N.J. Admin. Code § 13:35-6.17

Current through Register Vol. 56, No. 9, May 6, 2024

Section 13:35-6.17 - Professional fees and investments, prohibition of kickbacks

(a) For the purposes of this rule, the following words and terms shall have the following meanings:

1. "Health care service" means a business entity which provides on an in-patient or out-patient basis: testing for or diagnosis or treatment of human disease or dysfunction or dispensing of drugs or medical devices for the treatment of human disease or dysfunction. Health care service includes, but is not limited to, a bioanalytical laboratory, pharmacy, home health care agency, home infusion therapy company, rehabilitation facility, nursing home, hospital, or a facility which provides radiologic or other diagnostic imaging services, physical therapy, ambulatory surgery, or ophthalmic services.

2. "Financial interest" means a monetary interest of any amount held by a practitioner personally or through immediate family, as defined herein, in a health care service to which the practitioner's patients are referred. It includes the offer or receipt, directly or indirectly, by the practitioner or immediate family of anything of more than negligible value as a result of a patient's purchase of a prescribed service, goods or device from the person or entity providing this. Except as set forth in (a)2i through vii below, "financial interest" includes a licensee's financial interest in a contractual arrangement with a licensed health care facility (such as a hospital, nursing home or clinic, etc.), whereby the licensee agrees to provide health care services on referral, for example, cardiac or radiologic diagnostic testing, to patients including those receiving Emergency Room care or inpatients or outpatients of the health care facility. "Financial interest" does not include the following:

i. A straight salary or an annual retainer which is not related to the volume of patients treated;

ii. A contractual arrangement with a licensed health care facility or health care service to provide non-clinical services such as quality assurance review, peer review, administrative or supervisory services, duties (other than hands-on care) of a department chair or medical director, or similar services;

iii. A contractual arrangement with a licensed health care facility to provide health care services to patients who are medically indigent, under which the facility pays the licensee reasonable fees for services rendered. For purposes of this rule, "medically indigent" patient means any patient meeting the requirements for indigency established by the State Medicaid program, by the Federal government for purposes of meeting Hill-Burton obligations, by the State Department of Health and Senior Services for purposes of reimbursing hospitals for uncompensated care or by any other governmental program for purposes of providing health care to indigent individuals;

iv. A contractual arrangement (including a faculty practice plan) with a licensed health care facility to provide health care services to patients of the facility, under which the licensee agrees to accept payments from third party payors (plus any deductible or coinsurance amounts) as payment in full for such services; in the absence of a third party payment mechanism, the licensee shall have agreed to provide such services at no charge or the facility shall have agreed to pay the licensee reasonable fees for services rendered;

v. A contractual arrangement with a licensed health care facility to provide health care services to patients of the facility, under which the contract establishes the maximum fees which can be charged for the services or the facility approves the licensee's fees in advance, and the services to be provided are part of the facility's normal utilization review process;

vi. A contractual arrangement with a licensed health care facility in connection with a residency or externship program conducted by the facility in affiliation with a medical school accredited by the Accreditation Council on Graduate Medical Education, the American Osteopathic Association or the American Podiatric Medicine Association under which the facility pays the licensee (either directly or through a professional corporation or nonprofit corporation or other appropriate entity) for administration, teaching, supervision and/or hands-on care, and under which the facility or licensee (directly or indirectly) bills patients and third-party payors for hands-on care; or

vii. A contractual arrangement (either individually or through an individual practice association, competitive medical plan, or similar organization) with a licensed health care facility to provide health care services to the facility's employees and/or beneficiaries of the facility's health plan, and/or to provide services to eligible individuals pursuant to an agreement between the facility and a health maintenance organization, other managed health care organization, insurance company, union welfare plan, employers or other similar organizations.

3. "Immediate family" means the practitioner's spouse and children, the practitioner's siblings and parents, the practitioner's spouse's siblings and parents, and the spouses of the practitioner's children.

4. "Practitioner" means a physician, podiatrist, bioanalytical laboratory director or specialty laboratory director, acupuncturist, midwife, certified nurse midwife, physician assistant and all other categories of licensee now or henceforth under the jurisdiction of the State Board of Medical Examiners.

