BARTLEY HEALTHCARE NURSING AND REHABILITATION v. NEW JERSEY DEPARTMENT OF HEALTH AND SENIOR SERVICES
Annotate this CaseNOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3219-09T2
BARTLEY HEALTHCARE
NURSING AND REHABILITATION,
Petitioner-Appellant,
v.
NEW JERSEY DEPARTMENT OF
HEALTH AND SENIOR SERVICES,
Respondent-Respondent.
________________________________________________________________
February 15, 2011
Submitted January 25, 2011 - Decided
Before Judges Carchman and Graves.
On appeal from a Final Decision of the New Jersey Department of Health and Senior Services.
Buttaci & Leardi, L.L.C., attorneys for appellant (John W. Leardi, of counsel and on the brief; Vincent N. Buttaci, on the brief).
Paula T. Dow, Attorney General, attorney for respondent (Melissa H. Raksa, Assistant Attorney General, of counsel; Kimberly E. Jenkins, Deputy Attorney General, on the brief).
PER CURIAM
Appellant Bartley Healthcare Nursing and Rehabilitation appeals from the final decision of the Acting Commissioner of Health and Senior Services (DHSS or the Department) concluding that the salaries and benefits of two of appellant's vice-presidents should be reclassified and allocated to the management cost center in appellant's 2006 Medicaid cost report. The reallocation reduced the reimbursement rate to which Bartley was entitled under the Medicaid reimbursement program. We affirm.
These are the relevant facts. When seeking reimbursement for services provided under Medicaid, a nursing facility (NF) must submit a cost report allocating its expenses to a variety of categories, or "cost centers." Many of these categories are governed by "screens," or expense caps that designate the maximum reimbursement deemed reasonable by the Department. The rate component for each category is then calculated based on the lower of the NF's actual costs and the reasonable screen imposed by the Department. An NF's goal is to allocate its costs in a manner that places its actual costs for each category below the screen in order to obtain the maximum reimbursement rate.
Bartley is the owner and operator of two healthcare facilities: Bartley Healthcare Nursing and Rehabilitation (BHNR), and Bartley Assisted Living (BAL). In April 2007, Bartley submitted a nursing facility rate setting and reimbursement cost report for the period from January 1, 2006 to December 31, 2006. During this period, Laura Hoey served as Bartley's Vice President of Management and Operations (Management VP), and Susan Shaffer served as the Vice President of Customer and Employee Relations (Relations VP).
On September 14, 2007, the Department performed a "desk review" and made the following adjustments: (1) the salary and benefits of the Management VP were reallocated from the cost centers for "housekeeping," "property operating," and "other administrative" to the "management" cost center; and (2) the salary and benefits of the Relations VP were reallocated to the "non-allowable" section from the "other administrative" cost center. These changes shifted costs from categories in which Bartley had available cost allocation under the statutory caps, or "screens," to a category that was limited. The change reduced Bartley's total allocable expenses, thereby reducing its overall reimbursement rate.
The altered cost report became the basis for the Department's calculation of Bartley's prospective Medicaid reimbursement rate for the period from July 1, 2007 to June 30, 2008, and the Department notified Bartley of the rate in November 2007.
Bartley initiated a Level I appeal of its cost reallocation and stated:
We disagree with the reclassification of reported salaries and benefits from the housekeeping and maintenance cost centers to the management cost center and from the other administrative cost center to non-allowable expense. The individuals who were paid these salaries were properly classified on the filed cost report based on their job duties for the employees in question. . . .
We believe that the reclassifications were made based on the Titles of these people and not on the basis of their job duties.
In support of its appeal, Bartley provided the Department with relevant job descriptions. The description for the Management VP read:
Primary Duties:
[1.] Responsible for the oversight of all maintenance department staff[;]
[2.] Responsible for the oversight of all building physical plant[;]
[3.] Responsible for the oversight of all renovation projects[;]
[4.] Responsible for the ordering and purchasing of all furniture, fixtures and equipment[;]
[5.] Responsible for the oversight of the housekeeping vendor . . . [;]
[6.] Responsible for housekeeping contract negotiations and relations[;]
[7.] Provide assistance to staff as needed[;]
[8.] Review and approve all maintenance and service contracts and purchases[;]
[9.] Approve all maintenance expenditures[;]
[10.] Responsible for contract services providers for the facility maintenance[;]
[11.] Coordinates with design and professional consultants for building and physical plant[;]
[12.] Responsible for supervision of all site and exterior maintenance[.]
