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Saint Peter's University Hospital v. Lacy

September 14, 2004

SAINT PETER'S UNIVERSITY HOSPITAL, PLAINTIFF-APPELLANT,
v.
CLIFTON R. LACY, COMMISSIONER OF THE NEW JERSEY DEPARTMENT OF HEALTH AND SENIOR SERVICES, MARY WACHTER, CHIEF OF STAFF OF THE NEW JERSEY DEPARTMENT OF HEALTH AND SENIOR SERVICES, AND THE NEW JERSEY DEPARTMENT OF HEALTH AND SENIOR SERVICES, AN AGENCY OF THE STATE OF NEW JERSEY, DEFENDANTS-RESPONDENTS, AND ROBERT WOOD JOHNSON UNIVERSITY HOSPITAL, INTERVENOR-RESPONDENT.



On appeal from the Department of Health and Senior Services.

Before Judges Kestin, Cuff and Winkelstein.

The opinion of the court was delivered by: Kestin, P.J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued: February 4, 2004

Saint Peter's University Hospital (St. Peter's) appeals from the adoption by the Department of Health and Senior Services (the Department) of regulations codified at N.J.A.C. 8:43G-22A.6(c) and (e) on the ground that those provisions violate the certificate of need (CN) requirements of the Health Care Facilities Planning Act (the Act), N.J.S.A. 26:2H-1 to -26. Shortly after St. Peter's filed its notice of appeal, Robert Wood Johnson University Hospital (RWJ) moved to intervene as a respondent. We granted the motion.

I.

St. Peter's operates a children's hospital licensed to conduct a specialized pediatric service known as a regional perinatal center (RPC). The Act requires that a children's hospital apply for and obtain a CN before qualifying to operate an RPC. See generally N.J.S.A. 26:2H-7 to -12. In 2002, however, the Department promulgated regulations requiring"[a] licensed children's hospital not licensed to operate [an RPC]... [to] file a licensing application to initiate such a service[.]" N.J.A.C. 8:43G-22A.6(d). An applicant was"not... required to obtain certificate of need approval to establish such a... center[.]" N.J.A.C. 8:43G-22A.6(e). RWJ has represented that, historically, it had operated the only licensed children's hospital without an RPC.

St. Peter's urges that the regulations be invalidated on the ground that they conflict with the Act to the extent they authorize the approval of RPCs without CNs. We conclude that the Legislature has clearly expressed its intent that the CN mechanism be retained as an integral part of the process for approving undertakings such as RPCs, and that the challenged regulations are invalid because they contravene that legislative requirement.

II.

On April 1, 2002, the Department proposed new regulations governing licensure standards for children's hospitals. See 34 N.J.R. 1305(a). During the comment period, St. Peter's submitted written objections to one of the proposed regulations, later codified as N.J.A.C. 8:43G-22A.6(c), which required all children's hospitals to operate RPCs within a year of the rule's adoption. An RPC is"a general acute care hospital which is designated and licensed to provide care to high risk mothers and neonates. Such a facility provides consultation, referral, transport and follow-up to other members of its Maternal and Child Health Consortium." N.J.A.C. 8:33C-1.2. The Consortium is"a voluntary [sic] formed nonprofit organization which is licensed as a central service facility by the Department as specified in these rules, and incorporated under Section 501(c)(3) of the United States Internal Revenue Code." Ibid.

St. Peter's, which operated a children's hospital that already had an RPC, asserted in its objections that such a facility demanded certain human and financial commitments that would unduly burden a hospital that had not chosen to operate an RPC in the past. St. Peter's protested, as well, that the"proposal will also place undue competitive and economic pressures on current centers," such as its own, impairing its financial integrity as well as RWJ's, thus derogating some of the policies informing the CN requirement. St. Peter's urged that RPCs be mandated only when meeting a geographic need,"as determined through a rational review in the certificate of need process."

