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(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