NEW JERSEY - PROFESSIONAL PRACTICE STRUCTURE

March 25, 2008

New Jersey state laws and regulations that affect your medical practice

1. Under what business structures are physicians permitted to practice?

Physicians may practice in the following manner:

A. Solo

A practitioner may practice solo and/or may employ or otherwise remunerate other licensed practitioners to render professional services within the scope of practice of each employer’s license, but which scope shall not exceed that of the employer’s license. The practitioner may employ ancillary non-licensed staff in accordance with Board rules, if any, and accepted standards of practice.

B. Partnership, Professional Association or Limited Liability Company

A practitioner may practice in a partnership, professional association, or limited liability company, but such entity shall be composed solely of health care professionals, each of whom is duly licensed or otherwise authorized to render the same or closely allied professional service within this State.

A limited liability company means a limited liability company formed under the laws of this State, pursuant to the New Jersey Limited Liability Act, except where inconsistent with these rules.

A practitioner who is a member, employee, agent or representative of the limited liability company shall remain personally responsible for his or her own negligence, wrongful acts, or misconduct, and that of any person under his or her direct supervision and control while rendering professional services on behalf of the limited liability company in this State to the person for whom such professional service was being rendered.

The professional services offered by each practitioner, whether a partner, member or shareholder, shall be the same or in a closely allied medical or professional health care field. For purpose of this rule, closely allied fields, pursuant to the Professional Service Corporation Act shall be deemed to include the health care professions licensed by the State Professional Boards under the Division of Consumer Affairs; for example, chiropractic, dentistry, nursing, nurse midwifery, optometry, physical therapy, podiatry, psychology, social work, etc.

If the scope of practice authorized by law for each such person differs, any document used in connection with professional practice including, but not limited to, professional stationery, business cards, advertisements or listings and bills, shall designate the field to which such person’s practice is limited.

Prescriptions shall list only those practitioners authorized by law to prescribe, shall designate the practice of each listed prescriber and shall comply with all data requirements.

C. Associational Relationship with Other Physician or Professional Entity

For purpose of this rule, the term “employment” shall include an ongoing associational relationship between a physician and professional practitioner(s) or entity on the professional practice premises for the provision of professional services, whether the physician is denominated as an employee or independentcontractor, for any purpose of remuneration.

A practitioner may be employed, as so defined, within the scope of the practitioner’s licensed practice and in circumstances where quality control of the employee’s professional practice can be and is lawfully supervised and evaluated by the employing practitioner. Thus, a practitioner with a plenary license shall not be employed by a practitioner with a limited scope of license, nor shall a practitioner with a limited license be employed by a practitioner with a more limited form of limited license.

By way of example, a physician with a plenary license may be employed by another plenary licensed physician, but an M.D. or D.O. may not be employed by a podiatrist (D.P.M.) or chiropractor (D.C.) or midwife or certified nurse midwife (R.M., C.N.M.). A podiatrist may not employ a chiropractor.

This section shall not preclude any physician from employing licensed personnel such as nurses, x-ray technologists, physical therapists, ophthalmic dispensers and ophthalmic technicians, etc., as appropriate to the primary practice of the employer.

D. Shareholder or Employee of General Business Corporation

Physicians may offer health care services as an employee of a general business corporation in this State only in one or more of the following settings. Any such setting shall have a designated medical director licensed in this State who is regularly on the premises and who (alone or with other persons authorized by the State Department of Health, if applicable) is responsible for licensure credentialing and provision of medical services.

1. The corporation is licensed by the New Jersey Department of Health as a health maintenance organization, hospital, long or short-term care facility, ambulatory care facility or other type of health care facility or health care provider such as a diagnostic imaging facility. The above may include a licensed facility which is a component part of a for-profit corporation employing or otherwise remunerating licensed physicians.

2. The corporation is not in the business of offering treatment services but maintains a medical clinic for the purpose of providing first aid to customers or employees and/or for monitoring the health environment of employees.

3. The corporation is a non-profit corporation sponsored by a union, social or religious or fraternal-type organization providing health care services to members only.

4. The corporation is an accredited educational institution which maintains a medical clinic for health care service to students and faculty.

5. The corporation is licensed by the State Department of Insurance as an insurance carrier offering coverage for medical treatment and the physician is employed to perform quality assurance services for the insurance carrier.

E. Equity or Employment Interest in a Professional Practice

A physician may also have an equity or employment interest in a professional practice (including a professional service corporation or limited liability company) which is a limited partner to a general business corporation which, in turn, has a contractual agreement with the professional service entity, in the following circumstances only:

The general business corporation may contract to provide the professional practice with services exclusively of a non-professional nature such as, but not limited to, routine office management, hiring of non-professional staff, provision of office space and/or equipment and servicing thereof, and billing services. The physician shall nevertheless be responsible, at all times except as excused below, to assure that an appropriate licensed health care professional determines and carries out all services and medical care policies set forth above, including retention of sole discretion regarding establishment of patient fees and modification or waiver thereof in an individual case. The physician shall assure, as a condition of such contractual arrangement, that the general business corporation makes no representations to the public of offering, under its own corporate name, health care services which require licensure.

