(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued January 30, 1995 -- Decided May 22, 1995
O'HERN, J., writing for a unanimous Court.
Douglas R. Colkitt, M.D. is a licensed radiation oncologist specializing in the treatment of cancer
through x-ray therapy. Dr. Colkitt seeks to install cancer radiation equipment in an outpatient office in
Vineland, New Jersey.
The Health Care Facilities Planning Act, N.J.S.A. 26:2H-7, states that a health care facility cannot be
constructed or expanded nor can a new health care service be instituted except on application for and receipt
of a certificate of need from the Department of Health (Department). One may apply for a waiver of the
certificate of need requirement if: 1) the applicant demonstrates an inability to practice the specialty without
the service or equipment at issue; 2) at least 75" of the applicant's charges stem from the challenged service
or equipment; and 3) the service or equipment is otherwise unavailable to patients, as determined by the
Commissioner of Health (Commissioner).
In March 1992, the Department notified Dr. Colkitt that to establish his radiation therapy facility, he
would have to apply for either a certificate of need or a waiver. On March 24, 1992, Dr. Colkitt submitted a
request for a waiver. On June 2, 1992, the Department requested information from South Jersey Hospital
System (SJHS) concerning the effect of Dr. Colkitt's proposed service on SJHS's existing radiation treatment
services. SJHS opposed the proposed Vineland facility, seeing no need for an additional facility because
there was no backlog of patients and because it could expand should the need arise. Dr. Colkitt was not
informed of the information supplied by SJHS.
On September 15, 1992, the Commissioner denied the waiver application, finding that Dr. Colkitt
had failed to show that he would be unable to practice his specialty without the Vineland facility, that "any
substantial portion" of his total charges for radiation therapy would be derived from the Vineland facility, and
that the radiation service was otherwise unavailable to patients in the area. The Commissioner also informed
Dr. Colkitt of a moratorium on the acceptance of certificate applications that had been in effect since August
22, 1991, expiring only when the Department formally adopted new regulations.
Dr. Colkitt appealed the Commissioner's decision to the Appellate Division, arguing that his facility
was not subject to certificate of need requirements because no regulations were in place when he submitted
his proposal. The previous certificate regulations governing radiation oncology services had expired on
September 15, 1991. Thereafter, the Department enacted an updated set of radiation therapy regulations
which became effective February 16, 1993 (the February 1993 regulations) after Dr. Colkitt had submitted his
application. Dr Colkitt argued that: because no regulations were in place when he sought to operate his
facility, the Commissioner had no jurisdiction; the August 22, 1991 moratorium on applications for
certificates of need became irrelevant with the expiration of the certificate regulations in 1991; and, the
February 1993 regulations were not intended to be applied retroactively. In response the Department
claimed that it never intended to cease regulating such services and that the Commissioner had sufficient
authority to require a certificate or a waiver.
The Appellate Division determined that because the certificate regulations governing radiation oncology had lapsed, unless the February regulations were valid and applied retroactively, Dr. Colkitt's
proposal would not fall under certificate review. Anticipating that the Supreme Court's decision in In re
Adoption of Regulations Governing State Health Plan would resolve the validity of the new regulations, the
Appellate Division concluded that the February 1993 regulations would apply retroactively to Dr. Colkitt,
unless State Health Plan invalidated them. On the waiver issue, the Appellate Division found that Dr.
Colkitt met the first two requirements of the waiver regulation but found with regard to the "availability"
criterion that the Commissioner had denied Dr. Colkitt due process by not giving him the opportunity to
rebut the information obtained from SJHS. The court gave Dr. Colkitt the opportunity to await the decision
in State Health Plan or accept a remand on the third portion of the waiver requirement. State Health Plan
was decided by this Court on February 28, 1994. The Court held that regulations directly implementing the
policies identified in the State Health Plan were invalid under Chapter 31 of the Laws of 1992, which
expressly forbade regulations with such an effect or intent.
The Supreme Court granted certification to consider whether the February 1993 certificate of need
regulations for radiation oncology facilities are valid in light of State Health Plan.
HELD: The February 1993 regulations governing certificate of need eligibility for radiation oncology services
are not an immediate and direct implementation of the goals and objectives of the State Health
Plan. As such, these regulations do not conflict with Chapter 31 and are, therefore, valid.
