Bill Barring Out-of-State Owners Would Block Outpatient Surgery Center

Andrew Kitchenman | June 30, 2015 | Health Care
Pennsylvania hospital battle spills over New Jersey border as Warren County legislator urges Christie to veto measure

State Sen. Michael Doherty (R-Warren)
As recently as last month, executives with Coordinated Health had no reason to believe that their plans for an outpatient surgery center in Lopatcong Township, Warren County, could be in jeopardy.

But now their plans are in upheaval, and they say it’s because they’re being unfairly singled out by the Legislature.

A fast-moving bill — the Assembly version was introduced, referred to a committee, and released by the committee on the same day — is what’s upsetting their plans. The bill, A-4476/S-2876, includes a provision that would retroactively ban out-of-state hospitals from owning ambulatory surgery centers in New Jersey. The ban would apply to any plans submitted since March 1.

Officials with Coordinated Health, a Pennsylvania-based chain of specialty hospitals and ASCs, say the Lopatcong facility would be the only one in the state affected by that provision.

Supporters of the bill say it’s an outgrowth of a 2009 state law requiring that the outpatient centers be at least partially owned by a hospital or medical school. For the first few years after the law was enacted, all of those hospitals were located in New Jersey.

However, the state Department of Health then began approving out-of-state-owned facilities – a trend that continued in the early months of this year, when Memorial Sloan Kettering Cancer Center of New York advanced plans for a center in Middletown, Monmouth County, and Nemours/Alfred I. DuPont Hospital Children in Delaware announced plans for a facility in Deptford.

Those plans were submitted to the state before the March 1 retroactive deadline for applications, but Coordinated Health’s were submitted after that date.

While Coordinated Health opposes the legislation, the bill is supported by the company’s competitor, St. Luke’s University Health Network, a Bethlehem, PA-based system that owns St. Luke’s Hospital-Warren Campus in Phillipsburg.

The New Jersey Hospital Association joined St. Luke’s in backing the measure, with NJHA representatives arguing that the rapid expansion of cross-state systems wasn’t occurring when the 2009 law restricting ASC ownership to hospitals and medical schools was enacted.

The Senate passed the bill yesterday in a 22-14 vote. All 14 opponents were Republicans, with Sen. Dawn Marie Addiego (D-Atlantic, Burlington, and Camden) the only Republican supporting the measure. Twenty-one Democratic senators voted for it, while the three Democrats and one Republican didn’t vote. The Assembly passed the bill last week in a 67-5 vote. It now heads to Gov. Chris Christie’s desk.

Opponents of the measure said it’s anti-competition, while supporters argued that it would prevent unfair competition with New Jersey hospitals.

Sen. Michael J. Doherty (R-Hunterdon, Somerset, and Warren), an opponent of the ban, said there’s a dire need for medical facilities like Coordinated Health’s proposed surgical center in the Phillipsburg area. He cited an estimate that more than 6,300 Warren County residents travel across the border to Pennsylvania for procedures each year, including 5,500 go there for outpatient procedures.

“They happen to be from Pennsylvania — who cares?” Doherty said of Coordinated Health. “They want to have jobs here in New Jersey. They want to build a $20 million facility.”

Bill sponsor Sen. Richard J. Codey (D-Essex and Morris) said that ASCs that aren’t affiliated with New Jersey hospitals “cherry-pick” the patients with the highest-paying insurance, leaving other hospitals at financial risk if they lose higher-paying patients.

“We’re not talking about the Camdens of the world, the Jersey Cities, the Newarks, the Oranges – those aren’t the people that are getting access to these places,” Codey said.

Coordinated Health has been building a medical office building at the site in Lopatcong, a vacant former commercial property. Company executives originally planned a specialty hospital focused on orthopedic surgery, but decided to scale back their plans early this year after learning that the state hadn’t approved a new hospital for decades.

[related]While specialty hospitals and ASCs are both smaller than traditional inpatient hospitals, specialty hospitals also perform inpatient surgeries, while ASCs don’t. For example, an orthopedic specialty hospital might offer hip-replacement surgery, while a fixing a broken bone would be a more typical procedure at an outpatient center.

ASCs were started by doctors in the 1970s and 1980s as a way to offer surgeries outside of hospitals to patients who didn’t require overnight stays. In recent years, many ASCs have merged with hospitals.

Doherty said he hopes Christie vetoes the measure. Coordinated Health officials said they would consider filing a legal challenge if the bill were to be enacted, possibly based on the state constitutional prohibition on legislation that targets a specific situation, known as “special legislation.”

“We believe, let the patients decide when it comes to quality and experience,” said Jim Tsokanos, Coordinated Health’s president.