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Application of Holy Name Hosp.

May 28, 1997


On appeal from the Office of Administrative Law.

Approved for Publication May 28, 1997.

Before Judges Shebell, Baime and P.g. Levy. The opinion of the court was delivered by Baime, J.A.D.

The opinion of the court was delivered by: Baime

The opinion of the court was delivered by


Holy Name Hospital (Holy Name) appeals from the denial of its application for a certificate of need (CON) to expand its home health services into Hudson County. Administrative Law Judge (ALJ) Edith Klinger sustained the findings of the State Health Planning Board (SHPB) that the potential increase in the need for home health services could be satisfied by existing providers and that granting Holy Name's application could adversely affect the cost efficient delivery of home health care in the county. Holy Name contends that (1) the proceedings were procedurally defective because the SHPB did not issue a separate written decision as required by regulation, and (2) the ALJ's findings are not supported by sufficient credible evidence and her legal Conclusion is arbitrary and capricious. We reject these arguments.


Under the Health Care Facilities Planning Act (N.J.S.A. 26:2H-1 to -18.78), no health care provider may construct new facilities or expand existing ones or initiate new services unless a certificate of need has been granted by the Commissioner of Health. N.J.S.A. 26:2H-7; see also N.J.A.C. 8:33-3.1. In In re Certificate of Need Granted to the Harborage, 300 N.J. Super. 363, 693 A.2d 133 (App. Div. 1997), we described the statutory and regulatory framework within which decisions pertaining to applications for certificates of need are made. We need not tread upon ground so ably covered by Judge Michels in that decision. Suffice it to say, no CON may be issued unless the applicant establishes that there is a need for "health care in the area to be served," and that granting the application "will not have an adverse economic or financial impact on the delivery of health care services in the region or statewide." N.J.S.A. 26:2H-8. The factors that must be considered include: (1) the availability of facilities or services which may serve as alternatives or substitutions, (2) the need for special equipment or special services in the area, (3) the potential economies that could be accomplished by the operation of joint central services, (4) the adequacy of financial resources and the potential for future revenues, (5) the availability of sufficient personnel in the applicable professional disciplines, and (6) other relevant factors as may be identified by way of regulation. Ibid.

The administrative process is triggered by a "call" from the Department of Health and Senior Services, inviting the submission of CON applications. N.J.A.C. 8:33-4.1(a), (b). Once the Department determines that the applications are complete, N.J.A.C. 8:33-4.5, -4.9, -4.10, they are forwarded to a Local Advisory Board (LAB) with jurisdiction over the applicable geographic area. N.J.S.A. 26:2H-5.9(b), -10; N.J.A.C. 8:33-4.1, -4.12. If twenty-five percent or more of the quorum of voting members approve the application, it is forwarded to the SHPB. N.J.S.A. 26:2H-10.1(a)(1). In turn, if twenty-five percent or more of the voting members of SHPB approve the application, it is forwarded to the Commissioner for his review. N.J.S.A. 26:2H-10.1(a)(2); N.J.A.C. 8:33-4.14(b). If the applicant does not obtain the approval of the requisite percentage of the LAB's or the SHPB's voting members, it may seek a hearing by the Office of Administrative Law (OAL). N.J.A.C. 8:33-4.14. Upon approval of the application by an ALJ, the matter is then forwarded to either the SHPB or the Commissioner, as appropriate, for review. N.J.A.C. 8:33-4.14(c). However, if the ALJ sustains the LAB's or the SHPB's denial of the application, the decision is deemed a final agency determination which may be directly appealed to this court. R. 2:2-3(a)(2).

It is against this somewhat abstruse statutory and regulatory backdrop that we briefly summarize the salient facts. In 1991, the Department conducted a home health care survey in an attempt to determine whether there was a need for additional services for medical patients. Under its methodology, the Department sought to find whether there existed a "service gap," i.e., the difference between services provided and services needed coupled with demonstrated access problems for patients in a given service area. See N.J.A.C. 8:33L-2.4(a)(3). Utilizing 1991 data, the Department concluded that between 147,550 and 313,110 visits to home health agencies by medicare beneficiaries would be needed in Hudson County by 1994. The data indicated that in 1991, 88,757 actual visits were provided in the county. The Department thus anticipated that a gap of between 58,803 and 224,353 visits would exist in 1994 unless existing providers expanded their services or new providers became available. Although the statewide percentage of individuals sixty-five years or older was 13.5% and in Hudson County was only 12.7%, the Department considered the potential service gap sufficiently significant to issue a call for CON applications.

Holy Name, a 361-bed hospital located in Bergen County, submitted an application pursuant to the call. Specifically, Holy Name sought to expand its existing Bergen County home health care program by providing services in neighboring Hudson County. In its application, Holy Name emphasized that it was forced to refer its Hudson County patients to other home health providers. Noting that the percentage of its patients residing in Hudson County had increased over the years, Holy Name indicated that it wished to provide continuity of patient care.

Holy Name's application was forwarded to the LAB having jurisdiction in Bergen and Hudson counties. Evidence was presented indicating that Holy Name had long provided valuable services to the homeless and to battered women in Bergen County. Additional evidence was submitted in which it was contended that if its application were granted, Holy Name would provide a broad array of home health services, including maternal and child care, pediatric, hospice and rehabilitative services, and physical therapy.

A consortium of existing Hudson County home health providers recommended against granting Holy Name's application. The consortium noted that there were six home health providers in the county and that these agencies provided adequate consumer choice and access. Specific access problems alleged by the other applicants for home health services were rebutted by the consortium. Moreover, the consortium presented data indicating that allowing additional providers in the county would reduce the number of visits provided by the existing agencies, thereby increasing the cost per visit. The consortium noted that while Holy Name projected a per visit cost of $63.44, the average cost per visit in the county was $61. The consortium argued that there was no unmet need for home health services in Hudson County, and that granting Holy Name's application would result in costly duplicative services.

The LAB voted to approve Holy Name's application. The application was thus forwarded to the SHPB for its review. We need not recount at length the evidence presented to the SHPB. It is enough to say that the proofs were conflicting both with respect to whether existing Hudson County home health providers could satisfy the anticipated service gap and whether cost per visits would be increased if Holy Name were granted a CON. In their comments immediately preceding their votes, SHPB members emphasized the lower percentage of medicare patients residing in Hudson County compared to the state average, the strong likelihood that any future need for home health services could be fulfilled by existing providers, and the possibility that granting Holy Name's application might ...

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