MSNJ President Richard J. Scott, MD on Senate Bill 787

Comments before the N.J. Senate Health and Human Services Committee by Richard J. Scott, MD, Medical Society of New Jersey President, on Senate Bill 787

Thank you for allowing us to bring our comments and concerns to this committee today. We very much appreciate the fact that Senator Codey has moved so quickly to right the wrong resulting from HealthNet vs. Wayne Surgicenter. This legislation will make it clear to all judges, present and future, that physicians who practice quality, efficient medicine in ambulatory surgery centers (ASC) in which they have a financial interest are deemed in compliance with the Codey legislation of 1991. Resolving that ambiguity addresses the concerns of physicians who have acted in good faith, in an open, public, and regulated forum, as they partnered with hospitals and others in revolutionizing the delivery of healthcare in New Jersey over the past two decades.

As 2008 dawns, the public has access to many clean, efficient centers for surgical care that did not exist in 1991. Physicians and hospitals have found new ways to be partners and to cooperate with one another. The competition, where it exists, has improved healthcare for all patients, as surgicenters often raised the bar for convenience and quality. When patient satisfaction is measured, surgicenters are often rated as among the best.

This change in our healthcare delivery system is a good one, an example of capitalism and competition producing a better product. But no one in this legislature can really be shocked by what I am about to reveal. Physician investor/partners were bringing their own patients to places in which they, the physicians, have some say in quality, cleanliness, and efficiency. This bill recognizes that these physicians did so in good faith and in the open. In fact, they did so in broad daylight.

This state often approved the plans for the surgicenters, regulated their construction, and yes, in 2004, learned to tax their profits. No one felt they were in violation of anything—not the physicians, the hospitals, or, when they were involved, the third-party managers who brought capital and expertise to the equation.

I ask that you to continue to allow the continued evolution of what has been a very positive thing for patients. For the unintended consequences of grandfathering may be the creation of more severe problems than those you intend to correct. The first Codey Act was intended to prevent the prescription of unnecessary health services based upon possible financial incentives. And yet, nothing in the present court case even remotely suggests that unnecessary care was delivered, or that any of the physician owners’ medical judgments were influenced by their ownership of the facility.

It is significant that over 30 surgicenters are in partnership with financially strapped New Jersey hospitals, whose profits from these centers help fund their community mission to provide healthcare to those less fortunate.

But the solution of grandfathering only existing centers will end that sort of synergy for future needs. While grandfathering is a real benefit to existing shareholders, it strains logic to suggest it has any public benefit. Present shareholders are empowered, but future physicians, and hospitals that might wish to partner with them, will forever be left out. Present centers and hospitals will have an unfair advantage, creating a world of “haves” and “have nots.” Do we really want to make ASC licenses like liquor licenses?

Worse still, for the public, it will move New Jersey even lower on the wish list of future practice locations for graduating medical students and residents. As our population ages, and our charity care burden increases, new physician graduates will look first to the other 49 states where federal STARK II guidelines define what is, and what is not, a safe harbor for physician investment.

In those states, young surgeons will no doubt settle, invest, and become partners with other healthcare providers and hospitals in a healthy competitive market. They will seek places in which they have some control over not just the quality of their surgical results, but over the quality of the facility and staff.

All physicians should be compelled to abide by the ethics of Codey 1. Patients should always be told when they are being sent to a center in which the physician has an interest and offered a choice based on the principles of informed consent. It should always be 100% transparent, as it has been. Through competition on quality and customer service, the best centers will prosper; the others close, as the free market dictates.

But our younger physicians, and those still in training, should have access to the same opportunities that the present owners had, just as the next generation of patients should have access to those physicians.

As a state we lag far behind others, such as Texas, California, and Ohio, in medical liability reform, we must not further discourage the physicians-in-training who will follow in our footsteps. These states are importers of young medical talent; we have become exporters. There should be a way to keep us on the same footing with the rest of the country and allow for new projects with our hospitals and other corporate partners. It’s good public policy.

The future health of New Jersey may depend on it.

Thank you again for allowing us your time today, and we hope for your continued consideration. We are most grateful to Senator Codey for moving so quickly.