Currently, New Jersey restricts the ownership of medical practices to physicians and allied health care providers; unlicensed persons may not own any part of a medical practice. These types of restrictions are commonly known as the “corporate practice of medicine” doctrine (CPOM). In states that have CPOM, a common and well-established way for non-physicians to work with medical practices is using a management services organization (MSO). MSOs are general business entities that specialize in providing the majority of business services to medical practices. These services can include accounting, payroll, HR, managing inventory, placing advertising, and other administrative functions. S 4844 would also place additional restrictions on how the owners and employees of an MSO may interact with the medical practice.

Under S 4844, nonprofessional entities may not directly or indirectly exercise control over the professional clinical judgment of a licensed physician, dentist, or professional practice. Licensed physicians or dentists must retain ultimate authority over elements such as diagnosis, treatment, medical necessity, diagnostic testing, referrals, clinical decisions, clinical competency determinations, hiring and firing of licensed employees, clinical staffing, patient volume and patient evaluation times, procedure coding, medical records content, and the selection of medications and devices. Provided the professional practice retains the ultimate authority, nonprofessional entities could still provide nonclinical business and administrative functions such as accounting and bookkeeping, payroll and employee-benefit administration, nonclinical human resources, information technology and cybersecurity, facilities and real estate, nonclinical procurement, equipment administration, marketing and lawful advertising, billing administration, revenue-cycle management, coding support, budgeting, financial planning and analysis, strategic planning, compliance infrastructure, data analytics, payer-contract analysis and negotiation support, value-based-care infrastructure, scheduling administration.

S 4844 also prohibits any contracts or agreements that give nonprofessional entities the authority to make decisions on any of the elements listed above. And rather than being grandfathered, existing provisions would also be declared unenforceable, beginning 12 months following the effective date of the bill.

Professional practices must give notice to the Attorney General and Commissioner of Health prior to entering a material transaction with a nonprofessional entity. This notice must be given at least 60 days before and must be posted on the practice’s website. The Attorney General and Commissioner of Health are not required to review or approve the transaction unless it violates a provision of the law. In this case, material transactions are those that have a value of 1) $25 million or more, 2) if the parties have combined revenue of $25 million or more, or 3) a transaction or series of transactions that results in the ownership or control of a professional practice involving 10 or more NJ licensed physicians or dentists. These notice requirements don’t apply to a number of situations such as internal reorganizations, the starting of a professional practice or changes in a practice due to death or retirement of a practitioner.

Many states, including Rhode Island, Washington, Vermont, Oregon and California, either had bills or passed laws regarding the scope of MSO practices. Often with these types of bills the restrictions can make it difficult or impossible for compliant MSOs to function effectively. This in turn can shift the administrative, compliance, and business burdens back onto the medical practice. If you would like additional information, to read the language of the bill or to contact the sponsors or committee, you can find the information you need through this link: S 4844.