January 14, 2011
TRINITAS HOSPITAL, APPELLANT,
NEW JERSEY DEPARTMENT OF HEALTH AND SENIOR SERVICES, RESPONDENT.
On appeal from a Final Agency Decision of the Department of Health and Senior Services, Docket No. CN #021205-20-01.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted: October 20, 2010 - Decided: Before Judges Cuff, Sapp-Peterson, and Fasciale.
Trinitas Hospital (Trinitas) responded to a call for new cardiac surgery services in Union and contiguous counties issued by the Department of Health and Senior Services (HSS) in September 2002. On March 11, 2009, the Commissioner of HSS adopted the Initial Decision of an administrative law judge (ALJ), which concluded that the Deputy Commissioner acted reasonably when he denied a Certificate of Need (CN) to Trinitas to initiate adult cardiac surgery.
On appeal, Trinitas argues the CN decision is based on a mathematical error and this error renders the decision arbitrary, capricious, and unreasonable. We affirm.
The issuance of the call for Union and contiguous counties*fn1 represented the culmination of an extensive planning effort prior to promulgation of rule amendments. These amendments were designed to allow a more provider-driven cardiac CN review process with the goal of improving access for minority and medically underserved populations, while maintaining quality of care. See N.J.A.C. 8:33E-2.14(a)4i. To that end, the September 2002 call notice invited existing New Jersey cardiac surgery centers located in Essex, Middlesex, Morris, Somerset, and Union counties to file a written submission as an affected facility with HSS in response to any submitted CN applications deemed complete by HSS. Morristown Memorial Hospital (Morristown) submitted a timely analysis. Robert Wood Johnson University Hospital (RWJUH) submitted an untimely comment, but it was received before a State Health Planning Board (SHPB) meeting on September 11, 2003.
The Trinitas cardiac surgery CN application was one of the first to be evaluated in accordance with newly adopted rule amendments. Muhlenberg Regional Medical Center (Muhlenberg), Somerset Medical Center (Somerset), and Overlook Hospital also sought to provide adult regional cardiac surgery services. All were subject to the newly adopted competitive review criteria. N.J.A.C. 8:33E-2.15. The criteria were informed by HSS experience that showed a strong correlation between the volume of cardiac procedures performed and the quality of care and outcome of the procedure. Although HSS applied new competitive review criteria, the goals of the process remained largely unchanged: improved access to cardiac care for minority and indigent populations; continued viability of existing cardiac surgery services; and high standards of care and good patient outcomes. N.J.A.C. 8:33E-2.15(a), -2.15(b)1, and -2.15(b)5.
The Trinitas CN application argued there was a compelling need for a new cardiac surgery program in Elizabeth and in Union County. It stated that in 2001, 790 Union County residents underwent cardiac surgery in other counties; an additional seventy-five to one hundred residents underwent cardiac surgery in New York. Of those 790, Trinitas suggested that 72% came from its primary service area (PSA). Trinitas provided population figures of African Americans and Hispanics within its PSA from the 2000 U.S. Census, and suggested the majority of the residents in Union County below the poverty level live in its PSA. Trinitas further noted an expected increase in population in its PSA.
Trinitas predicted that in addition to the 900 Union County cardiac patients currently served by out-of-county hospitals, there could be an additional 250 minority cases due to population growth and improved minority access to health care. From that base, Trinitas predicted that in the first year it would capture 200 cases (employing a 20% draw from the county total of 1000). During the second year, it employed a 30% draw to predict 330 cases out of a possible 1100. It applied a 42% draw to project that it would capture 500 of the 1200 cases during the third year, but reduced this number to 432 when it accounted for a 10% reduction due to the use of drug-eluting stents and another reduction due to "deflation."
Trinitas relied on data from a study by Patrice M. Gregory, Ph.D., to suggest that its projections for minorities were conservative. The data Trinitas submitted included the total number of admissions for patients in Union County with a diagnosis of acute myocardial infarction (AMI) who received a coronary artery bypass graft (CABG) or percutaneous transluminal coronary angioplasty (PTCA) as a result. The data was broken down into racial composition. Trinitas concluded that African-American and Hispanic residents had a much lower chance of receiving PTCA or CABG when diagnosed with AMI than white residents.
