brach eichler l.l.c. healthcare year in review
TRANSCRIPT
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2009 Health Law Year in Review
JAN | 2010
New Jersey Court Decisions and Cases
New Jersey Court Finds MRI Facility that Billed Before Licensure Liable under Insurance Fraud Act
In Open MRI of Morris & Essex, LP v. Frieri, a case decided on March 11, 2009, the Appellate Division of the Superior Court of New Jersey determined that an MRI facility that billed for services before it became licensed was liable under the New Jersey Insurance Fraud Prevention Act even though it applied and obtained licensure during a New Jersey Department of Health and Senior Services amnesty period.
Appellate Division Affirms Adoption of Rules Authorizing New Jersey’s Continued Participation in the Atlantic C-Port Trial, Elective Angioplasty Study
On September 10, 2009, the Appellate Division of the Superior Court of New Jersey reached a decision in Cooper Univ. Hosp. v. Jacobs, that upheld the adoption of rules by the New Jersey Department of Health and Senior Services (“DHSS”) at N.J.A.C. 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 community hospitals without on-site cardiac surgical services to provide elective angioplasty to their patients (the “Project”).
Prior to the adoption of the Adopted Rules, a hospital without on-site cardiac surgical facilities could not perform elective angioplasties. Such a hospital could, however, perform emergency angioplasties.
In 2007, the New Jersey Supreme Court held that while termination of the Project would be “unjust and inappropriate,” the regulations violated “fundamental principles relating to the regulatory process,” and required that the regulations include more details.
As a result of the 2007 decision, DHSS proposed new rules and amendments to rules to implement the Project. DHSS formally adopted the rules on December 17, 2007.
The Adopted Rules permit the continued participation by New Jersey community hospitals in the Atlantic C-Port Trial, Elective Angioplasty Study. Of the twelve CN applications permitted by the Adopted Rules, only nine CNs have currently been issued.
Appellate Division Rules Insurer Not Entitled to Court Ordered Discovery in PIP Arbitration Matter Involving Ambulatory Surgical Center
On October 7, 2009, in N.J. Mfrs. Ins. Co. v. Bergen Ambulatory Surgery Ctr., the Appellate Division of the Superior Court of New Jersey (the “Court”) held that an automobile insurance carrier’s
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. 39:6A et seq. Such requests, the Court concluded, must instead be approved by the Dispute Resolution Professionals empowered to decide PIP arbitration disputes.
The decision affirmed the trial court’s dismissal of the plaintiff’s complaint seeking expansive discovery of an assignee health service provider for use in PIP arbitrations. The Court held that petitioning the court, rather than pursuing the PIP arbitration appeals mechanisms, would contravene the Legislature’s express preference for limited judicial oversight of PIP disputes.
New Jersey Attorney General Sues Nonprofit Corporation Trustees
On September 17, 2009, the New Jersey Attorney General filed a lawsuit against the trustees of Hoboken-based Stevens Institute of Technology (“Stevens”), a nonprofit corporation, its president, and the chairman of the board of trustees. The sixteen-count civil complaint alleges financial mismanagement, excessive spending of endowment investment gains, improper handling of specific endowments and investments, failure to properly maintain records and accounts, and excessive compensation of the school president. On January 15, 2010, the parties settled.
Developments Relating to the Codey Law and Garcia Case
Bill Revising Codey Law Passed into Law
On March 23, 2009, Senate Bill S787, Senator Richard J. Codey’s bill revising the 1991 Codey Law, was signed into law (the “Law”) by Governor Jon Corzine. The Law modifies the Codey Law in the following ways:
Practitioners may refer to ASCs. The Law now expressly provides that a practitioner may refer a patient to an ASC or a surgical practice in which the practitioner holds an ownership interest, provided that: (1) the practitioner who provides the referral personally performs the procedure; (2) the practitioner’s remuneration as an owner is based on his or her ownership interest and not on the volume of referrals; (3) all medical decisions at a facility owned in part by non-practitioners are made by practitioners; and (4) disclosure of the referring practitioner’s interest is made to the patient in writing at or prior to the time the referral is made.
