Health Care Administration Bd., Matter of

• Decision Date: 28 May 1980
• Citation: 415 A.2d 1147,83 N.J. 67
• Parties: In the Matter of the Review of Administrative Promulgation of the HEALTH CARE ADMINISTRATION BOARD: N.J.A.C. 8:30-14.1 through 8:30-14.6. NEW JERSEY ASSOCIATION OF HEALTH CARE FACILITIES, a corporation not for profit of the State of New Jersey, and Wayne Haven Nursing Home, Valley Nursing Home, Pine Rest Nursing Home, Dunroven Nursing Home, Allendale Nursing Home, Wellington Hall Nursing Home and Woodcliff Lake Manor Nursing Home, Appellants, v. Joanne E. FINLEY, M.D., State Commissioner of Health, and the Health Care Administration Board, Respondents, and Public Advocate of New Jersey, Intervenor-Respondent.
• Court: New Jersey Supreme Court

Page 67

83 N.J. 67

415 A.2d 1147

In the Matter of the Review of Administrative Promulgation of the HEALTH CARE ADMINISTRATION BOARD: N.J.A.C. 8:30-14.1 through 8:30-14.6 NEW JERSEY ASSOCIATION OF HEALTH CARE FACILITIES, a corporation not for profit of the State of New Jersey, and Wayne Haven Nursing Home, Valley Nursing Home, Pine Rest Nursing Home, Dunroven Nursing Home, Allendale Nursing Home Wellington Hall Nursing Home and Woodcliff Lake Manor Nursing Home, Appellants, v. Joanne E. FINLEY, M.D., State Commissioner of Health, and the Health Care Administration Board, Respondents and Public Advocate of New Jersey, Intervenor-Respondent.

Supreme Court of New Jersey.

Argued March 4, 1980.

Decided May 28, 1980.

Adrian M. Foley, Jr., Newark, for appellant nursing homes (Connell, Foley & Geiser, Newark, attorneys; R. Peter Connell, Newark, on the brief).

Jonathan D. Weiner, Westfield, for appellant New Jersey Ass'n of Health Care.

Thomas C. Fox, Washington, D. C., a member of the bar of the District of Columbia, for amicus curiae American Health Care Ass'n (Jonathan D. Weiner, Westfield, attorney; Joel M. Hamme and E. Michael Flanagan, Washington, D. C., members of the bar of the District of Columbia, on the brief).

Andrea M. Silkowitz, Deputy Atty. Gen., for respondents Finley and Health Care Administration Bd. (John J. Degnan, Atty. Gen., attorney; Stephen Skillman, Asst. Atty. Gen., of counsel; Frederick S. Title, Deputy Atty. Gen., on the brief).

Arthur Penn, Asst. Com'r, Trenton, for respondent Public Advocate (Stanley C. Van Ness, Public Advocate, attorney pro se).

Toby S. Edelman, Washington, D. C., a member of the bar of the District of Columbia, submitted a brief on behalf of amicus curiae Gray Panthers.

Mary K. Brennan, Princeton, submitted a brief on behalf of amicus curiae New Jersey Hospital Assn.

The opinion of the court was delivered by

SULLIVAN, J.

We granted certification, 81 N.J. 330, 407 A.2d 1204 (1979), to consider challenges to the legality of administrative regulations, N.J.A.C. 8:30-14.1 et seq., which were adopted by the Commissioner of Health with the approval of the Health Care Administration Board. In essence, the regulations require nursing homes to make available "a reasonable number of (their) beds to indigent persons" as a condition of licensure. N.J.A.C. 8:30-14.4(a). The Appellate Division upheld the regulations. 168 N.J.Super. 152, 402 A.2d 246 (1979). We affirm.

The events leading up to the adoption of the administrative regulations were summarized by the Appellate Division as follows:

The record before us amply demonstrates that N.J.A.C. 8:30-14.1 et seq. was adopted in an effort to alleviate the acute shortage of long-term care nursing home beds available for indigent persons in this State. Apparently, state-licensed nursing homes were largely unwilling to voluntarily accept and treat indigent patients. Although the State Medicaid program reimbursed qualified nursing homes which voluntarily accepted indigents for their care at standard rates, the homes could generally obtain greater fees from private paying patients than from Medicaid reimbursement. This fact led to the unwillingness of many private nursing homes to accept indigent persons. Consequently there developed a severe shortage of accommodations for indigents. Whereas it normally took one to three days for a private pay patient to find an available nursing home bed, it often required six to eight months for a Medicaid eligible patient. As a consequence of this acute shortage many Medicaid eligible patients needing nursing home care had to remain in their homes or in general care hospitals or other institutions unsuited to their requirements for undue periods or indefinitely. Another critical situation was presented by the plight of paying patients who were forced to vacate when their financial resources were depleted (so-called "transfer-trauma"). (168 N.J.Super. at 158, 402 A.2d at 249)