Trinitas also suggested there was a need for a cardiac surgery center because it was very difficult for residents in its PSA to travel to existing cardiac surgery centers. It argued it takes an average of forty minutes to drive, forty-five minutes to take the bus, and fifty minutes to take the train to get to a cardiac center in Newark.
Trinitas further projected it would draw approximately 350 cases from the other cardiac centers currently in existence, but it stated this draw would not place any particular cardiac center at risk of falling below the minimum required by the state. Trinitas also discussed the cost to institute its new cardiac center and the additional services it would provide. Trinitas also submitted answers to several completeness questions posed by the HSS staff after it received the CN application.
In response to the three CN applications,*fn2 Morristown filed an affected facility submission that argued against the need for additional cardiac centers in the region. With respect to the Trinitas application, Morristown argued that the Trinitas data did not provide "the actual number of patients who do not receive needed interventions . . . ." Morristown then used the Trinitas data to "perform this calculation for the entire Union County population." Morristown used the data Trinitas submitted from the Gregory study. Morristown noted that from 1994 to 1996, there was a total of 6171 AMI diagnoses in Union County: 3892 whites, 732 African Americans, 286 Hispanics, 61 Asian Pacific Islanders, and 1200 unknown or other. Morristown also stated that a total of 370 surgeries resulted: 230 whites,19 African Americans, 19 Hispanics, 4 Asian Pacific Islanders, and 100 unknown or other. Morristown divided the total number of AMI diagnoses by the total number of surgeries to obtain a rate of surgery for each class presented. It found that the surgery rate for whites was 0.06. African Americans had a surgery rate of 0.03, Hispanics at 0.06, 0.06 for Asian Pacific Islanders, and 0.08 for unknown or other. When it compared the surgery rates, Morristown determined that there was an unmet need of 25 surgeries for African Americans (0.06*732 - 19 = 25).
As the data from the study was compiled over a three-year period, Morristown divided this total by three to project that there was an actual unmet need of nine surgeries per year in the Trinitas service area. Thus, Morristown concluded the Trinitas projections were not supported by its own data.*fn3
The HSS staff reviewed all three applications, and recommended SHPB deny each because none demonstrated a need for a new cardiac surgery program. HSS staff first found there was no statewide need for new cardiac programs. They based this determination on the decrease in CABG surgeries between 2000 and 2002, the substitution of PTCA for CABG, and Food and Drug Administration approval of a drug-eluting stent in 2003. They also found research supports the conclusion that cardiac surgery programs with a high volume of cases have a lower mortality rate than those with lower volume.
Nevertheless, HSS staff continued their analysis by determining whether there was a regional need for a new cardiac center. HSS staff found several inconsistencies in their review of the Trinitas CN application. First, although Trinitas asserted that Union County ranked seventh in the number of heart disease deaths per county, they noted that when adjusted for age, the death rates put Union County in nineteenth place. HSS staff also found a train ride to Newark from Elizabeth takes twelve minutes, not fifty as Trinitas claimed. Finally, although Trinitas asserted 790 Union County residents received cardiac surgery in 2001, HSS staff found only 629 cases.
HSS staff also noted that while Trinitas attempted to demonstrate need by focusing on minority disparity, it did not provide data to show "how a cardiac surgery program at Trinitas could further increase minority use rates and reduce those persistent disparities that remain within Trinitas' service area." Here, HSS staff relied on Morristown's affected facility submission to show that with the Trinitas data, there was a need of only twenty-five cardiac surgeries over three years. HSS staff concluded:
[I]n view of the current and expected decline in the demand for cardiac surgery, the very small number of additional cases that would result if minority disparities in use rates were reduced, and the lack of documentation that transportation issues result in barriers to accessing services at the three cardiac surgery centers located within ten miles, Trinitas has failed to document a need to establish a new cardiac surgery program in Elizabeth.*fn4
The SHPB held meetings on September 11 and 12, 2003, to receive public comment. The SHPB recommended approval of the Somerset application and denial of the Muhlenberg and Trinitas applications.
On February 11, 2004, the Deputy Commissioner denied all three applications, citing a failure to document a need to establish a new cardiac surgery program. The Deputy Commissioner reviewed the CN applications, the SHPB's recommendations, public testimony, and the affected facility submissions, and considered the applications in light of statutory and regulatory standards. He began by stating SHPB approval of the Somerset application was "inconsistent with the rationale for the two recommended denials, and . . . [i]n other words, the same reasoning that supports denial of Trinitas and Muhlenberg should also have led to a recommended denial of Somerset."
