Title: Cooper University Hospital v. Jacobs

State: new-jersey

Issuer: New Jersey Supreme Court

Document:

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). In November 2004, the Department of Health and Senior Services (Department) issued a call inviting New Jersey hospitals licensed to perform primary percutaneous transluminal coronary angioplasty (PTCA), but not licensed to perform cardiac surgery, to submit a certificate of need (CN) application to perform elective PTCA. The call stated that six successful applicants would be granted a CN to participate in the Atlantic C-PORT-E Trial, Elective Angioplasty project (Atlantic C-PORT-E) to test the safety, quality and cost of elective angioplasty offered at community hospitals that do not also offer cardiac surgery services on site. The call required applicants to comply with the Certificate of Need Application and Review Process outlined in N.J.A.C. 8:33, and specifically to submit documentation in accordance with N.J.A.C. 8:33-3.11(e). Virtua-West Jersey Hospital-Marlton (Virtua) submitted an application in response to the call. On October 31, 2005, the Commissioner of the Department (Commissioner) granted CNs to nine hospitals, including Virtua, to participate in the planned multi-state demonstration project. Five CNs, including the one issued to Virtua, the only one challenged in litigation, had been among six recommended for approval by the State Health Planning board (SHPB). The other four had not been recommended by the SHPB. One reason given by the Commissioner for granting a CN to Virtua was that Virtua was the only applicant located within the seven southernmost counties in New Jersey. Cooper University Hospital (Cooper) and Our Lady of Lourdes Medical Center (Lourdes), joined by Deborah Heart and Lung Center (Deborah), cardiac surgery centers located in Virtua s general service area, filed an appeal in the Appellate Division challenging the call and the Commissioner s grant of a CN to Virtua. Appellants argued that the call was ultra vires principally because it authorized as a demonstration project a procedure that is expressly prohibited by other regulations. Appellants also asserted that, even if the call was valid, issuance of the CN to Virtua was arbitrary, capricious and unreasonable. In an unpublished opinion, the Appellate Division rejected the contentions of appellants. The panel held that the call was for a valid demonstration project and that the Commissioner s grant of a CN to Virtua was not arbitrary, capricious, or unreasonable. The panel recognized that the Department s regulations prohibit the performance of elective PTCA at hospitals without on-site cardiac surgery facilities, but accepted the Commissioner s argument that N.J.A.C. 8:33-.11(e) nevertheless authorizes calls for demonstration projects that do not comply with other regulations. The panel did not discuss the factual merits of Virtua s application or the Commissioner s approval of that application. The Supreme Court granted certification and accelerated the appeal. HELD: Although N.J.A.C. 8:33-3.11(e) authorized the call, the regulation, as applied, violates fundamental principles relating to the regulatory process. Under the circumstances, the Court cannot sustain the grant of Certificates of Need for the Atlantic C-PORT-E study. The projects may continue through November 30, 2007. However, a proper regulation must be promulgated -- after appropriate adherence to the principles of rulemaking -- before any such demonstration project can be continued beyond that date. 1. In 1971, the Legislature enacted the Health Care Facilities Planning Act (HCFPA), N.J.S.A. 26:2H-1 to -26, in accordance with the public policy declared therein that hospital and related health care services of the highest quality, of demonstrated need, efficiently provided and properly utilized at a reasonable cost are of vital concern to the public health. To achieve its cost-containment purpose, the HCFPA provides that [n]o health care facility shall be constructed or expanded, and no new health care service shall be instituted . . . except upon application for and receipt of a certificate of need[.] N.J.S.A. 26:2H-7. The Legislature has authorized the Commissioner to promulgate rules and regulations to effectuate the provisions of the HCFPA. However, those regulations must be promulgated in accordance with the Administrative Procedures Act (APA) and require approval of the Health Care Administration Board (HCAB). The health care regulations adopted by the Commissioner and HCAB expressly limit the performance of elective PTCA to those facilities that have an on-site operating room. The regulations also permit the Commissioner to issue CNs to hospitals wishing to participate in demonstration projects. The