F. A physician employed or having a significant beneficial interest in any of the practice forms listed above shall terminate such employment or sever professional affiliation upon acquiring personal knowledge that the entity regularly fails to provide or observe the quality control/assurance mechanisms listed above and refuses, upon request, to implement such mechanisms. A physician terminating employment or affiliation with a general business corporation as described above for reasons required by this section shall so notify the Board.

G. Managed Health Care Plans

A physician may participate in organized managed health care plans including, but not limited to, those involving wholly or partially pre-paid medical services. 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 designations. Such plans typically cover certain types of health care services but only when the services are rendered by physicians who are provider-members of the plan; or the patient has been referred to a specialist or admitted to a hospital by a provider-member and has secured the advance approval of the plan administration. Such plans usually permit coverage for referrals in situations of emergency or other special conditions. A physician may participate in any such plan which complies with the following professional requirements:

1. The physician retains authority at all times to exercise professional judgment within accepted standards of practice regarding care, skill and diligence in examinations, diagnosis and treatment of each patient.

2. The physician retains authority at all times to inform the patient of appropriate referrals to any other health care providers:

(a) Whether or not those persons are provider-members of the plan; and

(b) Whether or not the plan covers the cost of service by such non-member providers to the patient.

3. Plan patients are informed that they may be personally responsible for the cost of treatment by a provider who is not a member-provider within the plan, or for treatment not having the approval of the plan administration.

4. Provisions for remuneration to the physician shall not be inconsistent with the regulations on professional fees and investments, and the prohibition of kickbacks, discussed below.

H. Laboratory Service

1. A physician having a financial interest in a laboratory for the performance of bioanalytical tests may prescribe and/or perform such tests on the physician’s primary medical office premises solely for the patients of the prescribing physician. The physician is responsible for establishing and maintaining a protocol for quality and cost control and for compliance with the provisions of the Clinical Laboratory Improvement Act. Billing shall be done only in the name of the practitioner’s medical office and in compliance with the law.

2. A physician having a financial interest in a laboratory offering services only to patients of the owning physician(s) but conducted at a site other than the office premises of the owners shall assure that such laboratory has a director and that the laboratory is licensed under the New Jersey Clinical Laboratory Improvement Act. The physician shall assure compliance with applicable law and the name of the laboratory shall be accompanied at all times by the name(s) of the owning physician(s) except as authorized for media advertising. Petition may be made for exemption on billing forms for good cause shown. Patient referral may be made only by a physician holding such financial interest prior to July 31, 1991.

3. A physician having a financial interest in a laboratory which accepts referrals from physicians who are not owners/investors shall assure that such laboratory is licensed under the New Jersey Clinical Laboratory Improvement Act and is directed by a licensed bioanalytical laboratory director who shall establish and maintain quality and cost control. The physician shall assure compliance with the law and the name of the laboratory shall be accompanied at all times by the name(s) of the owning physician(s), except as authorized for media advertising. Petition may be made for exemption on billing forms for good cause shown. Patient referral may be made only by a physician holding such financial interest prior to July 31, 1991.

I. Physical Therapy

1. A physician may perform and/or prescribe physical therapy to be administered in the physician’s office. Billing shall be done only in the name used by the physician’s office. A bill for services of a physician’s employees, which were rendered by licensed professionals authorized to provide services without medical supervision, shall identify the provider by name and degree.

2. A physician having a financial interest in a physical therapy entity at a location other than the physician’s office, whether conducted under the physician’s name or under another name, shall establish quality control/assurance provisions. The physician shall assure compliance with service provider identification and the name of the entity shall be accompanied at all times by the name(s) of the owning physician(s) except as authorized for media advertising. Petition may be made for exemption on billing forms for good cause shown. Patient referral may be made only by a physician holding such financial interest prior to July 31, 1991.

J. Radiology

1. A physician may prescribe and/or perform radiologic services on the physician’s office premises. Billing shall be done only in the name of the prescriber or office.

2. A physician having a financial interest in a radiologic service facility at a location other than the physician’s fixed office premises, whether conducted under the physician’s name or under another name, shall establish quality control/assurance provisions. The physician shall assure compliance with the law and the name of the facility shall be accompanied at all times by the name(s) of the physician(s) except as authorized for media advertising. Petition may be made for exemption on billing forms for good cause shown. Patient referral may be made only by a physician holding such financial interest prior to July 31, 1991, or by a physician having a financial interest in a facility offering radiation therapy pursuant to an oncological protocol.