At a meeting of the Health Care Administration Board on September 19, 2002, the Department recommended approval of the proposed regulations without change, and the Board voted accordingly. The regulations were published and effective on October 21, 2002. See 34 N.J.R. 3637(b). In its adoption notice, the Department summarized St. Peter's written objections and responded to them:

COMMENT: [St. Peter's] reported a single area of concern with the proposed rules. While the commenter agrees that all children's hospitals should maintain a NICU, it does not agree that each should be a regional perinatal center (RPC). [St. Peter's] argues that"the responsibilities associated with operation of a RPC are broad in scope. These centers must comply with strict facility and service requirements. RPCs are further required to provide community education programs and follow-up care geared toward the specific needs of neonatal patients. Existing RPCs have made the necessary financial commitments and investments in human capital to comply with these necessarily rigorous rules. Requiring this same commitment from all licensed children's hospitals will place an undue financial burden on existing children's hospitals that would, under this proposal, be forced to seek designation as a RPC. This proposal will also place undue competitive and economic pressures on current centers." The commenter asked for the removal of the requirement for children's hospital to become a RPC at proposed [N.J.A.C.] 8:43G-22A.6(c).

RESPONSE: The Department disagrees. The Department contends that it is essential that all children's hospitals provide the services of a RPC, services geared toward the needs of pregnant women, neonates, and pediatric patients. To permit a children's hospital to do less would damage access to a smooth continuum of necessary services for these classes of patients. [34 N.J.R. 3638.]

The regulatory provisions challenged are subsections of N.J.A.C. 8:43G-22A.6. They provide:

(c) By October 21, 2003, all licensed children's hospitals shall operate a regional perinatal center in accordance with N.J.A.C. 8:43G-19, and applicable provisions of N.J.A.C. 8:33C, including N.J.A.C. 8:33C-3.4(a)3 through 10.

(e) A licensed children's hospital not also licensed to operate a pediatric intensive care unit or a regional perinatal center on October 21, 2002 shall not be required to obtain certificate of need approval to establish such a unit or center, including neonatal intensive or intermediate care unit(s) within the center.

1. A licensed children's hospital without a licensed pediatric intensive care unit may establish such a unit with a maximum size of six beds without certificate of need approval.

2. A licensed children's hospital without a licensed neonatal intermediate or intensive care unit may establish such a unit(s) with a maximum size of four bassinets for an intermediate care nursery and six bassinets for an intensive care nursery without certificate of need approval.

St. Peter's unsuccessfully moved before the Department for a stay of the challenged regulations pending appeal. Following the filing of its notice of appeal, St. Peter's moved before us for a stay pending appeal. The Department cross-moved for a partial remand so that it could amend the regulations to cure appellant's objections.

In separate orders entered on November 18, 2002, we denied the motion for a partial remand, and granted a stay pending appeal"without prejudice to the authority of the [Department] to propose and adopt amendments to the challenged regulations and to seek, thereafter, such relief regarding the appeal as may be appropriate."

On February 3, 2003, the Department published a proposed amendment to the disputed regulation. See 35 N.J.R. 582(a). The proposal eliminated the mandate for RPC's, instead requiring only that all children's hospitals have a"community perinatal center-intensive." See 35 N.J.R. 583. After receiving comments, however, the Department, on May 5, 2003, withdrew the proposed amendment, explaining that 523 out of the 530 commenters supported the RPC mandate in the existing regulation, and that 529 opposed the amendment. See 35 N.J.R. 1831(a).

On June 30, 2004, after oral argument in this appeal, while consideration was pending, we received a communication from the Attorney General advising that the Department, on June 4, 2004, had notified RWJ of the approval of RWJ's CN application for a change in scope"from Community Perinatal Center-Intermediate to Regional Perinatal Center."

We received a letter from counsel for St. Peter's, dated July 7, 2004, objecting to this action and asserting that the decision of June 4, 2004, was issued under the Department's expedited review process, N.J.A.C. ...


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