September 10, 2009
COOPER UNIVERSITY HOSPITAL AND OUR LADY OF LOURDES MEDICAL CENTER, APPELLANTS,
FRED M. JACOBS, M.D., J.D., COMMISSIONER OF THE NEW JERSEY DEPARTMENT OF HEALTH AND SENIOR SERVICES, RESPONDENT.
VIRTUA HEALTH, INC., INTERVENOR-RESPONDENT.
On appeal from the New Jersey Department of Health and Senior Services.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted March 30, 2009
Before Judges R. B. Coleman, Sabatino and Simonelli.
Appellant Cooper University Hospital (Cooper)*fn1 appeals from the adoption of certain administrative regulations by the Department of Health and Senior Services (Department) which authorizes New Jersey's continued participation in a multi-state demonstration project intended to assess the safety and efficacy of allowing community hospitals without on-site cardiac surgical services to provide elective angioplasty to its patients (the Project). Cooper argues that the adoption of the rules was arbitrary and capricious because (1) they were adopted without a full consideration of the numerous comments submitted to the Department on the proposed rules, in violation of the Administrative Procedure Act, N.J.S.A. 52:14B-1 to -25 (APA); (2) they were not supported by relevant medical and fiscal evidence; and (3) they did not comply with a prior Supreme Court decision regarding the Project. We are unpersuaded by appellant's arguments and, for the reasons set forth below, we affirm the Department's regulations as adopted.
The regulations on appeal concern a medical procedure known as percutaneous transluminal coronary angioplasty (angioplasty). There are two types of angioplasties: emergent angioplasty, required when the patient is suffering from a myocardial infarction or heart attack; and elective angioplasty, performed when the patient shows symptoms of an arterial blockage. Prior to the adopted regulations, a hospital without on-site cardiac surgical facilities could not perform elective angioplasties. N.J.A.C. 8:33E-2.16. However, such a hospital could perform emergent angioplasties. Research indicated that elective angioplasty could also be performed safely at hospitals without on-site cardiac surgical facilities. As the need for elective angioplasty increased state-wide, the Department initiated the "Atlantic C-Port Trial, Elective Angioplasty Study," a "multi-state demonstration project" to assess the safety, efficacy and cost of providing elective angioplasty services at community hospitals which do not also have full, on-site cardiac surgical services.
On November 1, 2004, the Department issued a call in the New Jersey Register by which it sought to invite applications for Certificates of Need (CNs) to participate in the demonstration project. On October 6, 2005, the State Health Planning Board (SHPB) considered and approved six of the eighteen applications received in response to the call. On October 31, 2005, the Department's Commissioner, Fred M. Jacobs (Commissioner), issued his decision letter, in which he granted CNs to nine of the hospitals that responded to the call.
Cooper, joined by Lourdes, appealed from that decision and on October 2, 2006, another panel of this court affirmed the Commissioner's action. Cooper Univ. Hosp. v. Jacobs, No. A-1122-05T3 (App. Div. October 25, 2006). The Supreme Court reversed that decision but held that the projects could continue through November 30, 2007. The Court remanded the case to the Commissioner, directing the Department to promulgate a proper authorizing regulation in adherence to the principles of rulemaking prior to continuing the demonstration project beyond that date. Cooper Univ. Hosp. v. Jacobs, 191 N.J. 125, 146-47 (2007) (Cooper I). Under the circumstances, the Court found termination of the Project would be "unjust and inappropriate." Id. at 146. A clarification of the Supreme Court opinion was sought by one of the hospitals that had previously been awarded a CN pursuant to the call, and on November 29, 2007, the Supreme Court clarified its opinion in Cooper Univ. Hosp. v. Jacobs, 193 N.J. 271 (2007) (Cooper II).