No new ASC Licenses. The Law prohibits the New Jersey Department of Health and Senior Services from issuing any new ASC licenses unless one of the following scenarios apply: (1) a change of ownership; (2) the relocation of an ASC within twenty miles or to a “Health Enterprise Zone” (provided there is no expansion in the ASC’s scope of services); (3) entities that filed architectural plans within six months of the effective date of the Bill, by September 17,
2009; (4) entities that are owned in whole or in part by a New Jersey hospital; or (5) entities that are owned in whole by a medical school.
No New Surgical Practices. Further, only existing unlicensed surgical practices, as well as those that: (1) change ownership; (2) had construction plans filed by September 17, 2009; or (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.
Exceptions for Lithotripsy and Radiation Oncology 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 date of the Law and the practitioner discloses the ownership interest in writing.
Change in Notice Requirements under New Jersey’s Codey Law
Revisions to the Codey Law, effective as of March 23, 2009, include new disclosure requirements by practitioners who refer patients for a health care service in which they have a financial interest:
Financial Interest. A referring practitioner must provide written disclosure to a patient, at or prior to the time that the referral is made, of any significant financial interest held by the practitioner in the practice or facility where the health care service would be performed. A copy of this disclosure must also be posted in a conspicuous public place in the practitioner’s office.
Choice of Providers. A patient must be notified that he or she may seek treatment at a health care service provider of his or her choosing and informed that a listing of alternative 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 carrier and that part or all of the upcoming procedure will be considered “out-of-network.”
Appellate Division Affirms Garcia Decision
In a decision issued on November 17, 2009, in Garcia v. Health Net of New Jersey, Inc., the Appellate Division of the Superior Court of New Jersey (the “Appellate Division”) upheld the trial court decision which found that physicians’ referrals to an ambulatory surgical center (“ASC”) in which they held an ownership interest did not violate the New Jersey Insurance Fraud Prevention Act.
The Appellate Division also affirmed the trial court decision that the ASC did not knowingly submit false and misleading claims to Health Net when it failed to pursue the collection of patients’ co-insurance obligations because the ASC routinely had patients sign a form stating that they would pay co-insurance and at
the time the ASC submitted the claims to Health Net, it did not know whether or not it would pursue collection of a particular patient’s co-insurance obligation. The Appellate Division further noted that there is no statute, regulation or regulatory directive in New Jersey barring the waiver of a contractual right to collect co-insurance.
New Law Passed in New Jersey Relating to Medical Errors
On August 31, 2009, Governor Jon S. Corzine signed Senate Bill S2471, the New Jersey Adverse Event Reporting Act (the “Act”), into law. The Act, which will become effective on February 27, 2010, (1) requires the Department of Health and Senior Services to publicly report certain patient safety indicators by hospital on an annual basis; and (2) prohibits hospitals from billing a patient or a third party for hospital-acquired conditions, based on a list of conditions set by the Centers for Medicare & Medicaid Services.
Proposed New DHSS Rules Concerning Collection Stations
On October 19, 2009, the New Jersey Department of Health and Senior Services proposed new rules that would continue to permit clinical laboratories to operate collection stations in physician offices, but would prohibit the payment of rent, sharing of employees or performing or offering other goods or services by the clinical laboratory. The proposed rules would additionally impose requirements on independent collection stations.
New Jersey Department of Banking and Insurance
Proposed DOBI Rules Seek to Regulate Managed Care Provider Networks
On June 15, 2009, the New Jersey Department of Banking and Insurance (“DOBI”) proposed new rules that seek to limit insurance carriers with respect to how network contracts are negotiated with health care providers. As of this date, no further action has been taken. The proposed rules would affect the negotiation of terms within the ambit of credentialing, pre-certification, fee schedules, and claim denials, and include the following proposed provisions:
Insurance carriers must complete the provider credentialing process within ninety days.
