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New Jersey Legislative Update


Email Alert

By Karen L. Palestini*

June 17, 2009

Many of the 2008-2009 New Jersey Legislative Session's efforts in healthcare have been influenced by two developments: (1) the increasing degree of hospital financial distress, as manifested by an alarming number of hospitals bankruptcies and closures; and (2) the uncertainty as to permissible ownership and business structures through which healthcare practitioners may render services, as manifested by a series of law suits challenging providers' rights to payment. Although these efforts will likely cause New Jersey healthcare providers to experience significant compliance costs, the State has made it clear that it will not make public funds generally available to providers finding themselves in financial distress.

Commission on Rationalizing Healthcare Resources (Reinhardt Report) Legislation

Pursuant to Executive Order No. 39, the New Jersey Commission on Rationalizing Health Care Resources (Commission) was created and charged with the task of analyzing the financial condition of New Jersey's healthcare system (with particular emphasis on hospitals) and making recommendations as to how to address adverse conditions. Subsequent to the release of the Commission's final report on January 24, 2008, the New Jersey Department of Health and Senior Services (DHSS) worked with the Assembly Health and Senior Services Committee and other members of the Legislature to draft the following set of bills (all of which were passed by both Houses of the Legislature prior to their recess at the end of June and were signed into law by Governor Jon Corzine (D) on August 8, 2008):

A2606/S1795 (P.L. 2008, c.57)—Requires training for all trustees of general hospitals. The training is designed to equip board members to keep pace with best practices for nonprofit governance and changes in the healthcare industry.

A2607/S1794 (P.L. 2008, c.59)—Requires each general hospital to conduct annually public meetings for the community it serves. Each hospital will be required to conduct an annual public meeting to discuss issues related to hospital operations. The public will have an opportunity to ask questions and raise any concerns about service delivery. A certain percentage of the hospital's board will be required to attend, as well as the hospital's CEO and board chair.

A2608/S1796 (P.L. 2008, c.58)—Authorizes and enhances DHSS monitoring of hospital financial performance and intervention in management of identified distressed hospitals. This law authorizes progressive levels of monitoring and oversight by DHSS, including the ability to appoint a monitor.

A2609/S1797 (P.L. 2008, c.60)—Prohibits hospitals from charging certain uninsured persons more than 15% greater than the applicable Medicare rate. This is intended to provide hospitals with clear guidance as to how to charge in a uniform and clear way patients who lack health insurance but do not qualify for public health insurance.

"Codey Amendment" Addresses Ownership Structure in Connection With Ambulatory Surgical Services

Because of a spate of recent law suits, physicians have been under scrutiny for making referrals for ambulatory surgical services in connection with the New Jersey anti-self-referral law (Codey Law). As a result of court decisions finding that physician owners of ambulatory surgical services violated the Codey Law, the Legislature prepared a bill to amend its provisions.

Signed into law on March 21, 2009, P.L. 2009, c.24 permits physicians to refer patients to a healthcare service in which the referring physician has a significant beneficial interest if the healthcare service is deemed a surgical practice (e.g., a private medical practice with only one operating room that "registers" with DHSS and is accredited by an accreditation body recognized by CMS) or an ambulatory care facility (e.g., a surgical facility that is "licensed" by DHSS and accredited by an accreditation body recognized by CMS). P.L. 2009, c.24 also provides retroactive exemption to referrals for ambulatory surgical services in certain circumstances to address issues relating to the above-referenced lawsuits. Providers of ambulatory surgical services need to be mindful that, except in certain limited circumstances, DHSS may not issue new registrations to surgical practices or new licenses to ambulatory care facilities subsequent to 180 days following the effective date of the Law, and that the New Jersey Board of Medical Examiners (BME) has been tasked with prescribing information that referring physicians must disclose to patients concerning reimbursement of "out-of-network" services and other matters as a condition to protection under the statute.

New Jersey False Claims Act

Modeled after the federal False Claims Act, P.L. 2007, c. 265, was part of the previous Legislative Session but became effective in March 2008, and has already resulted in significant enforcement actions by the Office of Insurance Fraud Prosecutor. Qui tam relators can receive generally 15-25% of proceeds recovered under a judgment and are protected against employer retribution and interference.