In Cooper I, supra, 191 N.J. at 128, the Supreme Court concluded that the regulations authorizing the call, N.J.A.C. 8:83-3.11(e), violated "fundamental principles relating to the regulatory process." In reaching that conclusion, the Supreme Court noted that N.J.A.C. 8:33-3.11(e), which the Department used as authority to conduct the Project, was "considerably broader and less detailed" than N.J.A.C. 8:33-3.11(c) and (d), which explicitly authorize other demonstration projects by incorporating medical prerequisites and other specific requirements for those projects. As then written, N.J.A.C. 8:33-3.11(e) authorized demonstration projects not specifically identified elsewhere in N.J.A.C. 8:33-3.11. The Court found, however, that the "need for such [greater] detail flows from the health care concerns involved." 191 N.J. at 144. The Court held that any rules authorizing the demonstration project, in this instance, must likewise include such detail. Ibid.
Pursuant to Cooper I, the Department proposed new administrative rules and proposed amendments to certain existing rules in order to implement the Project. Those proposed rules were first considered and approved by the Health Care Administration Board (HCAB) on July 19, 2007. The Department then sought public comment by formally publishing the proposed regulations as 39 N.J.R. 3462-64 (August 30, 2007).
On November 5, 2007, before the rules were formally adopted, the Department issued a second call seeking applications for CNs by community hospitals that wanted to participate in the Project. Thereafter, the Department summarized the comments it received and provided them to the HCAB. On November 15, 2007, the HCAB heard extensive public comment in consideration of the new rules and subsequently approved their final adoption. The Department formally adopted the rules upon their publication in the New Jersey Register. 39 N.J.R. 5316-37 (December 17, 2007).
Appellant filed notice of appeal challenging both the November 5, 2007, call and the adoption of the rules. On January 27, 2008, this court granted the motion of Virtua Health, Inc., to intervene in this appeal, and for its counsel to appear pro hac vice.
N.J.A.C. 8:33-3.11 specifically authorizes the licensing of demonstration projects in New Jersey. Before the instant project rules were adopted, the Department had established rules authorizing two specific demonstration projects: for an inner-city satellite demonstration; and for a bloodless surgery demonstration project. N.J.A.C. 8:33-3.11(c) and (d).
The new provision, N.J.A.C. 8:33-3.11(e), authorized the Commissioner to accept CN applications to participate in the Project. The rules permit the issuance of twelve CNs, N.J.A.C. 8:33-3.11(e)(2); N.J.A.C. 8:33-3.11(e)(7), lasting for three years each; N.J.A.C. 8:33-3.11(e)(3). Each CN must be extended annually and only if the Project is authorized to continue enrolling patients. N.J.A.C. 8:33-3.11(e)(3)(i). By adopting N.J.A.C. 8:33-3.11, the Department also amended other rules. Specifically, N.J.A.C. 8:33-1.3(d)(2), N.J.A.C. 8:33E-2.3(d)(4), and N.J.A.C. 8:43G-7.28, were amended to permit elective angioplasty in hospitals without on-site cardiac surgical facilities pursuant to the Project.
Appellant raises a number of arguments in contending that the Department's adoption of the rules in question here, and its publication of the November 2007 call, constituted arbitrary and capricious agency action that must be overturned. We disagree.
First, appellant challenges the Project on the grounds of safety, relying on a research paper (the so-called Wennberg Paper). In that paper, the authors concluded that patients who underwent elective angioplasty at a hospital without on-site cardiac surgical services suffered up to a thirty-eight percent higher mortality rate than when cardiac surgical services were available on-site. Similarly, the American College of Cardiologists/American Heart Association and Task Force on Practice Guidelines (ACC/AHA/SCAI) issued a report in 2005, which indicated that elective angioplasty should not be performed at institutions that do not have on-site cardiac surgical services available.
The Department acknowledged that prior studies raised questions regarding elective angioplasty at hospitals without on-site surgery services. However, the studies appellant relied upon also indicated that additional clinical data and experience was necessary. In particular, the Wennberg study was not persuasive because the patients in that study were more medically compromised and, therefore, "[h]igher mortality would be expected in [that] subset of patients." 39 N.J.R. 5324, 5331 (December 17, 2007).
