STATE PROPOSES REGULATIONS TO IMPLEMENT THE REGISTRATION OF SURGICAL PRACTICES
By: Charles H. Newman, Esq.
Two years after New Jersey Senate Bill 787 was enacted, amending the so-called “Codey Law” to mandate (among other things) the registration of one-room surgical practices, the New Jersey Department of Health & Senior Services (Department) finally has proposed regulations to establish registration standards and the form of registration application. Surgical practices that have no more than one operating room which is specially equipped to perform surgery and designed and constructed to accommodate invasive diagnostic and surgical procedures, with a PACU or dedicated recovery area (which, under the proposal, includes the operating room if used for recovery), and which was established for the physicians’ private practice, must comply with the registration requirement. The statute requires that, as a condition of registration, a surgical practice must obtain certification from CMS as an ambulatory surgery center provider or accreditation from an accrediting body recognized by CMS. However, the rules appear to not require documentation of such to be submitted to the Department until the first annual renewal application is filed. Initial registrants that have been in operation for at least one year prior to the rules’ effective date, and all applicants for annual renewal, must report certain data, including payment sources and the number of practitioners at the practice.
Surgical practices in operation prior to September 17, 2009, must register within 90 days of the effective date of the new rules. Surgical practices that began operation after September 17, 2009, but prior to the date the proposed new rules become effective, must register within 90 days of the effective date and provide documentation showing that the appropriate plans, specifications and any required documents were filed with their municipality prior to September 17, 2009. Surgical practices not in operation prior to the effective date of the proposed new rules, but which met the requirement of obtaining municipal approval by September 17, 2009, must supply documentation of that filing and must register within two years of receiving the municipal approval.
The proposal is a reminder that, in New Jersey, the ability of physicians to own or expand surgical practices (not to mention ASCs) is greatly restricted: the Department is prohibited from issuing registrations to surgical practices that do not qualify under the above timeframes, with few exceptions. The prohibition on new registrations does not apply to a transfer of ownership of an existing surgical practice if the Department approves the transfer. Nor does it apply to the relocation of a surgical practice, if the relocation is within 20 miles of the surgical practice’s current location (or is a relocation to a “Health Enterprise Zone”), there is no expansion in the scope of services provided at the new location from that of the current location, and the Department approves the relocation. Scope of services is defined by the Facility Guidelines Institute’s definition of “operating room” (see www.fgiguidelines.org). As a result, physicians wishing to add surgery to their office practice, or wishing to expand their present surgical practice, have few opportunities to do so.
The provisions governing transfers of ownership would have potentially significant impacts on various business transactions involving a surgical practice. With respect to an outright sale, an application for approval would have to be submitted to the Department at least 90 days before the proposed transfer, including signed copies of all documents related to the transfer. Therefore, under the proposed regulations, the parties to a sale or transfer of a surgical practice would have to be prepared to wait at least 90 days after negotiating and signing a contract before closing, and appropriate contingencies would have to be included in the contract of sale. The transfer-of-ownership regulations would apply not only to an outright sale but to any transaction resulting in the addition of a new owner to the practice. Thus, an associate of a surgical practice could not be made an equity owner without application to the Department for approval of a transfer of ownership. Finally, the proposed regulations would require notice to the Department within five business days after any change in percentage ownership of a surgical practice that does not result in the addition of new owners. This would include, among other things, the withdrawal of a partner, or the increase in the percentage ownership of a junior partner (which can occur, for example, where the new partner’s interest vests over time).
The regulations leave many unanswered questions:
Will those surgical practices that informally registered with the Department by the statutory deadline, when no process was in place, have to register again?
What role will the State Board of Medical Examiners play in these Medicare-certified, Department-registered practices?
Are practices with operating rooms dedicated to endoscopic and cytoscopic procedures exempt from the registration requirement?
The statute only prohibits expansion of the scope of services when a surgical practice relocates. Is the “no material change” requirement for registration renewal of non-relocating practices a backdoor way of further restricting the expansion of services in surgical practices?
Under New Jersey’s PIP law, only a physician-owned single operating room in an office setting that is “certified by Medicare” can bill a facility fee. Does that preclude any registered surgical practice that opts for accreditation, rather than direct Medicare certification, from facility fee billing?
Stay tuned and be prepared to make your voice heard. The proposed regulations are to be published in the April 18, 2011, New Jersey Register, and will have a comment period. A copy of the proposal can be accessed at www.drlaw.com.
Kern Augustine Conroy & Schoppmann, P.C., Attorneys to Health Professionals, www.DrLaw.com, is solely devoted to the representation and defense of physicians and other health care professionals. The authors of this article may be contacted at 1‐800‐445‐0954 or via email at firstname.lastname@example.org.