HEALTH
LAW REPORT
A Newsletter from the Health Care Law Practice Group
www.flastergreenberg.com
Editor’s Note…
Alma L. Saravia
This new issue of the Health Law
Report is dedicated to the State’s 21,000
licensed physicians — physicians who are
calming our fears and treating patients
concerned about exposure to biological
terrorism. Once again, physicians are
responding to an unforeseen medical crisis
with skill and compassion. Yet, as critical
as their care is to the patients’ well-being,
physicians are hindered in their ability to
practice medicine by restrictions placed
upon them by third parties.
This edition of the Report highlights
legislation that would allow physicians
and dentists to engage in joint negotiations
with managed care entities thereby granting
them more power in the market place.
Also read the update on why a
compliance plan is something every
medical practice must implement.
A summary is included on legislation
moving rapidly through the New Jersey
Legislature that will expand the authority
of the New Jersey State Board of Medical
Examiners (B.M.E.). The legislation will
also mandate that physicians be required
to take continuing medical education
courses in order to be a licensee in good
standing with the B.M.E. Finally, we
update you on the new Estate Law’s
implications.
Flaster/Greenberg continues to
lead the way in representing physicians
and other health care companies by
providing cutting edge information on
developments at the state and national
level. Please visit our web site or call any
one of the members of the Health Law
Practice Group if you have a question
about our services.
Copyright © 2001
LEGISLATIVE ALERT
Action Vital to Post Joint Negotiation
Legislation on Assembly Board List
By Alma L. Saravia
T
hrough the efforts of the State’s
physician community, including the
New Jersey Association of
Osteopathic Physicians and Surgeons and
the Medical Society of New Jersey, New
Jersey is positioned to be the second state
in the nation to enact joint negotiation
legislation. This important legislation,
SCS-1033/1098, passed the Senate, and
its companion bill ACS/2169/2241/464,
sponsored by Assemblymen Chatzidakis,
Asselta, Doria, Conaway and Connors was
released from the Assembly Health
Committee.
The legislation would create an
antitrust exemption, through state action
immunity, to allow physicians and dentists
to negotiate over fee and non-fee based
matters with managed care entities. In this
managed care environment, the ability to
negotiate with a managed care entity will
benefit patients. This legislation allows
physicians and dentists to jointly negotiate
with insurance carriers and managed care
entities over contractual terms and
conditions. Physicians need to be permitted
to negotiate about such important matters
as access to health care for their patients.
In This Issue…
Action Vital to Post Joint
Negotiation Legislation on
Assembly Board List ................1
Compliance Plans Protect
Against More Than
Just Audits ..............................2
Health Law Report • Flaster/Greenberg P.C.
Fall 2001
Physicians’ efforts are critical to the
passage of this bill and in securing the
posting of the joint negotiation bill
(which is part of Acting Governor
DiFrancesco’s 24 bill health care package)
on the Assembly Board list.
You may call or write to your local
Assemblyman (to find out, for example,
see NJAOPS web site at ww.njosteo.com),
or call or write the Speaker to have this
bill posted on the Assembly board list.
The Honorable Jack Collins
63 East Avenue, Suite C
Woodstown, NJ 08098-1499
Phone: 856-769-3633
Fax: 856-769-0049
Texas is the first state in the nation to
allow physicians to engage in joint negoti-
ations and a group of physicians have just
been certified by the State Attorney
General’s office to engage in negotiations
with one of the large managed care
organizations. While the managed care
organizations are not obligated to negotiate
under these bills, physicians look forward to
the managed care entities’ agreement to
discuss issues of concern to patients and the
health care delivery system.
Pending Legislation Would
Grant B.M.E. Sweeping
New Authority to Regulate
Physicians ................................2
New Estate Tax Law
Holds Surprises ........................3
 2

Compliance Plans Protect Against alleged activities, and the practice

prevailed in enforcing the restrictive
covenant.
More Than Just Audits By Stephen M. Greenberg Similarly, a compliance plan recently
rticles and his Employment Agreement by going helped a practice defend against a former