Secondary Duties:
[1.] Ensure operational functions are carried out promptly and efficiently[;]
[2.] Assist in developing, implementing and coordinating administrative policies and procedures[;]
[3.] Evaluate employee performance and make recommendations concerning wage and salary adjustments[;]
[4.] Ensure that all department staff members receive mandatory in-service training as required by the federal, state and local standards, guidelines and regulations as well as the facility's guidelines[.]
The job description for the Relations VP stated:
Primary Duties:
[1.] Responsible for the daily operations of the human resources department[;]
[2.] Responsible for the execution of human resource and employment policies and procedures[;]
[3.] Responsible for the oversight of resident customer service programs[;]
[4.] Responsible for the oversight of the employer relations program[;]
[5.] Responsible for the coordination of the employee education programs[;]
[6.] Responsible for employee recruitment and retention[;]
[7.] Responsible for supervision of payroll department[;]
[8.] Responsible for monitoring and updating all employee policies and procedures[;]
[9.] Responsible for employee benefit administration[;]
[10.] Responsible for administration of Workers Comp programs[.]
Secondary Duties:
[1.] Coordinate employee and resident surveys, employee orientation and employee retention programs[;]
[2.] Ensure operational functions are carried out promptly and efficiently[;]
[3.] Assist in developing, implementing and coordinating administrative policies and procedures[;]
[4.] Evaluate employee performance and make recommendations concerning wage and salary adjustments[;]
[5.] Ensure that all personnel attend and participate in all mandatory inservices.
DHSS rejected Bartley's Level I Appeal on September 9, 2009. Indicating that the decision was "based upon Regulations, Guidelines and Methodology," the Department responded:
The Department has reviewed the facilit[y's] position and disagrees with the facility. The VP of Management and the VP of Customer and Employee Relations are not the people that normally handle the day to day problems of the housekeeping, maintenance, or the payroll Department. No detail was provided that supports or justifies the allocation of these salaries and benefits to these departments.
Bartley appealed this determination and the matter was transferred to the Office of Administrative Law (OAL). The Department also provided a "further clarification of the issue:"
The authority for the contested adjustment is N.J.A.C. 8:85-3.6(b)(2)(iii) which states, "Compensation and special fringe benefits for all owners, related parties, and other employees acting in an administrative capacity must be reported as management unless parties specifically carry out the function of Administrator or Assistant Administrator (emphasis added)." The positions of VP of Management/Operations and VP Customer and Employee Relations, as described in the position descriptions provided to this office, are ones that should be properly classified as administrative.
. . . .
According to Webster's II New College Dictionary, the definition of administrator is one who administrates. Administrate is further defined as one who is in charge of or manages. The two VPs are responsible for a lot of areas of the facility, and therefore they function in an administrative capacity. According to the regulation stated previously, the salaries and fringe benefits were correctly classified as management.
After the matter was transferred to the OAL, the Department filed a motion for summary decision. In support of its motion, the Department submitted an affidavit by Joseph Klauss, an Administrative Analyst II for the Department. Klauss recounted the process followed by the Department and reiterated that the decision "was based upon [its] regulations, guidelines and methodology." He further stated that "[b]ecause [Bartley] filed a Level II appeal, the Department . . . again reviewed Bartley's position in order to confirm that the Department's initial decision was correct." According to Klauss, this secondary review confirmed the decision, except that the Department "determined that the salary and benefits for [the Relations VP] should be placed in the management cost center, rather than as non-allowable expenses as initially determined." However, Klauss observed that "a reclassification of these expenses to the management cost center would not increase [Bartley's] Medicaid rate as it is already over the screen for this cost center."
On August 21, 2009, the ALJ issued a letter order concerning discovery. In the order, the ALJ identified the issue to be considered as "whether the actions of the [Department] in reclassifying two vice-presidents from housekeeping and maintenance to management was arbitrary, capricious or unreasonable."
Bartley responded with four affidavits in support of its opposition to the motion on September 10, 2009. The first was from Hoey who reiterated many of the duties listed in the job description submitted by Bartley and emphasized that her position "involve[d] daily hands on issues and services." She also stated that she was "not responsible for the direction, control or supervision of [Bartley] or any other company" and that those areas were "the responsibility of [the] CEO."
