Elizabeth Litten of Fox Rothschild Discusses How to Be Prepared for N.J. Codey Law Amendments’ September 2009 Deadline

August 6, 2009 – In The News
Becker's ASC Review

Recent amendments to New Jersey's Codey Law, which prohibits self-referrals by physicians, include a Sept. 17, 2009, deadline which marks the beginning of a moratorium on new ambulatory surgery centers.

Elizabeth Litten, a N.J. healthcare attorney and partner with Fox Rothschild, offers insight into the following critical issues for New Jersey ASCs related to this looming moratorium.

Submit plans for new ASCs before the Sept. 17 deadline
According to the Codey Law amendments, physicians and others who wish to open a new ambulatory surgical facility must file plans, specifications and required documents with and receive a registration or project number from the Health Care Plan Review Unit of the New Jersey Department of Community Affairs (DCA) by Sept. 17, 2009.

Ms. Litten says that in order to meet the Sept. 17 filing deadline, ASC applicants should submit their paperwork to the DCA at least 20 days before the deadline. "The New Jersey DCA may take up to 20 days to review the documents and assign a project number, but physicians and others interested in creating ASCs may think that they can submit on Sept. 17 without considering the time it takes to process the application and deem it complete," she says.

For physicians and others interested in creating a new ASC, three documents must be filed to complete the application with the DCA. PDFs of these documents are included at the end of this article.

The first is a project review application, which includes the expected total cost of the project and documentation of an architectural firm or engineer who has agreed to work on the project, which can be amended as the project progresses. The second form is a planned review fee schedule, which includes the rates to be paid on the project. The third form is a healthcare plan review record and engineering check list, which includes the preliminary plans for the new ASC. The DCA also publishes a document describing its procedures for review of healthcare facility plans. Ms. Litten says that the plans initially submitted do not have to be the final plans and may be amended during the process.

Once the plans, specifications and required documents have been filed with, deemed complete and assigned a project number by the DCA, the documents will continue through DCA project and plan review and then will proceed through licensure application review by the New Jersey Department of Health and Senior Services (DHSS). Licensure by the DHSS typically takes several months following approval of the plans by DCA.

ASCs must meet new accreditation requirement

Another change that will go into effect as a result of the new Codey Law amendments is that ASCs will be required to be accredited by an organization approved by CMS, according to Ms. Litten.

Existing ASCs must be accredited by March 20, 2010, according to the Codey Law amendments. Surgical practices (physician-owned, single operating room facilities that meet Codey Law specifications) will also have until this date to register with the State.

Exceptions are not yet clear
According to Ms. Litten, it is not yet clear how stringently DHSS will interpret the Codey Law exceptions for governing licensure related to new and existing ASCs (such as those for relocations, transfers and those involved in hospital or medical school joint ventures). The commissioner of DHSS must review and approve new applications for transfer of ownership interests or relocation of the facility. Therefore, she suggests that any physicians interested in creating an ASC or transferring ownership or relocating or renovating their current facility should submit plans to the DCA 20 days before the Sept. 17 deadline.

Although the Codey Law permits certain relocations, Ms. Litten says it is not clear how loose or strict DCA and DHSS will be. "There is the possibility a facility can relocate within 20 miles of their current location or to a Health Enterprise Zone, as defined by New Jersey law, but the Commissioner must review and approve the application," she says. "Also, there can be no expansion in the services provided at the new location." Restrictions also apply to the transfer of ownership of an ASC to another party (the commissioner must review the qualifications of the new owner or owners and approve the transfer).

"If you are serious about renovation/expansion, transfer, relocation or, certainly, establishment of a new center, you should be aware of the upcoming deadlines and restrictions," Ms. Litten says.

Codey Law's self-referral exceptions

Ms. Litten says that, overall, the exceptions for existing ambulatory surgical facilities and for those meeting the Sept. 17 filing deadline will allow physicians to refer their patients to and provide services at their ASC.

The physician self-referral prohibition does not apply to referrals to a licensed ASC if the following requirements are met:

(i) the referring practitioner must personally perform the procedure;

(ii) the practitioner's remuneration as an owner of or investor in the surgical practice or ASC must be directly proportional to his or her ownership interest and not to the volume of patients the practitioner refers;

(iii) all clinically-related decisions at an ASC owned in part by non-practitioners are made only by practitioners in the best interests of the patient; and

(iv) written disclosure of the referring practitioner's interest is made to the patient at or prior to the time of the referral and in the manner specified in the law.

Download the project review application (pdf).

Download the plan review fee schedule (pdf).

Download the healthcare plan review record and engineer checklist (pdf).

Download the healthcare plan procedures for submission (pdf).

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