A information
about corpo-
rate compliance
plans seem to be
everywhere in the
health care arena
these days. This
Stephen M. Greenberg
publication is no
exception: past issues have addressed
the importance of putting a compliance
plan in place in your practice. (See
“Corporate Compliance Programs
Provide Best Defense Against Federal
False Claims Actions” Issue No. 1,
Summer 2000; “Office of the Inspector
General Mandates Corporate Compliance
Programs for All Physicians” Issue No.
2, Winter 2001.) Aside from avoiding
or defending an action by the Office of
the Inspector General or the Justice
Department, a compliance plan can
provide very real benefits where you
might least expect them, as evidenced
by the following two examples.
In one instance, an employed (i.e.,
non-owner) physician left a practice
and breached the restrictive covenant in
to work for a competing practice in the employee’s improper unemployment
same town. The practice sued its former compensation claim. The former
employee for violating his restrictive employee alleged that she was forced to
covenant. In his quit her job due to
defense, the physician fraudulent activities of
claimed that he was the practice, which, if
forced to quit because …a compliance true, would have
of billing fraud com- entitled her to
mitted by his former
plan is important for unemployment benefits.
employer, which, in all physician practices, The provisions of the
effect, invalidated his practice’s compliance
Employment regardless of size… plan and her attendance
Agreement and hence, at training sessions,
the restrictive covenant. with documentation
The practice was able to rely on the to that effect, provided
billing compliance plan it had adopted the practice with an effective defense
to refute the claims of its former against her claims.
employee. The compliance plan stated These examples demonstrate that a
that all employees were under an affir- compliance plan is important for all
mative duty to report any suspected physician practices, regardless of size,
fraud issues. Moreover, the physician for a variety of reasons. If you are
had signed a statement attesting to the interested in exploring the possibilities
fact that he understood this duty and for your practice, please give us a call.
related plan provisions. The fact that he We can design a compliance plan
had failed to report the fraud while he tailored to your practice and its individ-
was employed invalidated his argument ual needs and assist you in all stages of
that he had to quit because of the its implementation.

Pending Legislation Would Grant B.M.E.

Sweeping New Authority to Regulate Physicians
By Alma L. Saravia
omprehensive new legislation, The bill, as amended in the Senate Committee, provides

C A-2567/S-1408, concerning the

ability of professional licensing boards
to protect the public and that will mandate
continuing medical education for physicians,
is moving quickly toward enactment into
law. The bill (A-2567/S-1408), sponsored
by Senator Robert Martin and Assembly-
Alma L. Saravia
woman Charlotte Vandervalk, has already
passed the Senate and Assembly, and is now on the Governor’s
desk. It could be law by the end of the year. Physicians must
be aware of these comprehensive new changes that will
substantially impact on the practice of medicine. If you have
concerns about the bill, you may call Speaker Collins’ office
at the phone number on page one of this report.
the Division of Consumer Affairs and the New Jersey State
Board of Medical Examiners (“B.M.E.”) with sweeping new
powers to regulate physicians and other licensees as follows:
1. New authority to inspect premises;
2. New authority to inspect records without the consent of
the person (physician);
3. Require the licensee to submit to an assessment of skills
to determine if he or she can continue practicing with
skill and safety;
4. Allow a licensee to be ordered into medical or diagnostic
testing or psychological evaluation;
5. Order an assessment of the licensee’s skills and mandate
the completion of educational training;

Health Law Report • Flaster/Greenberg P.C.