The second affidavit submitted by Bartley was from Joanne Ryan, Bartley's Vice President of Administration and the Administrator of BHNR. Ryan indicated that both VPs "had their offices on our campus and were in the BHNR facility on a daily basis working with me to provide the services necessary for our facility to care for our residents." According to Ryan, Hoey and Shaffer were given "Vice President titles to make it clear to all staff vendors, residents and families that they had distinct and direct responsibilities and authority to provide the services indicated as their job duties." Nevertheless, Ryan stated that she relied on Shaffer to be involved with human resources, recruitment, retention and customer and employee relations, and Hoey to be involved with maintenance, housekeeping and other environmental issues "on a daily and detailed basis."
The third affidavit of Linda Byster, Bartley's Vice President of Finance, stated that "[b]oth Ms. Hoey and Ms. Shaffer worked at BHNR on a daily basis performing direct services for BHNR and for the assisted living facility on our campus." She also repeated Ryan's explanation for Hoey and Shaffer's job titles and reiterated that "[a]ll the services performed by both Ms. Hoey and Ms. Shaffer were performed at the facility."
The final affidavit was from Richard R. Speranza, a principal of Hubco Health Care Group and Bartley's Medicaid Consultant. Speranza had previously served as the director of New Jersey's Office of Long Term Care Reimbursement, "where [he] was responsible for the overall administration of the CARE Reimbursement System for Nursing Facilities in the State of New Jersey." In that capacity, Speranza "was involved in the preparation of Medicaid Long-Term Care Services Bulletin[s] 85-4 and 85-6," which "address[ed] the issues of allocation of the management and related party costs center (85-4) and for home office costs for chain operations (85-6)." According to his affidavit:
The general rule, a determination of what is management was and to my knowledge still is that allocation of salary and benefits should be made to management cost entries only when the person assumed "full legal responsibility for the determination of policy, management, operation, and financial control of the facility" that included owners, and positions like CEO or COO in which the person has control and responsibility for the entire organization.
In addition, Speranza stated, "[i]t was never the intention nor was it ever the practice to automatically include a person[']s salary and benefits in the management cost center simply because of their title or the fact that they may have duties involving other facilities." After discussing the subsequent implementation of Procedures #2 and #5, Speranza offered the following analysis of how they had been applied to Bartley:
10.) Since 1986, the policy that has been followed is that management should include those persons who direct or control the whole organization but that those persons who perform services at the facility for the facility should be allocated to reimbursable cost centers.
11.) In preparing the Cost Report at issue in this matter (2006) we followed this long standing policy and position. Unfortunately, without notice of a change in policy or any regulatory change [the Department] decided that if a person has a title or duties that indicate that they "administrate," then that person should be classified as "management."
12.) These above referenced Bulletins and Procedures are policy statements of how the regulation should be and was applied before [the Department] misapplied it in this particular case. . . . [T]he individuals involved had been consistently reported and allowed in the same cost centers that were now disallowed based upon a new and, in my opinion, unsupported definition of management that was applied in this matter and is contrary to policy and interpretation followed for more than 30 years.
Before the OAL, Bartley contended that the Department's decision was based largely on title and that the positions in question were responsible for "dealing with the staff [and residents and families] on a day-to-day basis." Citing Department Bulletins 85-4 and 6 and Procedures #2 and #5, Bartley claimed that "the allocation of salary and benefits should be made to management cost entries only when the person assumes full legal responsibility for the determination of policy, management, operation, and financial control of the facility." It contended that this regulation was only intended to "include[] owners and positions like CEO or Chief Operating Officer in which the person has control and responsibility of the entire organization." It further asserted that because the Department had adhered to this strict definition for several years, it could not alter it without notice.
Regarding the standard of review, Bartley asserted that a material question of fact existed over whether the VPs' "actual duties involve[d] direction, control and supervision of a company." It also challenged the standard being employed, insisting that the Department was "not entitled to any deference [regarding] how they apply . . . their procedures." Instead, Bartley urged the court to adopt a summary judgment standard "giving the non-moving party the benefit of all favorable inferences."
In response to Bartley, the Department claimed that the 1985 bulletins had been superseded by Procedure #2 and that because there was "a regulation clear[ly] on point," the Department didn t have to "look to the bulletins or procedures." The Department observed:
[T]hese people are in the management positions. They oversee entire departments. They're not the ones out there like from housekeeping. They're not the ones out there scrubbing the toilets or cleaning the floors. . . . [T]hey're management. They're overseeing contractors. They're overseeing vendors. . . . [T]hat's management duties. Very simply put then, they were moved from housekeeping and maintenance to the management cost center.