Based on the recommendations of HSS staff, the Deputy Commissioner further found there was no overall state need for additional cardiac surgery programs. He gave substantially the same reasons for the finding, including the number of cardiac centers currently operating in New Jersey, the decline in cardiac surgery and corresponding increase in PTCA, the introduction of drug-eluting stents, and the correlation between the high volume of cardiac surgeries and a low mortality rate.
The Deputy Commissioner continued his evaluation of the CN applications even after determining that there was no statewide need. Rather, he next focused his analysis on whether there was a regional need that would justify a new cardiac center. However, in light of the regulations' goal of enhancing minority access to cardiac surgery, he stated "it is especially telling that the applicants failed to demonstrate how initiating a new program at their facility would effectively reduce racial and ethnic disparities." Thus, in determining whether there was a regional need for a new cardiac surgery program, the Deputy Commissioner relied on and agreed with the HSS staff's validation of Morristown's unmet minority need calculations of eighty-three cases for Muhlenberg and seventy-four cases for Somerset.
After summarizing the Trinitas application, the Deputy Commissioner noted the three inconsistencies cited by HSS staff. He also accepted the HSS staff's validation of Morristown's calculation that Trinitas could only show a minority deficit of twenty-five additional surgeries over three years.
The Deputy Commissioner also questioned the Trinitas argument that it needed a new cardiac center in light of the fact that Trinitas had "recently implemented an approved CN for emergency PTCA, so that heart attack patients are able to receive this service in a timely fashion in Elizabeth."*fn5 He also noted that SHPB agreed with the HSS staff that there was no need for a new cardiac program.
Finally, the Deputy Commissioner stated that Trinitas used "an overly conservative estimate of the impact of drug-eluting stents on cardiac surgery volume . . . [and] uses differing and inconsistent methodologies in its application to make various volume projections, e.g. its own projected volume, it's [sic] projected impact on existing providers." The Deputy Commissioner agreed with the HSS staff recommendations and concluded that Trinitas failed to establish a need for a new cardiac surgery program.
Trinitas appealed and the matter was transferred to an ALJ for a hearing as a contested case. In response to cross-motions for summary decision, the ALJ concluded the Deputy Commissioner based his decision on sufficient credible evidence in the record. The ALJ made several findings. She first found that "the Deputy Commissioner reasonably determined that the projected decline in the volume of cardiac surgery would make it unlikely that Trinitas could reach the minimum volume within three years and this decline would effectively offset Trinitas's projected population increases in the region." The ALJ also found that "the Deputy Commissioner reasonably determined that Trinitas failed to show that initiating a new program at its facility would effectively enhance access to minority and medically underserved individuals." Furthermore, she found that the Deputy Commissioner "reasonably determined that any existing disparity was not on a scale sufficient to justify a need for a new facility in the region." The ALJ found that the Deputy Commissioner "reasonably determined that the location of Trinitas was not sufficient grounds for concluding that a new facility at that site would resolve issues of access." Moreover, "the Deputy Commissioner reasonably rejected Trinitas's argument that patients lacked emergency access to the Newark hospitals due to the failure of effective transportation." The ALJ concluded that there was sufficient credible evidence in the record to support the Deputy Commissioner's determination and it was neither arbitrary nor capricious. The ALJ then granted the Commissioner a summary decision and dismissed the Trinitas appeal with prejudice.
In the Commissioner's final decision, she adopted the ALJ's findings. Moreover, she stated that the Trinitas exception asserting that the Deputy Commissioner . . .made a calculation error in evaluating its application by failing to use the same unmet volume projections in its application that were used in the applications for [Somerset] and [Muhlenberg] . . . is not sufficient to warrant overturning the decision of the ALJ as the applicant . . . is pursuant to, N.J.A.C. 8:33-4.9(b), responsible for demonstrating that the project meets the need standard set.
Trinitas contends that the Commissioner's final decision must be overturned because it is founded on a mathematical error. The Commissioner argues that the decision was based on sufficient credible evidence in the record and is not arbitrary or capricious. We conclude the record contains sufficient credible evidence to support the Commissioner's decision even if a mathematical error was committed in the analysis of the Trinitas response.
