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Home Care Association of New Jersey v. New Jersey Dep't of Health and Senior Services

May 7, 2008


On appeal from a Final Agency Decision of the Commissioner, New Jersey Department of Health and Senior Services, CN # ER 051202-13-06; 051203-12-06.

Per curiam.


Argued March 10, 2008

Before Judges S. L. Reisner, Gilroy and Baxter.

Appellant Home Care Association of New Jersey (Home Care)*fn1 appeals from the March 7, 2006, decisions of the New Jersey Department of Health and Senior Services (Department), which granted two applications for certificates of need (CN) submitted by intervenor Erickson Retirement Communities, LLC (Erickson),*fn2 as amended by the Department's supplemental decision of August 25, 2006. We affirm.

The combined statement of facts and procedural history is as follows. On July 12, 2005, Erickson received approval from the Federal Centers for Medicare & Medicaid Services (CMS) to participate in the Federal Medicare Advantage Continuing Care Retirement Community Demonstration project through December 31, 2008. Under that program, Erickson was charged with developing a new healthcare access program known as "Evercare" for enrollment by senior residents of the Erickson communities in various states, including New Jersey. Under the terms and conditions of the approval, Erickson was obligated to offer its Medicare Advantage Plan (Plan) to its residents at the same time and on the same basis as any other Medicare Advantage Plan.

Under the Plan, Evercare would be paid a capitated rate for each enrollee and would accept the risk for the full cost of healthcare, including hospitalization. Erickson described the Plan as:

[T]he program emphasizes preventive care to avoid or minimize hospital stays and assures the delivery of healthcare in the most appropriate setting. The program will rely heavily on the use of home health, tailoring a specific package of services for residents in independent living. The ability to manage total healthcare costs under a fixed capitated rate is largely dependent on the ability to manage appropriate hospitalizations and to provide care in the most appropriate setting.

On December 1, 2005, Marilyn Roach, Erickson's Director of Regulatory Affairs, submitted two applications, seeking authority to establish new home health agencies (HHA)*fn3 at Seabrook and at Cedar Crest. Both applications were submitted to the Department under the expedited review process, pursuant to N.J.A.C. 8:33-5.1(b)2, on the premise that the HHAs would have a "minimal impact on the healthcare system as a whole due to its unique status as a Medicare Advantage pilot demonstration." Erickson estimated that fifteen to twenty residents per month at each facility would use the proposed HHA services.

Erickson also stated in the applications that: (1) its "residents are more likely to use home health services if it is managed by their own community and if the HHA is on-site"; (2) approximately 90% of its residents participate in Erickson Health, an integrated health management system, and those residents "are dramatically less likely to use nursing home and acute care services"; (3) "in states where Erickson Health directly manages home health services for residents, the program is among the top performers in the country in keeping residents out of the hospital"; and (4) because the CN requests were limited to serving Seabrook and Cedar Crest residents exclusively, "we anticipate an insignificant impact on the state and local home health industry."

On January 20, 2006, the Department acknowledged receipt of the applications and requested additional information pertaining to Erickson's ability to operate the HHAs. On January 31, 2006, Erickson transmitted its responses to the Department, explaining that it: (1) had experience complying with state and federal requirements for operating HHAs and would develop policies specific to New Jersey licensing requirements; (2) had minimal start-up expenses, reduced overhead, seamless continuum of care, and corporate support; and (3) expected to treat a maximum of 192 patients per year.

On March 7, 2006, Commissioner Jacobs approved Erickson's two applications. In his two decision letters, the Commissioner noted that the Department had "accepted Erickson's application under the expedited review process . . . based on documentation that the proposed project will have minimal impact on the healthcare system as a whole in New Jersey since it will provide home health services only to Erickson residents enrolled in the [Evercare] program." The Commissioner further stated that the proposed HHAs would use existing space at the Erickson locations, enabling Erickson to better assist its residents, thus, avoiding placement of its residents in assisted living or nursing home settings. Although the Commissioner expressed concern about the projected low volume of patients that could affect the financial viability of the project, he accepted Erickson's assurances that it was able to operate the HHAs as proposed in the applications. The approval of each application was subject to the following three conditions:

1. Erickson's Home Health Agency services shall be limited to persons residing in the Erickson Retirement Community . . . who are also enrolled in Evercare Medicare Advantage [p]rogram.

2. Should the CMS terminate this demonstration project prior to the scheduled close in 2008, Erickson shall notify the Department and will arrange an ...

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