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Mainland Manor Nursing & Rehabilitation Center v. New Jersey Department of Health & Senior Services

November 17, 2008

MAINLAND MANOR NURSING & REHABILITATION CENTER, APPELLANT,
v.
NEW JERSEY DEPARTMENT OF HEALTH & SENIOR SERVICES, RESPONDENT.



On appeal from the Department of Health and Senior Services, CN#030730-01-32 HCQO 05-09.

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued October 21, 2008

Before Judges Skillman, Graves and Grall.

On April 21, 2003, respondent Department of Health and Senior Services (DHSS) published a "notice of invitation for certificate of need applications for specialized long-term care beds to provide ventilator care for adult residents." 35 N.J.R. 1739(c). The call identified a need for 154 such beds distributed among fifteen counties, and listed the bed need for each county, calculated through 2005. Ibid. The bed need for Atlantic County was set at ten. Ibid.

Three nursing facilities filed applications with the DHSS for a certificate of need to meet the need for long-term ventilator care beds in Atlantic County: appellant Mainland Manor (Mainland) in Pleasantville, Eastern Pines Convalescent Center (Eastern Pines) in Atlantic City, and the Health Center at Galloway (Galloway) in Absecon.

The State Health Planning Board (SHPB) considered Mainland's application, along with the others received in response to the April 21, 2003 call, at a formal meeting held on May 5 and 6, 2005. After hearing testimony from a representative of Mainland and considering the recommendations of DHSS staff, the SHPB voted unanimously to recommend denial of the application. At the same meeting, the SHPB voted unanimously to recommend the denial of Galloway's application and the grant of Eastern Pines' application. On September 23, 2005, Commissioner Jacobs adopted the SHPB's recommendations, and accordingly, denied Mainland's and Galloway's applications and granted Eastern Pines' application.

On October 21, 2005, Mainland requested an administrative hearing regarding the denial of its application for a certificate of need. However, Mainland did not appeal from the Commissioner's grant of a certificate of need to Eastern Pines to install the ten long-term ventilator care beds that the DHSS had determined to be needed in Atlantic County.

The DHSS transferred the matter to the Office of Administrative Law (OAL) as a contested case. Because Mainland had not challenged Eastern Pines' application for a certificate of need, Eastern Pines did not participate in the proceedings before the OAL.

The DHSS and Mainland brought the matter before an Administrative Law Judge (ALJ) by cross-motions for summary decision. These motions were supported by voluminous documentary materials, including an extensive analysis of the Mainland, Eastern Pines and Galloway applications by DHSS staff, which concluded with a recommendation that the Mainland and Galloway applications should be denied and that Eastern Pines' application should be granted. The record before the ALJ also included testimony before the SHPB by John Calabria, the DHSS's Director of Certificate of Need and Acute Care Licensure, who explained the staff review process and the basis of the DHSS staff's recommendations. In addition, there was testimony presented before the SHPB by a representative of Mainland and by one of the owners and a consultant for Eastern Pines.

Based on this evidence, the ALJ concluded that, on a comparative basis, Mainland's application was superior to Eastern Pines' application. The ALJ found that Eastern Pines' financial situation was much weaker than Mainland's and that the Commissioner should have explored this issue in greater detail:

Eastern Pines['] financial status was much weaker than that of Mainland. Eastern Pines had net losses for 2002 ($655,442) and 2001 ($540,456). The losses are increasing not decreasing year after year. The audited financial statements provided to this tribunal were only for the period 2001 and 2002. Eastern Pines' financial situation should have been explored in greater detail.

If Eastern Pines had losses in the years prior to 2001 and subsequent to 2002, it raised ...


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