New Jersey Ass'n of Health Care Facilities v. Finley

• Decision Date: 01 May 1979
• Parties: In Review of Administrative Promulgation of the Health Care Administration Board, N.J.A.C. 8:30-14.1 through N.J.A.C. 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 CareAdministration Board, Respondents, and Public Advocate of New Jersey, Respondent-Intervenor.
• Court: New Jersey Superior Court — Appellate Division

Page 152

168 N.J.Super. 152

402 A.2d 246

In Review of Administrative Promulgation of the Health Care Administration Board, N.J.A.C. 8:30-14.1 through N.J.A.C 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 CareAdministration Board, Respondents and Public Advocate of New Jersey, Respondent-Intervenor.

Superior Court of New Jersey, Appellate Division.

Argued Feb. 26, 1979.

Decided May 1, 1979.

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

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

Frederick S. Title, Deputy Atty. Gen., for respondents (John J. Degnan, Atty. Gen., attorney; Stephen Skillman, Asst. Atty. Gen., of counsel).

Arthur Penn, Asst. Com'r, Dept. of the Public Advocate, Trenton, for respondent-intervenor (Stanley C. Van Ness, Public Advocate, attorney).

Toby S. Edelman filed a brief on behalf of amicus curiae Gray Panthers.

Before Judges CONFORD, PRESSLER and KING.

The opinion of the court was delivered by

CONFORD, P. J. A. D. (retired, temporarily assigned).

These are consolidated appeals challenging the validity of an administrative regulation, N.J.A.C. 8:30-14.1 to 14.6, which was promulgated by the Commissioner of Health and the Health Care Administration Board ("Board"). Appellants are the New Jersey Association of Health Care Facilities ("New Jersey Association") and several private nursing homes ("Private Homes").

On November 10, 1977 the Commissioner of Health published in the New Jersey Register proposed regulations which would require nursing homes to make available a "reasonable number" of their beds to indigent persons as a condition of licensure or relicensure. See 9 N.J.R. 516. Pursuant to the notice numerous comments were received from interested persons concerning the proposed regulation. On January 5, 1978 the Commissioner, with the approval of the Board, finally adopted N.J.A.C. 8:30-14.1 Et seq., entitled "Beds for Indigent Persons," and the regulation was published and took effect February 9, 1978.

Appeals therefrom were filed by both the New Jersey Association and the Private Homes. The Division of Public Interest Advocacy was granted leave to intervene, and subsequently the Attorney General filed a motion to consolidate all the appeals, which was granted. A motion to stay implementation of the regulations was denied by the court.

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").

Sometime in 1975 the then Director of the State Medicaid program wrote to the Department of Health inquiring whether Medicaid-financed beds could be required of nursing homes as a condition of licensure. In turn, the Department of Health requested a formal opinion on the matter from the Attorney General. At that time he advised that it could not legally "include in its health facility licensing standards a requirement that proprietary facilities accept and treat a certain number of indigent patients." The Attorney General further opined that such a regulation was not a proper subject of licensing regulations, which he said might deal only with a health facility's day-to-day physical, fiscal and professional operations.

In December 1976 the Public Advocate filed a petition for Rule-Making with the Department of Health, requesting the Commissioner to adopt regulations requiring nursing homes to set aside a "fixed percentage of (their beds) to indigent persons" as a condition of state licensure. The Public Advocate criticized the Attorney General's opinion and urged that it not be followed. At first the Commissioner of Health stood on the Attorney General's advice and denied the request of the Public Advocate. Thereupon, the latter filed an appeal to this court challenging the validity of the Commissioner's determination that she lacked the authority to adopt the proposal. However, during the pendency of that appeal the Attorney General rendered a second opinion reversing his earlier position. He now indicated that a requirement for the provision of a certain number of beds for indigent persons was consistent with the Department's authority, pursuant to N.J.S.A. 26:2H-12(b), to examine the rules and bylaws of a health care facility to ascertain that its rules are "fit and adequate" and that a licensee is in compliance with the act. Accordingly, the Commissioner drafted the prototype regulation and the Public Advocate voluntarily dismissed his appeal.

At an October 6, 1977 meeting of the Health Care Administration Board, representatives of the nursing home industry, who had already received copies of the proposed regulations prior to the meeting, were permitted to voice their objections to the Board before the regulations were officially published for public comment. After a lengthy discussion of the merits of the proposed regulations and some minor changes in language, the Board voted to approve them for initial publication.

Numerous comments, both in favor and critical of the regulations, were received and considered by the Department of Health. Indeed, several of the comments led to the adoption of minor changes in order more fully to realize the intent of the regulations. For example, the term "percentage" in N.J.A.C. 8:30-14.4(a) as published on November 10, 1977 was changed to "reasonable number" to harmonize that section with N.J.A.C. 8:30-14.4(b). Moreover, the fact that many charitable, nonprofit and life care community nursing homes already provided extensive services to indigent patients and thereby met their fair share of the industry obligation to service indigents was recognized. See N.J.A.C. 8:30-14.4(a)(1). In order further to increase administrative flexibility, and prevent the "transfer trauma," mentioned above, experienced by elderly patients when forced to leave a familiar nursing home, the Department was authorized to require facilities to maintain all present patients despite a change in their economic status and to include them in the fair share calculation under the regulation. N.J.A.C. 8:30-14.4(a).

Appellants argue that the challenged regulations go beyond the powers delegated to the Department of Health by its enabling legislation, N.J.S.A. 26:2H-1 Et seq., and are therefore Ultra vires. Specifically, they contend that N.J.S.A. 26:2H-1 Et seq. establishes two separate and distinct functions, one being planning and the other licensing, and that the Department's responsibility to insure that health care services are available to meet the needs of our citizenry is limited to the exercise of those functions. Moreover, it is argued that the licensing function applies exclusively to the quality of services afforded by nursing homes, such as conditions relating to the standards of patient care, while the planning function is similarly confined to the certificate of need process, which deals with proposed new facilities or expansion of existing facilities. It is argued that since the challenged regulations are relevant only to the function of passing on applications for certificates of need, not to the licensing function, they are Ultra vires and invalid as conditions of licensure. This was essentially also the view of the Attorney General in his first formal opinion concerning the precursor to N.J.A.C. 8:30-14.1 Et seq.

It is beyond dispute that N.J.S.A. 26:2H-1 Et seq. neither expressly prohibits nor permits the regulations in question. However, in determining whether a particular administrative action enjoys statutory authorization, the reviewing court may look beyond the specific terms of the enabling act to the statutory policy sought to be achieved by examining the entire statute in light of its origin and objectives. New Jersey Guild of Hearing Aid Dispensers v. Long, 75 N.J. 544, 562, 384 A.2d 795 (1978); In re Suspension of Heller, 73 N.J. 292, 303, 374 A.2d 1191, 1196 (1977). The purpose of such an inquiry is to ascertain whether the requisite authority may be said to be implicitly supplied, as "(t)hat which is implied is as much a part of the law as that which is expressed." Ibid. In re Gastman, 147 N.J.Super. 101, 109,...