regulations identify two specific types of demonstration projects but also contain a broad provision allowing for the granting of CNs for demonstration projects not specifically identified in the regulations. N.J.A.C. 8:33-3.11(e). The issues before the Court require focus on N.J.A.C. 8:33-3.11(e). (Pp. 15-22) 2. The Supreme Court has long recognized that courts are obligated to give substantial deference to the interpretation an agency gives to a statute that the agency is charged with enforcing. However, we have also emphasized that a rule promulgated by the Commissioner and HCAB will be set aside if it is inconsistent with the HCFPA. In this case, no statute precludes demonstration projects or the conduct of elective angioplasty at a hospital that does not perform cardiac surgery. The administrative history of N.J.A.C. 8:33-3.11(e) makes clear that the Commissioner and HCAB contemplated that elective PTCA at a hospital without an on-site surgery facility might be authorized as a demonstration project. The Commissioner and HCAB contemplated that the regulation would permit the Commissioner to issue a call for a demonstration project permitting hospitals without on-site surgery to perform elective angioplasty, notwithstanding other existing regulations. The regulations authorization of the Commissioner s approval cannot end the inquiry before the Court, however, because adherence to due process has always been integral to the regulatory process. Furthermore, it is well settled that administrative action cannot be arbitrary or capricious or inconsistent with the legislative intent, policy, or delegation of authority. Independent of the demonstration project, the Commissioner could not approve the conduct of elective angioplasty in a facility without an on-site cardiac surgical center. Rulemaking would be required to permit authorization of the procedure. Yet here, by calling the C-PORT-E study a demonstration project, the Commissioner has authorized adoption of a medical procedure that has not otherwise been authorized by rulemaking. In so doing, he also decided for himself to authorize more CNs than announced in the call and included hospitals not recommended by the SHPB. Notwithstanding N.J.A.C. 8:33-3.11(e), the issuance of CNs incident to the Atlantic C-PORT-E study is the equivalent of a waiver without adequate standards. The fact that the Commissioner could decide for himself to issue the call for a demonstration project without any established medical criteria, determine how many CNs to issue, and choose the facilities to which they should be issued, emphasizes the need for proper rulemaking. In any event, in this case, the Commissioner has issued a CN based on a demonstration project that is inconsistent with the detailed regulations concerning PTCA. Under the circumstances, the Court cannot sustain the grant of CNs for the Atlantic C-PORT-E study. (Pp. 22-29) 3. It would be unjust and inappropriate to summarily terminate the demonstration projects. On the other hand, if the program is to continue, concerns both for the process and for patient well-being require that a specific regulation be promulgated to authorize continuation of the demonstration project and participation in Atlantic C-PORT-E. Accordingly, New Jersey s participation in the Atlantic C-PORT-E study must cease on November 30, 2007, unless N.J.A.C. 8:33-3.11 is amended, consistent with the procedure in the Administrative Procedures Act, to remedy the present inadequacies in the demonstration project authorization. Likewise, the previously issued CNs and licenses must be reissued in conformity with a new or amended regulation. (Pp. 30-32) The judgment of the Appellate Division is REVERSED, and the matter is REMANDED to the Commissioner of the Department of Health and Senior Services for further proceedings consistent with this opinion. CHIEF JUSTICE ZAZZALI and JUSTICES LaVECCHIA and ALBIN, and JUDGE CUFF (temporarily assigned) join in JUDGE STERN s opinion. JUSTICES LONG, WALLACE, RIVERA-SOTO, and HOENS did not participate. SUPREME COURT OF NEW JERSEY Appellants-Appellants, v. FRED M. JACOBS, M.D., J.D., Commissioner of the Department of Health and Senior Services, Respondent-Respondent, and VIRTUA-WEST JERSEY HOSPITAL-MARLTON, Intervenor-Respondent, and DEBORAH HEART AND LUNG CENTER, Intervenor-Appellant. Argued March 20, 2007 Decided May 31, 2007 On certification to the Superior Court, Appellate Division. Edwin F. Chociey argued the cause for appellants (Riker, Danzig, Scherer, Hyland & Perretti, attorneys; Glenn A. Clark, of counsel; Mr. Chociey and Mr. Clark, on the briefs). R. James Kravitz argued the cause for intervenor-appellant (FoxfRothschild, attorneys; Jonathan D. Weiner, of counsel; Mr. Weiner and Maureen E. Kerns, on the briefs). Susan