NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2571-18T1

IN RE CERTIFICATE OF 

NEED APPLICATION FOR

THE MEMORIAL HOSPITAL

OF SALEM COUNTY.

_________________________

Argued February 10, 2020 – Decided July 2, 2020

Before Judges Sabatino, Sumners and Natali.

On appeal from the New Jersey Department of Health, 

Docket No. FR 18-0503-17-01.

Eric S. Aronson argued the cause for intervenorappellants Carneys Point Rehabilitation & Nursing 

Center and Golden Rehabilitation & Nursing Center 

(Greenberg Traurig, LLP, attorneys; Eric S. Aronson 

and Matthew F. Bruno, on the briefs). 

Patrick Jhoo, Deputy Attorney General, argued the 

cause for respondent Department of Health (Gurbir S. 

Grewal, Attorney General, attorney; Melissa H. Raksa, 

Assistant Attorney General, of counsel; Patrick Jhoo, 

on the brief). 

Steven D. Gorelick argued the cause for respondent 

Salem County Hospital Corp. (Garfunkel Wild, PC, 

attorneys, join in the brief of respondent Department 

of Health). 

Barry J. Muller argued the cause for amicus curiae 

Health Care Association of New Jersey (Fox 

Rothschild LLP, attorneys; Jonathan D. Weiner, of 

APPROVED FOR PUBLICATION

July 2, 2020

APPELLATE DIVISION
A-2571-18T1 2

counsel and on the brief; Maureen E. Kerns and A. 

William Henkel, on the brief).

The opinion of the court was delivered by

NATALI, J.A.D.

Carneys Point Rehabilitation & Nursing Center (Carneys) and Golden 

Rehabilitation & Nursing Center (Golden) (collectively, intervenors) appeal a 

final decision of the Commissioner of the New Jersey Department of Health 

(the Commissioner) that granted Salem County Hospital Corporation's (SCHC) 

application for a certificate of need (CN) to transfer ownership of the 

Memorial Hospital of Salem County (Salem Hospital) to SCHC. In the context 

of that approval, the Commissioner also permitted SCHC to establish thirty 

long-term care (LTC) beds and twenty-six adult acute care psychiatric beds at 

the hospital.

We conclude that, despite the general deference owed to administrative 

agencies on appeal, the Commissioner failed to apply the relevant statutory 

factors to determine that there was a need for LTC beds in Salem County and 

he improperly awarded those beds without issuing a call notice in the New 

Jersey Register inviting competing applications. Further, even if the 

Commissioner's final decision can be interpreted as having determined a need 

for LTC beds in the area, the record contained insufficient support for such a 

finding. We also conclude that the Commissioner was required to conduct an 
A-2571-18T1 3

independent analysis of the actual need for a proposed service regardless of 

whether the transaction has an otherwise meritorious purpose, such as to 

support a hospital's financial viability. We agree, however, with the 

Commissioner's approval of the open adult acute care psychiatric beds to 

SCHC consistent with an unimplemented CN. Accordingly, we affirm in part 

and vacate and remand in part.

I.

Salem Hospital is a licensed general acute care hospital1located in 

Salem. It was formerly owned and operated by Salem Hospital Corporation, 

"an indirect wholly owned subsidiary of . . . Community Health Systems, Inc. 

(CHS)." While owned by CHS, the hospital was licensed to provide a bed 

capacity of 114 medical and surgical beds, as well as twelve adult Intensive 

Care Unit/Critical Care Unit beds, totaling 126 beds. 

In May 2017, the Commissioner approved a CN to transfer ownership of 

Salem Hospital from CHS to Prime Healthcare Foundation-Salem Hospital, 

LLC (Prime) for $15 million. In support of his decision, the Commissioner 

noted Salem Hospital's "sustained operating losses and reduction in patient 

 

1

 N.J.A.C. 8:33-1.3 defines "[g]eneral hospital" as "a hospital which maintains 

and operates organized facilities and services as approved by the Department 

for the diagnosis, treatment or care of persons suffering from acute illness, 

injury or deformity . . . ."
A-2571-18T1 4

volume for several years" and that "the only option [besides] the transfer of 

ownership of Salem Hospital is the closure of the Hospital . . . ." Prime, 

however, cancelled the agreement and the transfer of ownership never 

occurred. 

In addition, on November 17, 2017, the Commissioner approved a CN 

application by CHS which permitted it to implement twenty-six "open adult 

acute care psychiatric beds" at Salem Hospital. That CN, however, was never 

implemented.

