ENDO SURGI CENTER, P.C. v. LIBERTY MUTUAL INSURANCE COMPANY

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4611-07T34611-07T3

ENDO SURGI CENTER, P.C.,

Plaintiff-Appellant/

Cross-Respondent,

v.

LIBERTY MUTUAL INSURANCE COMPANY,

Defendant/Third-Party

Plaintiff-Respondent/

Cross-Appellant,

v.

SAMIAPPAN MUTHUSAMY, PRADEEP P.S.

MAHAL, SURESH JAIN, DAVID H. YU,

EYAD BAGHAL and PAVAN SACHAN,

Third-Party Defendants-

Appellants/Cross-Respondents.

________________________________________________________________

 

Argued February 22, 2010 - Decided

Before Judges R. B. Coleman, Baxter and Alvarez.

On appeal from the Superior Court of New Jersey, Law Division, Union County, Docket No. L-0228-06.

Charles X. Gormally argued the cause for appellants/cross-respondents Endo Surgi Center, P.C., Samiappan Muthusamy, Pradeep P.S. Mahal, Suresh Jain, David H. Yu, Eyad Baghal and Pavan Sachan, (Brach Eichler L.L.C., attorneys; Mr. Gormally, of counsel and on the briefs; Sean A. Smith, on the brief).

Clifford J. Giantonio argued the cause for respondent/cross-appellant Liberty Mutual Insurance Company (Law Offices of Baumann and Viscomi, attorneys; Mr. Giantonio, on the brief).

PER CURIAM

This is a dispute between plaintiff, Endo Surgi Center, P.C. (Endo) and defendant, Liberty Mutual Insurance Company (Liberty Mutual), over the latter's refusal to pay facility fees that were billed by Endo when surgeons performed ambulatory surgery procedures at Endo on Liberty Mutual's insureds. In particular, Liberty Mutual justified its refusal to pay Endo's facility fees by alleging that Endo and its physician-owners violated the Codey Law's prohibition against self-referrals to a health care service in which a physician has an ownership interest. See N.J.S.A. 45:9-22.5(a).

After the Law Division rendered its March 26, 2008 judgment denying Endo's claim for payment of $363,813 of unpaid facility fees and denying Liberty Mutual's counterclaim seeking reimbursement from Endo of facility fees it had already paid, the Legislature amended the Codey Law. Those amendments, which are to be applied retroactively, see N.J.S.A. 45:9-22.5, would entitle Endo to payment of the disputed facility fees, provided that Endo has obtained the license that is now required by the statutory amendments. We thus order a limited remand to enable the Law Division to make that determination. If the court finds that Endo did, in fact, obtain the required license during the one-year safe harbor period created by the amendments, then the Law Division is directed to enter judgment in favor of Endo in the amount of $363,813. If Endo did not obtain such license, then the Law Division shall issue a ruling on the consequences of such failure. We thus vacate the dismissal of Endo's complaint, and remand for the limited proceeding we have just described.

On Liberty Mutual's cross-appeal, we affirm the Law Division's conclusion that Liberty Mutual was not entitled to an order requiring Endo to reimburse Liberty Mutual for the $171,704 of facility fees Liberty Mutual had already paid.

I.

In January 1995, Endo began operation as an ambulatory surgical center performing out-patient gastrointestinal endoscopy and pain management procedures. Endo's sole owner was Dr. Samiappan Muthusamy, who also maintained a gastroenterology practice known as the Center for Digestive Diseases (CDD). The Endo facility was comprised of an operating room, along with a dedicated recovery area where a patient could be closely monitored and observed until discharged. Muthusamy's medical practice and Endo were both located at 1201 Morris Avenue in Union.

At the time Muthusamy opened Endo, he was the only physician intending to use the Endo Surgi Center. Consequently, the Department of Health (DOH) notified him that he was exempt from the requirement of obtaining a Certificate of Need (CON). When Dr. Muthusamy expanded his practice by hiring a second physician, Peter Carosella, M.D., Muthusamy sought, and obtained, permission from DOH to continue to operate without obtaining a CON.