J. Dougherty, Deputy Attorney General, argued the cause for respondent (Stuart Rabner, Attorney General of New Jersey, attorney; Michael J. Haas, Assistant Attorney General, of counsel). Philip H. Lebowitz, a member of the Pennsylvania bar, argued the cause for intervenor-respondent (Duane Morris, attorneys; Katherine Benesch, of counsel; Mr. Lebowitz and Erin M. Duffy, on the brief). JUDGE STERN (temporarily assigned) delivered the opinion of the Court. In November 2004, the Department of Health and Senior Services (Department) issued a call inviting health care facilities without a cardiac surgery facility on site to apply for a certificate of need (CN) to conduct elective angioplasty. The Commissioner of the Department (Commissioner) granted CNs to nine New Jersey community hospitals that responded to the call. One of the hospitals was Virtua-West Jersey Hospital-Marlton (Virtua). Three cardiac surgery centers located in Virtua s general service area -- Cooper University Hospital (Cooper), Our Lady of Lourdes Medical Center (Lourdes), and Deborah Heart and Lung Center (Deborah) -- challenged the call and the subsequent grant of a CN to Virtua. In an unpublished opinion, the Appellate Division concluded that the Commissioner was authorized to issue the call for the CN as a demonstration project pursuant to N.J.A.C. 8:33-3.11(e), and that the grant of the CN to Virtua was not arbitrary, capricious, or unreasonable. We granted the cardiac surgery centers petitions for certification and now conclude that although N.J.A.C. 8:33-3.11(e) authorized the call, the regulation, as applied, violates fundamental principles relating to the regulatory process. We further hold that because Virtua and eight other community hospitals with similar projects, based on CNs issued without challenge, have relied on CNs issued more than a year ago and on subsequent licensure, the projects may continue through November 30, 2007. However, a proper regulation must be promulgated -- after appropriate adherence to the principles of rulemaking -- before any such demonstration project can be continued beyond that date. If the Commissioner denies an application for a CN, the applicant may request a hearing pursuant to the Administrative Procedure Act (APA), N.J.S.A. 52:14B-1 to -25. N.J.S.A. 26:2H-9. The Legislature has authorized the Commissioner to promulgate rules and regulations to effectuate the provisions of the HCFPA. N.J.S.A. 26:2H-5(b). However, those regulations must be promulgated in accordance with the APA and require approval of the HCAB. N.J.S.A. 26:2H-5(b); N.J.S.A. 26:2H-2(d). The HCAB is comprised of thirteen members: the Commissioner together with the Commissioner of Insurance, or their designated representatives, and eleven representative[s] of medical and health care facilities and services, labor, industry and the public at large who are appointed by the Governor with the advice and consent of the Senate. N.J.S.A. 26:2H-4. The Chair of the HCAB also serves as an ex officio member of the SHPB along with the Chair of the Public Health Council, or their designees, and nine public members appointed by the Governor with the advice and consent of the Senate. N.J.S.A. 26:2H-5.7. The Commissioner and the Commissioners of Children and Families and of Human Services are ex officio members of the SHPB. Ibid. The health care regulations adopted by the Commissioner and HCAB provide for the hospital licensing standards in Chapter 43G of Title 8 of the New Jersey Administrative Code. Chapter 33E of Title 8 governs certificates of need for cardiac diagnostic facilities and cardiac surgery centers. N.J.A.C. 8:43G-7.28 provides that PTCA is to be performed only in cardiac surgical centers approved by the New Jersey State Department of Health. A [c]ardiac surgery center is defined as a facility capable of providing invasive diagnostic catheterization, and all treatment modalities including open and closed heart surgical procedures. N.J.A.C. 8:43G-7.1(b). The regulations expressly limit the performance of elective PTCA to those facilities that have an on-site operating room. N.J.A.C. 8:43G-7.31; see also N.J.A.C. 8:33E-2.3(d)(3) ( Elective PCI procedures shall be performed only in a hospital-based facility where cardiac surgery services are immediately available on site. ). However, general hospitals with licensed full service adult diagnostic cardiac catheterization program[s] are permitted to apply for a CN to perform primary PTCA without on-site cardiac surgery. N.J.A.C. 8:33E-2.16(a)(1); see N.J.A.C. 8:33E-2.3(d)(3). The hospital applying for the CN must, among other things, provide evidence of a transfer agreement with a nearby hospital that has on-site cardiac surgery. See N.J.A.C. 8:33E-2.16(b)(1). See footnote 5 The regulations also