Appellant further relied on studies which indicate a direct relationship between the total number of angioplasties performed at a medical facility and the number of successful procedures performed. Specifically, one study asserted that higher volumes led to more successful procedures. Appellant asserted that the mortality rate at hospitals performing fewer than 400 angioplasties per year was much higher than at hospitals where that volume was not met; however, even the author of that study looked forward to "new efforts to identify processes of care that are related to [angioplasty] outcomes and the relationship between [angioplasty] provider volumes and outcomes." Another study concluded that elective angioplasty should be done only in facilities that do at least 400 procedures per year, and only with on-site cardiac surgical facilities available.
Despite these studies, appellant argues, the Department's new rules permit participation in the Project even if the hospital did only 100 procedures in the first year; after that, the minimum was raised to 200 procedures per year. N.J.A.C. 8:33-3.11(e)(6)(v). The 2005 Guidelines ACC/AHA/SCAI recommended a minimum of 200 angioplasties per year, albeit with a preferred number of 400 per year. The minimum volume required to provide angioplasty at hospitals with on-site cardiac surgery facilities (such as appellant's) was only 200 per year, i.e., the same as proposed for the Project; and such hospitals were given three years to achieve that volume, rather than the two allowed under the Project.
Appellant also contends that angioplasty without cardiac surgical backup costs more than at a hospital with surgical backup. The Department responded by noting that the costs incurred by any hospital participating in the Project would depend upon the specifics of that facility. Once the Project ended, the Department would analyze startup and redundancy costs in determining whether angioplasty should be permitted in hospitals without cardiac surgical backup. 39 N.J.R. 5322-23 (December 17, 2007).
It is well settled that arbitrary and capricious action by an administrative agency must be overturned on review. Worthington v. Fauver, 88 N.J. 183, 2004 (1982); Drake v. Human Servs. Dep't, 186 N.J. Super. 532, 636 (App. Div. 1982). The burden lies with the party challenging an agency's action to demonstrate its invalidity. Van Dalen v. Washington Twp., 120 N.J. 234, 244 (1990); In re Amendment of N.J.A.C. 8:31B-3.31, 119 N.J. 531, 544 (1990).
Appellate review of an administrative action to determine whether it was arbitrary or capricious is restricted to three inquiries: (1) whether the agency's action violates the enabling act's express or implied legislative policies; (2) whether there is substantial evidence in the record to support the findings on which the agency based its action; and (3) whether in applying the legislative policies to the facts the agency clearly erred by reaching a conclusion that could not have reasonably been made upon a showing of the relevant factors. [In re Petition for Rulemaking, N.J.A.C. 10:82-1.2 and 10:85-4.1, 117 N.J. 311, 325 (1989).]
A court may not substitute its judgment for the agency's, even if the reviewing court would have chosen a different course of action. Clowes v. Terminix Int'l, 109 N.J. 575, 587 (1988); In re Application of Virtua-West Jersey Hospital Voorhees for a Certificate of Need, 390 N.J. Super. 444, 450 (App. Div. 2007), aff'd in part, remanded in part, 194 N.J. 413 (2008); In re Adopted Amendments to N.J.A.C. 7:7A-2.4, 365 N.J. Super. 255, 264 (App. Div. 2003).
Moreover, "the presumption of reasonableness is even stronger... [when] the agency has been delegated discretion to determine the specialized and technical procedures for its tasks." City of Newark v. Natural Res. Council in Dep't of Envtl. Prot., 82 N.J. 530, 539 (1980); Matter of Visiting Nurse Ass'n of Sussex County, Inc., 302 N.J. Super. 85, 95 (App. Div. 1997). In particular, administrative regulations are presumed to be valid, Dentists for Quality Care, Inc. v. New Jersey State Board of Dentistry, 339 N.J. Super. 257, 263 (App. Div. 2001), and our courts afford administrative agencies great deference in adopting rules because they possess the special expertise needed to enact rules involving technical matters. N.J. Soc. for the Prevention of Cruelty to Animals v. N.J. Dep't of Agriculture, 196 N.J. 366, 385 (2008). If there are two possible courses of action, "an administrative decision will not be deemed arbitrary and capricious if exercised honestly and the course ultimately chosen is a reasonable one." Sussex County, supra, 302 N.J. Super. at 95.