 3
6. Order the licensee to submit to supervision, monitoring
or a limitation;
7. If the licensee has not practiced in any jurisdiction for
five years, the B.M.E. may require the licensee to pass an
assessment examination;
8. Create the position of a full-time educational director for
the B.M.E.;
9. Allow the B.M.E. to refer the licensee to a focused
education program;
10. A Resident (permit holder) may only be permitted to
engage in practice outside of the residency if the director
of graduate medical education permits it;
11. Create a five-member advisory committee consisting of
the MSNJ and NJAOPS and others to advise the B.M.E.
on its responsibilities under this Act; and
12. Mandate continuing medical education (100 credits
biennially) as a condition of licensure and renewal.

assure that larger than intended

New Estate Tax Law Holds Surprises distributions do not pass to
grandchildren.
By Laura B. Wallenstein • When (and if) the estate tax is
repealed in 2010, carryover basis will
s you are aware, for a surviving spouse as a result

A a new tax law

recently has
been enacted, which
will have a present
and future impact
upon estate plans.
Some of the major
Laura B. Wallenstein aspects to consider
in determining how
this might impact upon you and your
estate plan are as follows:
• The estate tax is not repealed until
2010. Moreover, unless the repeal
of the law is itself extended by NEW
legislation beyond 2010, the estate
tax laws (as they exist today) will be
automatically reinstated.
• The Applicable Exclusion Amount
increases to $1,000,000 in 2002
and 2003, to $1,500,000 in 2004
and 2005, to $2,000,000 in 2006-
2008 and to $3,500,000 in 2009,
and the top estate tax rate drops to
50% in 2002, 49% in 2003, 48% in
2004, 47% in 2005, 46% in 2006,
45% in 2007-2009, with repeal
scheduled for 2010.
✦ Tax planned Wills are therefore
still necessary for couples whose
combined estates exceed the
applicable exclusion amount in
any given year.
✦ Some estate plans may create
larger than intended distributions
to children or other beneficiaries
as a result of the increases in the
Applicable Exclusion Amount.
✦ Some estate plans may create
larger than intended distributions
to trusts, which are less accessible
of increases in the Applicable
Exclusion Amount.
• Despite the liberalization and ultimate
repeal of the estate tax, the gift tax
will not be repealed, the $10,000
annual exclusion amount per donee
will NOT be increased and aggregate
taxable gifts in excess of a lifetime
exclusion amount of $1,000,000
will be subject to gift tax.
✦ Even aside from ultimate tax
savings while the estate tax
continues to exist, lifetime gifts
often achieve income tax savings
and non-tax related goals. Annual
exclusion gifts and gifts within
the lifetime exemption will
therefore remain an important
part of lifetime planning.
✦ Discounts on annual exclusion
gifts and gifts within the lifetime
exemption will therefore also
continue to play a significant part
in lifetime planning.
✦ Discounts on gifts which save
taxes in the interim (such as gifts
of closely-held corporate stock or
interests in partnerships or LLCs)
may engender income taxation
later on (after 2009), if the
resulting lower donee basis for
such asset is carried over and
does not fall within the limited
safe harbors for basis step-up.
• The generation-skipping transfer tax
exemption will increase with the
increase in the Application Exclusion
Amount and the same repeal
provisions will apply in 2010. Again,
estate plans must be reviewed to
return. This means that generally
inherited assets will have the same
basis as in the hands of the decedent.
✦ The new law provides a “safe
harbor” to the general “carryover
basis” rule by permitting the
basis of inherited property to be
increased to the date of death
value for latent gain of up to
$1,300,000, as well as for latent
gain of up to an additional
$3,000,000, and for assets
passing in a qualified manner to
a spouse.
✦ Gifts made on a discounted value
basis now may save gift taxes
currently but could conceivably
establish a low tax basis for
retained assets, which would
engender income tax on the
latent income upon death after
2009, if such asset values exceed
the limited safe harbors for basis
step-up.
✦ Reporting requirements will not
be eliminated, as estates in excess
of $1,300,000 will be required to
file, in order to properly allocate
basis for income tax purposes.
✦ Record keeping for basis in assets
becomes even more imperative.
This report, published as a
service to Flaster/Greenberg clients
and interested readers, is for
general use and information. The
content should not be interpreted
as rendering legal advice on any
specific matter.

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BREAKING NEWS
NJ Governor-Elect
Jim McGreevey has
named Alma L. Saravia, an
attorney with the Health
Care Practice Group of
Flaster/Greenberg, to
co-chair the transition
committee for the
Department of Human
Services.

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Alma L. Saravia
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