The Administrative Law Judge (ALJ) rendered his initial decision and determined that "[t]here may be some issues as to the interpretation of policy, but the essential facts involving this motion are not in dispute[,]" and thus "the matter [was] ripe for summary decision." In addition, the ALJ considered a deferential standard of review: "Generally, the reimbursement rates of healthcare facilities are within the peculiar competence of the administrative agency that promulgates the rules, not the special competence of the courts, and so substantial deference must be accorded to its administrative determinations."
After defining "administrator" and "assistant administrator," the ALJ found that the Management VP and Relations VP should have been classified as "management":
Since, pursuant to N.J.A.C. 8:85-3.6(b)(2)(iii), one must be licensed as an administrator to carry out the function of administrator, an officer such as a vice president is acting in an administrative capacity, but is not licensed as an administrator. He or she is officially holding dual positions, as vice president and administrator, and should be included under the management cost center, pursuant to N.J.A.C. 8:85-3.6(b)(2)(iii).
. . . .
Clearly both the employees in question were acting in an administrative capacity. The job descriptions for both positions clearly involve oversight, management, supervision and lack any specific daily tasks. The job description further provides that the purpose of both positions is to oversee specific business operations.
. . . .
Based upon the job description, title, and evidence submitted, I FIND that the [Management VP] and the [Relations VP] were working in a supervisory capacity overseeing the daily operation of a specific part of the business. The [Management VP] had . . . general direction and direct control over the housekeeping and maintenance department. The [Relations VP] had general direction and direct control over the employee and customer service operations of [Bartley].
Appellant filed exceptions and the matter was considered by the Commissioner. Regarding the deference afforded to the Department, the Commissioner noted that
[Bartley] admits that an agency determination based upon rules and regulations drafted and interpreted by that agency is entitled to deference and is evaluated to determine only if the agency acted in an arbitrary, capricious or unreasonable manner. Despite this admitted deference, [Bartley] claimed that the ALJ failed to recognize that the Department's characterization of the two job functions in question was "manifestly mistaken."
. . . [Bartley] claims that the Department should be afforded deference in the promulgation of regulations and the creation of interpretive policies instead of the application of those policies to a particular set of circumstances.
The Commissioner rejected appellant's arguments and adopted the ALJ's initial decision. After agreeing with the ALJ that "most of the facts in this case are clear and undisputed regarding the duties of the two vice president positions at issue," the Commissioner indicated that the dispositive issue was "whether, given these duties, the functions are considered 'administrative' such that they should be classified as 'management' for the purpose of rate setting and Medicaid reimbursement." The Commissioner adopted the ALJ's findings and dismissed the appeal. This appeal followed.
On appeal, appellant asserts that the Commissioner ignored material facts and the issues were not ripe for summary decision; the Commissioner adopted an improper standard of review; and because the Commissioner adopted a new interpretation of underlying regulations, appellant was not afforded due process. We address the issues seriatim and in doing so, we expand our earlier discussion of the nature of the Medicaid program and its reimbursement program.
"The Medicaid program is a federal-state cooperative program that is jointly funded by the state and federal governments." SSI Med. Servs. v. N.J. Dep't of Human Servs., 146 N.J. 614, 617 (1996); see also 42 U.S.C.A. 1396a(a)(11)(A). Medicaid is intended "to provide medical assistance, insofar as practicable, on behalf of persons whose resources are determined to be inadequate to enable them to secure quality medical care at their own expense[.]" N.J.S.A. 30:4D-2. The federal Medicaid statute requires participating states to develop methodologies to calculate reimbursement rates for any NF that provides care under the program. 42 U.S.C.A. 1396a(a)(13)(A).
The regulatory framework that governs Medicaid includes the Cost Accounting and Rate Evaluation Guidelines (the CARE Guidelines), N.J.A.C. 8:85-3.1 to 4.3, which "describe the methodology to be used by [the Department] to establish prospective per diem rates for the provision of nursing facility services to residents under the State's Medicaid program." N.J.A.C. 8:85-3.1(a).
