Private Payer

New Jersey Supreme Court case could expose physicians to large fines

Physicians are in a constant state of education to keep their skills and knowledge at the forefront so that their patients get the best care possible. But sometimes unintentional missteps on the business side of medicine can have serious ramifications for both physicians and their patients. A case before a state supreme court could put physicians in danger of exposure to large fines based on a legal technicality.

Inadvertent mistakes, sizeable consequences

At stake in Allstate Insurance Co. v. Northfield Medical Center, currently before the Supreme Court of New Jersey, is whether liability under the New Jersey Insurance Fraud Prevention Act (IFPA) can be based on what the medical group or practice should have known, as opposed to what they actually knew.

The IFPA is designed to protect against fraud in a way similar to the federal Stark Law and False Claims Act, which may subject physicians to large penalties for referring patients to health care facilities with which they have certain financial relationships.

“The detection and prevention of insurance fraud must be a two-way street,” the Litigation Center of the AMA and State Medical Societies said in an amicus brief (log in). “With the considerable latitude that has been afforded to insurance carriers in rooting out the reprehensible conduct of a select few, comes an equally great responsibility to demonstrate restraint as it relates to the vast majority of health professionals who strive on a daily basis to meet the need of their patients.”

The cause for concern in this case is not to challenge the Stark Law or the IFPA, but rather to encourage a narrow interpretation of complex and changing regulations to prevent medical professionals from being exposed to large unnecessary fines when they have not deliberately violated those regulations.

Northfield Medical Center, the health care group in question, thought it was in compliance with state regulations concerning the corporate practice of medicine. But because regulations are in a constant state of change—a position many physicians could find themselves dealing with—they suddenly found they were on the wrong side of the fence.

“There is no argument to support deliberate fraud,” the Litigation Center brief said, supporting a narrow reading of the IFPA. “But there is a [difference] between deliberate fraud and mistake. An appropriate standard and definition of ‘knowing’ prevents that [difference] from becoming a slippery slope that punishes health care practitioners who reasonably believe that they are in conformance with their professional ethical obligations and with state law.”