Pursuant to the Health Care Facilities Planning Act, N.J.S.A. 26:2H-1 to -18.70 (Act), and specifically N.J.S.A. 26:2H-7, no health care facility, including a hospital, may construct new facilities, or expand existing ones, or initiate a new health care service, unless a CN has been applied for by the facility and granted by the Commissioner. The Act authorizes the Commissioner, with approval of the HCAB, to adopt regulations to effectuate its purposes. N.J.S.A. 26:2H-5(b). The Commissioner is also authorized to announce calls for CN applications for particular services. N.J.A.C. 8:33-4.1(a). CN applications are submitted to the Department for review. N.J.S.A. 26:2H-10; N.J.A.C. 8:33-4.2(a); N.J.A.C. 8:33-4.3. N.J.S.A. 26:2H-8 authorizes the Commissioner to issue CNs if certain criteria are met.
After a CN application is deemed complete, it is forwarded to the SHPB for review. N.J.S.A. 26:2H-5.8(b); N.J.A.C. 8:33-4.1(a); N.J.A.C. 8:33-4.13. The SHPB furnishes a written recommendation to the Commissioner providing "the explicit basis for any recommendations" it makes on the CN application. N.J.A.C. 8:33-4.13(a) and (c). The Commissioner then reviews the application based on relevant statutory and regulatory criteria and determines whether or not to approve it. N.J.S.A. 26:2H-9; N.J.A.C. 8:33-4.15.
Appellant contends that the Department's adoption of the rules authorizing the Project was not supported by sufficient evidence, and it should, therefore, be invalidated. Appellant's substantive challenge is based largely on their claim that relevant medical literature raised significant questions regarding the safety and efficacy of the Project. However, as discussed at length above, the Department responded to each of these issues in a considered, thoughtful manner, relying on its expertise, other studies that supported the decision to participate in the Project, and the comments of numerous facilities and individuals supporting the Project. Thus, even though there was room for disagreement, i.e., whether to adopt the rules and participate in the Project or not, the Department exercised its discretion honestly and upon due consideration and reached the reasonable conclusion that adoption of the rules and participation in the Project was warranted. Worthington v. Fauver, supra, 88 N.J. at 204-05; Sussex County, supra, 302 N.J. Super. at 95. Therefore, we will not disturb the Department's action.
We note that the newly adopted rules authorize the Project for a limited duration, and that within this three-year period, the efficacy and safety of elective angioplasty in hospitals without on-site surgical backup can be determined. Further, each participating hospital must renew its participation each year, thus insuring that those hospitals which fail to meet the rules' requirements can be excised from the Project. Further, in Cooper II, supra, 193 N.J. at 271, the Supreme Court recognized that the Department's newly adopted regulations satisfied the Court's remand in Cooper I. Therefore, we do not find the Department's adoption of the rules so unsupported by sufficient evidence as to require their invalidation.*fn2 For this reason as well, appellant's assertion that the Department and HCAB failed to fully consider all written and oral comments on the proposed rule before the proposal was adopted, pursuant to N.J.S.A. 52:14B-4(a)(3) must fail.
The Department responded in detail to each comment received in the notice published in the New Jersey Register adopting the rules. Many of the comments submitted in response to the rule proposal were the same as those raised at the July 2007 HCAB meeting when the rules were approved for proposal. 39 N.J.R. 5316-36 (December 17, 2007). Thus, the HCAB had more than just one month to consider these issues, even though the Department provided written summaries to each HCAB member the day before the November 2007 meeting. Further, while numerous comments were received, many were essentially form letters raising identical issues against the Project. We note that the APA envisions the creation of a report summarizing the comments received, N.J.S.A. 52:14B-4(a)(4), which is what the Department provided to the HCAB. Understandably, the Department proceeded swiftly and efficiently due to the time constraints imposed by the Supreme Court in Cooper I.
