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Colkitt v. Siegel

May 22, 1995


On certification to the Superior Court, Appellate Division.

The opinion of the Court was delivered by O'hern, J. Chief Justice Wilentz and Justices Handler, Pollock, Garibaldi, and Stein join in this opinion.

The opinion of the court was delivered by: O'hern

(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).


Argued January 30, 1995 -- Decided May 22, 1995

O'HERN, J., writing for a unanimous Court.

Douglas R. Colkitt, M.D. is a licensed radiation oncologist specializing in the treatment of cancer through x-ray therapy. Dr. Colkitt seeks to install cancer radiation equipment in an outpatient office in Vineland, New Jersey.

The Health Care Facilities Planning Act, N.J.S.A. 26:2H-7, states that a health care facility cannot be constructed or expanded nor can a new health care service be instituted except on application for and receipt of a certificate of need from the Department of Health (Department). One may apply for a waiver of the certificate of need requirement if: 1) the applicant demonstrates an inability to practice the specialty without the service or equipment at issue; 2) at least 75% of the applicant's charges stem from the challenged service or equipment; and 3) the service or equipment is otherwise unavailable to patients, as determined by the Commissioner of Health (Commissioner).

In March 1992, the Department notified Dr. Colkitt that to establish his radiation therapy facility, he would have to apply for either a certificate of need or a waiver. On March 24, 1992, Dr. Colkitt submitted a request for a waiver. On June 2, 1992, the Department requested information from South Jersey Hospital System (SJHS) concerning the effect of Dr. Colkitt's proposed service on SJHS's existing radiation treatment services. SJHS opposed the proposed Vineland facility, seeing no need for an additional facility because there was no backlog of patients and because it could expand should the need arise. Dr. Colkitt was not informed of the information supplied by SJHS.

On September 15, 1992, the Commissioner denied the waiver application, finding that Dr. Colkitt had failed to show that he would be unable to practice his specialty without the Vineland facility, that "any substantial portion" of his total charges for radiation therapy would be derived from the Vineland facility, and that the radiation service was otherwise unavailable to patients in the area. The Commissioner also informed Dr. Colkitt of a moratorium on the acceptance of certificate applications that had been in effect since August 22, 1991, expiring only when the Department formally adopted new regulations.

Dr. Colkitt appealed the Commissioner's decision to the Appellate Division, arguing that his facility was not subject to certificate of need requirements because no regulations were in place when he submitted his proposal. The previous certificate regulations governing radiation oncology services had expired on September 15, 1991. Thereafter, the Department enacted an updated set of radiation therapy regulations which became effective February 16, 1993 (the February 1993 regulations) after Dr. Colkitt had submitted his application. Dr Colkitt argued that: because no regulations were in place when he sought to operate his facility, the Commissioner had no jurisdiction; the August 22, 1991 moratorium on applications for certificates of need became irrelevant with the expiration of the certificate regulations in 1991; and, the February 1993 regulations were not intended to be applied retroactively. In response the Department claimed that it never intended to cease regulating such services and that the Commissioner had sufficient authority to require a certificate or a waiver.

The Appellate Division determined that because the certificate regulations governing radiation oncology had lapsed, unless the February regulations were valid and applied retroactively, Dr. Colkitt's proposal would not fall under certificate review. Anticipating that the Supreme Court's decision in In re Adoption of Regulations Governing State Health Plan would resolve the validity of the new regulations, the Appellate Division concluded that the February 1993 regulations would apply retroactively to Dr. Colkitt, unless State Health Plan invalidated them. On the waiver issue, the Appellate Division found that Dr. Colkitt met the first two requirements of the waiver regulation but found with regard to the "availability" criterion that the Commissioner had denied Dr. Colkitt due process by not giving him the opportunity to rebut the information obtained from SJHS. The court gave Dr. Colkitt the opportunity to await the decision in State Health Plan or accept a remand on the third portion of the waiver requirement. State Health Plan was decided by this Court on February 28, 1994. The Court held that regulations directly implementing the policies identified in the State Health Plan were invalid under Chapter 31 of the Laws of 1992, which expressly forbade regulations with such an effect or intent.

The Supreme Court granted certification to consider whether the February 1993 certificate of need regulations for radiation oncology facilities are valid in light of State Health Plan.

HELD: The February 1993 regulations governing certificate of need eligibility for radiation oncology services are not an immediate and direct implementation of the goals and objectives of the State Health Plan. As such, these regulations do not conflict with Chapter 31 and are, therefore, valid.

1. In 1991, the Legislature enacted the Health Care Cost Reduction Act, which established the State Health Planning Board and directed the Board to prepare a State Health Plan. Under that legislation, no certificate of need was to issue unless the action proposed in the application for such certificate was consistent with the health care needs identified in the State Health Plan. Thereafter, in June 1992, prior to the adoption of the State Health Plan, the Legislature enacted Chapter 31, which deleted the requirement that the State Health Plan serve as the basis for all certificate applications. Instead, the Plan was to serve as only an advisory document that may be considered during the approval process. In addition, the Board and the Department were no longer able to adopt any regulation that implemented any goals, objectives or any other health planning recommendations included in the State Health Plan. (pp. 7-11)

2. In enacting Chapter 31, the Legislature did not intend to prohibit the Department from adopting any regulations that correspond in any respect with any of the numerous views and recommendations contained in the State Health Plan. Chapter 31 prohibits only the immediate and direct implementation of the specific health planning decisions set forth in the State Health Plan. The February 1993 regulations are not an immediate and direct implementation of the State Health Plan. They are nearly identical to and generally consistent with the previous regulations. That the regulations might be consistent with the State Health Plan does not render them invalid. (pp. 12-14)

3. Dr. Colkitt should be given a new hearing in order to review and rebut all information on which the Department relied when considering his waiver application. In addition, any of the numerous views and recommendations expressed as goals of the State Health Plan that are referenced in the subject regulations serve only as general standards to guide the Department. Since the time of oral argument, the February 1993 regulations have expired. Thus, the newest regulations, adopted on February 16, 1995, will govern further proceedings in this matter. (pp. 14-16)

Judgment of the Appellate Division invalidating N.J.A.C. 8:33I-1.1 to -1.6, effective February 16, 1993, is REVERSED and the matter is REMANDED for further proceedings in accordance with this opinion.


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