1. In 1991, the Legislature enacted the Health Care Cost Reduction Act, which established the State
Health Planning Board and directed the Board to prepare a State Health Plan. Under that legislation, no
certificate of need was to issue unless the action proposed in the application for such certificate was
consistent with the health care needs identified in the State Health Plan. Thereafter, in June 1992, prior to
the adoption of the State Health Plan, the Legislature enacted Chapter 31, which deleted the requirement
that the State Health Plan serve as the basis for all certificate applications. Instead, the Plan was to serve as
only an advisory document that may be considered during the approval process. In addition, the Board and
the Department were no longer able to adopt any regulation that implemented any goals , objectives or any
other health planning recommendations included in the State Health Plan. (pp. 7-11)
2. In enacting Chapter 31, the Legislature did not intend to prohibit the Department from adopting any
regulations that correspond in any respect with any of the numerous views and recommendations contained
in the State Health Plan. Chapter 31 prohibits only the immediate and direct implementation of the specific
health planning decisions set forth in the State Health Plan. The February 1993 regulations are not an
immediate and direct implementation of the State Health Plan. They are nearly identical to and generally
consistent with the previous regulations. That the regulations might be consistent with the State Health Plan
does not render them invalid. (pp. 12-14)
3. Dr. Colkitt should be given a new hearing in order to review and rebut all information on which the
Department relied when considering his waiver application. In addition, any of the numerous views and
recommendations expressed as goals of the State Health Plan that are referenced in the subject regulations
serve only as general standards to guide the Department. Since the time of oral argument, the February
1993 regulations have expired. Thus, the newest regulations, adopted on February 16, 1995, will govern
further proceedings in this matter. (pp. 14-16)
Judgment of the Appellate Division invalidating N.J.A.C. 8:33I-1.1 to -1.6, effective February 16,
1993, is REVERSED and the matter is REMANDED for further proceedings in accordance with this opinion.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, GARIBALDI, STEIN and
COLEMAN join in JUSTICE O'HERN'S opinion.
SUPREME COURT OF NEW JERSEY
A-
83 September Term 1994
DOUGLAS R. COLKITT, M.D.,
Appellant-Respondent,
v.
BRUCE SIEGEL, M.D., M.P.H.,
ACTING COMMISSIONER OF
HEALTH, STATE OF NEW JERSEY,
Respondent-Appellant.
Argued January 30, 1995 -- Decided May 22, 1995
On certification to the Superior Court,
Appellate Division.
Michael J. Haas, Senior Deputy Attorney
General, argued the cause for appellant
(Deborah T. Poritz, Attorney General of New
Jersey, attorney; Joseph L. Yannotti,
Assistant Attorney General, of counsel; Mr.
Haas and Darcy A. Saunders, Deputy Attorney
General, on the briefs).
John T. Brennan, Jr., a member of the
District of Columbia bar, argued the cause
for respondent (Cohen, Shapiro, Polisher,
Shiekman and Cohen, attorneys; Mr. Brennan
and Murray J. Klein, on the brief).
The opinion of the Court was delivered by
O'HERN, J.
The central question in this appeal is whether a physician
must obtain a certificate of need to open a high-voltage cancer
radiation treatment facility. The Appellate Division held that
the regulations of the State Department of Health requiring a
certificate of need were invalid under our decision in In re
Adoption of Regulations Governing State Health Plan,
135 N.J. 24
(1994). In that case we held, substantially for the reasons
stated by Judge Skillman in the Appellate Division opinion
reported at
262 N.J. Super. 469 (1993), that regulations directly
implementing the policies identified in the State Health Plan
were invalid under Chapter 31 of the Laws of 1992, which
expressly forbade regulations with such an effect or intent. We
find that the subject regulations requiring a certificate of need
incorporated many standards and requirements that long predated
the adoption of a State Health Plan in 1992, and that the
regulations do not directly implement health-planning goals
identified in the State Health Plan. Accordingly, we reverse the
judgment of the Appellate Division and remand the matter to the
Department of Health to permit consideration of plaintiff's
request for a certificate of need.