Over time, the ownership of both CDD and Endo changed. In particular, in 1998, three physicians, who were not associated with Muthusamy's practice at CDD, purchased partial ownership of Endo. Dr. Suresh Jain and Dr. Pradeep Mahal, gastroenterologists, purchased five percent and forty percent interests, respectively. Dr. David Yu, a board-certified anesthesiologist, purchased a two and one-half percent interest. Yu's practice was known as Union County Pain Management, and was located at a different location from Endo, namely at 1308 Morris Avenue in Union.

At Endo, Yu performed epidural nerve blocks and other anesthesiology procedures. He testified at his deposition that when discussing an upcoming procedure with a patient, he routinely advised the patient of his ownership interest in Endo. Yu is the only owner-physician for whom Liberty Mutual has challenged the facility fees charged by Endo.

In 1999 and 2003, Muthusamy expanded his practice at CDD by adding two partners, Dr. Eyad Baghal and Dr. Pavan Sachan. Each of them purchased an eight percent ownership interest in Endo, but both had been performing medical procedures there before they became owners of Endo. Liberty Mutual points to the use of Endo by Baghal and Sachan as a basis for its claim that Endo was required to have obtained a license from DOH.

At the time this action was commenced, Liberty Mutual had been sending its personal injury protection (PIP) insureds to Endo for several years for out-patient pain management procedures. Prior to rendering services on behalf of Liberty Mutual's policyholders, Endo obtained pre-certification approval from Liberty Mutual for each patient's treatment. Among the procedures for which Liberty Mutual granted such pre-certification were the anesthesiology procedures performed by Dr. Yu.

The dispute that led Endo to file its complaint against Liberty Mutual for payment of outstanding facility fees arises from eighty-one anesthesiology procedures performed on Liberty Mutual insureds by Dr. Yu at Endo. Endo's facility fee invoices were issued in the name of "Endo Surgi Center, P.C." and listed Dr. Yu, by name and license number, as the "attending physician." The corresponding bills from Dr. Yu for the medical procedures he performed at Endo were issued in the name of "Union County Pain Management, P.C."

In its complaint, Endo sought payment from Liberty Mutual of $363,813 for unpaid facility fees, plus interest and attorney's fees. Each of the insureds assigned his or her claim for payment to Endo. Liberty Mutual filed an answer denying any obligation to pay the sums demanded in Endo's complaint, asserting that Endo violated the Codey Law's prohibition on self-referrals, see N.J.S.A. 45:9-22.5, by receiving referrals from its owner physicians. In particular, Liberty Mutual alleged that because the Endo facility was not located at Yu's medical office and because patients treated at Endo were not billed by Yu in Yu's name, Endo had violated the Codey Law. Second, Liberty Mutual asserted that because N.J.A.C. 13:35-6.17(h)(5) allows ambulatory care facilities, such as Endo, to charge a facility fee only if such ambulatory care facility is licensed, Endo, an unlicensed facility, was not entitled to charge a facility fee. Liberty Mutual relied on those two provisions as a basis for denying payment of the outstanding bills submitted by Endo, and also as a basis for its counterclaim and third-party complaint seeking reimbursement of $171,704 in facility fees it had previously paid.

After oral argument, the judge issued a written opinion in which he addressed the threshold issue of whether Endo was required to have obtained a facility license from DOH. The judge observed that if a facility license was required, Endo's failure to have obtained such a license would, standing alone, justify Liberty Mutual's refusal to pay Endo's facility fees, without regard to the Codey Law violation Liberty Mutual had also asserted.

The judge concluded Endo was not required to secure a license as a "surgical facility," and therefore Liberty Mutual was not permitted to withhold payment of Endo's facility fees on that basis. He did, however, agree with Liberty Mutual's assertion that Endo had violated the Codey Law's ban on self-referrals because Yu had referred his patients to Endo while having a financial interest in the facility, and Yu's self-referral did not qualify for any exception to the Codey Law's provisions. The judge accordingly rejected Endo's claim for payment of facility fees in the amount of $363,813 and granted partial summary judgment to Liberty Mutual.