On May 1, 2018, SCHC filed a CN application to transfer ownership of 

Salem Hospital. SCHC noted in its application that it sought to modify the 

licensed bed capacity at Salem Hospital to implement the November 17, 2017 

award of twenty-six "[o]pen [a]dult [a]cute [p]sychiatric" beds. Further, as 

noted, SCHC sought to establish thirty LTC beds at the hospital. The 

Commissioner, however, did not issue a call notice regarding the need for LTC 
A-2571-18T1 5

beds in the area.2 In conjunction with its request to add the LTC beds, SCHC 

also sought to reduce the number of medical/surgical beds from 114 to 75.3

In support of its request for the thirty LTC beds, SCHC stated it sought 

"to meet the demand for post-acute services and to enhance the continuity of 

services at the current location." It contended that there was a "minimal 

availability of [LTC] services in the immediate area of [Salem] Hospital," and 

that the additional beds would "represent[] an addition of only 5.8% of 

capacity in the Salem County service area and will have minimal impact on 

existing providers." It also stated that the closest facility offering [LTC] 

services was "located more than [ten] miles from [Salem] Hospital."

Further, SCHC noted that because the application was "limited to a 

[t]ransfer of [o]wnership, there [would] be no reduction in competition," and 

that "any decrease in volume on any one provider will be minimal, at best." 

SCHC prepared a Market Share Data report and concluded that "since this 

 

2

 Pursuant to N.J.A.C.8:33-4.1(a), "[t]he Commissioner shall publish in the 

New Jersey Register . . . an anticipated schedule for receipt of [CN] 

applications subject to full review procedures," otherwise known as a call 

notice, in order to "invite [CN] applications" for a particular service in a given 

area.

3

 SCHC's CN application provides that it would reduce the amount of 

medical/surgical beds to [sixty-five]. In SCHC's responses to completeness 

questions from the Department, however, it clarified that "all references to 

[sixty-five] medical/surgical beds were intended to be [seventy-five]."
A-2571-18T1 6

application is limited to a [t]ransfer of [o]wnership, there will be no reduction 

in competition as a result of the project." That report included no analysis 

regarding any effect on providers in the service area specifically relating to 

SCHC's proposed increase in LTC beds. With regard to alternatives to the 

project, SCHC noted in its application that its only available alternative would 

be "the closure of [Salem] Hospital."

On November 8, 2018, the Department held a public hearing on SCHC's 

application. It considered written testimony on behalf of Carneys, Golden, and 

another facility objecting to approval of the portion of the application that 

requested the establishment of LTC beds. Those facilities argued that 

"SCHC's request to establish [thirty LTC] beds at [Salem] Hospital" was not 

"filed in accordance with governing statutes and regulations" and that SCHC 

was attempting to acquire a new license while characterizing the establishment 

of LTC beds as a "transfer" or "conversion." In this regard, Carneys, Golden, 

and the third facility contended that the portion of SCHC's application 

requesting LTC beds was "subject to the full review certificate of need 

process," which required a Department finding "that a need exists for such 

beds." 

On December 6, 2018, the State Health Planning Board (Planning 

Board) held a hearing at which it voted to recommend that the Commissioner 
A-2571-18T1 7

approve SCHC's application. At that hearing, one Planning Board member 

questioned whether it was permissible "to grant [the LTC] beds without . . . a 

needs assessment or a call for beds in the area." In response, a representative 

of the Department stated:

[T]he [D]epartment determined that the addition of the 

[thirty] beds, which is just over [five] percent . . . of 

the licensed beds in the area would have a minimal 

impact on the service area, so that would be more in 

keeping with . . . an expedited [CN] review . . . . We 

have received an objection. The [D]epartment 

considered the objection in making its determination . 

. . that it's only a minimal impact, and there's no 

impediment going forward. 

At that hearing, the Planning Board also heard oral testimony both in 

favor of and against SCHC's CN application. The Human Resources Director 

at Golden testified "with certainty that the creation of [thirty] new [LTC] beds 

at the hospital will not create new jobs in the area as promised, but instead 

cause a transfer of current jobs from already well-established nursing 

facilit[ies]." Counsel for intervenors contended at that hearing that the 

Department's conclusion that "there will be a minimal impact on the service 

area is absolutely untrue" because the "[thirty] LTC beds, if they were built 

with Medicare subacute patients, represent about 36 percent of the Medicare 

business in [Salem] [C]ounty," and that market share would "devastate existing 

providers [in] the county."
A-2571-18T1 8

The Chief Operating Officer of intervenors' parent company also stated 

that SCHC's estimate that the thirty LTC beds would comprise 5.8 percent of 

Salem County's total beds was "grossly wrong," instead explaining that the 

beds would comprise 30 percent of the market. He also stressed that if SCHC 

were "granted a 30 percent market share of Salem County's subacute market, 

the existing providers in that market [would] be devastated." Ultimately, three 

members of the Planning Board voted to recommend the application to the 

Commissioner, while one member voted against it. 

One month later, on January 15, 2019, the Commissioner issued a 

sixteen-page final decision approving SCHC's CN application, including the 

thirty requested LTC beds and the unimplemented CN for psychiatric beds. In 

making his decision, the Commissioner "considered the CN application, 

responses to completeness questions, the public hearing transcript, written 

comments and exhibits, Department staff recommendations, and the [Planning 

Board] recommendations."