The Health Care Facilities Planning Act, N.J.S.A. 26:2H-1 to -26, requires an application for and receipt of a CN before a health care facility can begin a new healthcare service. N.J.S.A. 26:2H-7. HSS will only issue a new CN for cardiac surgery services after a hospital "has petitioned the [HSS] and established the potential need for new cardiac surgery services by demonstrating that it meets [certain] minimum standards, which indicate a potential unmet need and that the petitioner is qualified to meet the unmet need . . . ." N.J.A.C. 8:33E-2.14(a)1 (emphasis added). Once a hospital has successfully petitioned for a CN call, as Muhlenberg did here, HSS will issue a call for applications from the county of the successful petitioner and all contiguous counties. N.J.A.C. 8:33E-2.14(a)4. HSS issued a call for cardiac surgery services for Union and its contiguous counties on September 3, 2002. 34 N.J.R. 3136(a) (Sept. 3, 2002). The language of this call specifically indicated that its issuance "does not constitute a finding of need by the [HSS] for any new cardiac surgery programs in the region affected by the call . . . ." Ibid. (emphasis omitted).
Review of CN applications is competitive. It is limited to applicants who are able to provide documentation of a historic commitment to cardiac services, and documentation of collaboration with existing cardiac centers in New Jersey, documentation that despite collaboration, a need exists for a new center. N.J.A.C. 8:33E-2.15(b). In addition, data must show a complication rate of no greater than two percent of all diagnostic cardiac catheterizations over the last three years, documentation there will not be an adverse impact on the quality of healthcare in the region, documentation the applicant will be able to capture cases from out-of-state surgery centers, a demonstration there is sufficient personnel in the disciplines used to staff the new center, and documentation regarding the impact of technological or medical advances in the field. Ibid. The applicant must also be able to document its ability to conduct 350 open heart surgeries by the third year. N.J.A.C. 8:33E-2.3(a)1.
Furthermore, a CN will not issue unless the action proposed in the application for such certificate is necessary to provide required health care in the area to be served, can be economically accomplished and maintained, will not have an adverse economic or financial impact on the delivery of health care services in the region or Statewide, and will contribute to the orderly development of adequate and effective health care services. [N.J.S.A. 26:2H-8.]
Finally, one of the primary goals of the CN process "is to improve access to all cardiac services, especially for medically underserved and minority populations . . . ." N.J.A.C. 8:33E-2.15(a).
This court will only disturb a final agency determination if it concludes that the decision was arbitrary and capricious. In re Holy Name Hosp., 301 N.J. Super. 282, 295 (App. Div. 1997) (citing Worthington v. Fauver, 88 N.J. 183, 204 (1982)). The arbitrary and capricious standard is essentially a rational-basis analysis. Worthington, supra, 88 N.J. at 204. That is, "'[a]rbitrary and capricious action of administrative bodies means willful and unreasoning action, without consideration and in disregard of circumstances.'" Ibid. (quoting Bayshore Sewerage Co. v. Dep't Envtl. Prot., 122 N.J. Super. 184, 199 (Ch. Div. 1973), aff'd, 131 N.J. Super. 37 (App. Div. 1974)). A "determination predicated on unsupported findings is the essence of arbitrary and capricious action." In re Boardwalk Regency Corp., 180 N.J. Super. 324, 334 (App. Div. 1981), modified by 90 N.J. 361, appeal dismissed sub nom. Perlman v. Att'y Gen. of N.J., 459 U.S. 1081, 103 S. Ct. 562, 74 L. Ed. 2d 927 (1982).
Where the Legislature has "'delegated a great amount of discretion to the administrative experts, deference must be accorded to the administrative agency's expertise and experience in its domain.'" In re The Harborage, 300 N.J. Super. 363, 379 (App. Div. 1997) (quoting Riverside Gen. Hosp. v. N.J. Hosp.Rate Setting Comm'n, 98 N.J. 458, 469 (1985)). Thus, there is a strong presumption of the agency's reasonableness. In re Holy Name Hosp., supra, 301 N.J. Super. at 295. The burden of showing that an agency determination was arbitrary and capricious is on the party challenging it. Ibid.