In March 1992 the Department of Health (Department) informed Dr. Colkitt that to establish his radiation therapy facility, he would need either a certificate or a waiver. Dr. Colkitt submitted a request for a waiver on March 24, 1992. On June 2, 1992, the Department requested information from South Jersey Hospital System concerning the effect of Dr. Colkitt's proposed service on its existing radiation treatment services. The Department wanted that information because South Jersey Hospital System was an approved provider in the same health-planning region as Dr. Colkitt's facility. South Jersey Hospital System opposed Dr. Colkitt's proposal. It saw no need for an additional facility because no backlog of patients existed, and because it could expand its existing radiation treatment capacity should the
need arise. Without informing Dr. Colkitt of the information
supplied by South Jersey Hospital System, the Department
requested additional information concerning his qualifications,
practice, and proposed Vineland facility, which Dr. Colkitt
provided on July 1, 1992.
The Commissioner of Health found that Dr. Colkitt had failed
to show that he would be unable to practice his specialty without
the Vineland facility, that "any substantial portion" of his
total charges for radiation therapy services would be derived
from the Vineland facility, and that the radiation service was
otherwise unavailable to patients in the area. The Commissioner
denied Dr. Colkitt's waiver request on September 15, 1992. She
informed Dr. Colkitt that a moratorium on the acceptance of
certificate applications had been in effect since August 22,
1991, and would expire when the Department formally adopted new
regulations.
Dr. Colkitt appealed that decision, arguing that his
facility was not subject to certificate requirements because no
regulations were in place when he submitted his proposal. The
previous certificate regulations governing radiation oncology
services, N.J.A.C. 8:33I-1.1 to -1.5, effective since 1981, had
expired on September 15, 1991, pursuant to the "Sunset
Provisions" of Executive Order 66 (1978), which created a
presumptive five-year life span for all administrative rules.
Thereafter, the Department enacted an updated set of radiation
therapy regulations, N.J.A.C. 8:33I-1.1 to -1.6, which became
effective February 16, 1993 (February 1993 regulations)--after
Dr. Colkitt submitted his application. According to Dr. Colkitt,
because no regulations were in place when he sought to operate
his facility, the Commissioner had no jurisdiction over his
oncology services. Dr. Colkitt argued that the August 22, 1991,
moratorium on applications for projects that required certificate
approval became irrelevant with the expiration of the certificate
regulations in 1991. He also asserted that the February 1993
regulations were not intended to be applied retroactively. The
Department insisted that it never intended to cease regulating
such services and that the Commissioner had sufficient authority
to require a certificate or a waiver.
The Appellate Division determined that because N.J.A.C.
8:33I had lapsed, unless the new chapter 8:33I, effective
February 16, 1993, was valid and applied retroactively, Dr.
Colkitt's proposal would not fall under certificate review.
Anticipating that this Court's decision in State Health Plan
would "definitively resolve" the validity of the new regulations,
the Appellate Division concluded that the February 1993
regulations would apply retroactively to Dr. Colkitt, unless
State Health Plan invalidated them. The court found no
unfairness in subjecting Dr. Colkitt to the application standards
that governed health-care providers under valid prior and then-current regulations.
The court next considered the Department's waiver decision,
in the event that the regulations were upheld and applied
retroactively to Dr. Colkitt. As noted, under N.J.S.A. 26:2H-7e,
a physician-applicant must meet three criteria to earn a waiver
of the certificate requirement. First, the applicant must show
an inability to practice the specialty without the service or
equipment at issue; second, at least seventy-five percent of the
applicant's charges must stem from the challenged service or
equipment; and third, the service or equipment must otherwise be
unavailable to patients, as determined by the Commissioner's
standards.
The court found that Dr. Colkitt met the first two
requirements but found with regard to the "availability"
criterion that the Commissioner had denied Dr. Colkitt due
process by not extending to him the opportunity to rebut the
information obtained from South Jersey Hospital System. The
court rejected the Commissioner's argument that Dr. Colkitt could
adequately confront the information on appeal, and held that the
denial of due process required a remand for further consideration
on the availability criterion. It therefore gave Dr. Colkitt the
choice either to await this Court's decision in State Health Plan
or to accept a remand on the third portion of the waiver. We
decided State Health Plan on February 28, 1994. After
reconsideration, the Appellate Division reaffirmed its ruling
that State Health Plan invalidated the new certificate
regulations, thus allowing Dr. Colkitt to operate his clinic.