Insurance carriers will be required to deliver to prospective providers, twenty days before entering into any agreements
with such providers, a complete “provider-specific” or “specialty-specific” fee schedule for the carrier’s health benefits plan.
Provider-specific fee schedules will be required to be negotiated between the carrier and provider.
Specialty-specific fee schedules, on the other hand, may be established by the carrier without any negotiations with the provider, but shall have a maximum term of one year.
Agreements may not include “most-favored nation” clauses or mandatory binding arbitration clauses.
Fee schedules, both provider-specific and specialty-specific, must be included in the final agreement.
All agreements must identify all preferred provider organizations, organized delivery systems, and other entities, from which carriers lease networks and to whose fees the provider is subject under the agreement.
Providers would be able to terminate a multi-year term agreement without cause at the conclusion of each year in the multi-year term, or as otherwise agreed to by the parties. Providers may terminate one-year agreements without cause at any time during the term of the agreement with sixty days notice.
DOBI Issues Cease and Desist Letter to Oxford for Violation of Insurance Laws
On June 23, 2009, DOBI issued a cease and desist order to Oxford Health Plans (NJ) Inc. for illegally seeking recoupment of monies from health care providers through the extrapolation of claims in violation of the New Jersey Health Claims Authorization, Processing and Payment Act (“HCAPPA”).
Proposed Department of Banking and Insurance Rule that Affects Personal Injury Protection Benefits and Dispute Resolutions
On July 6, 2009, DOBI proposed a new rule which, if approved, will amend the Personal Injury Protection medical benefit regulations in what DOBI characterizes as an effort to better promote cost-efficient quality medical care to persons injured in automobile accidents. As of this date, no further action has been taken. Provisions under the proposed rule include:
Insurers would be able to waive policy deductibles or co-payments if a patient decides to obtain treatment from an in-network provider contracted by an organized delivery system.
Insurers would be prohibited from requiring “precertification”of the evaluation and management visit for a new patient because, in order to develop a plan of care, a provider needs to be able to examine the injured insured.
The requirement that insurers maintain their decision point review plan on the Internet would be removed because DOBI does not have the resources to keep the listings current.
Proposed Amendments to the Prompt Payment of Health Claims Regulations
On July 20, 2009, DOBI proposed to amend its rules governing the prompt payment of health claims to track the language of HCAPPA. As of this date, no further action has been taken.
Currently, when missing information or documentation is a reason for denying or disputing a claim, the notice must identify with specificity the additional information or documentation that is required and the carrier must engage in a good faith effort to expeditiously obtain such additional information or documentation by, among other things, telephoning the provider.
DOBI proposes to amend its rules to track the language of HCAPPA, which decreases the carrier’s responsibility by not requiring the carrier to engage in a good faith effort to expeditiously obtain missing information or documentation. Under HCAPPA, carriers are only required to distribute to providers, through a posting on their websites, a list of all documentation and information that must be submitted with claims, and specify the timeframes and means for carriers to inform providers that a claim has been denied or that information or documentation is inaccurate.
Under the proposed amendment, the carrier’s right to contest the claim will not be automatically waived if the carrier does not provide adequate notice. Instead, the claim will be deemed overdue and claimants will need to pursue the claims payment mechanisms made available to them by HCAPPA and pursuant to the procedures and timeframes set forth therein.
Amendment to Medical Malpractice Reporting Requirement Adopted
On August 7, 2009, DOBI adopted its proposal to amend the medical malpractice reporting requirements under N.J.A.C. 11:1-7.1 et seq., which require insurance companies to notify the Board of Medical Examiners (“BME”) Medical Practitioner Review Panel in writing of any medical malpractice claim settlement, judgment or arbitration award involving any practitioner who is licensed by the BME. This information is then included on the practitioner’s “Physician Profile,” which can be accessed at http://12.150.185.184/dca. Specifically, effective September 8, 2009, N.J.A.C. 11:1-7.3(a)1 is amended to provide that, in the case of a “high/low” agreement, where there is a finding of no liability on the part of the practitioner, but the insurer must make a payment to the claimant under the “low” provision of the agreement, the insurer would not have to report this information for inclusion on the practitioner’s Physician Profile.