Notably, a bill is pending (A-3731/S-2534) that would amend the New Jersey False Claims Act to bring it into compliance with the federal Deficit Reduction Act for purposes of entitling the State to enhanced recovery in Medicaid fraud cases. Under the federal Deficit Reduction Act, a state is entitled to enhanced recovery in Medicaid fraud cases if the state's false claims act is at least as effective in rewarding and facilitating qui tam actions as the federal False Claims Act. Generally, a qui tam action allows a private individual with knowledge of a fraud committed against the government to bring a suit against the alleged wrongdoer in the name of the government.

The New Jersey False Claims Act was reviewed by the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services in consultation with the Department of Justice. The OIG found three provisions of the New Jersey False Claims Act related to qui tam actions to be deficient because they were not at least as effective as the federal law in rewarding and facilitating qui tam actions. This bill amends the New Jersey False Claims Act to address those three provisions as follows:

  • Deletes language enabling the Attorney General to take over a qui tam action that is based upon facts underlying a pending Attorney General investigation;

  • Amends language related to the award of attorney's fees and other costs so that a person bringing a qui tam action may collect such expenses as an award against the defendant; and

  • Precludes in the initiation of qui tam actions based upon allegations or transactions that are the subject of a pending action or administrative proceeding to which the State is already a party.

Amendment to FY2009 Appropriation Act Moves FQHC Appropriation to General Fund

P.L. 2009, c.22, amends the Fiscal Year 2009 (FY2009) appropriation act to implement certain components of the Executive's plan to offset shortfalls in state revenues. Following the Legislature's assessment that "federally qualified health centers . . . are projected to be overfunded," (perhaps due to the availability of federal stimulus funds for New Jersey FQHCs under the American Recovery and Reinvestment Act (ARRA) of 2009), this law permits $14.7 million of the $40 million in state revenues appropriated for FQHCs to be moved to the General Fund.

Anatomical Gift Act Expands List of Persons Authorized to Make Anatomical Gift of Decedent's Body

The Anatomical Gift Act P.L. 2008, c.50, became effective on July 22, 2008. A key component of the Act is a list of persons authorized to make an anatomical gift of a decedent's body in order of specified priority:

  • Spouse, civil union, or domestic partner;

  • Adult child;

  • Adult sibling;

  • Another related adult by blood, marriage, adoption, or who has exhibited special care for decedent;

  • Person acting as guardian; or

  • Any other person authorized to dispose of the decedent's body, including hospital administrators

The Act specifically states that "[i]n the absence of actual notice of contrary indication by the decedent, the administrator shall make an anatomical gift of a decedent's body or part."

New Jersey Health Information Technology Act

Enacted on January 13, 2008, the New Jersey Health Information Technology Act P.L. 2007, c. 330, is premised upon many of the same policy considerations as the Federal Health Information Technology for Economic and Clinical Health Act (HITECH Act, as part of the ARRA). Specifically, it is intended to promote the development of a health information technology (HIT) infrastructure so that medical errors can be reduced, patient care can be optimized, and cost efficiencies achieved. However, it does not provide monetary and other incentives for individual providers relative to the implementation of HIT or electronic health records (EHR). Rather, it requires that an HIT Committee be established within 180 days of its enactment so that a statewide HIT plan can be developed in connection with having interoperable HIT and EHR available and utilized by all healthcare facilities, providers, and public and private healthcare payors within a definitive period of time.

Pressure Redistribution Mattresses Will Be Required in New Jersey Nursing Homes

Signed into law on April 23, 2009, P.L. 2009, c.44, requires nursing homes to begin the process of replacing their current mattresses with pressure-redistribution mattresses within three years of its effective date. The Legislature noted that New Jersey's nursing home residents ranked fourth and fifth in the nation, respectively, in the percentage of nursing home residents with pressure ulcers upon stay and admission. In an attempt to address the pain and complications from infection that pressure ulcers present to elderly persons, the Bill requires the phase-in of pressure redistribution mattresses, which are "widely recognized as one of the more effective ways to prevent and treat pressure sores."