The Commissioner determined that the November 17, 2017 CN approval 

letter which awarded the implementation of twenty-six psychiatric beds to 

CHS would be transferred to SCHC as part of the transfer of ownership. In 

doing so, he noted that the November 17, 2017 CN approval letter "addressed 
A-2571-18T1 9

the requirements of N.J.S.A. 26:2H-8(a) [to] (f) [with] regard to the psychiatric 

beds and that analysis is incorporated herein by reference." 

With respect to the LTC beds, the Commissioner concluded that "the 

addition of [thirty] LTC beds will have a minimal impact on the health care 

system as a whole and will contribute to the financial viability of Salem 

Hospital." The Commissioner relied upon SCHC's testimony before the 

Planning Board that: 

if this approval does not contain the transfer of 

ownership, the psychiatric beds, and the LTC beds, 

then the continued operation of Salem Hospital would 

be in question, and the closure of the hospital would 

have a greater negative impact on the area's healthcare 

system as a whole than the addition of the [thirty] 

LTC beds would. 

The Commissioner also found that the only alternative to the award of 

thirty LTC beds would be the "closure of Salem Hospital," and that "[t]he 

transfer of ownership and licensing of the psychiatric and LTC beds is the least 

disruptive alternative to maintaining the current level of care and services in 

the area." Moreover, he found that "[t]he addition of [thirty] LTC beds 

represent an addition of 5.3 [percent] of the capacity in the Salem County 

service area and will have a minimal impact on the health care system as a 

whole." Thus, he stated, "the minimal impact coupled with the need for this 
A-2571-18T1 10

hospital to have these beds in order to maintain the operations of the hospital 

necessitates the granting of these LTC beds to Salem." 

Finally, the Commissioner concluded that under N.J.A.C. 8:33-4.9(a),4

were he to deny the application, there would be an adverse effect on patients in 

the Salem community because:

the transfer of ownership . . . along with the transfer of 

the psychiatric beds [and] the award of the [thirty] 

LTC beds appear to be the only manner in which 

Salem Hospital may remain in operation. This 

approval is the only manner in which the current level 

of care and services may be maintained in the area. 

This approval will preserve access to health care 

services for the Salem community, including the 

medically indigent and medically underserved 

populations. 

The same day, intervenors filed this appeal. One month later, the 

Department denied intervenors' request to stay the implementation of the 

award of the LTC beds. 

On appeal, intervenors argue the Commissioner's final decision was 

contrary to the requirements for granting CN applications detailed in the 

Health Care Facilities Planning Act (Planning Act), N.J.S.A. 26:2H-8, and the 

relevant administrative regulations and therefore constituted an ultra vires 

 

4

 N.J.A.C. 8:33-4.9(a) provides in part that "[n]o [CN] shall be issued unless 

the action proposed in the application . . . will not have an adverse impact on 

access to health care services in the region or Statewide . . . ."
A-2571-18T1 11

action as he: 1) failed to issue a call notice before approving SCHC's request 

to convert medical surgical beds to LTC beds; 2) failed to adequately support 

his approval of SCHC's request for LTC beds; and 3) erred by approving the 

transfer of an unimplemented CN for psychiatric beds along with the transfer 

of ownership. 

II.

Our review of an agency's decision is limited. In re Stallworth, 208 N.J. 

182, 194 (2011) (citing Henry v. Rahway State Prison, 81 N.J. 571, 579 

(1980)). A reviewing court "should not disturb an administrative agency's 

determinations or findings unless there is a clear showing that (1) the agency 

did not follow the law; (2) the decision was arbitrary, capricious, or 

unreasonable; or (3) the decision was not supported by substantial evidence." 

In re Virtua-West Jersey Hosp. Voorhees for a Certificate of Need, 194 N.J. 

413, 422 (2008) (citing In re Herrmann, 192 N.J. 19, 28 (2007)); see also

Bergen Pines Cty. Hosp. v. N.J. Dep't of Human Servs., 96 N.J. 456, 477 

(1984). 

As noted, intervenors initially argue that the final decision should be 

vacated because the Commissioner failed to comply with CN regulations by 

approving SCHC's request to add thirty LTC beds without subjecting it to the 

full review process outlined in N.J.A.C. 8:33-4.1(a). Specifically, they 
A-2571-18T1 12

contend that the Commissioner was required to publish a call notice in the 

New Jersey Register to invite competing applications for LTC beds, and by 

failing to do so, committed an ultra vires act that "deprived other providers . . . 

of the opportunity to similarly apply to provide [LTC] services at Salem 

Hospital." They also maintain that there was insufficient support in the record 

to indicate that there was a need to provide LTC beds in the area and that the 

process employed by the Commissioner "runs afoul of [his] statutory 

obligations to first determine that there is a need for such services." We agree. 