Under the CARE Guidelines, NFs must submit annual cost reports used by the Department to set prospective reimbursement rates. N.J.A.C. 8:85-3.2(a). NF expenses are broken down into categories called "cost centers" to which the Department applies "screens," defined as "standards and reasonableness criteria." N.J.A.C. 8:85-3.3(a); see also Medford Convalescent & Nursing Ctr. v. Div. of Med. Assistance & Health Servs., 218 N.J. Super. 1, 3 (App. Div. 1985) (describing the application of screens). The NF is ultimately reimbursed at a rate based on the lower of its actual costs and the reasonable limits calculated using the screens. N.J.A.C. 8:85-3.6(a).
Screens are applied to five rate categories: (1) raw food costs; (2) general service expenses; (3) property-operating costs; (4) patient care expenses; and (5) property-capital costs. N.J.A.C. 8:85-3.3(b). The category for "general service expenses" includes six components: (1) food; (2) administrator; (3) assistant administrator; (4) other administrative services; (5) dietary, housekeeping, laundry, and linen; and (6) other general services. N.J.A.C. 8:85-3.6(a).
Costs associated with "management" are also categorized as "general services expenses," as illustrated by the Schedule A cost report form in the record.1 In response to comments regarding the general services expenses regulation, the Department has referred explicitly to the "management/administrative cost center," e.g., 27 N.J.R. 159 (January 3, 1995); 27 N.J.R. 1310 (March 20, 1995).2 Nevertheless, the regulation states that "[c]ompensation and special fringe benefits of all owners, officers, related parties, and other employees acting in an administrative capacity must be reported as management unless such parties specifically carry out the function of Administrator or Assistant Administrator." N.J.A.C. 8:85-3.6(b)(2)(iii).
The CARE Guidelines also provide an appellate procedure for aggrieved NFs:
When a NF believes that, owing to an unusual situation, the application of these rules results in an inequity (except for the application of N.J.A.C. 8:85-3.2(f) [concerning substitution or revision of a cost report by an NF]), two levels of appeal are available: a Level I appeal heard by a representative of the Department; and a Level II appeal heard before an Administrative Law Judge.
[N.J.A.C. 8:85-3.21(a).]
In 1985, the Department issued two documents to offer guidance on the application and interpretation of the CARE Guidelines: Bulletin 85-4 and Bulletin 85-6. Bulletin 85-4 stated that "[c]osts applicable to all parties . . . who work in a management/administrative capacity," apart from the Administrator or Assistant Administrator, should be allocated to the management cost center. It further defined "management/administrative capacity" as "functions performed by a person or persons who assume full legal responsibility for the determination of policy, management, operation and financial control of the facility."
Bulletin 85-6 addresses the home office costs of chain organizations, which are defined as "group[s] of two or more healthcare facilities which are owned, leased, or through any other device, controlled by one organization[,] person or group of persons." The bulletin permits "home office costs for salaried or contracted individuals who perform services at the facility [to] be reported in the cost center in which that service appears on the cost report." In addition, Bulletin 85-6 defines "[m]anagement . . . of the chain organization" as "the exercise of general direction and control over the/an operation of the chain organization."
In 2005, Bulletins 85-4 and 85-6 were replaced by Procedure #2 and Procedure #5. Procedure #5 was intended "to clarify the definition of management and clarify how facilities are to report management related costs." It maintained the Bulletin 85-4, definition of "management" as "being responsible for the direction, control, or supervision of an organization, whether directly incurred by the facility or allocated to it by a parent or home office[.]" As did Bulletin 85-4, Procedure #5 required "[c]osts applicable to all [non-Administrator or Assistant Administrator] parties . . . who work in a management capacity" to be reported in the management cost center.
Procedure #2 sought to "formalize[] the Department's position on the reporting of Home Office Costs." After reiterating Bulletin 85-6's definition of a "chain organization," Procedure #2 stated:
There are only two cost center categories on the cost report for reporting Home Office Costs: Management or Other Administrative Costs (OADM). Management costs represent those costs of employees at a home office who exercise general direction and control
over either the chain organization or some identifiable part of the chain organization. These employees would generally include such persons as the President, Vice President, CEO, CFO, Controller, Treasurer, Director, Manager, etc.
Bartley alleges that the Department and ALJ erred by "ignoring material facts" when considering the Department's motion for summary decision. Specifically, it claims that the Commissioner and ALJ failed to consider the Department's bulletins and procedures and that their "'factual findings' are directly contradicted by the affidavits submitted by Bartley." Specifically, appellant urges that the definition of "administrative capacity" is an issue of fact that is not subject to summary decision.
