New Jersey's Ambulatory Surgical Centers Continue to Face Uncertainty

Fall 2008Cole Schotz DocketAttorneys: Christopher P. Massaro and Donald A. Ottaunick

Ambulatory surgical centers (“ASCs”) provide patients with a convenient alternative to having certain surgical procedures performed in hospitals.  Such facilities are located throughout New Jersey and have become an established component of our health care system.

Last year, however, a ruling by the Superior Court of New Jersey in Joseph Garcia, M.D., et al. v. Health Net of New Jersey, Inc. v. Wayne Surgical Center, LLC, cast doubt on the continued viability of ASCs.  The court concluded that a 1989 law known as the Codey Act prohibited physicians from referring patients to ASCs in which they have a financial interest.  New Jersey enacted the Codey Act to ensure that physicians made referrals based upon sound medical judgment, not on personal financial considerations.  The ruling came as a surprise to the medical community because it had been generally understood that the Codey Act did not apply to physicians who referred patients to ASCs, which require those referrals to function profitably.  Although the court found that the Codey Act prohibited these referrals, it also recognized that the state has tolerated the practice and acknowledged that ASCs provide needed medical services to the public.

In response to the decision, ASCs are now seeking relief from the state legislature and Board of Medical Examiners (“BME”).  Proposed legislation is pending in both the Senate and the Assembly that would specifically permit physicians to make referrals to ASCs in which they have a financial interest, so long as certain requirements relating to the manner in which they conduct business are met, and the BME has proposed a regulation that would accomplish the same result.

Until a definitive legislative or regulatory solution is reached, the future of ASCs will remain uncertain and the public will continue to face a potentially serious disruption to the health care system.   The BME indicates that the state’s hospitals and other medical facilities might not be able to immediately absorb all the patients who are currently receiving treatment through ASCs if the ASCs were to disappear.

Although ASCs appear to be operating as they did before the court’s ruling, it is critical that physicians and patients continue to monitor the state’s actions with respect to ASCs.



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