New Jersey - Volume XIII, Number 8 - August, 2004

NJ BOARD OF MEDICAL EXAMINERS PROPOSED RULE FORMALIZING ITS APPROVAL OF LLC’S FOR MEDICAL PRACTICES The New Jersey Board of Medical Examiners (“Board”) has proposed an amendment to its professional practice rules which formalizes its prior approval of the use of limited liability companies (“LLCs’) by medical practices. The rule, however, does far more. It opens the door to the corporate practice of medicine by allowing for-profit business corporations, managed care companies, and hospitals to become business partners with healthcare professionals. The proposal allows a for-profit business entity to act as a general partner to an LLC and share in its profits. The regulation also permits physicians, chiropractors, nurses, podiatrists and other healthcare professionals to join together, as shareholders, in a single LLC. As such, a nurse or chiropractor could have controlling interest in an LLC which provides medical care through an employed physician. The nurse or chiropractor controlled LLC could be capitalized by a for-profit business corporation. Ratification of this proposal could be a sentinel event in the evolution of the healthcare delivery system and rapidly accelerate the shift of control over healthcare decisions away from physicians. Comments on the proposed regulation are accepted by the Board until October 1, 2004. Questions about the implications of the proposal can be directed to Steven Kern, Esq. Questions about the tax benefits of LLC’s and other professional practice entities can be directed to Steve Holt, Esq. Both can be reached at 908-704-8585.

NOTE: A 1992 regulation with similar language applying to other types of business entities included commentary indicating that physicians should have a majority interest in these practices and never be supervised by a limited license professional, and was widely interpreted to so limit these entities. No similar limitation exists in this new proposal.

MSNJ SUES TO STOP UNITED/OXFORD MERGER The Medical Society of New Jersey, through its counsel, Kern Augustine Conroy & Schoppmann, has filed suit in Mercer County challenging the approval of the United/Oxford merger by the NJ Commissioner of Banking and Insurance. Under New Jersey law the filing of the complaint stays the approval, pending further judicial action, and permits a public trial on the question of whether the merger is in the best interests of New Jersey citizens. United has moved to dismiss the lawsuit, challenging the constitutionality of the underlying New Jersey law. If the lawsuit is permitted to proceed, it could provide an opportunity to expose dangers of mega-HMOs to the health and welfare of patients.

CMS PROGRAM TO HELP PHYSICIANS, HOSPITALS & AMBULANCE PROVIDERS RECOUP UNPAID EMERGENCY ROOM COSTS The Centers for Medicare & Medicaid Services (“CMS”) has announced a new program to provide $1 billion over four years to help hospitals and other providers, including physicians, recoup the costs of providing medical care to certain undocumented aliens under EMTALA. Payments will be made out of a state allotment, directly to certain physicians and other providers for some of the costs of providing such emergency health care. Physician services would include medically necessary, EMTALA-required and “related” services physicians furnish to a hospital inpatient or outpatient. Hospitals would be required to collect information on a patient’s citizenship or immigration status and provide the information to physicians for use in obtaining payment under the program.

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