On Liberty Mutual's counterclaim, the judge concluded that plaintiff's billing practices did not violate a provision of the Insurance Fraud Prevention Act (IFPA), N.J.S.A. 17:33A-4(a)(1), because there was no evidence demonstrating that Endo was aware that its billing practices violated the Codey Law, or that it had submitted facility fee invoices to Liberty Mutual while knowing it was not entitled to receive payment. The court held that in the absence of an IFPA violation, Liberty Mutual had "provided this court with no basis at law to order disgorgement." Thus, the judge dismissed Liberty Mutual's counterclaim against Endo and its third-party complaint against Muthusamy, Mahal, Jain, Yu, Baghal and Sachan, and granted partial summary judgment to Endo. Both sides appealed.

On appeal, Endo argues: 1) the trial judge erred by applying the Codey Law's prohibition on self-referrals to Endo which is a facility, even though by its terms, the Codey Law applies only to practitioners, and not to facilities; 2) because the Codey Law places sole responsibility for enforcement of the Codey Law with the Attorney General, and because the Codey Law did not establish a private cause of action, such as the one maintained here by Liberty Mutual, the judge erred when he concluded that a violation of the Codey Law disqualifies a surgical facility from obtaining payment of its facility fees from an insurer; 3) the judge's conclusion that Endo had violated the Codey Law impermissibly ignored two prior letter opinions issued to other surgical practices by the Board of Medical Examiners (BME) that held to the contrary; and 4) even if the practices of Endo constituted a Codey Law violation, there is no support for the judge's conclusion that such violation entitles an insurer to deny payment of claims that are otherwise proper. Endo did, however, agree with Judge Anzaldi's conclusion that because Endo qualified as a "surgical practice," as defined by N.J.A.C. 8:43A-1.3, it was not required to obtain the license that is required for a "surgical facility."

In its cross-appeal, Liberty Mutual argues the judge erred in ruling that: 1) Endo did not require a facility license under N.J.A.C. 8:43A-1.3; and 2) Liberty Mutual had not established a violation of the IFPA and was therefore not entitled to recoup facility fees previously paid to Endo.

This appeal arises from orders granting and denying motions for summary judgment. Consequently, we apply the Brill standard, which requires us to review the record to determine whether there are material factual disputes and, if not, whether the undisputed facts viewed in the light most favorable to the party opposing the motion nonetheless entitle the moving party to judgment as a matter of law. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). Because there are no disputed issues of fact, we review the trial court's determination of these summary judgment motions de novo, applying the same legal standards the trial judge applied. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998).

II.

We turn first to the portion of Liberty Mutual's cross-appeal that presents the threshold issue of whether the judge erred when he concluded that Endo was not obligated to obtain a facility license. Relying on N.J.A.C. 13:35-6.17(h)(5), Liberty Mutual maintains that if a facility qualifies as a "surgical facility," as defined in N.J.A.C. 8:43A-1.3, it is not entitled to charge a facility fee unless it has obtained a license from DOH. Endo agrees with Liberty Mutual that N.J.A.C. 13:35-6.17(h)(5) requires a "surgical facility" to obtain a license from DOH before it may bill for facility fees; however, Endo maintains that it is not a "surgical facility," and therefore was not required to obtain a facility license.

In reaching the conclusion that Endo was not required to obtain a license as a "surgical facility," the judge relied upon the definition of "surgical facility" contained in N.J.A.C. 8:43A-1.3. The regulation defines that term as follows:

1. One or more rooms dedicated for use as operating rooms, which are specifically equipped for the performance of surgery, designed and constructed to accommodate invasive diagnostic and surgical procedures;

2. One or more postanesthesia care units or a dedicated recovery area where the patient may be closely monitored and observed until discharged; and

3. Is not a surgical practice.

[N.J.A.C. 8:43A-1.3 (emphasis added).]

Thus, as is evident from N.J.A.C. 8:43A-1.3, a facility will be exempt from the licensure requirements applicable to a "surgical facility" if the facility satisfies the definition of a "surgical practice." N.J.A.C. 8:43A-1.3 defines a "surgical practice" as having three elements, the first two of which are identical to the first two elements of the definition of "surgical facility." However, the third element of the definition of a "surgical practice," which is the element that is in dispute here, provides as follows:

3. Established by a physician or physician professional association surgical practice solely for his/her/their private medical practice.

[N.J.A.C. 8:43A-1.3 (emphasis added).]

