On appeal from the Health Care Administration Board.
Petrella, R.s. Cohen and A.m. Stein, JJ. The opinion of the court was delivered by Cohen, R.s., J.A.D.
The opinion of the court was delivered by
Holy Name Hospital is a 370-bed acute care hospital located in Teaneck. It submitted to the New Jersey Department of Health an application for a Certificate of Need (CN) for the establishment of a magnetic resonance imaging (MRI) facility in a Health Service Area (HSA) consisting of Bergen and Passaic counties. Holy Name's application was part of the July 15, 1989, competitive review cycle. It was considered along with other CN applications for an MRI facility that was to be located in the same HSA. The other applications were submitted by the Passaic Consortium, a partnership of two hospitals and a profit-making corporation, and Wayne General Hospital/Barnert Memorial Hospital, which later dropped out. At the time, the HSA had a population of about 1.3 million people.
The applications were considered according to regulations recently adopted by the Department to deal with the relatively
new subject of MRI services, and their orderly establishment. N.J.A.C. 8:33J-1.1 et seq. The regulations were untested ones which were modeled on ones developed for the same purpose in New York. They established an expected need of one MRI unit for each 420,000 population within an HSA. N.J.A.C. 8:33J-1.2. After the regulations were adopted, the 1/420,000 ratio came under some criticism as understating the need for MRI units. The applications, however, were entertained and decided according to that benchmark.
Based on the 1/420,000 ratio, the Bergen/Passaic HSA had a need for 3 MRI units, two of which were already in place and operating. One was at Englewood Hospital; the other was in Passaic County, and was run by MRI Northern, a partnership in which Holy Name had an interest. Thus, the applications of Holy Name and the Passaic Consortium competed for the one available CN. An additional one could be granted, according to the Department, but only on a showing that it would "appreciably improve access to [MRI] service and . . . contribute to the orderly development of MRI services in the [HSA]."
The North Jersey Health Planning Council, the first level of review, endorsed the applications of both Holy Name and the Passaic Consortium. The next referral was to the State Staff of the Statewide Health Coordinating Council. The State Staff recommendation was to deny Holy Name's application. Its reasons were:
1. The applicant is not in compliance with minimum requirements for the initiation of MRI services contained in N.J.A.C. 8:33J-1.1 et seq.
2. The applicant has failed to demonstrate an ability to initiate this new MRI service and to achieve acceptable utilization levels, based on an analysis of factors at N.J.A.C. 8:33J-1.2 (Minimum Population Base), N.J.A.C. 8:33J-1.3 (Minimum Utilization Standards), and N.J.A.C. 8:33J-1.6 (Competitive Areawide Criteria), to a greater degree than other competing applicants from the health service area.
3. Approval of additional MRI services over and above that permitted under the existing MRI rule would not appreciably improve access to this service and would not contribute to the orderly ...