Pursuant to the Planning Act, and specifically N.J.S.A. 26:2H-7, no 

health care facility, including a hospital, may construct new facilities, expand 

existing ones, or initiate a new health care service, unless a CN has been 

applied for by the facility and granted by the Commissioner. The ultimate 

policy goals of the Planning Act are to "protect and promote the health of the 

inhabitants of the State" and to "guard against the closing of important 

institutions and the transfer of services from facilities in a manner that is 

harmful to the public interest." N.J.A.C. 8:33-1.2(a). Further, the Planning 

Act states that the Commissioner shall not grant a CN unless the proposal: 

is necessary to provide required health care in the area 

to be served, can be economically accomplished and 

maintained, will not have an adverse economic or 

financial impact on the delivery of health care services 

in the region or [s]tatewide, and will contribute to the 
A-2571-18T1 13

orderly development of adequate and effective health 

care services. 

[N.J.S.A. 26:2H-8.]

In determining whether to grant a CN, the Commissioner shall consider:

(a) the availability of facilities or services which may 

serve as alternatives or substitutes, (b) the need for 

special equipment and services in the area, (c) the 

possible economies and improvement in services to be 

anticipated from the operation of joint central 

services, (d) the adequacy of financial resources and 

sources of present and future revenues, (e) the 

availability of sufficient manpower in the several 

professional disciplines, and (f) such other factors as 

may be established by regulation. 

[Ibid.; see also N.J.A.C. 8:33-4.9(a)(1)-(5); N.J.A.C. 

8:33-4.10(b).]

The application and review process regarding CNs is further outlined in 

N.J.A.C. 8:33-1.1 to -6.2. In this regard, the applicable regulations provide for 

either a full or expedited review of a CN application. N.J.A.C. 8:33-4.1(a) to 

(b). As defined by N.J.A.C. 8:33-1.3, a full review includes "the review of an 

application by the . . . Planning Board, as well as the Department," while an 

expedited review "means the review by the Department of a [CN] application 

meeting certain specified criteria" without a Planning Board review. 

As noted, where the Commissioner determines that a need exists for a 

particular service in a given area, he is required to publish a call notice in the 

New Jersey Register in order to "invite [CN] applications . . . ." N.J.A.C. 
A-2571-18T1 14

8:33-4.1(a). Any such call notice must "identify the needed service(s), 

proposed geographic area(s) to be served, the date the application is due, and 

the date the application is deemed complete for processing." Ibid. Call 

notices are required only for CN applications subject to full review. Compare

N.J.A.C. 8:33-4.1(a) with N.J.A.C. 8:33-4.1(b).

Once an applicant submits an application subject to full review, the 

Department reviews it for completion. N.J.A.C. 8:33-4.5(a). It submits 

completed applications along with its analysis and recommendations to the 

Planning Board. Ibid. The Planning Board then conducts a public hearing to 

consider the application. N.J.A.C. 8:33-4.13. Following that hearing, the 

Planning Board provides the Commissioner with its recommendations. 

N.J.A.C. 8:33-4.13(c). Finally, the Commissioner issues a final agency 

decision that details its factual findings and reasoning. N.J.A.C. 8:33-4.15(a).

Conversely, an expedited review requires neither a call notice nor a 

review by the Planning Board. N.J.A.C. 8:33-4.1(b). The Commissioner may 

expedite review of the types of CN applications outlined in N.J.A.C. 8:33-

5.1(a), as well as in "[e]mergency situations which demand rapid action," 

N.J.A.C. 8:33-5.1(b)(1), or when it determines that "the project has minimal 

impact on the health care system as a whole," N.J.A.C. 8:33-5.1(b)(2). The 

expedited review process still requires "review of a [CN] application by the 
A-2571-18T1 15

Department" against the statutory factors outlined in N.J.S.A. 26:2H-8 with "a 

decision . . . by the Commissioner no later than [ninety] days" after the end of 

the review cycle. N.J.A.C. 8:33-4.1(b).

Generally, "[a]ny increase in the number of licensed beds by licensure 

and/or health planning category" requires a full review. N.J.A.C. 8:33-

3.4(a)(1). In this regard, "[c]onversions of licensed beds to other uses shall be 

treated as increases in the number of beds by licensure or health planning 

category" and are also subject to full review. N.J.A.C. 8:33-3.4(a)(2). 

However, as noted, where the Commissioner determines, consistent with 

N.J.A.C. 8:33-5.1, that a project will have a "minimal impact on the health 

care system as a whole," the project may be reviewed on an expedited basis.

Where an agency commits an act that violates its enabling act or 

regulations, that act is ultra vires, meaning that it is "void and may not be 

ratified." Port Liberte II Condo. Ass'n v. New Liberty Residential Urban 

Renewal Co., 435 N.J. Super. 51, 65 (App. Div. 2014) (quoting Grimes v. City 

of East Orange, 288 N.J. Super. 275, 279 (App. Div. 1996)); see also Comms. 