We granted certification on September 13, 1994,
138 N.J. 264, to consider whether that decision conflicts with State
Health Plan and Monmouth Medical Center v. State Department of
Health,
272 N.J. Super. 297 (App. Div.), certif. denied,
137 N.J. 310 (1994), a case holding that Chapter 31 did not invalidate
regulations declaring a moratorium on the processing of
certificates of need for new cardiac facilities. (We later
stayed the Appellate Division grant of authority for Dr. Colkitt
to operate his facility.) The Commissioner has not petitioned
for review of the Appellate Division's ruling on the waiver
criteria. Nor has Dr. Colkitt asked us to review the Appellate
Division's determination that, if valid, the February 1993
regulations apply retroactively to his application. The only
issue before us, then, is whether the February 1993 certificate
of need regulations for radiation oncology facilities are valid
in light of State Health Plan.
* * * ." N.J.S.A. 26:2H-7. The purpose of that Act was to
promote "health care services of the highest quality, of
demonstrated need, efficiently provided and properly utilized at
a reasonable cost." N.J.S.A. 26:2H-1. The Act provided
legislative standards to govern the Department's review of
certificate applications:
No certificate of need shall be issued
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, and will contribute to the
orderly development of adequate and effective
health care services.
In 1991 the Legislature amended the Health Care Facilities
Planning Act by enacting the Health Care Cost Reduction Act,
L. 1991, c. 187, which established the State Health Planning
Board, a new agency within the Department of Health, N.J.S.A.
26:2H-5.7, and directed the Board to prepare a "State Health
Plan." L. 1991, c. 187, § 34; N.J.S.A. 26:2H-5.8a. The
amendment provided that "[t]he State Health Plan shall identify
the unmet health care needs in an area by service and location
and it shall serve as the basis upon which all certificate of
need applications shall be approved." Ibid. To conform with
that new provision, the following criterion was added to N.J.S.A.
26:2H-8: "No certificate of need shall be issued unless the
action proposed in the application for such certificate is
consistent with the health care needs identified in the State
Health Plan * * * ." L. 1991, c. 187, § 31.
Pursuant to that legislation, the State Health Planning
Board drafted several portions of a proposed State Health Plan.
After its review of that draft, the Department proposed that
certain parts of the State Health Plan be adopted as regulations.
Following a notice-and-comment period, see
24 N.J.R. 2562-65
(July 20, 1992), the Health Care Administration Board approved
and the Commissioner adopted the regulations on June 25, 1992.
Those regulations, N.J.A.C. 8:100-1.1 to -18.18, were
collectively entitled "State Health Plan." The purpose of that
chapter was "to establish a plan that will satisfy the mandate of
[the Health Care Cost Reduction Act]." N.J.A.C. 8.100-1.1(a).
The State Health Planning Board released a "preliminary draft
chapter" of the State Health Plan on cancer treatments.
24 N.J.R. 3789, 3831-63 (Nov. 2, 1992). However, it never completed
or adopted that chapter.
On June 29, 1992, four days after the "State Health Plan"
regulations were adopted, the Legislature amended the Health Care
Cost Reduction Act and Health Care Facilities Planning Act by
enacting chapter 31. Chapter 31 deleted the requirement that the
State Health Plan serve as the basis for all certificate
applications. Instead, chapter 31 provided that the Plan would
serve only as "an advisory document which may be considered when
certificate of need applications are reviewed for approval."
N.J.S.A. 26:2H-5.8a. In addition, chapter 31 imposed the
following restriction on the Department's authority to adopt
regulations:
Effective May 15, 1992, notwithstanding
any other provision of law to the contrary,
neither the Health Care Administration Board
[nor] the Department of Health shall adopt
any regulation which implements any goals,
objectives or any other health planning
recommendations that have been included in
the State Health Plan prepared by the State
Health Planning Board.
Regulations Governing State Health Plan,
262 N.J. Super. 469,
481-82 (1993) (citation omitted), aff'd,
135 N.J. 24 (1994).
The regulations at issue in State Health Plan clearly
conflicted with chapter 31 in that they explicitly identified the
policies and goals of the State Health Plan and established
specific guidelines to satisfy that Plan. The Department
conceded that the regulations in State Health Plan conflicted
with chapter 31. 262 N.J. Super. at 486.
