New Jersey - Volume VI, Number 7 - July, 1997

DIAGNOSTIC TESTING SERVICES DO NOT QUALIFY FOR PIP REIMBURSEMENT IF NOT SUPERVISED BY A PHYSICIAN

A New Jersey Appellate Court has ruled that Personal Injury Protection reimbursement is not available when a covered procedure or service is rendered by a medical diagnostic testing facility that does not meet the Board of Medical Examiners' requirements that it be "owned and under the responsibility" of a licensed physician or that all of its testing be performed under the authority of a "designated responsible physician" who must establish a protocol and a quality assurance program for the specific type of screening or study. The case involved mobile testing for range of motion and muscle strength. Allstate Insurance Company sought a court ruling that the testing company was not entitled to PIP reimbursement for its services because they did not meet the Medical Board's rules regarding medical screening and diagnostic testing. The court found that, normally, the PIP statute's "reasonable and necessary" test controls entitlement to reimbursement. However, the court said, here there are standards governing such services and the law should not recognize entities that place the public at risk by failing to provide the professional supervision and control deemed essential by the Medical Board. This case marks a turning point in the battle between PIP insurers and diagnostic testing companies, with the Medical Board an active participant, long arguing that diagnostic testing companies cannot legally bill for the services of a physician and that diagnostic testing services must comply with its rules regarding physician involvement.

IRS RULING LOOSENS RESTRICTIONS ON PHYSICIAN INCENTIVES

Physicians offered recruitment incentives from non-profit hospitals may be able to breathe a little easier, thanks to a recent IRS Revenue Ruling which grants more flexibility in such arrangements. The IRS' discussion of how nonprofits should structure recruitment/retention packages appears to allow one-time signing bonuses, time-limited liability coverage, tail coverage, reasonable and time-limited start-up financial aid, reasonable moving expenses, time-limited net income guarantees, and so-called "cross-town recruiting" incentives for hospital-based physicians where patient referrals are not involved. Time-limited, below fair market value office rent, is allowed but may still violate fraud and abuse laws. Any incentive deal should be in writing, negotiated at arm's-length, approved by the hospital's board, and exclude any side agreement benefits. Notably, the IRS has dropped its policy that all medical staff members are, by definition, hospital "insiders," making only physicians with substantial influence at a hospital subject to federal private inurement prohibitions.

KERN AUGUSTINE OPENS SOUTH JERSEY OFFICE

Kern Augustine Conroy & Schoppmann is pleased to announce the opening of its "South Jersey" office at the Executive Center of Greentree, 1 Eves Road, Suite 148, Marlton, NJ 08053, just off of Route 73 and Greentree Road, easily accessible from Exit 4 of the New Jersey Turnpike, I-295, and Routes 70 and 38. Denise Sanders will be the resident partner working out of our new office.