Visiting Nurse Ass'n of Sussex County, Inc., Matter of

• Decision Date: 06 June 1997
• Parties: In the Matter of the Certificate of Need of the VISITING NURSE ASSOCIATION OF SUSSEX COUNTY, INC.
• Court: New Jersey Superior Court — Appellate Division

Page 85

302 N.J.Super. 85

694 A.2d 1038

In the Matter of the Certificate of Need of the VISITING NURSE ASSOCIATION OF SUSSEX COUNTY, INC.

Superior Court of New Jersey Appellate Division.

Argued May 21, 1997.

Decided June 6, 1997.

Murray J. Klein, Princeton, argued the cause for appellant (Reed Smith Shaw & McClay, attorneys; Mr. Klein, of counsel; Susan D. Bonfield and Joseph D. Glazer, on the brief).

Mary F. Rubinstein, Deputy Attorney General, argued the cause for respondent (Peter Verniero, Attorney General, attorney; Mary C. Jacobson, Assistant Attorney General, of counsel; Ms. Rubinstein, on the brief).

Before Judges SHEBELL, BAIME and P.G. LEVY.

The opinion of the court was delivered by

BAIME, J.A.D.

Visiting Nurse Association of Sussex County, Inc. (VNA) appeals from the denial of its application for a certificate of need (CON) to provide home health care services in Morris and Warren Counties. The State Health Planning Board (SHPB) adopted the findings of the Local Advisory Board (LAB) that (1) VNA failed to demonstrate an unmet need in Morris County and (2) the applications of other providers to furnish services in Warren County were superior and were thus entitled to a priority. The Administrative Law Judge (ALJ) determined that the SHPB's findings were supported by the record, and thus denied VNA's application. VNA contends that (1) the proceedings were procedurally defective because the SHPB did not issue a separate written decision as required by regulation, and (2) the ALJ's denial of a CON was arbitrary and capricious. We perceive no sound basis to disturb the ALJ's decision.

I.

Under the Health Care Facilities Planning Act ( N.J.S.A. 26:2H-1 to -18.70), no health care provider may construct new facilities or expand existing ones or initiate new services unless a CON has been granted by the Commissioner of Health. N.J.S.A. 26:2H-7; see also N.J.A.C. 8:33-3.1. In In re Certificate of Need Granted to the Harborage, 300 N.J.Super. 363, 693 A.2d 133 (App.Div.1997), and In re Holy Name Hospital for a Certificate of Need, 301 N.J.Super. 282, 693 A.2d 1259 (App.Div.1997), we described at length the statutory and regulatory framework within which decisions pertaining to applications for CONs are made. It would be superfluous to tread upon the ground so exhaustively covered in these opinions. By way of summary, the administrative process is triggered by a "call" from the Department of Health and Senior Services inviting the submission of CON applications based upon a preliminary finding of need or patient access problems. N.J.A.C. 8:33-4.1(a). Applications must receive the affirmative vote of at least twenty-five percent of the voting members of the LAB having jurisdiction over the applicable geographic region as well as that of the SHPB, before they will be forwarded to the Commissioner for final review. N.J.S.A. 26:2H-10.1(a)(1), (2). If the applicant does not obtain the approval of the requisite percentage of the voting members of either the LAB or the SHPB, it may seek a hearing by the Office of Administrative Law. N.J.A.C. 8.33-4.14. Upon approval of the application by an administrative law judge, the matter is then forwarded to the Commissioner for final review. However, if the ALJ sustains the LAB's or the SHPB's denial of the application, the decision is deemed a final agency determination which may be directly appealed to this court. R. 2:2-3(a)(2).

It is against this abstruse statutory and regulatory backdrop that we briefly recite the salient facts. In 1994, the Department of Health and Senior Services issued a call inviting the submission of CON applications for the establishment or expansion of home health agency services. The call was predicated upon a statewide survey which disclosed a "service gap"--a gap between services provided and services needed--in home health care for medicare patients.

VNA submitted an application in response to the call, proposing to expand its existing service to meet the perceived need in both Morris and Warren counties. As described in its application, VNA has existed as a health care agency for thirty years in Sussex County. It is licensed by the Department of Health and has received medicare certification as a free-standing home health care agency.