Workers of Am., AFL-CIO v. N.J. Civil Serv. Comm'n, 234 N.J. 483, 534 

(2018). "While findings of ultra vires actions are disfavored, '[o]ur role is to 

enforce the will of the Legislature' because '[s]tatutes cannot be amended by 

administrative fiat.'" In re Agric., Aquacultural, & Horticultural Water Usage 
A-2571-18T1 16

Certification Rules, 410 N.J. Super. 209, 223 (App. Div. 2009) (alterations in 

original) (citations omitted).

In considering whether the Commissioner has exceeded his authority or 

acted arbitrarily in approving an application, we are guided by the holding in 

Virtua-West. In that case, our Supreme Court vacated and remanded the 

Commissioner's decision to grant a CN to an applicant who "asked for a 

change in classification" of its Voorhees hospital which would permit it to 

provide "maternal and child health services . . . [for] 'high risk mothers and 

neonates.'" Virtua-West, 194 N.J. at 418, 434. In support of its decision, the 

Court determined that the Commissioner failed to analyze "the impact that this 

CN will have on the urban hospitals likely to be affected by its grant." Id. at 

434. In this regard, the Court described a "long-standing legislative objective 

to protect urban hospitals" and noted that CN review is "an important 

protective tool in the management of the health of urban hospitals." Id. at 434-

35; N.J.S.A. 26:2H-6.1(h). 

Further, in determining that the Commissioner "did not analyze, in any 

meaningful way," whether the grant would have "an adverse impact on the 

region's urban hospitals," the Court found that omission to constitute "a critical 

failing in a proceeding that has, as one of its pillars, avoidance of negative 

impacts on the delivery of health care services in the region." Virtua-West, 
A-2571-18T1 17

194 N.J. at 436. The Court emphasized that its role was not to reexamine the 

strength of the application, but to search the final agency decision for 

arbitrariness:

As far as her decision reveals, the Commissioner 

uncritically accepted Virtua's position without 

examining and explaining her response to the 

positions advanced by the objectors. Virtua contends 

that petitioners' concerns are speculative. That may 

prove to be true, but on this record we cannot be sure. 

It may be that there was a basis for her to reach her 

conclusion to do so, but her decision gives little 

comfort that the required analysis took place.

[Ibid.]

Moreover, when reviewing a final decision, we expect that the 

Commissioner will "state the basis of [the] decision with clarity; and, with 

sufficiency, to articulate the factual determinations and legal standards that 

inform the action taken." In re Certificate of Need Application of Arnold 

Walter Nursing Home, 277 N.J. Super. 472, 479 (App. Div. 1994) (citing Holy 

Name Hosp. v. N.J. Health Care Admin. Bd., 258 N.J. Super. 411, 415-16 

(App. Div. 1992)). We cannot properly review a case "in the absence of a 

particularized and detailed articulation of the Commissioner's assessment of 

the salient features of each application, how the various applications compare 

to each other, and how each serves or fails to serve public health needs as 
A-2571-18T1 18

expressed by the Legislature and in effecting regulations." Id. at 483; see also

Application of Holy Name Hosp., 301 N.J. Super. 282, 292 (App. Div. 1997). 

Here, in SCHC's application for transfer of ownership, it sought to 

"modify [its] licensed bed capacity" by decreasing the amount of 

medical/surgical beds and increasing the amount of LTC beds. By seeking to 

convert medical/surgical beds to LTC beds, SCHC's May 2018 application 

functioned as an "increase in the number of licensed beds by licensure"

pursuant to N.J.A.C. 8:33-3.4(a)(1). Accordingly, the Commissioner was 

required to consider that request specifically and in the context of a full review 

consistent with the Planning Act and applicable regulations.5

Even if the Commissioner was authorized to proceed in the manner in 

which he did, we also conclude that the limited findings made by the 

Commissioner regarding the LTC beds under N.J.S.A. 26:2H-8 were not 

supported by substantial credible evidence in the record. In his decision, the 

 

5

 We note that in Virtua-West, the Court concluded that despite the lack of a 

specific call notice for applications for regional perinatal centers, other 

providers received sufficient notice that such applications would be accepted 

under a general call for "services encompassed under the maternal-and-childhealth-need category." 194 N.J. at 429-30. Here, however, there is no 

indication in the record that any such general notice existed which would have 

notified all interested providers that applications for an increase in LTC beds 

in the area would have been accepted for processing. And, even if intervenors' 

participation could reflect a lack of prejudice as to their interests, as we have 

concluded, the Commissioner failed to establish a need for LTC beds with 

proper support in the record.
A-2571-18T1 19

Commissioner conducted an analysis of N.J.S.A. 26:2H-8(a) through (f) with 

regard to the transfer of ownership of the hospital. This analysis focused on 

the transfer of ownership and stressed that "continuation of the operating 

losses at Salem Hospital could put the future of Salem Hospital at risk and lead 

to [its] closure." The Commissioner also noted that "[t]he applicant's plan to 

bring the hospital into good financial health includes the addition of the 

[thirty] LTC beds and without the beds the hospital's financial forecast would 

not be sustainable thereby placing the continuing operation of the hospital in 

jeopardy." 