5. "Significant beneficial interest" means any financial interest including an equity or ownership interest in a practice or in a commercial entity holding itself out as offering health care service as defined in (a)1 above. This interest does not, however, include ownership of a building or component thereof wherein the space is leased, in writing, to a person or entity at the prevailing rate under a straight lease agreement (that is, a fixed fee for a fixed term), or any interest held in publicly traded securities.

6. "Grandfathered" means a personal attribute and status of an individual licensee derived from a significant beneficial interest in a health care service, held on or before July 30, 1991, which renders him or her exempt from the referral prohibitions set forth in 45:9-22.5. Those practitioners employed by or professionally affiliated with a grandfathered practitioner do not share the "grandfathered" status.

(b) A practitioner shall not refer a patient or direct an employee of the practitioner to refer a patient to a health care service in which the practitioner or the practitioner's immediate family, or the practitioner in combination with the practitioner's immediate family, has a significant beneficial interest, unless the practitioner held the interest prior to July 31, 1991 and discloses that interest to the patient as required herein or as otherwise permitted in this rule. Such a practitioner shall be deemed to be grandfathered. If a licensee professionally affiliated with a grandfathered practitioner obtains a significant beneficial interest in the same health care service in which the grandfathered practitioner holds an interest, on or after July 31, 1991, that practitioner shall not refer patients to that service. A licensee professionally affiliated with a grandfathered practitioner who does not hold an interest in that health care service may refer patients to that service so long as all of the disclosure requirements set forth below are met. Disclosure shall be made by the practitioner in ways appropriate to the professional circumstances including conspicuous posting of a written disclosure form prepared as set forth below, at least 8 1/2 by 11 inches in size, in the practitioner's waiting room in all office locations. The patient shall also be provided with a personal copy of the notice. The notice format shall be as follows:

Public law/rule of the State of New Jersey/Board of Medical Examiners mandates that a physician, podiatrist and all other licensees of the Board of Medical Examiners inform patients of any significant financial interest held in a health care service.

Accordingly, take notice that practitioners in this office do have a financial interest in the following health care service(s) to which patients are referred:

(LIST APPLICABLE HEALTH CARE SERVICES)

You may, of course, seek treatment at a health care service provider of your own choice. A listing of alternative health care service providers can be found in the classified section of your telephone directory under the appropriate heading.

1. In any inquiry regarding the applicability of the financial disclosure provisions of this rule, including the holding of a significant beneficial interest or exemption therefrom, the Board may require a Board licensee to submit financial and familial information sufficient to determine the financial interest in an investment.

2. With regard to durable medical equipment, a physician having a significant beneficial interest as defined in (a) above, who prescribes and refers a patient to a source for said product, shall provide the personal notice copy to a patient in any setting, including the practitioner's office and prior to the time of patient discharge from a hospital, nursing home or free standing health care facility (for example, urgent care offices or ambulatory surgery centers).

3. Neither the prohibition on referral, nor disclosure requirements of this rule apply in the case of a practitioner providing health care services pursuant to a prepaid capitate contract with the Division of Medical Assistance and Health Services in the Department of Human Services.

4. The restrictions on referral of patients established in this subsection shall not apply to:

i. A health care service that is provided at the practitioner's medical office for which the patient is billed directly by and in the practitioner's name; or

ii. Radiation therapy pursuant to an oncological protocol, or lithotripsy or renal dialysis treatment, provided that there is disclosure of the financial interest.

(c) The following pertain to miscellaneous monetary arrangements:

1. A licensee shall not, directly or indirectly, give to or receive from any licensed or unlicensed source a gift of more than nominal (negligible) value, or any fee, commission, rebate or bonus or other compensation however denominated, which a reasonable person would recognize as having been given or received in appreciation for or to promote conduct by a licensee including: purchasing a medical product, ordering or promoting the sale or lease of a device or appliance or other prescribed item, prescribing any type of item or product for patient use or making or receiving a referral to or from another for professional services. For example, a licensee who refers a patient to a health care service (such as a cardiac rehabilitation service or a provider of durable medical equipment or a provider of testing services) shall not accept from nor give to the health care service a fee directly or indirectly in connection with the referral, whether denominated as a referral or prescription fee or consulting or supervision fee or space leasing in which to render the services (other than as permitted in (h) below), or by any other name, whether or not the licensee has a financial interest as defined in (a) above.

