Bill Seeks to Stop Spread of Outpatient Centers Owned by Out-of-State Hospitals

Andrew Kitchenman | June 10, 2015 | Health Care
Industry association backs measure limiting surgical center ownership to in-state hospitals or medical schools

ambulatory surgery center
The recent proliferation of outpatient surgery centers owned by out-of-state providers would halt if a bill backed by New Jersey hospitals becomes law.

The bill, S-2876/A-4476, would require that all new ambulatory surgery centers – which perform less-complicated surgeries that don’t require patients to stay overnight and are typically less complicated — be owned by New Jersey hospitals or medical schools.

Bill sponsor Sen. Richard J. Codey (D-Essex and Morris) said the bill is an outgrowth of the 1989 law known as the “Codey Act,” which prevents doctors from referring patients to facilities in which they have a financial interest. A later Codey-sponsored law, enacted in 2009, required that any new ambulatory surgery centers must be at least partly owned by a hospital or medical school.

While ownership of these centers was long limited to in-state hospitals, in recent years the state Department of Health began approving facilities with out-of-state owners.

Memorial Sloan Kettering Cancer Center of New York operates an outpatient center in the Basking Ridge section of Bernards Township and is planning a second center in Middletown, Monmouth County. The University of Pennsylvania-affiliated Penn Medicine operates outpatient centers in South Jersey, noted a recent report commissioned by the Plainsboro-based Robert Wood Johnson Foundation.

Codey said the latest bill is meant to clarify “what should be going on in the marketplace in the future.”

Sen. Robert M. Gordon (D-Bergen) noted that many patients seek care across state lines.

“I understand that we’re trying to protect our hospitals and level the playing field,” Gordon said, noting that New York’s Hospital for Special Surgery operates a nonsurgical site in Paramus.

After Codey pointed out that the bill wouldn’t cover sites that don’t offer surgeries, Gordon said the state is likely to see many more nonsurgical facilities open in the coming years. Codey said he would consider amending his bill to address that issue.

Mark Manigan, a lawyer who represents ambulatory surgery centers, said the bill close an unintended loophole that allowed out-of-state hospitals to own centers in New Jersey.

The New Jersey Hospital Association supports the bill. Spokeswoman Kerry McKean Kelly said state lawmakers didn’t anticipate hospitals crossing over New York and Pennsylvania when they passed the 2009 law.

“We’re seeing state boundaries disappearing as different healthcare providers integrate and organize on a much larger, and sometimes regional, basis,” Kelly said.

The ambulatory surgery centers grew rapidly in the years before the 2009 law, as patients were drawn by the convenience – and frequently lower prices – of the centers. Critics raised concerns that the centers were not equipped to deal with emergencies onsite if complications occurred.

The 2009 law provided a six-month window for new ambulatory surgery centers to seek licenses before the ownership restrictions started. This prompted a flurry of new activity as centers sought to finalize their plans ahead of the deadline.

No one spoke against the bill at a recent Senate Health, Human Services, and Senior Citizens Committee hearing, but it’s not clear if Gov. Chris Christie will support the measure. While the committee released the bill, at least one of the Republicans on the committee — Sen. Robert W. Singer (R-Monmouth and Ocean) — opposed it. The Assembly Health and Senior Services Committee released its own version of the bill earlier this month.