We acknowledge that couched within the Commissioner's analysis were 

spare references to the merits of granting SCHC's request for the LTC beds, 

including that the application would be approved because "[t]he transfer of 

ownership and licensing of the psychiatric and LTC beds is the least disruptive 

alternative to maintaining the current level of care and services in the area" 

and that "[t]he addition of [thirty] LTC beds represent an addition of 5.3 

[percent] of the capacity in the Salem County service area and will have a 

minimum impact on the healthcare system as a whole." Nevertheless, the 

Commissioner clearly considered SCHC's application in the general context of 

the financial viability of Salem Hospital and not with the necessary focus and 

analysis regarding the actual need for LTC beds in the area. 
A-2571-18T1 20

For example, although the Commissioner found that there would be a 5.3 

percent increase in LTC beds in the area by dividing 30 beds into the 513 LTC 

beds at the other four local facilities, we note that this figure represents, at 

best, only an increase in capacity. It does not address whether an actual need 

exists for those increased LTC beds. In this regard, the only evidence in the 

record establishing the extent the LTC beds at those facilities are actually 

filled was provided by intervenors, who pointed to data indicating that the 

occupancy rate in Salem County in 2017 was 83.1 percent and "today's overall 

occupancy rate" was less than 80 percent. 

Likewise, the Commissioner stated that besides Inspira Medical CenterElmer, "all other New Jersey hospitals in the area are located greater than 

[sixteen] miles from Salem Hospital." However, written testimony before the 

Planning Board indicated that Golden "is located about 0.5 miles from [Salem] 

Hospital," Carneys "is located 11.6 miles from [Salem] Hospital," and another 

LTC facility "is located 7.7 miles from [Salem] Hospital." As such, we 

conclude the Commissioner did not engage in the necessary analysis of the 

N.J.S.A. 26:2H-8 factors and instead analyzed the application substantively in 

the context of the financial viability of Salem Hospital. While this may have 

been an altruistic goal, it did not address completely the appropriate standard, 

which is whether granting SCHC's request for LTC beds would be necessary to 
A-2571-18T1 21

supply "required health care in the area to be served, can be economically 

accomplished and maintained, will not have an adverse economic or financial 

impact on the delivery of health care services . . ., and will contribute to the 

orderly development of adequate and effective health care services." N.J.S.A. 

26:2H-8.

Moreover, the Commissioner improperly failed to address substantively 

with support in the record, the positions of the objectors in making his 

decision. Instead, as in Virtua-West, the Commissioner appears to have 

"uncritically accepted" the position of SCHC "without examining and 

explaining [his] response to the positions advanced by [intervenors]." 194 N.J. 

at 436; see also Holy Name Hosp., 258 N.J. Super. at 416 (reversing the denial 

of a CN application where the Commissioner's decision appeared to be 

"effectively determined at the State Staff level and was not subjected to any 

critical judgment thereafter").

By way of example, as noted, the Commissioner found that the addition 

of thirty LTC beds would have a "minimum impact" on providers in the area 

because "[t]he addition of [thirty] LTC beds represent an addition of 5.3% of 

the capacity in the Salem County service area." However, at the Planning 

Board meeting, one member was "disturbed" by an existing provider's 

suggestion that SCHC "could basically put them out of business . . . by . . . 
A-2571-18T1 22

taking those [LTC] beds." Further, representatives of intervenors contended 

that if SCHC received thirty LTC beds, it would "devastate existing providers 

to the county." Not only did the Commissioner note in a conclusory fashion 

that there would be a "minimum impact" on existing providers without 

considering the positions of intervenors, it appears that his words are "those of 

the . . . investigator who had initially recommended" approval of SCHC's 

application. Holy Name Hosp., 258 N.J. Super. at 416. 

Further, according to the intervenors and amicus, limited personnel 

resources and federal funding comprising the bulk of the payments for LTC 

patients' care will be funneled from current underutilized facilities which will 

result in not more or better care, but worse because it could "reduc[e] existing 

providers' ability to provide services," particularly to the indigent population. 