In this case the Department does not concede that the
February 1993 regulations requiring a certificate of need for
radiation oncology services conflict with chapter 31. Rather,
the Department argues that the February 1993 regulations are
largely a re-codification of older, expired regulations, and
because they do not conflict with chapter 31, they are valid.
"annual patient treatment capacity levels for existing and
approved megavoltage equipment must exceed 90 percent for the
calendar year prior to the Commissioner's call for certificate of
need applications for new services * * * ." N.J.A.C. 8:33I-1.4(a). That new requirement corresponds to the following
portion of the preliminary draft of the State Health Plan
published at
24 N.J.R. 3848 (Nov. 2, 1992):
Strategies that can be employed to
"redirect" cancer treatment in the future
would include:
Future acute cancer resources allocation
can be determined through a [Local
Advisory Board]-specific process, with
certificate of need applications only
being accepted for processing from those
regions of the state that achieve a
relatively high level of regional
service capacity (e.g., 90 percent over
the previous 12 months).
Further, N.J.A.C. 8:33I-1.4(c)8 notes that applications for new
and additional radiation oncology programs in a health service
area will be evaluated by considering a number of factors,
including whether "the proposed service is compatible with
overall health planning goals and recommendations for the State
as identified in the State Health Plan * * * ."
When the February 1993 regulations were proposed, the
Department specifically described them as "consistent with both
the previous megavoltage rules and the advice contained in the
draft cancer chapter of the State Health Plan."
24 N.J.R. 4222
(Nov. 16, 1992). The Department also noted:
Since the new rules are being proposed
without the advantage of the relevant advice
contained in the State Health Plan, the
Department views this proposal as an interim
measure that is principally intended to
reaffirm the regional nature of this service
and can serve to guide the consideration of
replacement megavoltage services while
awaiting completion of the cancer chapter of
the State Health Plan. It is anticipated
that future amendments may be necessary to
refine policies regarding quality assurance
measures. A two year expiration date is also
being proposed in order to make clear the
Department's intention to review and amend
this chapter to conform to the final text of
the cancer chapter of the State Health Plan.
respect with any of the numerous views and recommendations
contained in the State Health Plan":
If chapter 31 were construed that broadly, it
could effectively prevent the Department from
exercising its rule-making authority and
seriously undermine its capacity to discharge
its "central, comprehensive responsibility"
under the Act "for the development and
administration of the State's policy with
respect to health planning, hospital and
related health care services and health care
facility cost containment programs."
N.J.S.A. 26:2H-1. We are unwilling to
ascribe such an intent to the Legislature
based upon the vague, general language of
chapter 31.
Department may consider as a factor whether "the proposed service
is compatible with" the State Health Plan.
further proceedings in the matter in the same manner as the
February 1993 regulations, with any material drawn from the State
Health Plan serving as an "advisory document" in the review of
certificate of need applications. N.J.S.A. 26:2H-5.8a. In those
proceedings the Department of Health may consider Dr. Colkitt's
claims that he should be permitted to continue to operate the
facility, allegedly opened before we stayed the Appellate
Division's judgment, as well as the needs of any patients whom he
might be currently serving. The policy choice between managed
competition and a free market in medical services is for the
Department to resolve under its statutory mandate.
We reverse the judgment of the Appellate Division
invalidating N.J.A.C. 8:33I-1.1 to -1.6, effective February 16,
1993, and remand for further proceedings in accordance with this
opinion.
Chief Justice Wilentz and Justices Handler, Pollock,
Garibaldi, Stein, and Coleman join in this opinion.
NO. A-83 SEPTEMBER TERM 1994
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court
DOUGLAS R. COLKITT, M.D.,
Appellant-Respondent,
v.
BRUCE SIEGEL, M.D., M.P.H.,
ACTING COMMISSIONER OF
HEALTH, STATE OF NEW JERSEY,
Respondent-Appellant.
DECIDED May 22, 1995
Chief Justice Wilentz PRESIDING
OPINION BY Justice O'Hern
CONCURRING OPINION BY
DISSENTING OPINION BY