N.J. Codey Ruling, 'A Dramatic Threat' to N.J. Ambulatory Surgical Centers

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On November 20, 2007, a New Jersey court ruled that the referral of a patient to an ambulatory surgical center (“ASC”) in which the referring physician owns an interest — an everyday occurrence throughout the State — violates the New Jersey anti-self- referral law, commonly known as the Codey Act. N.J.S.A. 45:9-22.5.

This ruling has potentially devastating consequences for every ambulatory surgical center in New Jersey. There are approximately 100 physician-owned ASCs in the State that deliver services in a far more efficient way than they could be delivered in the State’s hospitals. If the ASCs suddenly closed, the hospitals could not handle the volume of patients. The insurance companies are paying the ASCs less than they would pay the hospitals. However, insurance carriers, relying on this decision, may well refuse to pay claims of ASCs for all self-referred procedures, delivering a potentially crippling economic blow.

Stephen M. Greenberg, Flaster/Greenberg shareholder, concentrates his practice in health care law with a particular expertise in mergers and acquisitions of health care provider and physician practice groups and regulatory law and managed care issues. He is available at 856-661-2261 for comment on the N.J. Codey ruling. Mr. Greenberg deals with health care matters including the formation of practice entities, antitrust issues surrounding physician groups, and designing qualified retirement plans for medical practices. Among his notable accomplishments, Mr. Greenberg served as general counsel to one of the largest single specialty physician’s group in the country, overseeing its growth through a series of mergers and acquisitions. The author of numerous articles, he is a frequent lecturer to various professional organizations.
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