In this regard, intervenors’ written testimony before the Planning Board stated 

that based on SCHC’s projected 95 percent occupancy of LTC beds, a thirtybed increase at Salem Hospital would transfer 36 percent of Salem County’s 

Medicare population from existing providers. And, we note that this diversion 

of services would be from financially viable entities currently providing the 

necessary LTC beds to a hospital in financial distress - as conceded by SCHC's 

own submissions and the Commissioner's findings - with an uncertain future 

even with an increase in LTC beds. On this point, in its CN application SCHC
A-2571-18T1 23

disclosed historic operating losses of approximately $19 million in 2016 and 

$22 million in 2017. While it also estimated total net operating revenues from 

2019 through 2022 of approximately $70 million per year, it projected only a 

total income of approximately $200,000 per year as a result of the LTC beds. 

We also reject the Commissioner's argument that to the extent a separate 

inquiry for an increase in LTC beds was required, the Commissioner made the 

necessary findings to review that request on an expedited basis because he 

"determined that [the additional LTC beds] would have a minimal impact on 

the health care system as a whole." First and foremost, it is clear from the 

record that the Department proceeded with a full review, as opposed to an 

expedited review, of SCHC's application to acquire ownership of Salem 

Hospital. In this regard, the Commissioner submitted SCHC's application to 

the Planning Board and the Planning Board held a public hearing on the 

application in order to issue recommendations to the Commissioner, a process 

exclusive to applications subject to a full review. See N.J.A.C. 8:33-4.1(a)-

(b). And, neither party disputes that SCHC did not seek expedited review of 

any portion of its CN.6

 

6

 Here, the concept of an expedited review was first raised in the Department's 

staff recommendations, in which it noted "SCHC could have separately applied 

for these LTC beds as an expedited review . . . claiming minimal impact on the 

healthcare system as a whole," but that "for transparency purposes these LTC 

(continued)
A-2571-18T1 24

As SCHC made no application for review of its CN application on an 

expedited basis and the Commissioner clearly considered the application under 

the full review process, we need not address whether a hypothetical CN 

application for LTC beds could proceed on an expedited basis. Even were we 

to assume, however, that an increase in LTC beds could proceed without a call 

and the necessary input from all interested parties to assess the need for those 

beds, and were we to further indulge the argument that the post hoc findings 

by the Commissioner satisfied the requirements of N.J.A.C. 8:33-5.1(b)(2), for 

the reasons detailed, supra pages 18 to 23, the Commissioner's findings on the 

need for LTC beds under N.J.S.A. 26:2H-8 were not supported by the record in 

any event. 

Finally, we observe that the robust review process contemplated by 

N.J.A.C. 8:33-1.1 to -6.2 and the Planning Act has numerous substantive 

purposes including to limit the "proliferation of certain health care services to 

preserve the viability of existing providers, . . . guard[ing] against the closing 

 

(continued)

beds were added to this CN to indicate to the community all planned uses" of 

Salem Hospital. Similarly, at the December 6, 2018 Planning Board meeting, 

one member noted that the steps taken to that point with regard to the LTC 

beds were "more in keeping with . . . an expedited [CN] review." Despite 

these comments, it is clear that an expedited review was not the process 

employed and that SCHC's CN application to transfer ownership of Salem 

Hospital underwent a full review. 
A-2571-18T1 25

of important institutions[,] and . . . transfer[ring] of services from facilities in a 

manner that is harmful to the public interest." N.J.A.C. 8:33-1.2(a). Here, 

despite the Commissioner's apparent goal to "save" Salem Hospital, noble as it

may have been, his final decision did not adequately address the 

aforementioned legislative objectives or the intervenors' objections. 

Accordingly, we vacate the Commissioner's January 15, 2019 final agency 

decision to the extent that it granted SCHC an increase in LTC beds and 

remand for further proceedings consistent with the Planning Act. 

III.

Finally, intervenors argue that the Commissioner erred in approving the 

transfer of the twenty-six psychiatric beds from the unimplemented November 

2017 CN awarded to CHS. Specifically, they contend that N.J.A.C. 8:33-3.3(j) 

prohibits "the transfer of unimplemented certificates of need," and that the 

Commissioner's approval was not based on any exception enumerated in 

N.J.A.C. 8:33-3.3(h)(1) to (6). In response, the Commissioner maintains that 

intervenors lack standing to challenge his award of psychiatric beds to SCHC 

because that award does not affect intervenors' interests. 

Generally, where an applicant seeks to acquire an unimplemented CN, 

"the transfer of unimplemented [CNs] is prohibited [and] [p]roceeding with 

any such transfer shall nullify the [CN] and preclude licensure as a health care 
A-2571-18T1 26

facility." N.J.A.C. 8:33-3.3(j). N.J.A.C. 8:33-3.3(k) provides that in the 

Department's discretion, "the [CN] process for transfer of ownership may be 

allowed to proceed on an unimplemented [CN] if the types of changes set forth 

at [subsection] (h)(1) through (6) above apply,"7and that "[a]pplicants for 

transfers of unimplemented [CNs] shall demonstrate in the application that the 

transfer will not adversely affect the financial feasibility of the project." 