Thus, if non-owner or non-employee physicians make use of the ambulatory surgical facility, a license is required.

Liberty Mutual argues that two of the physicians performing surgery at the center, Dr. Baghal and Dr. Sachan, who were part-owners of Muthusamy's medical practice, CDD, performed surgery at Endo before they acquired an ownership interest in Endo.

In support of its argument that licensure is required, Liberty Mutual relies upon our decision in Seashore Ambulatory Surgery Center, Inc. v. New Jersey Department of Health, 288 N.J. Super. 87 (App. Div. 1996). In Seashore, an anesthesiologist, Dr. Morris Antebi, operated an ambulatory surgery center known as Seashore Ambulatory Surgery Center, Inc. Id. at 89. Antebi also maintained an anesthesiology practice through a professional association, Pain Specialists, P.A., of which he was the sole owner. Id. at 89-90. DOH determined, under the then-existing regulations governing surgical facilities, N.J.A.C. 8:33S-1.1 to -1.7, that Antebi's practice could use the surgery center without obtaining a CON so long as Antebi's office used only one operating room and limited use of that operating room "to physicians who are associates or employees of Dr. Antebi's professional association until a CON is obtained." Id. at 90.

We held that DOH did not err in concluding that the surgical center would no longer be exempt from the requirement of obtaining a CON if physicians not affiliated with Antebi's medical practice were permitted to use the operating room. Id. at 100. We reasoned that:

[B]oth the statutory and regulatory language amply support the Assistant Commissioner's determination that the CON exemption does not extend to a situation where a physician invites other physicians outside his professional association to perform surgical procedures in his operating room, regardless of his participation in the procedures.

Were Dr. Antebi, an anesthesiologist, permitted to invite outside surgeons to use his facility as he proposes, the facility would no longer be used for services provided by him in his private practice. The services provided would be those of outside surgeons performed on their patients, in Dr. Antebi's operating room. The patients and surgical procedures would necessarily be determined by the private practices of unassociated surgeons and, therefore, it could no longer be said that the practice is limited to [Dr. Antebi's] . . . private practice.

[Id. at 100-01 (internal quotations omitted) (second emphasis added).]

We reject Liberty Mutual's contention that Seashore stands for the proposition that only the owners of an unlicensed ambulatory surgery center are permitted to use such facility. Seashore merely held that "physicians outside [the] professional association" were prohibited from performing procedures at an unlicensed center. Id. at 100. An employee of a professional medical association cannot, under any reasonable interpretation, be deemed to be "outside" such association or medical practice group.

This distinction makes sense given the language of N.J.S.A. 26:2H-2 when read in conjunction with N.J.S.A. 26:2H-7(a). The latter statute requires any "health care service," as that term is defined in N.J.S.A. 26:2H-2, to obtain a CON. N.J.S.A. 26:2H-7(a). However, N.J.S.A. 26:2H-2(b) specifically exempts from its definition of "health care service" -- for which N.J.S.A. 26:2H-7(a) would require a CON -- the "services provided by a physician in his private practice . . . ." Thus, other physicians who are part of the professional association that uses the surgical facility would not violate the requirement that it only be used for the physician's private medical practice, as those physicians are involved in the private medical practice in question.

Here, Drs. Baghal and Sachan were employees of Muthusamy's professional association when they performed procedures at Endo. They were certainly not the "unassociated surgeons" whose presence required a CON in Seashore, supra, 288 N.J. Super. at 101. Thus, the medical services rendered by Baghal and Sachan at Endo, before they became owners of Endo, satisfy the requirement of N.J.A.C. 8:43A-1.3 that the services rendered in a "surgical practice" be provided "solely for his/her/their private medical practice." We agree with the judge's conclusion that the physicians in question, who were members of Muthusamy's medical group, but were not yet owners of Endo, were entitled to perform surgery at Endo without subjecting Endo to the requirement of obtaining a facility license because they were, as the judge found, "part of the same professional association and the [Endo] facility was used for the private practice of medicine, obviating the need for a license." We thus reject the claim Liberty Mutual advances in this portion of its cross-appeal.

III.

