider.
fees the provider is subject under the agreement.
DOBI proposes to amend its rules to track the language of
Providers would be able to terminate a multi-year term HCAPPA, which decreases the carrier’s responsibility by
agreement without cause at the conclusion of each year in not requiring the carrier to engage in a good faith effort to
the multi-year term, or as otherwise agreed to by the parties. expeditiously obtain missing information or documentation.
Providers may terminate one-year agreements without cause Under HCAPPA, carriers are only required to distribute to
at any time during the term of the agreement with sixty providers, through a posting on their websites, a list of all
days notice. documentation and information that must be submitted with
claims, and specify the timeframes and means for carriers to
DOBI Issues Cease and Desist Letter to Oxford for inform providers that a claim has been denied or that information
Violation of Insurance Laws or documentation is inaccurate.
On June 23, 2009, DOBI issued a cease and desist order to Under the proposed amendment, the carrier’s right to contest
Oxford Health Plans (NJ) Inc. for illegally seeking recoupment the claim will not be automatically waived if the carrier does
of monies from health care providers through the extrapolation not provide adequate notice. Instead, the claim will be deemed
of claims in violation of the New Jersey Health Claims overdue and claimants will need to pursue the claims payment
Authorization, Processing and Payment Act (“HCAPPA”). mechanisms made available to them by HCAPPA and pursuant to
the procedures and timeframes set forth therein.
Proposed Department of Banking and Insurance Rule
that Affects Personal Injury Protection Benefits and Amendment to Medical Malpractice Reporting
Dispute Resolutions Requirement Adopted
On July 6, 2009, DOBI proposed a new rule which, if approved, On August 7 2009, DOBI adopted its proposal to amend the
,
will amend the Personal Injury Protection medical benefit medical malpractice reporting requirements under N.J.A.C.
regulations in what DOBI characterizes as an effort to better 11:1-7 et seq., which require insurance companies to notify the
.1
promote cost-efficient quality medical care to persons injured in Board of Medical Examiners (“BME”) Medical Practitioner Review
automobile accidents. As of this date, no further action has been Panel in writing of any medical malpractice claim settlement,
taken. Provisions under the proposed rule include: judgment or arbitration award involving any practitioner who
is licensed by the BME. This information is then included on
Insurers would be able to waive policy deductibles or
the practitioner’s “Physician Profile, which can be accessed at
”
co-payments if a patient decides to obtain treatment
http://12.150.185.184/dca. Specifically, effective September 8,
from an in-network provider contracted by an organized
2009, N.J.A.C. 11:1-7 .3(a)1 is amended to provide that, in the
delivery system.
case of a “high/low” agreement, where there is a finding of no
Insurers would be prohibited from requiring liability on the part of the practitioner, but the insurer must make
“precertification”of the evaluation and management a payment to the claimant under the “low” provision of the
visit for a new patient because, in order to develop a agreement, the insurer would not have to report this information
plan of care, a provider needs to be able to examine the for inclusion on the practitioner’s Physician Profile.
injured insured.

5. Health Insurers the procedure, in a language and manner that the patient
understands. This notice must also be posted within the ASC
in a place likely to be noticed while waiting for treatment.
This notice must include contact information for a state
New Jersey Oxford Health Plans Reduce Non-Network agency representative to whom complaints may be reported
ASC Reimbursement and a web site for the Office of the Medicare Beneficiary
Ombudsman.
New Jersey Oxford Health Plan (“Oxford”), by letter dated
January 6, 2009, informed out-of-network ambulatory Advance Directives. The ASC must provide the patient, prior
surgical centers in New Jersey that, effective that month, as to the date of the procedure, with information concerning
Oxford members purchased or renewed their coverage, the its policies on advance directives, including a description of
reimbursement for non-network ambulatory surgery center applicable state health and safety laws, and if requested,
claims would be calculated at 225% of the published rates official state advance directive forms.
allowed by Medicare, less any applicable co-insurance, Informed Decisions. The ASC must inform the patient of
co-payments or deductibles. the patient’s right to make informed decisions regarding care
and prominently document in the patient’s medical record
Studies Suggest that Insurance Monopolies in Some whether or not an advance directive has been executed.
States, Including New Jersey, Increase Premiums and Discharge. All patients must be provided with written
Reduce Provider Reimbursement discharge instructions and overnight supplies and have
a written discharge order, signed by the physician who
Two studies performed by Health Care for America Now
performed the surgery. According to CMS, all patients must
(“HCAN”) and the American Hospital Association have concluded
be discharged in the company of a responsible adult, except
that shrinking competition among health insurance companies is
those patients exempted by the attending physician. Note
a major cause of escalating health insurance premium costs and
that New Jersey additionally requires that patients who
decreasing reimbursement to providers.
receive anesthesia, excluding minor regional blocks, may
Specific to New Jersey, the study performed by HCAN not drive themselves home after discharge and that they
determined: must be accompanied home by another person who accepts
2007, Horizon Blue Cross and Blue Shield controlled
In responsibility for the patient.