Recognizing the serious problem, the Department of Health at the request of the Director of the State Medicaid Program, asked the Attorney General whether the Department of Health could include a requirement in its health facility licensing standards that proprietary facilities accept and treat a certain number of indigent patients. By letter opinion dated January 31, 1975, the Attorney General advised that the Department lacked the power to include such a requirement in its licensing standards. However, at the urging of the Commissioner of Health, ¹ the Attorney General reconsidered the question and in Formal Opinion No. 15-1977 ruled that a nursing home could be required to provide for the care and treatment of a specified number of indigent persons as a condition of licensure. The opinion noted that there was an acute shortage of nursing home beds available for indigent persons. It referred to the statutory provisions for health care facilities, N.J.S.A. 26:2H-1 et seq., and particularly section 12(b) which authorizes the Department of Health to condition licensure of a health care facility upon findings that the "premises * * * and standards of health care services are fit and adequate." The opinion also emphasized that since nursing homes are given a special status under section 7 by being allowed to operate largely on a noncompetitive basis, it was therefore implicit under this statutory provision that a nursing home must fully serve the public interest in its approved area or region. ² See N.J.S.A. 26:2H-7.

Proposed regulations were immediately drafted by the Commissioner. At the October 6, 1977 meeting of the Health Care Administration Board ³ (Board), representatives of the nursing home industry who had received copies of the proposed regulations were given the opportunity to present objections. The proposed regulations were then published in 9 N.J.R. 516(a) (1977), and resulted in the receipt of numerous comments which were considered by the Department. Some modifications of the proposed regulations were made and submitted to interested persons including appellant Association prior to the Board meeting of January 5, 1978. At that meeting, after further discussion in which interested persons were allowed to participate, the Commissioner, with the approval of the Board, adopted the regulations. N.J.A.C. 8:30-14.1 et seq. (effective January 24, 1978).

Basically, the regulations require a long-term care facility (licensed nursing home) as a condition of licensure, to make available "a reasonable number of its beds to indigent persons." As an alternative, the Department may require a facility to maintain all patients regardless of a change in their economic status. N.J.A.C. 8:30-14.4(a). Under the regulations, the Department is to notify the facility of the requirement to make available a percentage of its beds to indigent persons 90 days prior to the renewal of a license or upon application for a license for a new facility. Ibid. An indigent person is defined as "a person participating in the State Medicaid program and certified as needing nursing care, or a person who could meet the eligibility requirements for receiving nursing care under the State Medicaid program." N.J.A.C. 8:30-14.3.

In determining whether to require a long-term care facility to provide a reasonable number of its beds for indigent care, or to require a facility to maintain all patients regardless of their economic status, the Department is required to consider but is not limited to the following:

1. Whether there currently exists a long-term care bed shortage for indigent persons, and if so, the extent and location of the shortage;

2. The State health plan or the plans of the appropriate health systems agencies;

3. The length of time indigent persons must await for placement of long-term care facility;

4. The costs of providing care to indigent persons in need of nursing care to other health care providers;

5. Whether the nursing home would be able to make a just and reasonable rate on equity if required to accept and care for indigent persons;

6. Whether a certificate of need granted for a new, expanded or modernized long-term facility included a commitment to provide a specified number of beds for indigent persons. (N.J.A.C. 8:30-14.4(b))

Opportunity to be heard on the administrative determination is provided as follows:

i. Any nursing home which feels it cannot make a just and reasonable rate on equity if required to accept indigent persons may request an administrative review of that decision at least 60 days prior to the date for renewal of its license, at which time the facility shall submit to the department a detailed cost analysis substantiating its claim. ii. If, after an administrative review of the decision, the department finds against the long-term care facility, it shall notify the facility within 30 days of the date for renewal of its license.

iii. Consistent with the Administrative Procedure Act and chapter 136 (Health Care Facilities Planning Act of 1971), the long-term care facility may ask for an administrative hearing within 30 days of the revocation notice from the department.

iv. Applicants for licensure of a new facility shall have the same opportunity for an administrative review and for a hearing on the non-issuance of a license. (N.J.A.C. 8:30-14.4(b)(6))

Following the January 5, 1978 adoption of the regulations, appeals were filed by the New Jersey Association of Health Care Facilities and by a number of nursing homes. The appeals were consolidated and, after hearing argument, the Appellate Division filed its opinion upholding the regulations. 168 N.J.Super. 152, 402 A.2d 246 (1979). Appellants attack the facial validity of the regulations. This appeal does not involve a challenge by any nursing home to a particular allotment of beds for indigents that is to the regulations as applied. Appellants argue that the regulations (1) are not within the power delegated to the Board by the St...