We turn next to Endo's appeal, in which it argues that the judge erred when he concluded that the Codey Law applied to Endo and that Endo had violated it. Endo maintains that the Codey Law applies only to "practitioners" and thus the statute's provisions cannot be applied to a "facility" such as Endo. Endo also maintains that the Codey Law does not establish a private cause of action, and that any violations are to be addressed solely in an action maintained by the Attorney General, see N.J.S.A. 45:9-22.8 and 45:1-25. Endo therefore argues that the judge erred when he essentially permitted Liberty Mutual to act in the stead of the Attorney General and thereby obtain a private benefit, namely, avoiding the obligation to pay facility fees that were, in all other respects, proper.

We need not address these contentions, as we are satisfied that the retroactive amendments to the Codey Law, which became effective on March 1, 2010, would require Liberty Mutual to pay the disputed facility fees so long as Endo satisfies all of the conditions of the retroactive amendments. At the time Judge Anzaldi rendered his decision, a practitioner violated the Codey Law if he referred a patient to a facility in which he had a financial interest, unless the facility was located at the same premises where the physician maintained his medical practice, and both invoices bore the same physician name or medical practice name. See N.J.S.A. 45:9-22.5(c) (as existing prior to the amendments contained in L. 2009, c. 24). Because Yu's medical office was located at a different location from the premises where Endo was situated, the judge concluded that Yu's referral of his patients to Endo, of which he was a part owner, did not qualify for the N.J.S.A. 45:9-22.5(c) exception to the Codey Law's ban on self-referrals.

The retroactive amendments to N.J.S.A. 45:9-22.5 eliminate the same-premises requirement that was in effect at the time Judge Anzaldi rendered his order and decision. Thus, so long as Endo satisfies the four conditions contained in the amendments, Endo would be deemed retroactively compliant with N.J.S.A. 45:9-22.5(c), and would be entitled to payment of the disputed $363,813. However, before discussing the recent amendments any further, we shall briefly describe the goals of the Codey Law when it was enacted in 1989.

Originally enacted in 1989, the Codey Law, N.J.S.A. 45:9-22.4 to -22.9, was designed to prevent physicians from referring patients to a health care facility in which the physician or the physician's immediate family had a significant financial interest. In his Reconsideration and Recommendation Statement to L. 1989, c. 19, codified at N.J.S.A. 45:9-22.4, Governor Kean explained that:

Physicians and other health care providers are becoming increasingly diversified in the health care field by acquiring financial interests in a broader spectrum of health care services. Many practitioners are thus placed in a position in which they routinely refer patients to related health care services in which they share a financial interest. While this phenomenon may have benefits in terms of efficiency and convenience for both the practitioner and the patient, I want to insure that the referral of patients to specific health care services continues to be based on purely medical considerations and that the decision not be influenced, or appear to be influenced, by any financial gain that may accrue from the referral. This legislation will assure that patients are properly advised of any apparent conflicts.

In its original form in 1989, N.J.S.A. 45:9-22.5(a) provided that:

A practitioner shall not refer a patient or direct an employee of the practitioner to refer a patient to a health care service in which the practitioner, or the practitioner's immediate family, or the practitioner in combination with practitioner's immediate family has a significant beneficial interest . . . .

[N.J.S.A. 45:9-22.5(a).]

However, the statute's ban on self-referrals contained an exception for "a health care service that is provided at the practitioner's medical office and for which the patient is billed directly by the practitioner . . . ." N.J.S.A. 45:9-22.5(c)(1) (as existing prior to the amendments contained in L. 2009, c. 24). Yu's use of the Endo facility, as we have noted, did not qualify for that exception because his office was located elsewhere, and the Endo facility fee invoices were not issued in Yu's name.

The March 21, 2009 amendments, which became effective on March 1, 2010, see P.L. 2009, c. 24, dramatically changed the landscape by broadening the scope of permissible self-referral of patients. The amendments permit a physician to refer patients to an ambulatory surgical center in which the physician has a financial interest, under certain conditions:

c. The restrictions on referral of patients established in this section shall not apply to:
. . . .