Health Insurers
New Jersey Oxford Health Plans Reduce Non-Network ASC Reimbursement
New Jersey Oxford Health Plan (“Oxford”), by letter dated January 6, 2009, informed out-of-network ambulatory surgical centers in New Jersey that, effective that month, as Oxford members purchased or renewed their coverage, the reimbursement for non-network ambulatory surgery center claims would be calculated at 225% of the published rates allowed by Medicare, less any applicable co-insurance, co-payments or deductibles.
Studies Suggest that Insurance Monopolies in Some States, Including New Jersey, Increase Premiums and Reduce Provider Reimbursement
Two studies performed by Health Care for America Now (“HCAN”) and the American Hospital Association have concluded that shrinking competition among health insurance companies is a major cause of escalating health insurance premium costs and decreasing reimbursement to providers.
Specific to New Jersey, the study performed by HCAN determined:
In 2007, Horizon Blue Cross and Blue Shield controlled 34% of New Jersey’s commercial market, and Aetna, Inc. controlled 25%, for a combined market share of 59%.
Health insurance premiums increased 71% from 2000 to 2007.
For family health coverage, the average annual combined premium for employers and employees rose from $7,592 to $12,979.
Centers for Medicare & Medicaid Services
Change in Medicare Disclosure Requirements
On May 18, 2009, changes made by the Centers for Medicare & Medicaid Services (“CMS”) became effective pertaining to conditions for coverage (“Conditions for Coverage”) that ambulatory surgery centers (“ASCs”) must now meet in order to participate in the Medicare and Medicaid programs. Such new disclosure requirements include, but are not limited to:
Financial Interests. The ASC must disclose in writing, prior to the date of the procedure, physician ownership in the ASC (when applicable).
Patient Rights. The ASC must provide written and verbal notice to a patient of the patient’s rights prior to the date of
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 agency representative to whom complaints may be reported and a web site for the Office of the Medicare Beneficiary Ombudsman.
Advance Directives. The ASC must provide the patient, prior to the date of the procedure, with information concerning its policies on advance directives, including a description of applicable state health and safety laws, and if requested, official state advance directive forms.
Informed Decisions. The ASC must inform the patient of the patient’s right to make informed decisions regarding care and prominently document in the patient’s medical record whether or not an advance directive has been executed.
Discharge. All patients must be provided with written discharge instructions and overnight supplies and have a written discharge order, signed by the physician who performed the surgery. According to CMS, all patients must be discharged in the company of a responsible adult, except those patients exempted by the attending physician. Note that New Jersey additionally requires that patients who receive anesthesia, excluding minor regional blocks, may not drive themselves home after discharge and that they must be accompanied home by another person who accepts responsibility for the patient.
Exceptions. CMS will exempt an ASC from the advance notice requirements when the referral to the ASC is made on the day of the procedure and the referring physician provides a written statement that it is medically necessary for the patient to have the procedure on the same day and that an ASC setting is suitable for that patient. In this case, the aforementioned notice provisions must be provided prior to obtaining the patient’s informed consent.
CMS Selects Twelve New Jersey Hospitals to Participate in Medicare Gainsharing Program
On August 17, 2009, the Centers for Medicare & Medicaid Services announced that it had selected twelve New Jersey hospitals to participate in the Physician Hospital Collaborative Demonstration, one of its three new demonstration projects. The Physician Hospital Collaborative Demonstration will evaluate gainsharing as a means of aligning incentives between hospitals and physicians to improve quality of care and efficiency. Gainsharing occurs when a hospital pays incentives to a physician who assists in saving internal hospital costs while improving quality and efficiency.