Appellant's next assertion, that the Department failed to comply with Cooper I, also fails in light of the Cooper II holding. Recall that in Cooper I and Cooper II the Supreme Court concluded that, although the regulations authorizing the Project were deficient, the hospitals that had already been granted CNs could continue to participate in the Project as long as new rules were adopted by the Department that included detailed medical prerequisites such as those required by N.J.A.C. 8:33-3.11(c) and (d). In response, the Department properly adopted the rules currently under review which provided sufficient detail to resolve the Court's concerns. Therefore, this issue does not warrant further discussion in a written opinion. R. 2:11-3(e)(1)(E).
Next, the divergence appellant points to, that the new rules permit up to twelve CN applications, even though the Department issued only nine CNs pursuant to the November 2004 call, is of no moment. We find nothing in Cooper I limiting the Department to a demonstration project involving "only" the nine hospitals previously approved, as appellant claims. Rather, the Supreme Court simply noted that any CNs previously granted would have to be re-issued in conformance with any subsequently adopted rules. Cooper I, supra, 191 N.J. at 147. In sum, we find that the Department substantially complied with the Court's mandates in Cooper I and II.
Appellant claims that the Project should be deemed a "research project," pursuant to N.J.A.C. 8:33-1.3, rather than a demonstration project, and that the adopted regulations should thus be invalidated. Appellant raised the same argument before the Supreme Court. Although the Court did not address it directly, it did discuss N.J.A.C. 8:33-1.3, which authorizes demonstration projects for a health care service, technology or modality not currently available. The Court noted that two such projects had been codified for a "bloodless surgery demonstration project" and an "inner city" cardiac satellite demonstration project. Cooper I, supra, 191 N.J. at 139. Accordingly, we find that the Supreme Court decided this matter previously in Cooper I, and that appellant is collaterally estopped from raising this issue now.
Collateral estoppel bars reconsideration of an issue of law or fact that has been previously determined, even though the second action may be different from the first. State v. Gonzalez, 75 N.J. 181, 186 (1977); Kram v. Kram, 94 N.J. Super. 539, 551 (Ch. Div.), rev'd on other grounds, 98 N.J. Super. 229 (App. Div. 1967), aff'd, 52 N.J. 545 (1968). Collateral estoppel arises when: (1) the issue under review is identical to the issue decided in the prior proceeding; (2) the issue was actually litigated in the earlier proceeding; (3) the prior court issued a final decision; (4) the determination of the issue was essential to the first judgment; and (5) the party against whom the doctrine is asserted was a party to the prior proceeding. First Union Nat'l Bank v. Penn Salem Marina, Inc., 190 N.J. 342, 352 (2007); Hennessey v. Winslow Twp., 183 N.J. 593, 599 (2005).
Here, the identical issue raised by appellant now (i.e., that the regulations are invalid because the Project is a research, rather than demonstration, project) was raised before the Appellate Division and Supreme Court in the first round of this litigation. Moreover, the issue was litigated, as it was one of the primary issues appellant raised. Both the Appellate Division (directly) and Supreme Court (indirectly) agreed that the Project was a demonstration project, and the party against whom the doctrine is asserted, appellant, was a party in the prior proceeding.
We are mindful of N.J.A.C. 8:33-3.11(a), which provides "[p]rojects which satisfy the definition of a research project, as specified at N.J.A.C. 8:33-1.3, shall be exempt from certificate of need requirements as long as they are conducted exclusively for the purposes of investigational studies and scientific research." We also recognize that had the Supreme Court agreed with appellant's argument on this point, that the rules authorized only a research project, then it would not have permitted the facilities which had already been granted CNs and licenses under the initial rules and call to continue, would not have required that those CNs be reissued, nor would it have required the Department to expeditiously review the new CN applications submitted pursuant to the new rules.