 
(3) ambulatory surgery or procedures requiring anesthesia performed at a surgical practice registered with the Department of Health and Senior Services pursuant to subsection g. of section 12 of P.L. 1971, c. 136 (C. 26:2H-12) or at an ambulatory care facility licensed by the Department of Health and Senior Services to perform surgical and related services, if the following conditions are met:
(a) the practitioner who provided the referral personally performs the procedure;
 
(b) the practitioner's remuneration as an owner of or investor in the practice or facility is directly proportional to his ownership interest and not to the volume of patients the practitioner refers to the practice or facility;
 
(c) all clinically-related decisions at a facility owned in part by non-practitioners are made by practitioners and are in the best interests of the patient; and
 
(d) disclosure of the referring practitioner's significant beneficial interest in the practice or facility is made to the patient in writing, at or prior to the time that the referral is made, consistent with the provisions of section 3 of P.L. 1989, c. 19 (C. 45:9-22.6).

[L. 2009, c. 24 (N.J.S.A. 45:9-22.5).]

This amendment to the Codey Law applies retroactively in certain instances:

a. A referral for ambulatory surgery or a procedure requiring anesthesia made prior to the effective date [March 21, 2009] of this section of P.L. 2009, c. 24 by a practitioner to a surgical practice or ambulatory care facility licensed by the Department of Health and Senior Services to perform surgical and related services shall be deemed to comply with the provisions of section 2 of P.L. 1989, c. 19 (C. 45:9-22.5) if the practitioner personally performed the procedure that is the subject of the referral.
 
b. As used in this section, "surgical practice" means a structure or suite of rooms that has the following characteristics:
 
(1) has no more than one room dedicated for use as an operating room which is specifically equipped to perform surgery, and is designed and constructed to accommodate invasive diagnostic and surgical procedures;
 
(2) has one or more post-anesthesia care units or a dedicated recovery area where the patient may be closely monitored and observed until discharged; and
 
(3) is established by a physician, physician professional association surgical practice, or other professional practice form specified by the State Board of Medical Examiners pursuant to N.J.A.C. 13:35-6.16(f) solely for the physician's, association's or other professional entity's private medical practice.
 
"Surgical practice" includes an unlicensed entity that is certified by the Centers for Medicare and Medicaid Services as an ambulatory surgery center provider.

[N.J.S.A. 45:9-22.5a (emphasis added).]

Thus, pursuant to N.J.S.A. 45:9-22.5 of the amended Codey Law, a restriction on self-referrals of patients to an ambulatory surgical center in which the referring physician has an interest shall be deemed to comply with the amended Codey Law so long as: the ambulatory surgery center is licensed; the practitioner who made the referral personally performed the procedure; the practitioner's renumeration as an owner in the facility is directly proportional to his ownership interest and not to the volume of patients referred; all clinically-related decisions at the facility are made by practitioners; and disclosure of the referring practitioner's significant beneficial interest is made to the patient in writing. These amendments were made retroactive in N.J.S.A. 45:9-22.5a(a).

The amendments, which were enacted on March 21, 2009, did not take effect until March 1, 2010. Thus, pursuant to the retroactivity portion of the statute, any ambulatory surgical center that did not possess a facility license on March 21, 2009 was afforded a one-year safe harbor period, until March 1, 2010, to secure a facility license from the Department of Health and Senior Services (DHSS).

Thus, the location of Yu's medical office at a different location from the Endo premises no longer disqualifies Endo from receiving payment of a facility fee for ambulatory surgical procedures Yu performed there. At appellate oral argument Liberty Mutual implicitly conceded that the 2009 amendments, if applied retroactively to Yu, would require payment by Liberty Mutual of the disputed $363,813. Liberty Mutual argued before us that we should not permit the amendments to be applied retroactively because any such retroactive application would 1) be violative of its due process rights, and 2) create a manifest injustice.

In support of that argument, Liberty Mutual relies upon Nobrega v. Edison Glen Associates, 167 N.J. 520 (2001), in which the Court considered the retroactivity provisions of the New Residential Real Estate Off-Site Conditions Disclosure Act, N.J.S.A. 46:3C-1 to -12, id. at 526, against a claim by the affected plaintiffs that such retroactivity would result in "an unconstitutional interference with vested rights," see Phillips v. Curiale, 128 N.J. 608, 617 (1992) (internal quotations omitted), or would create a "manifest injustice," see State Troopers Fraternal Ass'n of N.J. v. State, 149 N.J. 38, 55 (1997).