i. The charging of a "facility fee," as described in (h)1 below, is forbidden, except by a registered Medicare provider of surgical services who is billing pursuant to criteria for such fee established by rules of the United States Department of Health and Human Services.

ii. This section shall be construed broadly to effectuate its remedial intent. It shall not, however, prohibit a flat-fee payment by a licensee for regular advertising services (including placement on a commercially-sponsored "referral list" of licensed health care providers). It shall not prohibit receipt of reasonable payment for bona fide participation as a speaker at a professional workshop or seminar nor attendance by non-faculty licensees at a continuing medical education program whereby in conformance with the guidelines of the Accreditation Council on Continuing Medical Education or the American Podiatric Medical Association commercial sources have been utilized in calculating the registration fees to be charged to all participants. It shall not prohibit receipt of normal, commercially reasonable discounts for volume purchases from vendors, nor prohibit compensation for the sale of medical equipment by a licensee of the Board, in the disclosed capacity of a salesman, to another licensed health care professional. It shall not prohibit a licensee's participation by permit in an FDA-approved research project.

2. A laboratory director licensee may bill either the patient or the prescribing physician who submits the specimen, as permitted by 45:1-10.

3. All other categories of licensees who bill for professional services shall submit the bill directly or via a named designee entity to the patient or patient representative if for treatment services, or to the recipient of the professional services in a non-patient capacity, as applicable.

4. A bill for services of members of a professional service corporation, or services of a physician's employees which have been rendered by licensed professionals authorized to provide services without medical supervision, shall identify the provider of service by name and degree, as well as the name of the service entity (if different).

5. A licensee may bill for only the actual cost of prescribed professional/technical services (including, for example, laboratory services, radiologic and EKG consultation, fabrication of eyeglasses, orthotics, etc.) ordered by or through the licensee, with the patient's consent, provided that the name and address of the provider of the professional/technical services and the cost as billed to the licensee, are disclosed to the patient. A licensee may contract with and provide professional/technical services to the prescribing licensee, supplying the information necessary for incorporation in the bill prepared by the prescribing licensee to the patient.

(d) A licensee shall not charge for "free samples" or other similar items obtained by the licensee from any source.

(e) Acting within the scope of lawful practice, a licensee may offer to and provide to a patient medications, including a prescription drug or an over-the-counter preparation or vitamin or food supplement, but only in accordance with the requirements of P.L. 1991, c. 187, sec. 46 (45:9-22.1 1) and N.J.A.C. 13:35-7. A licensee may also offer to and provide to a patient, at fair market value, medical goods and devices such as hearing aids, eyeglasses, contact lenses, prosthetic devices, orthotics, etc.

1. Where items are prescribed by a licensee, and the consumer elects to fill the prescription elsewhere, the prescriber's obligation to the patient shall include, if requested by the patient, follow-up to ascertain that the item prescribed is appropriate and/or the fit is acceptable (for example, as in the prescribing of eyeglasses or external contact lenses), and that the result of the prescribed service is properly evaluated and integrated into the treatment plan for the patient.

(f) As addressed in 13:35-6.16(h), a licensee may participate in and receive remuneration from organized managed health care plans including, but not limited to, those involving wholly or partially pre-paid medical service. By way of example, this includes plans commonly described as health maintenance organizations, preferred provider organizations, competitive medical plans, individual practice associations or other similar organizations.

1. A licensee is not precluded from entering into a plan agreement which provides interim remuneration to licensees by making provisional allocation of percentages of plan-member fees, whether denominated as reserves, pools, withholds, holdbacks, etc., for the purpose of funding all portions of the health care services plan.

2. A licensee may participate in a managed health care services plan which requires a purchase of shares for the purpose of providing start-up funds, provided that any profits of the plan are paid solely in accordance with the principles listed in (g) below.

