Tuesday, September 18, 2007

Undemocratic Taxation

In this fall's campaign, it's important for voters to scrutinize the judgment of their representatives. In 2004, Assemblyman Patrick Diegnan was the sole Assembly sponsor of a bill (A3127/S1659) that taxed our medical practice 3.5 percent of its gross receipts. It was the largest gross receipt tax imposed on any small business in the state. There was no debate on the tax, as it was introduced a week before both houses were to recess for the summer and signed into law eight days later. Four years after its inception and despite hundreds of proposed amendments to this makeshift law, not one amendment has been allowed a committee hearing.

This onerous tax has forced us to close offices that provided care for the indigent. We had to let go of a physician, and my partners and I have made substantial cuts in our salaries, yet we still can't afford this tax. If Diegnan can get away with taxing small businesses without representation, preventing any say in legislation and preventing any amendment from being heard, everyone is vulnerable to similar irresponsible legislating. I hope voters let him know his undemocratic methods will no longer be tolerated.

-- Timothy J. Dunn, MD, Mount Laurel

September 16, 2007 / Star Ledger

Diegnan Socks it to Physicians

The Assembly Bill A-3127 was introduced on June 21st, 2004 by Assemblyperson Richard Deignan (D)

Middlesex County. Mr. Deignan is the Primary Sponsor.


A3127 [Diegnan, Patrick J.], Est. annual assess. on cert. ambulatory care facilities

The Following is from INSIDE NJMGMA July 2004 Volume 2, Issue 4

Physician’s Take It In The Neck......Again

If the malpractice debacle wasn't enough get a load of this. The New Jersey Legislature at the behest of the New Jersey Hospital Association (NJHA) has rammed a gross receipts tax bill through the legislature with lightening speed. The bills, S-1659 and A-3127 establishes annual assessment on gross receipts of certain licensed ambulatory care facilities and requires licensure of certain health care services.

The Senate bill S-1659 was introduced on June 7th and originally sponsored by Richard Codey (D) Orange County. However the primary sponsorship of this bill was changed and the current co-sponsor is Wayne Bryant, (D) Camden and Gloucester Counties.

This is how it went;

6/7/2004 Introduced in the Senate, Referred to Senate Budget and Appropriations Committee

6/21/2004 Reported from Senate Committee as a Substitute, 2nd Reading

6/24/2004 Substituted by A3127

The Assembly Bill A-3127 was introduced on June 21st by Assemblyperson Richard Deignan (D) Middlesex County. Mr. Deignan is the Primary Sponsor.

It went even faster in the Assembly.

6/21/2004 Introduced, Referred to Assembly Budget Committee

6/21/2004 Reported out of Assembly Committee, 2nd Reading

6/24/2004 Passed by the Assembly (42-34-2)

6/24/2004 Received in the Senate without Reference, 2nd Reading

6/24/2004 Substituted for S1659 (SCS)

6/24/2004 Passed Senate (Passed Both Houses) (21-19)

Based on the information I received from the Medical Society this bill is a fait de accompli meaning that the governor will sign it into law effective July 1, 2004.

Is there a possibility that the governor might not sign it? I would give it the same chance that I would beat Lance Armstrong in the Tour de France.

The Bad News

The following is almost verbatim from the summary statement provided on the New Jersey Legislative Website:

Assembly Bill No. 3127 imposes an assessment on certain licensed ambulatory care facilities, based on the facility's gross receipts, beginning July 1, 2004. The revenues raised by the assessment will be deposited in the Health Care Subsidy Fund. The assessment would apply to facilities that are licensed to provide one ormore of the following ambulatory care services: ambulatory surgery, computerized axial tomography, comprehensive outpatient rehabilitation, extracorporeal shock wave lithotripsy, magnetic resonance imaging, megavoltage radiation oncology, positron emission tomography, orthotripsy and sleep disorder services. The assessment would not apply to an ambulatory care facility with annual gross receipts less than $300,000, or to an ambulatory care facility that is licensed to a hospital in this State as on offsite ambulatory care service facility.

In Fiscal Year (FY) 2005 (which begins July 1, 2004), an ambulatory care facility with at least $300,000 in gross receipts shall pay an assessment equal to 3.5% of its gross receipts or $200,000, whichever amount is less. The assessment will be payable to the department in four installments, with payments due October 1, 2004, January 1, 2005, March 15, 2005 and June 15, 2005. The Commissioner of Health and Senior Services is directed to provide notice no later than August 15, 2004 to all facilities that are subject to the assessment that proof of gross receipts for the facility's tax year ending in calendar year 2003 must be provided by the facility to the commissioner no later than September 15, 2004. If a facility fails to provide proof of gross receipts by that date, the facility shall be assessed the maximum rate of $200,000 for FY 2005. Each facility that is subject to the assessment will be required to submit an annual report including, at a minimum, data on volume of patient visits, charges and gross revenues, by payer type, for patient services, beginning with calendar year 2004 data. A facility that fails to provide the required information shall be liable to a civil penalty not to exceed $500 for each day in which the facility is not in compliance.

Finally, the bill amends N.J.S.A.26:2H-2 and 26:2H-12 to clarify that an entity that provides magnetic resonance imaging or computerized axial tomography services shall be required to obtain a license from the department to operate those services prior to commencement of services. The bill also provides that a physician who is operating such services on the effective date of the bill shall have one year from the effective date to obtain the license.

What Does It Mean?

Well it means the physicians continue to take it in the neck here in the Garden State. Given the speed at which this bill got through the legislature (all bills should be this lucky, given that the financial impact is modest, the state estimates the revenue generated from this tax at approximately $31million, and given that hospital outpatient facilities are exempt from this tax, it seems reasonable to assume that the tax is a retaliatory strike against the physicians for taking revenue from the hospitals via the above named outpatient facilities. All of this in the name of charity care. Call me prejudiced but the last time I checked how much charity care did the physicians collect? I believe the word is zero, nada, nothing. The hospital's complained that they provided $778 million in charity care last year and received less than half in reimbursement from the state. This budget year FY 2005 $558 million is budgeted for charity care. The estimated $31 million is included in that number and is approximately 5% of the total. I am going to take a wild stab at this but I am willing to bet the hospitals have never approached the physicians with a check in hand and said thanks for all of the help here is a little something for taking care of those indigent patients for us. Can I bet the house on it, probably not? The financial impact for charity care is nominal but the financial impact to physicians is severe. Physicians who are owners of these facilities are triple taxed. They are tax corporately, individually and now have to bear this tax.


For those of you whose physicians are members of the Medical Society they should work closely with MSNJ who is working diligently to minimize the impact of this onerous tax. For those of you whose physicians are not members of MSNJ they should consider joining. The Medical Society is not the end all but it is one of the few resources available to fight this tax.

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