Archive | November 2009

APPELLATE COURT RULING: A Win for Physicians and Patients

This week, the New Jersey Superior Court Appellate Division upheld the trial court’s opinion in Garcia v. HealthNet concerning billing practices at the Wayne Surgical Center. The unpublished per curiam appellate court decision affirmed the lower court ruling that physicians are not compelled to collect co-insurance from their patients. MSNJ participated as amicus curiae. The AMA’s Litigation Center provided support for the appeal.

This case was filed by physicians in 2006 when HealthNet refused to renew their contracts. HealthNet counterclaimed and countersued the Wayne Surgical Center alleging fraud, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and tortuous interference with HealthNet’s subscriber contracts. The physicians were in-network providers with an ownership interest in Wayne Surgical Center; the surgical center was not a network facility.

HealthNet’s appeal was from the 2007 trial court decision that was favorable to both the physician community and to the owners of ambulatory care facilities. HealthNet alleged violations of the “Codey Act” prohibition on self-referal and improper billing practices by the surgical center in violation of the Insurance Fraud Protection Act (IFPA). HealthNet also alleged violations of the IFPA because the facilities failed to disclose that they waived collection of co-insurance. The trial court found that the referral practices of the physicians were in violation of the “Codey Act” (which was subsequently amended and allows the conduct complained of), but the State, not HealthNet, had authority to prosecute those violations.  The trial court also found no authority to support HealthNet’s claim that providers’ failure to collect co-insurance violated the IFPA.

The appellate division evaluated HealthNet’s theory on appeal that the trial court had used an erroneous “knowledge” standard under the IFPA. Since knowledge was not a defined term, the appellate division used the commonly understood meaning and found that HealthNet failed to establish that the claims were submitted knowing that they were false or misleading as required by the fraud statute.

Importantly for the state’s physician community is that the appellate court’s decision affirms that providers who waive their right to collect co–insurance do not misrepresent their charges. This opinion affirms the trial court’s finding that there is no legal authority barring a provider of healthcare services from waiving their contractual right to collect co-insurance.

According to Larry Downs, MSNJ’s General Counsel, “The ruling is important to the state’s physician community which wants to remain unencumbered in making decisions relating to waiving co-insurance based on an individual patient’s situation.” This case demonstrates that the courts, not the insurers, have the final say in the question of fraud and that they will decide by evaluating the evidence before them.

MSNJ and the AMA were represented by David Stone, Esq. formerly of Boies, Schiller & Flexner and now at Stone & Magnanini.


The Medical Society of New Jersey (MSNJ) urges the members of Congress to vote “no” tomorrow on House health reform bill H.R. 3962, The Affordable Health Care for America Act, while supporting H.R. 3961 to ensure the security and stability of Medicare.

“There is just too much left out of the current bill which, if approved, will severely impact the quality and access to care long-term,” stated Joseph H. Reichman, MD, President of the Medical Society of New Jersey.  “The effect on the practice of medicine and the patients we serve could be devastating.”

Of particular concern to New Jersey, which has the lowest Medicaid reimbursement in the country, is the proposed addition of 15 million Americans to the under-funded program.  “While it is encouraging to see some effort to adequately fund primary care for those relying on Medicaid, swelling the ranks of beneficiaries in New Jersey will only exacerbate the challenges facing our specialists and the hospitals they work in,” Reichman added.

“While MSNJ supports efforts to meaningfully address the broken Medicare funding formula in H.R. 3961, the decoupling of these efforts has led to fears that Congress is prepared to move forward without a permanent Medicare fix,” Reichman said.  Last week, a similar bill was defeated in the Senate, adding to the unease.

The health reform debate has reached a critical juncture. MSNJ offers the following guidance to patients on what MSNJ considers the essential components for real, lasting, cost effective health reform.

MSNJ calls on Congress to deliver:

  • Access to affordable health insurance coverage for all, tailored to individual needs and with individual responsibility for obtaining insurance and finding a medical home.
  • Health insurance market reforms to help patients obtain and keep affordable health insurance and to remedy widely documented abusive insurer practices such as preexisting condition exclusions and denials of medically necessary care.
  • Changes in antitrust law to promote information sharing and care coordination between doctors and to level the playing field in negotiations with health plans.
  • Permanent correction of the fatally flawed Medicare physician sustainable growth rate formula which has restricted patient access to care.
  • Strong and effective medical litigation reforms to reduce the costs of wasteful defensive medicine.
  • Subsidies for low-income individuals and families to purchase private health insurance, as a means of covering the uninsured and as a market-based alternative to Medicaid expansion.
  • Health education, prevention and wellness initiatives to improve patients’ overall health and reduce long-term costs.
  • Initiatives and incentives to assure there will be enough physicians trained in the future to care for patients.

Not all reforms are good for patient care. MSNJ stands opposed to:

  • Government-mandated treatment guidelines that interfere with doctors’ clinical decision-making and the doctor-patient relationship.
  • A government-subsidized “public option” that would unfairly compete in the health insurance market.
  • A single payor health system. MSNJ believes health system reform should improve and expand upon the current public-private system and focus on incremental, evolutionary change.
  • Further expansion of Medicaid as a means of covering the uninsured. Given New Jersey’s track record of a woefully under-funded Medicaid program, we much prefer subsidies for the private purchase of health insurance by low-income patients.

“While we all support healthcare reform in the United States, we simply can’t ignore these important details that could be a detriment to the physician-patient relationship,” said Michael T. Kornett, CEO of the Medical Society of New Jersey.