Trinitas bases its entire argument on the contention that the Commissioner erred when she based her decision on Morristown's calculation, verified by HSS staff and accepted by the Deputy Commissioner, of the Trinitas analysis of actual unmet minority need. Trinitas argues this finding of a minority deficit was incorrect because it relied on Morristown's error. It also contends the Deputy Commissioner could have used the same calculation as it did for Muhlenberg and Somerset. Finally, the magnitude of the error is great and undermines the entire analysis of the Trinitas application.
The Commissioner contends she relied on data Trinitas submitted with its CN application. Trinitas does not contest Morristown's assertion that it did not provide an actual calculation of unmet minority need in its CN application. Our review of Morristown's critique reveals that it used data presented in each CN application to make a determination of the actual unmet minority need in each of the applicant's service areas. Trinitas asserts the Commissioner attempted to make the same calculation of need for each applicant, this is not so. The same calculation could not be made because each applicant presented different data.
Muhlenberg provided white and minority population data from its PSA and SSA. It also provided the white and minority cardiac surgery rates per 1000 people in its PSA and SSA. Somerset provided white and minority population data, but instead of providing a rate of cardiac surgery, it provided the total number of cardiac surgeries in its PSA and SSA.
By contrast, Trinitas provided population figures and also very specific data showing the number of cardiac surgeries performed on Union County residents after obtaining a diagnosis of AMI. Trinitas provided the race of each AMI patient and the percentage of CABGs and PTCAs performed as a result. Trinitas further broke down the total number of surgeries by race.
From this detailed data, Morristown was able to determine exactly how many cardiac surgeries were performed on each AMI patient by race in Union County. Because Trinitas provided the actual number of surgeries performed on whites and each minority group, Morristown did not need to use the total population figures to determine the actual unmet need. It simply derived the surgery rate for each class of persons by dividing the total number of surgeries by the total number of AMI diagnoses in each category. Thus, the surgery rate for African Americans was 19/732, or 0.03.
When it compared the surgery rates for whites with all other classes (Hispanics, Asian Pacific Islanders, and unknown/other), Morristown determined there was no deficit because the rates were either equal to or higher than the white surgery rate. It was only the African American surgery rate that was lower. Thus, applying the white surgery rate to the number of African American AMI diagnoses, Morristown showed there was a twenty-five surgery deficit. As the data that Trinitas presented was compiled over three years, Morristown divided this number by three to show an unmet minority need of nine surgeries per year.
Morristown, HSS staff, and the Commissioner did not commit a "grievous" mathematical mistake. The only difference in the three calculations is simply the fact that Trinitas knew exactly how many white, African Americans, Hispanic, Asian Pacific Islander, and unknown/other surgeries were performed in its service area, whereas in Muhlenberg's and Somerset's cases, Morristown had to extrapolate. Furthermore, because Trinitas broke down the minority data into classes, Morristown and the Commissioner could actually determine that there was no unmet need in the Hispanic and Asian Pacific Islander classes.
Notably, Trinitas simply argues that the calculation was wrong, not that a diagnosis of AMI is an inaccurate prediction of the need for cardiac surgery. It is true that in calculating Trinitas's unmet minority need, Morristown did not factor in the entire Union County population as provided in the Trinitas CN application. However, because the Trinitas data was so detailed, this step was not necessary. The disparity between white and African American surgeries was immediately apparent from the data Trinitas presented in its CN application. Thus, the argument that the Commissioner "ignored the other 211,000 minority individuals living in Trinitas's service area" misses the point. It was not necessary to take the general population data into account because the Trinitas data was so detailed.
Trinitas simply argues that the calculation was wrong because it was different from the other two calculations as it did not take into account the population figures it cited in its CN application. This court must presume that the Commissioner's decision to use Morristown's calculation as representative of the unmet need in all of Union County was reasonable, and should defer to the agency's expertise in the matter. See Harborage, supra, 300 N.J. Super. at 380. The Trinitas contention to the contrary is not persuasive.
It is also clear that the Commissioner did not use one standard to assess the Somerset and Muhlenberg CN applications and a different standard to assess the Trinitas application. Rather, the Commissioner evaluated all three applications in accordance with the type of data each applicant presented. Instead of a mathematical error as claimed by Trinitas, the record reflects three sets of data interpreted in three separate ways.
