New Jersey - Volume XIII, Number 7 - July, 2004

NEW JERSEY IMPOSES GROSS RECEIPTS TAX ON AMBULATORY CARE FACILITIES AND COSMETIC MEDICAL PROCEDURES New taxes on physician services were rushed into law last month by the Democrat controlled legislature and at the urging of the NJ Hospital Association. In response, many physicians are calling for an end to hospital mandates which require them to provide services without compensation. Others are refusing to contribute to hospital fund-raising campaigns.

This is the first time physician services have been directly taxed and portends a trend of even greater efforts by the State to tax medical care. The tax, promoted as a means to fund hospital charity care, drastically impacts the bottom line for practitioners who provide ambulatory care facility (ACF) services and for those who perform cosmetic medical procedures. The ACF law, effective July 1, 2004, imposes a 3.5% tax on the annual gross receipts of an ACF that has gross receipts of at least $300,000, with a $200,000 annual cap on any assessment. Penalties will be imposed on any facility that fails to submit the required annual report, understates its gross receipts in its annual report, or provides any of the affected ambulatory care services without a license. Also, those physicians who are providing MRI and CT scan services without a license as of July 1, 2004, will have one year to obtain a license.

A separate law, effective September 1, 2004, imposes a 6% gross receipts tax on cosmetic medical procedures, defined as “any medical procedure performed on an individual which is directed at improving the person’s appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease.” The term includes cosmetic surgery; hair transplants; cosmetic injections and soft tissue fillers; dermabrasion and chemical peel; laser hair removal, skin resurfacing, and leg vein treatment; sclerotherapy; and cosmetic surgery, but excludes reconstructive surgery or dentistry. The tax is to be paid by the patient to the practitioner at the time payment for the procedure is collected. The practitioner must report and pay the tax on a quarterly basis to the State.

The Medical Society of New Jersey, along with cosmetic and facial surgeons, and plastic surgery, dermatology, and anesthesiology societies, with guidance from Kern Augustine , are actively seeking to minimize the impact of these laws and work for their repeal.

INSURANCE FRAUD PROSECUTOR ADOPTS FRAUD BOUNTY RULE The New Jersey Office of Insurance Fraud Prosecutor has adopted a rule, effective July 6, 2004, establishing a reward program for the reporting of suspected health care claims fraud, insurance fraud or any other criminal offense involving or related to an insurance transaction. A reward of up to $25,000 will be paid to persons providing information leading to the arrest, prosecution and conviction of persons who have committed such crimes.

MEDICAL BOARD ADOPTS CONTINUING MEDICAL EDUCATION RULE The NJ Board of Medical Examiners has adopted a rule requiring that all NJ licensed physicians and podiatrists, as a condition of biennial license renewal, complete 100 credits of continuing medical education (CME) in each biennial renewal period, beginning July 1, 2003 (only 50 credits are required the first period). Category I courses (which must make up 40 of the 100 required credits) may include not only attendance at conferences, workshops, and seminars, but also printed, audio, video, and website activities, so long as they are designated Category I by the AMA, the AOA or the APMA. Category I credit will be granted for American Board of Medical Specialties member board certification and recertification.

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