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Christie Vetoes Licensing Bill for Single-Room Surgeries

Inequity in taxes with ambulatory surgery centers hangs up health department oversight.

A bill that would have placed single-room surgical practices under the same Department of Health licensing and inspection system as ambulatory surgery centers with two or more operating rooms has been pocket-vetoed by Gov. Chris Christie.

According to the Department of Health, because the bill exempted the single-room surgeries from a tax levied on ambulatory surgery centers, it conflicted with a federal rule that to qualify for federal matching funds from Medicaid, states must have uniform policies for taxing healthcare providers.

"The department recognizes the importance of consumer protections, but there were a number of concerns with this bill, including the fact that it would create new licensed facilities not subject to the same assessment as other licensed facilities, in contravention of the federal requirement that assessments be broad-based in order to qualify for federal matching funds," said Donna Leusner, the health department's spokeswoman.

There was also the issue of the cost to the health department to license and inspect more than 100 single-room surgical practices across the state. There are already about 200 large ambulatory surgery centers now subject to health department licensure and inspection, Leusner said. "Creating cost commitments outside of the budget process is problematic. Funding needs to be looked at in the context of the budget."

Both Sen. Joseph F. Vitale (D-Middlesex), chairman of the Senate health committee, and Dr. Herb Conaway, (D-Burlington), chairman of the Assembly health committee, have strongly advocated for creating a level playing field in the regulation of surgical facilities -- whether they are in hospitals, ambulatory surgery centers, or single-room surgical practices in physicians' offices. Vitale cited the report last year by the New Jersey Health Care Quality Institute, which revealed a higher rate of serious safety violations in surgical practices than in the ambulatory surgery centers.

But Vitale said physicians had lobbied against being subjected to the tax, and he decided to exempt them because "my primary concern with moving this legislation is about patient safety and quality, and I wasn't interested in foisting a tax on this particular subset of providers."

Lawrence Downs, CEO of the Medical Society of New Jersey, said he supports licensing and inspection by the health department, but is opposed to being subjected to the ambulatory surgery center tax. "Our solution would be to repeal the tax," Downs said, in which case there would be no tax on the large ambulatory surgery centers or on the small one-room surgeries.

"Repeal the tax and license everybody," Downs said. "Healthcare is not a commodity that should be taxed. We are trying to reduce the tax burden and the cost of providing healthcare, so taxing it makes no sense at all. So if the problem is one of equal application [of the tax], the simple solution is to repeal the tax on the multiroom centers, and then you can license everyone."

Dr. Peter Hetzler, past president of the New Jersey Society of Plastic Surgeons, said he is in favor of having all surgical practices licensed and inspected by the health department, but he is against extending the ambulatory surgery centers tax to the single operating rooms. "We definitely are in favor of inspections and licensing and we have no problem with that at all. We think it will increase the quality of one-room ORs throughout the state," he said.

"Our concern is really for patient safety," Hetzler added. "We want to make sure we have high-quality facilities. And there is no question that there have been some questionable facilities in the state of New Jersey. But as far as the tax goes, that is another issue. It doesn't make a lot of sense to me to put a burden like that on to a single-room facility."

Hetzler, a Little Silver plastic surgeon, said he works in a larger, multi-specialty ambulatory surgery center that is taxed. "I am not in favor of taxing one-room ORs," he said.

New Jersey currently collects about $16 million annually from ambulatory surgery centers, according to Jeffrey Shanton, chairman of advocacy and legislative affairs for the New Jersey Association of Ambulatory Surgery Centers. Centers with less than $300,000 a year in gross receipts pay no assessment. Those with revenue exceeding $300,000 pay a 2.95 percent tax on 100 percent of their revenue, up to a maximum tax of $350,000 a year.

Shanton said he is optimistic that the issue will be resolved in discussions among the industry, the health department and the legislature. The bill, he said, "is good and needed legislation."

Vitale is also optimistic the bill can be reworked and passed in the next few weeks, but said he has not yet arrived at a way of resolving the issue. "We may have to apply the tax to the single- room" surgery providers, Vitale said. "Or we may find a way to not tax them. Right now I don't have an answer. Hopefully we get it resolved in a matter of a couple of weeks. In the meantime, we have hundreds of single-room facilities that are operating without [health department] licenses. That is ridiculous."

Currently the state Board of Medical Examiners oversees single-room ORs as part of its regulation of the practice of medicine. But David Knowlton, president of the New Jersey Health Care Quality Institute, said all facilities where surgery is performed should be inspected by the health department. "We have people getting care in facilities and they have no idea whether they are safe or not. It is necessary to have a set of rules and regulations to make a practice safe, no matter where the practice is carried out -- whether it's a hospital or an ASC or a doctor's office."

The health department inspects ambulatory surgery centers every three years. In addition to the 2.95 percent assessment, the centers pay a $4,000 a year licensing fee, and a fee of $2,000 in the year they are inspected.

"We are disappointed because we were fully behind this legislation and believe it was a good step toward increasing public safety by increasing the review of these facilities," said Randy Minnear, senior vice president, government relations and policy for the New Jersey Hospital Association. "It is a matter of public safety and also quite frankly it leveled the playing field in the healthcare provider community."

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