Medicaid Eligibility Information to Be Provided to All Residents of Assisted Living Facilities and Nursing Homes

P.L. 2009, c.61, which becomes effective ninety days after its enactment (May 29, 2009), requires nursing homes and assisted living residences to provide prospective private-pay residents (or the financially responsible party for the prospective resident or the prospective resident's legal guardian) a written informational sheet that explains eligibility for long term care under the Medicaid program or eligibility for participation in a federally approved 1915(c) Medicaid waiver program that provides assisted living services, as appropriate. The written informational sheet (which will be prepared by the DHSS and made available on its website) must be accompanied by a written statement signed by an authorized representative of the nursing home or assisted living residence, as appropriate, stating that:

  • The nursing home or assisted living residence is unable to guarantee the availability of a Medicaid bed at the nursing home or assisted living residence at the time that the resident becomes Medicaid-eligible; and

  • If there is no Medicaid bed available at the time the resident becomes Medicaid-eligible, the resident will need to transfer to another nursing home or assisted living residence.

If a private-pay resident of a nursing home or assisted living residence, or the resident's financially responsible party or legal guardian, as appropriate, provides written notice to the nursing home or assisted living residence that the resident is likely to become Medicaid-eligible within the next six months, the nursing home or assisted living residence, upon receipt of such notice, shall inform in writing the resident, financially responsible party, or legal guardian, as appropriate, of the position at the time of the notice of the resident's placement on any list of residents awaiting a Medicaid bed.

Bills Not Sent to the Governor's Office by June 30, 2009, (or prior to the Passage of the 2009-2010 Budget) Unlikely to Be Passed

Given the current economic and political climate in New Jersey, it is anticipated that many members of the Legislature will return to their home districts to focus on campaign efforts in connection with the November elections. With the only piece of business that must be concluded before they recess being the passage of the 2009-2010 budget—expected on or before June 30—it is anticipated that any bills that do not reach the Governor's desk by that time will not be passed during this Legislative Session. That said, there are a couple of interesting Bills that remain active that are set forth below.

  • S-2040/A-3103—Reported out of the Senate Health, Human Services and Senior Citizens Committee (favorably) on December 15, 2008, but remains in the Assembly Health and Senior Services Committee (as of its introduction on September 15, 2008), this Bill requires practitioners to disclose business relationships with out-of-state facilities when making patient referrals to those facilities. The Bill seeks to ensure that when a patients is referred to healthcare services located or owned by an entity that is outside of New Jersey, the referring practitioner notifies the patient of any business relationships that the practitioner may have with the out-of-state entity. The Bill requires very detailed disclosures as to:

    (1) the nature of the practitioner's relationship with the out-of-state entity; (2) whether the entity with which the practitioner has a financial relationship does or does not participate in the patient's health plan; (3) cost differentials between the out-of-state provider versus and in-state provider; (4) and a statement that the patient's recovery may be affected by the healthcare service's location.

  • S-2231/A-3728—Passed the Senate on February 23, 2009, but awaiting action in the Assembly, this Bill permits a nurse midwife to certify the disability of an individual for temporary disability payments, thus adding to the list of authorized professionals who may examine, certify, and treat disability claimants under the Temporary Disability Benefits Law. In addition, the Bill amends a provision of law pertaining to the "Work First New Jersey Act," established pursuant to P.L. 1977, c.38, that currently allows examining physicians to certify that an individual is unable to engage in a gainful occupation for a period of less than twelve months under certain circumstances. The Bill permits examining nurse midwives acting within the scope of their profession to also so certify.

*AHLA wishes to thank Karen L. Palestini, Esquire (Saul Ewing LLP, Princeton, NJ) for providing this email alert.

The Healthcare Reform Educational Task Force is a joint endeavor of the Healthcare Liability and Litigation; Hospitals and Health Systems; In-House Counsel; Payors, Plans, and Managed Care; Physician Organizations; Regulation, Accreditation, and Payment; and Teaching Hospitals and Academic Medical Centers Practice Groups.
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