VNA proposed to provide Morris and Warren counties with a broad range of services including "24-hour, seven day a week skilled nursing care, physical therapy, speech therapy, occupational therapy, home health aid[ ], medical social [assistance], nutritional therapy, [psychiatric care], and complex treatment modalities." It anticipated servicing five percent of the indigent population in the two counties. According to VNA, because it had extensive experience operating in rural areas, it was well-equipped to expand its services into Morris and Warren counties. VNA appended letters of recommendation from satisfied customers, as well as an agreement with the Karen Ann Quinlan Center of Hope Hospice in Newton to provide staffing for the center's home health care operations.

With respect to the need for its services, VNA furnished a study which compared the current utilization rates in each of the subject counties with the demand present in mature population markets having almost identical demographics, and identified an unmet need of 548,675 visits in Morris County and 162,946 visits in Warren County. VNA asserted that it would be able to provide substantial skilled nursing assistance in both counties. Because of the overwhelming need which it claimed existed, VNA claimed that approval of its application would have no impact on existing agencies.

VNA identified access problems in Morris and Warren counties. It stated that it could "offer the full range of complex treatment modalities to this expanded service area." VNA identified the full range of services as "total parenteral nutrition (TPN), IV chemotherapy and pain management." As will become evident later in our opinion, no specific mention of mechanical ventilator care was made in the application or in response to supplemental requests made by the Department.

After VNA's application was certified as complete, it was forwarded to the LAB for the applicable geographical region. The LAB determined that much of the data submitted by VNA and other applicants was out of date and could not be verified. To correct this situation, the LAB created a task force charged with the responsibility of determining whether there was a service gap or patient access problem in the region. The task force subsequently issued a report indicating: (1) need and access problems were caused largely by the insufficient supply of professionals and staff in existing agencies, and (2) existing providers lacked the financial capacity to withstand additional competition. The latter finding--potential financial impairment of existing providers--was corroborated by additional evidence presented to the LAB.

The LAB initially decided that any service gap in Morris County could be satisfied by the existing providers, and that two CONs would be approved in Warren County, not because of need or patient access problems, but merely to enhance consumer choice. The recommendation to approve two CONs in Warren County was based upon N.J.A.C. 8:33L-2.4(d), which requires that every county or region be served by a minimum of three home health care providers regardless of need. The LAB recommended approval of the applications submitted by the Karen Ann Quinlan Center of Hope Hospice and the Adventist Home Health Care Services. These applications were found to have greater merit than that of VNA because the providers had better "linkages" within the respective communities and because they proposed to address specific access problems regarding complex therapies, including mechanical ventilator and infusion therapy. The LAB noted that, while VNA was an existing agency and was deserving of some priority in ranking under N.J.A.C. 8:33L-2.4(b)(4), VNA did not propose to address complex modality access problems with the same comprehensiveness as the two providers whose applications were approved. Specifically, the LAB claimed the VNA had not incorporated ventilator care in its proposal.

When VNA appealed to the OAL, the LAB decided to alter its position. The LAB and VNA agreed upon a settlement in which VNA's application was forwarded to the SHPB. The agreement required the SHPB to consider VNA's application along with the two it had previously recommended.

We need not recount at length the evidence presented at the SHPB's meeting which took place on July 6, 1995. We note that testimony indicated an increase of approximately 16,500 persons of sixty-five years of age or older in Morris County by the year 2010. However, the current number of home health visits was said to be misleadingly low because unlicensed agencies had not reported their activities in Morris County and several of the licensed agencies had not responded to the Department's survey requests. The SHPB voted to reject VNA's application based upon the LAB's finding that it had not demonstrated an unmet need and that the five agencies in operation in Morris County could satisfy any potential service gap. As to Warren County, the SHPB adopted the finding of the LAB that other applications were superior to that of VNA. Although the SHPB did not issue a separate written opinion, its duly adopted minutes referred to its decision as recited in the printed transcript of its meeting.

The matter was then transferred to the OAL as a contested case pursuant to N.J.S.A. 26:2H-10.1(b) and N.J.S.A. 52:14F-1 to -13. VNA and the SHPB filed opposing motions for summary decision. On November 2, 1995, ALJ Klinger issued her final decision, accepting the findings and recommendations made by the SHPB. The ALJ determined that there was no unmet need for home health services in Morris County. Alternatively, the ALJ noted that if there was such a...