34% of New Jersey’s commercial market, and Aetna, Inc.
Exceptions. CMS will exempt an ASC from the advance
controlled 25%, for a combined market share of 59%.
notice requirements when the referral to the ASC is made on
Health insurance premiums increased 71% from 2000 the day of the procedure and the referring physician provides
to 2007. a written statement that it is medically necessary for the
family health coverage, the average annual combined
For patient to have the procedure on the same day and that an
premium for employers and employees rose from $7,592 to ASC setting is suitable for that patient. In this case, the
$12,979. aforementioned notice provisions must be provided prior to
obtaining the patient’s informed consent.
CMS Selects Twelve New Jersey Hospitals to Participate
Centers for Medicare & Medicaid in Medicare Gainsharing Program
Services On August 17 2009, the Centers for Medicare & Medicaid
,
Services announced that it had selected twelve New Jersey
Change in Medicare Disclosure Requirements hospitals to participate in the Physician Hospital Collaborative
Demonstration, one of its three new demonstration projects.
On May 18, 2009, changes made by the Centers for Medicare The Physician Hospital Collaborative Demonstration will evaluate
& Medicaid Services (“CMS”) became effective pertaining gainsharing as a means of aligning incentives between hospitals
to conditions for coverage (“Conditions for Coverage”) that and physicians to improve quality of care and efficiency.
ambulatory surgery centers (“ASCs”) must now meet in order to Gainsharing occurs when a hospital pays incentives to a
participate in the Medicare and Medicaid programs. Such new physician who assists in saving internal hospital costs while
disclosure requirements include, but are not limited to: improving quality and efficiency.
Financial Interests. The ASC must disclose in writing, prior The participating hospitals are AtlantiCare Regional Medical
to the date of the procedure, physician ownership in the ASC Center, Overlook Hospital, Holy Name Hospital, Jersey Shore
(when applicable). University Medical Center, Hunterdon Medical Center, Monmouth
Patient Rights. The ASC must provide written and verbal Medical Center, St. Francis Medical Center, Our Lady of Lourdes
notice to a patient of the patient’s rights prior to the date of Medical Center, The Valley Hospital, Somerset Medical Center,
JFK Medical Center, and CentraState Healthcare System.

6. CMS Finalizes Amendments to the Stark Law arrangement had the potential to generate remuneration
prohibited under the federal Anti-Kickback Statute if the requisite
Last year, the Centers for Medicare & Medicaid Services intent was present, the OIG stated that it would not impose
published its 2009 final hospital inpatient prospective payment administrative sanctions because the proposed arrangement
system rule (the “IPPS Rule”), which contained several
presented a low risk of fraud and abuse.
significant changes that became effective on October 1, 2009,
to the federal regulations related to the federal Stark Law, the
OIG Advisory Opinion Regarding Safe-Harbor for
law that prohibits a physician from making referrals for certain
Investment Income from Physician/Hospital-Owned ASCs
designated health services (“DHS”) payable by federal health
care programs to an entity with which the physician has a On July 22, 2009, the U.S. Department of Health and Human
financial relationship unless a Stark Law exception applies. Services Office of Inspector General (“OIG”) issued Advisory
1. “Per-Click” Arrangements Opinion 09-09, which provides guidance on joint ventures
between physicians and hospitals. In this case, an orthopedic
The final IPPS Rule prohibits the use of “per-click” payments in
surgeon group and a hospital wanted to enter into a joint
the context of lease arrangements between physicians and DHS
venture to own and operate an ambulatory surgical center
entities when such payments reflect services referred between
with two operating rooms in a medical office building owned
the parties.
by the hospital and located on its campus. The OIG found that
2. Percentage-Based Compensation Formula although the arrangement could potentially generate prohibited
Percentage-based compensation arrangements for space and remuneration under the federal Anti-Kickback Statute if the
equipment rental charges will no longer be permitted, and any requisite intent to induce or reward federal referrals was present,
existing arrangements must be amended as of October 1, 2009. the OIG would not impose administrative sanctions.
OIG Advisory Opinions Latest Developments Concerning
the Red Flags Rule
OIG Opinion Approves Compensation for On-Call Services
On October 30, 2009, the Federal Trade Commission once again
On May 21, 2009, the U.S. Department of Health and Human
delayed enforcement of the Red Flags Rule. At the request of
Services Office of Inspector General (“OIG”) posted Advisory
several members of Congress, enforcement of the Red Flags
Opinion 09-05 concerning a hospital’s proposal to compensate
Rule, which went into effect on January 1, 2008, will now be
physicians for providing on-call coverage and other services
delayed until June 1, 2010.
to uninsured patients seeking care through the hospital’s
emergency department. Although the OIG found that the
Health Law Practice Group
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Richard B. Robins
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llipsky@bracheichler.com
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In Memoriam: Burton L. Eichler, 1933-2009 Pioneer of Healthcare Law in New Jersey