However, N.J.A.C. 8:33-3.3(m), which governs the transfer of 

unimplemented CN approvals in the specific context of a transfer of ownership 

of a health care facility, provides: 

If the facility being transferred has any partially 

implemented or unimplemented [CN] approvals, an 

application for a license to own and/or operate the 

facility by the new owner will not be accepted . . . 

unless the current owner/operator surrenders to the 

Department the unimplemented [CN] approvals. The 

Commissioner may waive this requirement, based on a 

determination that the project has been substantially 

 

7

 N.J.A.C. 8:33-3.3(h) provides that a CN is not required for various types of 

changes by health care facilities, including where: 1) "less than [ten] percent 

of the outstanding stock" is purchased or sold; 2) a transaction occurs 

involving "purchase or sale of limited partnership interests in a limited 

partnership," 3) there exists "[a] change in the membership of a nonprofit 

corporation . . . and there is no purchase or sale of assets,"; 4) there exists "[a] 

change in ownership which does not involve acquisition of an ownership 

interest by a new principal"; 5) there is a "death of a principal in a health care 

facility"; and 6) there is "[a] transfer, which involves a change in the 

controlling legal entity, but not in individuals with ownership interests," such 

as a merger, consolidation, or "[a] change in the type of organizational entity 

owning the facility only." 
A-2571-18T1 27

completed and that completion of the project is in the 

public interest, consistent with the principles set forth 

at N.J.A.C. 8:33-1.2.

Here, in the Planning Board's statement of reasons for recommending 

that the Commissioner approve SCHC's CN application for transfer of 

ownership, it stated that it relied upon Department staff's assertion "that 

approval to transfer the [twenty-six] open psychiatric beds is a project that has 

been substantially completed and that completion of the project is in the public 

interest." Further, the Commissioner relied upon the November 7, 2017 CN 

approval to determine that it was "not only appropriate but necessary to 

transfer the unimplemented CN to [SCHC] to ensure that the need for these 

beds is met." In support of his decision, the Commissioner considered the 

"availability of facilities or services which may serve as alternatives or 

substitutes," pursuant to N.J.S.A. 26:2H-8(a), and determined that "[t]he 

transfer of ownership and licensing of the psychiatric . . . beds is the least 

disruptive alternative to maintaining the current level of care and services in 

the area." 

In intervenors' reply brief, they argue that the Commissioner did not 

make an explicit finding as to whether the unimplemented November 7, 2017 

CN for psychiatric beds has been "substantially completed" pursuant to 

N.J.A.C. 8:33-3.3(m). We initially note that because intervenors did not raise 
A-2571-18T1 28

this argument below, we consider any such contention waived. Nieder v. 

Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973). Further, intervenors 

improperly raised the lack of substantial completion argument for the first time 

on reply. See Borough of Berlin v. Remington Vernick Eng'rs, 337 N.J. Super. 

590, 596 (App. Div. 2001) ("Raising an issue for the first time in a reply brief 

is improper.") (citing State v. Smith, 55 N.J. 476, 488 (1970)). 

As to the merits of intervenors' contention, we note that the 

Commissioner incorporated the reasoning of the November 7, 2017 CN by 

reference and conditioned his approval on SCHC's compliance "with all 

conditions related to the [twenty-six] psychiatric beds as stated in the CN 

approval letter dated November 17, 2017." At the December 6, 2018 hearing, 

the Department's Health Systems Specialist read the Department's findings into 

the record, including that "approval to transfer the [twenty-six] open 

psychiatric beds is a project that has been substantially completed and that 

completion of the project is in the public interest." There was never a 

challenge to that finding by any entity in the administrative proceeding, and on 

appeal intervenors fail to cite any record support to challenge that specific 

finding or the Commissioner's decision to award the November 7, 2017 CN, 

generally. As a result of our decision, we need not address the Commissioner's 
A-2571-18T1 29

argument that intervenors do not possess standing to challenge the November 

7, 2017 CN as they do not provide psychiatric beds at their facilities. 

IV.

In sum, we affirm the Commissioner's January 15, 2019 final agency 

decision transferring the unimplemented November 7, 2017 CN for twenty-six 

psychiatric beds to SCHC. We vacate, however, that final agency decision to 

the extent that it granted SCHC an increase in LTC beds, and we remand for 

further proceedings consistent with our opinion and the Planning Act. 

As in Virtua-West, "[w]e recognize that the CN has already been issued 

and never has been stayed. Nonetheless, in order to fulfill the statutory, and 

salutary, purposes of the CN system, we must remand this case to the 

Commissioner for a full analysis and a complete explanation of [his] decision." 

194 N.J. at 436. While we acknowledge that on remand, the Commissioner 

may again award the LTC beds to SCHC, his conclusion "must be reached 

through a more careful examination of the record and explication for the 

determination that is reached." Ibid. We express no opinion on the outcome 

of any future administrative proceedings. 

Affirmed in part and vacated and remanded in part. We do not retain 

jurisdiction.