The participating hospitals are AtlantiCare Regional Medical Center, Overlook Hospital, Holy Name Hospital, Jersey Shore University Medical Center, Hunterdon Medical Center, Monmouth Medical Center, St. Francis Medical Center, Our Lady of Lourdes Medical Center, The Valley Hospital, Somerset Medical Center, JFK Medical Center, and CentraState Healthcare System.
CMS Finalizes Amendments to the Stark Law
Last year, the Centers for Medicare & Medicaid Services published its 2009 final hospital inpatient prospective payment system rule (the “IPPS Rule”), which contained several significant changes that became effective on October 1, 2009, to the federal regulations related to the federal Stark Law, the law that prohibits a physician from making referrals for certain designated health services (“DHS”) payable by federal health care programs to an entity with which the physician has a financial relationship unless a Stark Law exception applies.
“Per-Click” Arrangements1.
The final IPPS Rule prohibits the use of “per-click” payments in the context of lease arrangements between physicians and DHS entities when such payments reflect services referred between the parties.
Percentage-Based Compensation Formula 2.
Percentage-based compensation arrangements for space and equipment rental charges will no longer be permitted, and any existing arrangements must be amended as of October 1, 2009.
OIG Advisory Opinions
OIG Opinion Approves Compensation for On-Call Services
On May 21, 2009, the U.S. Department of Health and Human Services Office of Inspector General (“OIG”) posted Advisory Opinion 09-05 concerning a hospital’s proposal to compensate physicians for providing on-call coverage and other services to uninsured patients seeking care through the hospital’s emergency department. Although the OIG found that the
arrangement had the potential to generate remuneration prohibited under the federal Anti-Kickback Statute if the requisite intent was present, the OIG stated that it would not impose administrative sanctions because the proposed arrangement
presented a low risk of fraud and abuse.
OIG Advisory Opinion Regarding Safe-Harbor for Investment Income from Physician/Hospital-Owned ASCs
On July 22, 2009, the U.S. Department of Health and Human Services Office of Inspector General (“OIG”) issued Advisory Opinion 09-09, which provides guidance on joint ventures between physicians and hospitals. In this case, an orthopedic surgeon group and a hospital wanted to enter into a joint venture to own and operate an ambulatory surgical center with two operating rooms in a medical office building owned by the hospital and located on its campus. The OIG found that although the arrangement could potentially generate prohibited remuneration under the federal Anti-Kickback Statute if the requisite intent to induce or reward federal referrals was present, the OIG would not impose administrative sanctions.
Latest Developments Concerning the Red Flags Rule
On October 30, 2009, the Federal Trade Commission once again delayed enforcement of the Red Flags Rule. At the request of several members of Congress, enforcement of the Red Flags Rule, which went into effect on January 1, 2008, will now be delayed until June 1, 2010.
John D. Fanburg/Chair [email protected]
Members:
Todd C. Brower [email protected] 973.403.3103
Carol Grelecki [email protected] 973.403.3140
Joseph M. Gorrell [email protected] 973.403.3112
Lani M. Dornfeld
973.403.3136
Kevin M. Lastorino
973.403.3129
Mark E. Manigan
973.403.3132
Debra C. Lienhardt
973.364.5203
Counsel:
Richard B. Robins [email protected] 973.403.3147
Associates:
Jenny Carroll [email protected] 973.364.5223
Deborah A. Cmielewski [email protected] 973.364.5213
Eric W. Gross [email protected] 973.364.5228
Rita M. Jennings [email protected] 973.364.5204
Leonard Lipsky [email protected] 973.364.5218
Isai Senthil [email protected] 973.403.3150
Joseph B. Vas [email protected] 973.403.3135
Edward J. Yun [email protected] 973.364.5229
Health Law Practice Group
In Memoriam: Burton L. Eichler, 1933-2009 Pioneer of Healthcare Law in New Jersey