New Rule Affecting Collection Stations in Physicians' Offices

            New Jersey physicians will no longer be able to collect rent payments from clinical laboratories that operate collection stations in the physicians’ offices as the result of the passage of a new regulation, N.J.A.C. 8:44-2.14, which was first proposed last year.  The new rule became effective on July 19, 2010.  The New Jersey Department of Health and Senior Services (the “Department”) cites to various rationales leading to adopting the rule, including that that it has received too many reports that rent payments were exceeding fair market value, and that as a result physicians are unfairly influenced to choose from a limited number of laboratories to operate collection stations in physician offices.  In addition to the prohibition on collecting rent, clinical laboratories cannot share employees or perform or offer other goods or services in exchange for operating a collection station in a physician’s office.   The Department states that it would be “next to impossible” to monitor compliance if these practices are permitted.  42 N.J.R. 1530(a).

            Historically, operators of clinical laboratories set up collection stations in physicians’ offices as an accommodation to patients so that the patients do not have to be inconvenienced by having to travel directly to the central laboratory in order to provide a specimen.  Instead, laboratory specimens are collected at the collection station in the physician’s office and then sent to the central laboratory for analysis.  The laboratory would pay the physician a fair market value rental fee in exchange for operating a collection station in a physician’s office. The Department acknowledges the benefits of collection stations to both patients and physicians of timely testing and treatment when indicated, and that patients have ready access for specimen collection.  For these reasons, the Department did not seek to completely ban collection stations from physicians’ offices. However, the new rule drastically alters the parameters by which a clinical laboratory can operate a collection station in a physician’s office.

            The new rule was promulgated in response to reports received by the Department that rental agreements between laboratories and physicians for physician office collection stations far exceed fair market value and, as a result, influence physician’s choice when selecting laboratory services. Moreover, in its Notice of Adoption, the Department stated that it currently has “no effective means of assuring that these rental agreements do not exceed fair market value.” 42 N.J.R. 1530(a).  The new rule is intended to ensure that New Jersey's licensed clinical laboratories operate under the same standards and practices in order to eliminate any perceived or actual conflict of interest or abuse.  Further, the Department believes that the payment of rent or the offer of goods or services by laboratories has unduly influenced a physician’s selection of a laboratory to operate a collection stations in his or her office. It is the Department’s position that the new rule places all laboratories on a level playing field with regard to prohibiting payments or other remuneration to physicians, which should place the laboratories that provide superior service to patients and physicians at an advantage.  42 N.J.R. 1530(a).   The Department suggested that the funds currently paid for rent and other goods or services should now be available to enhance customer service for patients.  42 N.J.R. 1530(a).

Under the new rule, a clinical laboratory that operates a collection station in a physician’s office is now limited to collecting specimens only from patients of the physician’s office in which the collection station is located, and must comply with the following provisions:

• The collection station must be licensed by the Department and the license must be prominently displayed in the collection station area;
• No reimbursement, fees, rent, or any type of direct or indirect payment may be made to the physician by the clinical laboratory;
• Employees of the clinical laboratory are not permitted to perform services for the physician that are normally the responsibility of the physician’s staff, such as taking patient vital signs or other nursing functions, drawing specimens or performing clerical services;
• The clinical laboratory and physician’s office may not share employees or independent contractors;
• Except as necessary for the reporting of test results, the clinical laboratory may not provide supplies, waste disposal services, test kits for the physician’s own use, electronic medical records systems or other goods or services to the physician; and
• A copy of the signed lease or agreement between the physician and clinical laboratory for the operation of the collection station must be made available to the Department upon request.

As set forth above, although a clinical laboratory may not pay rent to a physician for space for a collection station, the parties may still have a lease agreement in place and a copy of that agreement must be provided to the Department upon request.  While the rule does not require a clinical laboratory to have a written lease agreement with a physician, the Department stated in its Notice of the Adoption of the rule that it shall “encourage laboratories operating collection stations in physician offices to have a written agreement that outlines the terms of the space arrangement and delineates the laboratory’s responsibilities for compliance with the proposed rule.” 42 N.J.R. 1530(a).

On the other hand, the new rule does not prohibit laboratories from operating a patient service center in a building owned by a physician or group of physicians; provided that, the patient service center is not located in a physician’s office, and provided further that the patient service center must be:

• Open to and serve the general public, and not restricted to serving one or more specific medical practices;
• Located in a freestanding building or occupy a space in a building accessible to the public;
• Accessed directly through an exterior building entrance or from a public access foyer or hallway that clearly identifies the name of the laboratory and the days and hours of operation;
• Not accessible through a physician’s office;
• Identified to the public by clearly visible signage on the exterior of the building and listed in the building on-site directory and advertisements of the laboratory must list the address and numbers of the patient service center;
• Self-contained with regard to all aspects of operations including the waiting room, reception area, phlebotomy rooms, restroom facilities and specimen and supply storage areas, except that the patient service center may share a common waiting area that is used by all tenants of a building or a floor of the building, provided that two or more tenants renting separate office spaces are not referring physicians or healthcare providers; and
• A copy of the signed lease between the clinical laboratory and physician’s office is made available to the Department upon request.

The new rule does not prohibit a laboratory from operating a patient service center in rented space in a building owned by a physician or group of physicians provided that all of the conditions set forth above are met.  In addition, the rule is not intended to prohibit the placement of a collection box by a laboratory in a physician’s office, so long as no remuneration is provided to the physician by the laboratory for placement of the collection box.  The Department believes that costs for pick-up and delivery of specimens constitute costs or services necessary for the collection and reporting of test results, which are exempt under the new rule.  42 N.J.R. 1530(a).

The rule became effective on its date of adoption and although it is not retroactive upon adoption, there will be no grandfathering of existing collection station arrangements between clinical laboratories and physicians’ offices.  In other words, laboratories that entered into long-term leases prior to the passage of the new regulation in an attempt to circumvent the rule will have to immediately stop paying rent and other remuneration or be subject to enforcement action.  This new regulation is promulgated under authority of the New Jersey Clinical Laboratory Improvement Act, N.J.S.A. 45:9-42.26, et seq., which establishes penalties of up to One Thousand Dollars ($1,000.00) for each violation of that act or the rules promulgated under it.  In order to avoid any penalties or an enforcement action, immediate compliance by all clinical laboratories operating collection stations in physicians’ offices is required.