K. Ophthalmology

1. A physician may prescribe eyeglasses or external contact lenses and may offer to sell the devices. Billing shall be done only in the name of the physician or office. A bill for services of a physician’s employees, which were rendered by licensed professionals authorized to provide services without medical supervision, shall identify the provider of service by name and degree.

2. A physician having a financial interest in a service entity for the selling of eyewear at a location other than the physician’s office, conducted under the physician’s name or another name, shall establish quality control/assurance provisions. The physician shall assure compliance with service provider identification and the name of the entity shall be accompanied at all times by the name(s) of the owning physician(s) except as authorized for media advertising. Patient referral may be made only by a physician holding such financial interest prior to July 31, 1991.

(N.J.A.C. 13:35-6.16)

2. What requirements must be met for a practitioner to engage in professionalpractice in New Jersey?

The SBME requires the following:

A. A practitioner may engage in professional practice only when in possession of a current biennial registration issued by the SBME.

1. The term “professional practice” is deemed to include the offering by a Medical Board physician of opinions on matters of professional practice (including testimony and professional review organization service), whether or not the offeror has provided direct patient care, where the holding of a professional board license is a significant component or foundation for the offering of the professional opinion.

2. The name of the professional practice entity shall be composed of the actual last names of one or more of the owning physicians, partners or shareholders or composed of a phrase or words reasonably descriptive of the type of professional practice.

B. The practice shall be conducted in a business form consistent with the principles set forth in this rule and, where so noted, only in accordance with the designated special conditions pertaining to that form. There shall be policies and procedures with respect to professionally licensed personnel. These topics shall include, but not be limited to, the following:

1. Responsibility of a licensed practitioner for review and approval of hiring professional staff and timely demand for and verification of current licensing credentials and any other educational credentials required by law or pertinent agency rule (for example, recertifications, continuing professional education, cardiopulmonary resuscitation, etc.);

2. Medical policies at the office or place where services shall be rendered;

3. Cleanliness of premises;

4. Maintenance, registration and inspection of professional equipment as necessary;

5. Standards for record keeping as to patient medical records, billing records, and such other records as may be required by law or rule including ControlledDangerous Substance inventories, as applicable;

6. Security, including drug storage, prescription pad control, confidentialityof patient records;

7. Periodic audit of patient records and of professional services to assure quality professional care on the premises;

8. Responsibility for the professional propriety of billing and of advertising or other representations including disclosure of financial interest in health care services offered to the public; and

9. Preparation and maintenance of a written list of current fees for standard services, which list shall be available to patients on request.

C. The physician shall post a conspicuous notice in the waiting room stating: “INFORMATION ON PROFESSIONAL FEES IS AVAILABLE TO YOU ON REQUEST.”

D. A physician, alone or with the other investing physicians, may employ a licensed health care professional as director of the professional entity to carry out those policies and procedures designated by the physician(s). The director must be licensed to conduct all services offered at the premises. Either the director, one of the investing physicians, or another licensed health care professional authorized to render those medical services without direct supervision, must be on the premises at all times when patients or clients are receiving professional services, except as specified herein or otherwise permitted by rule of the Board. With regard to health care entities whose services are performed away from the primary office address (for example, entities providing house calls, mobile medical services, or provision and management of services relating to durable medical equipment, etc.), the director need not be present at all times, provided that patients or clients are receiving professional services from an investing or employed professional who is a physician of a professional health care board of this State, except as may be limited by law or by another rule of this Board.

E. A physician may invest in a health care service. Said service shall be owned solely by one or more licensed health care professionals, except as otherwise permitted by licensure granted by another State agency. Whether or not any or all of the owners, partners or directors all regularly practice on the premises or within the entity, each such person who is a physician of this Board shall be responsible to the Board for requiring maintenance of all professional practice standards and control set forth in this rule, except if otherwise excused. A physician who has invested in a health care service in which he or she has a significant beneficial interest, to which he or she refers patients, shall assure that professional justification for the referred service is documented in the patient record maintained at that entity. Referred services include but are not limited to prescriptions for devices such as hearing aids, eyeglasses, intraocular lenses, requests for radiological studies, etc. Referral of patients is now limited to the exceptions set forth in N.J.S.A. 45:9-22.4 as amended.

3. Are there any restrictions on real estate and medical equipment arrangements?

Yes, the following restrictions address real estate and medical equipment arrangements:

A. A physician 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.

B. A physician 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 physician’s professional discretion in matters including choice of patients, professional services offered, or fees.

C. A physician 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.

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

E. A physician 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, 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 physician 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.

(N.J.A.C. 13:35-6.17 (h))

Copyright © Kern Augustine Conroy and Schoppmann, P.C. Used with permission.

Updated 2008