Summary decision is appropriate where "the papers and discovery which have been filed, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to prevail as a matter of law." N.J.A.C. 1:1-12.5(b). Because the standard is "substantially the same" as that for summary judgment under Rule 4:46-2, any consideration of summary disposition must be consistent with the same principles. Contini v. Bd. of Educ. of Newark, 286 N.J. Super. 106, 121 (App. Div. 1995), certif. denied, 145 N.J. 372 (1996).
"An issue of fact is genuine only if, considering the burden of persuasion at trial, the evidence submitted by the parties on the motion, together with all legitimate inferences therefrom favoring the non-moving party, would require submission of the issue to the trier of fact." R. 4:46-2(c).
[A] determination whether there exists a "genuine issue" of material fact that precludes summary judgment requires the motion judge to consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party. The "judge's function is not himself [or herself] to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial."
[Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995) (second alteration in original) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202, 212 (1986)).]
When reviewing an order for summary judgment, we apply the same standard as a trial court or here, the administrative tribunal. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). We "first decide[] whether there was a genuine issue of material fact and, if there was not, . . . whether the trial judge's ruling on the law was correct." Walker v. Atl. Chrysler Plymouth, Inc., 216 N.J. Super. 255, 258 (App. Div. 1987).
We agree with the ALJ and Commissioner that there was no genuine issue of material fact in dispute. Contrary to Bartley's assertions, the job duties of the Management and Relations VPs are not disputed. The ALJ's decision was based largely on the job descriptions composed and submitted by Bartley itself.
Most important, appellant's affidavits were, in good part, conclusions rather than facts. For example, Hoey, the Management VP, stated that she was "not responsible for the direction, control, or supervision of [Bartley] or any other company." While she may have had "daily hands on issues[,]" she functioned in a supervisory role.
The definition of "administrative" or "management capacity" under the regulations is not a question of fact. Rather, it is an issue of law subject to interpretation by the Department based on the information provided by, in this case, appellant. As the final decision rested as much on Bartley's own "job descriptions" as on any "characterizations" made by the Department, Bartley's position that the Commissioner's finding was "manifestly mistaken" is untenable.
We find no error in the Commissioner's interpretation of its regulatory definition of the terms in issue.
We reach the same result as to the deference to be afforded the Commissioner is reviewing the annual cost reports. The regulations provide that "[a]t the Level II hearing, the burden is upon the NF to demonstrate entitlement to cost adjustments under CARE Guidelines[.]" N.J.A.C. 8:85-3.21(a)(2)(iv). While an ALJ conducting a Level II hearing need not defer to an agency's determinations or legal interpretations, the NF seeking an adjustment must establish why the decision in question was incorrect.
Although the ALJ and Commissioner both misstated the degree of deference due to the Department in a Level II appeal, this oversight did not prejudice Bartley. As the Commissioner acknowledged, "[t]here is nothing in the record to indicate the ALJ failed to consider the evidence presented to him." Considering the entire record on this appeal, we consider any such error to be harmless.
The ALJ made careful factual findings and performed a full analysis of the VPs' job duties in light of the applicable regulations. In addition to referencing the job descriptions submitted by Bartley, the ALJ substantially relied on Hoey's own description of her duties. He also referenced Bulletins 85-4 and 85-6 and Procedures #2 and #5. The initial decision was supported by all the evidence submitted by both parties, not just the Department's interpretation.
Even with consideration of the misstatement we will "accord deference to final agency actions, reversing those actions if they are 'arbitrary, capricious or unreasonable or [if the action] is not supported by substantial credible evidence in the record as a whole.'" N.J. Soc'y for the Prevention of Cruelty to Animals v. N.J. Dep't of Agric., 196 N.J. 366, 384-85 (2008) (quoting Henry v. Rahway State Prison, 81 N.J. 571, 579-80 (1980)) (alteration in original). The Supreme Court has observed that:
[A]n appellate court ordinarily should not disturb an administrative agency's determinations or findings unless there is a clear showing that (1) the agency did not follow the law; (2) the decision was arbitrary, capricious, or unreasonable; or (3) the decision was not supported by substantial evidence.
[In re Virtua-West Jersey Hosp. Vorhees, 194 N.J. 413, 422 (2008).]
