In the ever-evolving landscape of healthcare regulation, it’s easy for even the most experienced providers to find themselves navigating a maze of legal obligations. One of the most frequently misunderstood—and critically important—laws that impacts how physicians and healthcare practices operate in New Jersey is the Codey Law. Whether you’re a practice owner, a referring physician, or considering a new joint venture, understanding the nuances of this law isn’t just about staying compliant—it’s about protecting the integrity and sustainability of your business.

The Codey Law, New Jersey’s version of a self-referral prohibition statute, limits the ability of licensed healthcare professionals to refer patients for certain services in which they have a financial interest. At its core, the law is designed to prevent conflicts of interest in medical decision-making, ensuring that clinical judgment remains patient-centered rather than profit-driven. While this intent is straightforward, the law itself is anything but simple. Its provisions can be broad, and the exceptions are many—making it essential to consult legal counsel before entering into any arrangement that might raise red flags.

We often counsel clients who are surprised to learn how easily a seemingly routine business relationship—such as ownership in a diagnostic testing facility or a lease agreement with an imaging center—can trigger a Codey Law violation. For example, a physician who owns a stake in a radiology facility may be prohibited from referring patients there for services like MRIs or CT scans. Even if the referral is clinically appropriate and the patient consents, the financial connection can put the physician at legal risk. Violations can lead to significant penalties, including fines and disciplinary action by the state medical board.

One of the challenges providers face is distinguishing the Codey Law from its federal counterpart, the Stark Law. While they share similar goals, the two laws are not identical. The Codey Law, for instance, applies more broadly to all licensed healthcare professionals in New Jersey, not just physicians who bill Medicare or Medicaid. It also covers a wider array of services and financial arrangements. Relying on federal compliance alone is a common pitfall that can leave practices vulnerable at the state level.

There are, however, several exceptions under the Codey Law that allow for compliant self-referral relationships. These include in-office ancillary services, certain group practice structures, and properly structured real estate arrangements. But the key word here is “properly.” The specifics matter—details like how services are billed, who owns the equipment, and where the services are provided can all impact whether an exception applies. That’s why taking a proactive approach to legal structuring is so important.

At our firm, we work closely with healthcare providers to evaluate their business models and uncover potential exposure before it becomes a problem. We help our clients navigate the gray areas, draft compliant contracts, and design operational frameworks that align with both their clinical goals and legal responsibilities. Our role isn’t just to tell you what you can’t do—it’s to help you achieve what you can, strategically and within the bounds of the law.

In today’s regulatory climate, waiting until something goes wrong is not an option. Whether you’re expanding your practice, entering into a new partnership, or simply want peace of mind about your current referral practices, understanding New Jersey’s Codey Law is a vital part of your risk management strategy.

If you’re unsure whether your referral arrangements comply with state law—or if you’re exploring new opportunities and want to build a compliant structure from the start—we’re here to help. Contact us today to schedule a consultation and take the next step toward protecting your practice’s future.