permit the Commissioner to issue CNs to hospitals wishing to participate in demonstration projects. N.J.A.C. 8:33-3.11. A demonstration project is a health care service, technology, equipment or modality not currently available in the State or which targets unique institutional circumstances or the needs of underserved populations. N.J.A.C. 8:33-1.3. The regulations identify two specific types of demonstration projects -- an inner city cardiac satellite demonstration project and bloodless surgery demonstration projects. N.J.A.C. 8:33-3.11(c) & (d). The regulations also contain a broad provision allowing for the granting of CNs for demonstration projects not specifically identified in the regulations. N.J.A.C. 8:33-3.11(e). The issues before us require focus on N.J.A.C. 8:33-3.11(e). Calls for demonstration projects pursuant to N.J.A.C. 8:33-3.11(e) are subject to several procedural requirements. First, the call must be published at least 45 days prior to the date the application is required to be filed. N.J.A.C. 8:33-3.11(e)(1). Second, each CN application submitted in response to the call must contain specific documentation concerning exactly what is proposed to be demonstrated[,] [p]atient care policies . . . including criteria for inclusion/exclusion in the demonstration[,] [p]roposed staff and staff qualifications for the demonstration[,] [w]ritten documentation that otherwise eligible patients will be accepted into the demonstration regardless of ability to pay[,] documentation of what data will be collected to evaluate the demonstration project[,] and [w]ritten assurances that all [such] data . . . shall be reported to the Department. N.J.A.C. 8:33-3.11(e)(2). Third, the SHPB must review each application that involves something that ordinarily would require a CN. N.J.A.C. 8:33-3.11(e)(3). The demonstration projects are to be approved for a period not to exceed two years unless otherwise specified in the call notice. N.J.A.C. 8:33-3.11(e)(4). See footnote 6 Those applicants who are granted a CN receive licensure approval from the Department to operate the service for the time period specified in the call notice plus the evaluation period specified by the Department . . . , provided all applicable licensure standards are met. N.J.A.C. 8:33-3.11(e)(5). In addition to the general criteria set forth in N.J.S.A. 26:2H-8, the regulations set forth a review procedure for CN applications, which applies to demonstration projects conducted pursuant to N.J.A.C. 8:33-3.11. See N.J.A.C. 8:33-4.1 to -4.16. The Department determines whether the application is complete, and if so, it refers the application to the SHPB for review. N.J.A.C. 8:33-4.5(a). The SHPB reviews the application and makes a written recommendation to the Commissioner. N.J.A.C. 8:33-4.13(a). The Commissioner then determines whether to approve or deny the application. N.J.A.C. 8:33-4.15(a). Consistent with N.J.S.A. 26:2H-9, if an application is denied, the applicant may request a hearing pursuant to the [APA]. N.J.A.C. 8:33-4.15(b). Despite that deference, a rule will be set aside if it is inconsistent with the statute it purports to interpret. That is, the agency may not under the guise of interpretation . . . give the statute any greater effect than its language allows. Thus, if the regulation is plainly at odds with the statute, we must set it aside. [Saint Peter s Univ. Hospital, supra, 185 N.J. at 13 (quoting In re Freshwater Prot. Act Rules, 180 N.J. 478, 488-89 (2004) (citations omitted)).] SUPREME COURT OF NEW JERSEY NO. A-88/89 SEPTEMBER TERM 2006 ON CERTIFICATION TO Appellate Division, Superior Court COOPER UNIVERSITY HOSPITAL And OUR LADY OF LOURDES MEDICAL CENTER, Appellants-Appellants, v. FRED M. JACOBS, M.D., J.D., Commissioner of the Department of Health and Senior Services, Respondent-Respondent, and VIRTUA-WEST JERSEY HOSPITAL- MARLTON, Intervenor-Respondent, and DEBORAH HEART AND LUNG CENTER, Intervenor-Appellant. DECIDED May 31, 2007 Chief Justice Zazzali PRESIDING OPINION BY Judge Stern (temporarily assigned) CONCURRING/DISSENTING OPINIONS BY DISSENTING OPINION BY Primary PTCA is an emergency PTCA performed during acute myocardial infarction. N.J.A.C. 8:33E-1.3(4)(d), N.J.A.C. 8:33E-2.3(d)(3). An acute myocardial infarction is [a] sudden occurrence of an infarction of the muscular wall of the heart, which means death of the muscle resulting from a blockage of the blood supply by a clot, Attorneys Dictionary of Medicine 2378, Part 1-A (2005), and is commonly known as a heart attack. MedLine Plus, Medical Encyclopedia, http://www.nlm.nih.gov/ medlineplus/ency/article/000195.htm. An elective PTCA is a PTCA that is performed on patients at times other than during acute myocardial infarction. See N.J.A.C. 8:33E-1.3(4)(d), N.J.A.C. 8:33E-2.3(d)(3).