(g) No licensee shall invest in an entity, including a managed health care plan, offering health care services or devices or durable medical equipment where the dividends or any other forms of remuneration are paid on any basis other than return on monetary investment. This prohibition does not preclude the issuance of shares in exchange for provision of equipment or realty or rendition of personal professional services at the entity premises, or licensing of patents in lieu of financial investment, provided that the investor's return is based on his/her capital interest.

(h) The following pertain to real estate and medical equipment arrangements:

1. A Board licensee may be an owner/investor in real estate or medical equipment utilized for the conduct of a professional health care practice, provided that rent, dividends or any other forms of remuneration are received solely on the basis of the investment or fair market value, as applicable to the circumstances.

2. A Board licensee may lease professional space from a commercial (non-professional) entity on any arrangements consistent with standard business practice in the community, provided that the arrangement does not affect the licensee's professional discretion in matters including choice of patients, professional services offered, or fees.

3. A Board licensee may lease space or medical equipment to or from another licensed health care professional to whom patients are referred, only where rent is a fixed fee set in advance and determined by the fair market value, or less, and is for a regular term and not for sporadic use of the space or equipment.

4. Any monetary arrangement other than as set forth above shall require Board approval for good cause shown.

5. A licensee who owns or practices in premises used for the performance of personal medical services including, but not limited to, ambulatory surgery services but not holding a Certificate of Need from the State Department of Health and Senior Services, shall not charge, or permit or condone a charge or "facility fee" separate from the fee for professional services. A facility fee may, however, be charged by a licensee who is a registered Medicare provider of surgical services, who is billing pursuant to criteria for such fee established by rules of the United States Department of Health and Human Services.

(i) A Board licensee may be an owner/investor or a lessee of medical equipment utilized in the conduct of a professional practice. Irrespective of the financial arrangements for the transaction, the lessee shall be at all times responsible to assure that an appropriate licensed health care professional determines and carries out all services and medical care policies set forth in 13:35-6.16(b) and (c), including retention of sole discretion regarding medical indications for use of the equipment, and establishment of patient fees and modification or waiver thereof in an individual case. (See also (b) above regarding mandatory disclosure to referred patients, as applicable.)

(j) A licensee having a significant beneficial interest, as defined in (a) above, in a health care service including a professional service corporation or a general business corporation (see 13:35-6.16(f) ) shall notify the Board of such interest no later than February 18, 1993. Notice is not required for a practice conducted under the practitioner's own name.

(k) This rule shall be operative April 15, 1992.

N.J. Admin. Code § 13:35-6.17

New Rule, R.1992 d.75, effective 2/18/1992 (operative April 15, 1992, except as noted).
See: 23 N.J.R. 161(a), 23 N.J.R. 1063(a), 24 N.J.R. 626(a).
Public Notice: Stay of operative date of (e) until July 15, 1992.
See: 24 N.J.R. 1905(a).
Public Notice: Stay of operative date of portion of (a)2 until August 12, 1992.
See: 24 N.J.R. 2460(a).
Public Notice: Delayed operative date of (e) until August 15, 1992.
See: 24 N.J.R. 3443(b).
Administrative Correction to (a)5.
See: 24 N.J.R. 4409(a).
Amended by R.1995 d.8, effective 1/3/1995.
See: 25 N.J.R. 5441(a), 27 N.J.R. 120(a).
Amended by R.2011 d.155, effective 6/6/2011.
See: 42 N.J.R. 1310(a), 43 N.J.R. 1359(b).
In (a)2iii and (h)5, inserted "and Senior Services"; in (a)2iii, deleted a comma following "uncompensated care"; in (a)2vi and (c)1ii, substituted "Accreditation" for the first occurrence of "American"; in (a)2vi, substituted "third-party" for "third party"; in the introductory paragraph of (c)1, deleted a comma following "patient use"; and rewrote (e).
LAW REVIEW AND JOURNAL COMMENTARIES:
Examiners' Board Hits Physician Referrals. 133 N.J.L.J. No. 4, 11 (1993).
Rules Changes Target Medical Group Practices. Theodosia A. Tamborlane, 136 N.J.L.J. No. 11, 10 (1994).