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St. Vincent''s Hospital v. Finley

Decided: October 31, 1977.


Bischoff, Kole and Gaulkin. The opinion of the court was delivered by Gaulkin, J.s.c., Temporarily Assigned.


St. Vincent's Hospital appeals from the denial of its application for a certificate of need by the Health Care Administration Board (HCAB) in the New Jersey State Department of Health (Department). N.J.S.A. 26:2H-7 et seq.

The procedural history of the application is long and complex. St. Vincent's, a private Catholic "less than full service" hospital of 112 beds operated in Montclair since 1898, applied to the Department in May 1972 for a certificate

of need permitting it to relocate to a 200-bed full service hospital in West Caldwell. Before that application was acted upon, and based upon informal discussions with Department personnel, St. Vincent's withdrew its application and in November 1973 filed a new application for a certificate of need for a 100-bed "less than full service" hospital in West Caldwell. Sometime thereafter Montclair Community Hospital, a 122-bed hospital also located in Montclair, applied for a certificate of need to relocate to a 200-bed facility in that area of Essex County known as West Essex, where West Caldwell lies.

In keeping with N.J.S.A. 26:2H-3 and 10, both St. Vincent's and the Montclair Community applications were submitted for review by the Hospital and Health Planning Council of Metropolitan New Jersey (the "B" agency), a comprehensive area-wide health planning agency. N.J.S.A. 26:2H-2(g). In conjunction with that review, the B agency initiated discussions between the hospitals to determine whether a merger of institutions or facilities might be effected. Those discussions proved abortive since St. Vincent's contended that theological and philosophical differences between its Catholic institution and the nonsectarian Montclair Community were insurmountable. Thereupon, on March 27, 1974, the B agency recommended that St. Vincent's be issued a certificate of need, giving as its essential reasons that (1) the contemplated facility would yield an actual decrease of 13 beds; (2) the proposed less-than-full care hospital would have an affiliation with St. Joseph's Medical Center for special services and (3) the estimated indebtedness of the hospital would be within the guidelines promulgated by the Department. At the same time, the B agency recommended denial of the Montclair Community application.

Pursuant to N.J.S.A. 26:2H-10 and N.J.A.C. 8:33-2.4, the St. Vincent's application was forwarded for review by the State Health Planning Council (the "A" agency). N.J.S.A. 26:2H-2(f). While it was there pending, the

then Acting Commissioner of Health pursued further merger discussions with St. Vincent's and Montclair Community, again to no avail. On September 27, 1974 the A agency recommended denial of both the St. Vincent's and the Montclair Community applications on grounds that Essex County was already overbedded by 170 medical-surgical beds and that no need existed for two "acute general hospitals" in West Essex. In recommending denial the A agency noted that merger discussions had taken place and recommended that the B agency and the Department of Health "work together to insure a certificate of need that will best meet the health care needs in the Montclair-West Essex area."

On October 7, 1974, following receipt of the recommendations of both the B and A agencies, the Commissioner of Health recommended denial of the application on the same grounds relied upon by the A agency. St. Vincent's sought reconsideration of this recommendation, in part relying upon a then-existing administrative regulation, N.J.A.C. 8:32-9.3(a):

The requests for reconsideration were forwarded by the Department to the A agency, which on January 31, 1975 determined that under the regulation it could not consider the bed need criterion in judging the St. Vincent's application; it thereupon reversed its earlier determination and recommended approval of that application. This recommendation was forwarded to the Commissioner who once again attempted to initiate merger discussions between St. Vincent's and Montclair Community, which once again aborted. Again the Commissioner recommended denial of the St. Vincent's application, this time on the basis of a number of reasons set forth in a letter addressed to St. Vincent's on April 24, 1975.

Pursuant to N.J.S.A. 26:2H-9 St. Vincent's demanded a hearing. Following extensive hearings conducted between July 16, 1975 and February 11, 1976, the hearing officer on June 24, 1976 rendered a lengthy report which specifically addressed the reasons for denial set forth in the Commissioner's April 24, 1975 letter. The hearing officer found each of the reasons given by the Commissioner unsupported by the record and therefore recommended that the HCAB approve St. Vincent's application.

The HCAB considered the report of the hearing officer at its meeting of August 5, 1976, and voted to deny the St. Vincent's application. N.J.S.A. 26:2H-9. The reasons given by the HCAB were precisely those set forth by the Commissioner in her April 24, 1975 letter, stated in virtually the same language. At the request of St. Vincent's the HCAB reviewed its decision after receiving copies of the documents introduced ...

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