Trinitas further argues that the correct approach was the one used to evaluate the Somerset data,*fn6 but at no point in its CN application did it even attempt to demonstrate actual unmet minority need, as was its burden. See N.J.A.C. 8:33-4.9(b). Moreover, Trinitas had several opportunities to object to Morristown's findings before the Deputy Commissioner denied its application. Trinitas did not disagree in its response letter or at the SHPB meeting. Trinitas cannot now argue that the Commissioner should have interpreted its data differently.
The assertion that the Commissioner could have used a different calculation in evaluating the Trinitas data is similarly unpersuasive. If Trinitas wanted to demonstrate unmet need with a formula such as the one employed by Morristown for the Somerset data, it could have done so because it is the applicant's responsibility to demonstrate need. See Ibid. The Commissioner denied the application because Trinitas could not demonstrate sufficient regional need, especially with respect to minorities, to justify an additional cardiac surgery program. Trinitas cannot now complain about the process the Commissioner employed when Trinitas had the burden to demonstrate unmet need.
In conclusion, the Commissioner's action was not unreasoned, without consideration, or based on unsupported findings. It was completely rational to use data provided in the Trinitas CN application to draw a conclusion about the unmet minority need in its service area. The unmet need calculation was based on the data presented by Trinitas in its CN application. As such, Trinitas has not satisfied its burden to demonstrate it was arbitrary or capricious to use this data in the Commissioner's decision to deny the application.
Moreover, considering the record as a whole, we conclude there is sufficient credible evidence in the record to support the Commissioner's decision. Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 92-93 (1973); Harborage, supra, 300 N.J. Super. at 378. In determining the sufficiency of the record, this court must "consider the proofs as a whole, with due regard to the opportunity of the one who heard the witnesses to judge of their credibility." Close v. Kordulak Bros., 44 N.J. 589, 599 (1965) (internal quotations omitted).
The Commissioner adopted the findings of the ALJ, who found that the Deputy Commissioner reasonably determined that Trinitas failed to demonstrate a need for a new cardiac program. In support of his denial of the Trinitas CN application, the Deputy Commissioner provided a detailed analysis of the relevant statutes and regulations. Even after determining that there was no statewide need for a new cardiac program, the Deputy Commissioner continued to scrutinize the Trinitas CN application to determine whether there was a regional need for such a program. He found that both the HSS staff and the SHPB recommended denial of the Trinitas application. Furthermore, the Deputy Commissioner considered in his determination Statewide and region-specific cardiac surgery utilization trends; Statewide and region-specific age-adjusted death rates due to heart disease; Statewide patient origin data related to the provision of services by existing New Jersey cardiac surgery providers to residents of the region affected by the Union County call; recent cardiac services literature that indicate the strong likelihood that cardiac surgery use rates would decline significantly due to the availability and dissemination of drug-eluting stents approved in 2003 by the Federal Food and Drug Administration; and the individual CN applications submitted by Muhlenberg, Somerset and Trinitas in response to the CN call for the Union and contiguous counties region issued on September 3, 2002.
With respect to the Trinitas application, he noted several inconsistencies, and this court should respect those determinations. See Harborage, supra, 300 N.J. Super. at 378. The Deputy Commissioner concluded:
[T]he Trinitas application primarily would have the effect of redistributing the provision of cardiac services to people currently being served rather than to address substantial, unmet need. I concur with the [HSS] staff finding that, in view of the current and expected decline in the demand for cardiac surgery, the very small number of additional cases that would result if minority disparities in use rates were reduced, and the lack of documentation that transportation issues result in barriers to accessing services at the three cardiac surgery centers located within ten miles, Trinitas has failed to document a need to establish a new cardiac surgery program in Elizabeth.
The Deputy Commissioner clearly reviewed all the evidence Trinitas submitted in support of its CN application and set out specific facts on which he based his determination. As such, the ALJ appropriately found that there was sufficient credible evidence in the record to support the Deputy Commissioner's determination, and it was neither arbitrary nor capricious. It was, therefore, proper for the Commissioner to adopt the findings of the ALJ with respect to the Deputy Commissioner's determination. The Commissioner also appropriately dismissed the Trinitas contention that the Deputy Commissioner made a mathematical error in determining unmet minority need.