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New Jersey Hospital Association v. New Jersey State Department of Health

Decided: June 14, 1991.

NEW JERSEY HOSPITAL ASSOCIATION, PLAINTIFF-APPELLANT,
v.
NEW JERSEY STATE DEPARTMENT OF HEALTH, FRANCES DUNSTON, M.D., M.P.H., COMMISSIONER OF THE DEPARTMENT OF HEALTH; HOSPITAL RATE SETTING COMMISSION; KATHLEEN BRENNAN, ACTING ADMINISTRATOR OF THE NEW JERSEY UNCOMPENSATED CARE TRUST FUND; IN HER OFFICIAL CAPACITY; AND THE NEW JERSEY UNCOMPENSATED CARE TRUST FUND, DEFENDANTS-RESPONDENTS



On appeal from a final decision of the Commissioner of Health.

Judges Long, R.s. Cohen and Stern. The opinion of the court was delivered by Stern, J.A.D.

Stern

Plaintiff New Jersey Hospital Association (hereinafter the "Association") filed a verified complaint in the Law Division seeking an order compelling payments out of the New Jersey

Uncompensated Care Trust Fund to certain hospitals which previously received such funds pursuant to statute. The Association also sought an order restraining defendants from "utilizing the monies remaining in the Trust Fund for any purpose other than the making" of such payments.

The matter was transferred here pursuant to R. 1:13-4(a).

On emergent application before us on February 26, 1991, we restrained the State

from utilizing the monies remaining in the New Jersey Uncompensated Care Trust Fund for any purpose other than the making of scheduled payments to hospitals pending disposition of this appeal. . . .

We also accelerated briefing and oral argument.

I.

The New Jersey Uncompensated Care Trust Fund ("Fund") was enacted on January 5, 1987 as a supplement to the Health Care Facilities Planning Act ("Act"), N.J. S.A. 26:2H-1 to -26.*fn1 The purpose of the Fund was to insure that health care would not be denied to residents who otherwise cannot afford it. See L. 1986, c. 204, § 1. See also N.J.S.A. 26:2H-18.4 (expired). The Fund was established to require that "all payers of health care services share in payment of uncompensated care on a Statewide basis." L. 1986, c. 204, § 1. See also N.J.S.A. 26:2H-18.4a (expired). We are told that prior to the establishment of the Fund, each individual hospital's rates included the costs of recovery for uncompensated care at that hospital. Thus, hospital rates were significantly higher for those hospitals which had a greater amount of uncompensated medical expenses, those hospitals usually being in the urban communities. See Matter of Schedule of Rates for Barnert Memorial

Hospital, 92 N.J. 31, 36 (1983) (noting that the Health Care Facilities Planning Act as amended in 1978 endeavored to address this problem).

The Fund was comprised of "monies collected from hospitals pursuant to [the statute as well as] monies appropriated from the General Fund" by the Legislature. L. 1986, c. 204, § 4a. See also N.J.S.A. 26:2H-18.7(a)(expired). For rate periods beginning January and July of each year, the Department of Health was to determine "a uniform Statewide uncompensated care add-on", or uniform surcharge to be "included in hospital rates." L. 1986, c. 204, § 6; N.J.S.A. 26:2H-18.9a (expired). The amount of the "add-on was determined "by dividing the Statewide amount of approved uncompensated care plus an amount adequate to repay any direct appropriation of State funds . . . and to fund the reasonable cost of administering the fund . . . and maintaining the reserve pursuant to [the A]ct, by the Statewide amount of approved revenue for all payers and approved revenue for medically indigent persons less the Statewide amount of approved uncompensated care." L. 1986, c. 204, § 6. See also N.J.S.A. 26:2H-18.9a (expired). The amount of the "add-on" was to be approved by the Hospital Rate Setting Commission ("Commission") before it was included in hospital rates. L. 1986, c. 204, § 6; N.J.S.A. 26:2H-18.9a (expired).

The Commission was also directed to approve the amount of each hospital's uncompensated care. L. 1986, c. 204, § 7a; N.J.S.A. 26:2H-18.10a (expired). The Fund was also required to "maintain a reserve equal to 1/12 of the fund's total estimated annual payment for uncompensated care costs for the ...


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