Observing that it had long "favor[ed] interpretation of statutes that afford prospective relief only," Nobrega, supra, 167 N.J. at 536, (citing Gibbons v. Gibbons, 86 N.J. 515, 521 (1981)), the Court in Nobrega nonetheless recognized its obligation to honor an "'unequivocal expression of contrary legislative intent.'" Ibid. (quoting Dewey v. R.J. Reynolds Tobacco Co., 121 N.J. 69, 95 (1990)). The Court noted, however, that its obligation to do so was limited to those instances where the concerns identified in Phillips and State Troopers are not presented. Id. at 537.

Turning to the due process/vested rights doctrine, the Court observed that a "vested right" constitutional violation will be found "'only under the most egregious of circumstances,'" id. at 545 (quoting E. Enters. v. Apfel, 524 U.S. 498, 550, 118 S. Ct. 2131, 2159, 141 L. Ed. 2d 451, 488 (1998) (Kennedy, J., concurring)), and that a mere claim to the right to the continued existence of a present law or statute is an insufficient basis for such a violation, id. at 540 (citing Levin v. Twp. of Livingston, 62 N.J. Super. 395, 404 (Law Div. 1960) (observing that "mere expectation as may be based upon an anticipated continuance of the present general laws" does not constitute "a vested right"), aff'd in part, rev'd in part, 35 N.J. 500 (1961)). So viewed, Liberty Mutual's claim of a violation of a "vested right" must fail, as it is based on nothing more than a claimed right to the continued existence of the 1989 version of the statute, which the Court in Nobrega held is insufficient to establish a due process violation. Ibid.

As to Liberty Mutual's claim of a "manifest injustice," the Court observed in Nobrega that the "manifest injustice" test "'does not flow from constitutional requirements, but instead is based on equitable concerns.'" Id. at 545 (quoting Edgewater Inv. Assocs. v. Borough of Edgewater, 103 N.J. 227, 239 (1986)). The Court defined the scope of the "manifest injustice" inquiry in the following terms:

The essence of this inquiry is whether the affected party relied, to his or her prejudice, on the law that is now to be changed as a result of the retroactive application of the statute, and whether the consequences of this reliance are so deleterious and irrevocable that it would be unfair to apply the statute retroactively.

[Id. at 546 (quoting Gibbons v. Gibbons, 86 N.J. 515, 523-24 (1981).]

Here, it is evident that Liberty Mutual has not relied to its detriment on the continued existence of the pre-amendment version of the Codey Law. Liberty Mutual has abandoned no otherwise settled right, nor has it changed any previous position, in reliance on the original version of the Codey Law remaining in effect. Thus, Liberty Mutual would suffer no "manifest injustice" if the 2009 amendments are applied retroactively. We thus reject the Nobrega claims Liberty Mutual has asserted, and conclude that there is no impediment, constitutional or otherwise, to the retroactive application of the 2009 amendments to N.J.S.A. 45:9-22.5(c).

Having rejected Liberty Mutual's claim that retroactive application of the Codey Law amendments to the present dispute would violate its due process rights and create a manifest injustice, we turn to a determination of how the amendments affect the order under review. As we have discussed, Yu's office being situated at a different location from the Endo facility no longer disqualifies Endo from receiving payment for any use of its facility by Yu. That particular portion of the Codey Law was eliminated when the 2009 amendments took effect. Under the present, and retroactive, amendments to the Codey Law, Endo is entitled to payment of its $363,813 facility fees provided that: "the practitioner who provided the referral personally performs the procedure," N.J.S.A. 45:9-22.5(c)(3)(a), which condition is satisfied because Yu provided the referral and performed the procedures in question; "remuneration as an owner or investor in the . . . facility is directly proportional to his ownership interest and not to the volume of patients the practitioner refers to the practice or facility," N.J.S.A. 45:9-22.5(c)(3)(b), a provision which Liberty Mutual did not challenge before us; the "clinically-related decisions at a facility owned in part by non-practitioners are made by practitioners and are in the best interests of the patient," N.J.S.A. 45:9-22.5(c)(3)(c), which Liberty Mutual also did not dispute; and "disclosure of the referring practitioner's significant beneficial interest in the . . . facility is made to the patient in writing," N.J.S.A. 45:9-22.5(c)(3)(d), which Liberty Mutual did not dispute.

Thus, the only section of the amendments that became effective on March 1, 2010 potentially in dispute is the requirement that the ambulatory care facility in question be licensed by DHSS to perform surgical services. At appellate oral argument, counsel for Endo informed us that he had not questioned his client as to whether such license had been obtained in the one-year safe harbor period created by the amendments to the Codey Law. Thus, the obtaining of the license is the only factor that could conceivably disqualify Endo from receiving the benefit of the amendments. We thus vacate the dismissal of Endo's complaint and order a limited remand for the sole purpose of determining whether, prior to March 1, 2010, Endo obtained the license required by N.J.S.A. 45:9-22.5(c)(3). If, during the remand, the judge determines that Endo obtained the required license prior to March 1, 2010, the judge shall enter judgment in Endo's behalf requiring the payment of the disputed $363,813 in facility fees. If Endo did not obtain the required license prior to March 1, 2010, the judge shall determine the legal effect of any such failure to obtain the required license.

IV.

Last, we turn to the remaining portion of Liberty Mutual's cross-appeal, in which it asserts the judge erred when he dismissed its counterclaim and third-party complaint seeking return of facility fees already paid to Endo. Liberty Mutual's counterclaim and third-party complaint are based upon Liberty Mutual's claim that Endo violated the IFPA.

Reasoning that a "[v]iolation of the Codey Law does not automatically amount to a violation of the IFPA," the judge found that there was no evidence that plaintiff attempted to hide its structure from Liberty Mutual. The judge held that Endo reasonably believed it was in compliance with the Codey Law and there was no evidence to demonstrate that Endo knowingly failed to disclose its ownership structure or knowingly benefited from billing for facility fees under a different name than the name of the referring physician. The court thus found that Liberty Mutual could not maintain a cause of action under the IFPA, and granted summary judgment to Endo on Liberty Mutual's counterclaim.

The IFPA is violated whenever a person or practitioner:

[p]resents or causes to be presented any written or oral statement as part of, or in support of or opposition to, a claim for payment or other benefit pursuant to an insurance policy . . . , knowing that the statement contains any false or misleading information concerning any fact or thing material to the claim[.]

[N.J.S.A. 17:33A-4(a)(1).]

Liberty Mutual relies on Allstate Insurance Co. v. Orthopedic Evaluations, Inc., 300 N.J. Super. 510 (App. Div.) certif. granted, 151 N.J. 67 (1997) (directing this court to address an argument on remand) as support for its contention that it is entitled to recoup all sums paid to a provider that violated a statute. Liberty Mutual overreads our decision in Allstate. We held in Allstate that an entity providing medical diagnostic services, and which had "place[d] the public at risk" by violating a BME regulation that required such diagnostic facilities to be "owned and under the responsibility" of a licensed physician, did not qualify for PIP reimbursement. Id. at 517.

Nothing in Allstate entitles an insurer to recoup payments already made. Nor do we discern from our decision in Allstate any intent to so require. In the absence of an IFPA violation, we agree with the judge's conclusion that Liberty Mutual has provided "no basis at law to order disgorgement." We therefore reject the arguments raised in Liberty Mutual's cross-appeal.

V.

 
On Endo's appeal, vacated and remanded. On Liberty Mutual's cross-appeal, affirmed.

A CON is a pre-condition for the operation of a "health care facility" or a "health care service." N.J.S.A. 26:2H-2(a), (b).

PIP is the portion of an automobile insurance policy that affords an insured up to $250,000 in medical benefits as part of the premium paid for the purchase of the policy. N.J.S.A. 39:6A-2, -4 and -5.

N.J.A.C. 13:35-6.17(h)(5) provides:

A licensee 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 licensee 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.

The legislation is named for its sponsor, Senator Richard Codey.

A "significant beneficial interest" was defined as "any financial interest" other than as a lessor of a building. N.J.S.A. 45:9-22.4.

Subsequent to the enactment of the original legislation in 1989, the name of the Department of Health was changed to the Department of Health and Senior Services.

(continued)

(continued)

29

A-4611-07T3

 

August 17, 2010