Furthermore, when an agency interprets and applies a statute it is charged with administering "in a manner that is reasonable, not arbitrary or capricious, and not contrary to the evident purpose of the statute, that interpretation should be upheld, irrespective of how the forum court would interpret the same statute in the absence of regulatory history." Blecker v. State, 323 N.J. Super. 434, 442 (App. Div. 1999); see also N.M. v. Div. of Med. Assistance & Health Servs., 405 N.J. Super. 353, 364 (App. Div. 2009), certif. denied, 199 N.J. 517 (2009) (holding that an agency's interpretation of a federal statute within its realm of expertise was "entitled to respectful consideration and deference," "even when not formalized by adoption of an administrative regulation"). This rule has been applied to the Department addressing the CARE Guidelines. Bergen Pines Cnty. Hosp. v. N.J. Dep't of Human Servs., 96 N.J. 456, 478 (1984) ("Since the reimbursement rates of health care facilities are within the peculiar competence of the agency that promulgated the rules and not the special competence of the courts, we must accord special deference to the administrative determinations.").
Here, the Department's interpretation of the CARE Guidelines was proper. The record provides ample support for the ALJ's conclusion that "both the employees in question were acting in an administrative capacity" and were appropriately allocated as management expenses. See N.J.A.C. 8:85-3.6(b)(2)(iii). Bartley had the burden to persuade the ALJ and the Commissioner otherwise, and it failed to do so. See N.J.A.C. 8:85-3.21(a)(2)(iv). We perceive of no reason to disturb a ruling that is "within the peculiar competence" of the Department. Bergen Pines, supra, 96 N.J. at 478.
Bartley's final assertion is that "the position taken by [DHSS] in this matter represents a striking departure from the manner in which N.J.A.C. 8:85-3.6(b)(2)(iii) has been interpreted and applied by [DHSS] for the last thirty (30) years." Therefore, Bartley claims that the change could only be made pursuant to the rulemaking provisions of the Administrative Procedure Act.
"It is by now well settled that, in carrying out their legislatively-delegated duties, administrative agencies have wide discretion in selecting the means by which they must fulfill their missions." Deborah Heart & Lung Ctr. v. Howard, 404 N.J. Super. 491, 503 (App. Div.) (citing Texter v. Dep't of Human Servs., 88 N.J. 376, 383-84 (1982)), certif. denied, 199 N.J. 129 (2009). Because agencies "possess the ability to be flexible and responsive to changing conditions," they may "select those procedures most appropriate to enable [them] to implement legislative policy." Texter, supra, 88 N.J. at 385. Therefore, "[i]n the exercise of their delegated statutory authority, administrative agencies may act 'informally, or formally through rulemaking or adjudication in administrative hearings.'" Deborah Heart, supra, 404 N.J. Super. at 503 (quoting Texter, supra, 88 N.J. at 383-84).
"Although not easily defined, informal agency action is any determination that is taken without a trial-type hearing, including investigating, publicizing, negotiating, settling, advising, planning, and supervising a regulated industry." Nw. Covenant Med. Ctr. v. Fishman, 167 N.J. 123, 136-37 (2001) (citing In re Request for Solid Waste Util. Customer Lists, 106 N.J. 508, 519 (1987). This type of action "constitutes the bulk of the activity of most administrative agencies." Id. at 137 (citing In re Solid Waste, supra, 106 N.J. at 518). In addition, informal agency actions are not subject to the weighty rulemaking provisions of the Administrative Procedure Act, N.J.S.A. 52:14B-1 to 15. Deborah Heart, supra, 404 N.J. Super. at 502 (stating that an informal agency action was "not subject to the APA's requirements governing adoption of agency rules").
However, "'[a]n agency may not use its power to interpret its own regulations as a means of amending those regulations or adopting new regulations.'" In re Hosps.' Petitions, 383 N.J. Super. 219, 247 (App. Div.) (quoting Besler & Co. v. Bradley, 361 N.J. Super. 168, 173 (App. Div. 2003)), certif. denied, 187 N.J. 81-82 (2006). To avoid this abuse, the Court has provided several factors to determine whether an agency action "must be considered an administrative rule" and therefore must comply with the APA:
Such a conclusion would be warranted if it appears that the agency determination, in many or most of the following circumstances, (1) is intended to have wide coverage encompassing a large segment of the regulated or general public, rather than an individual or a narrow select group; (2) is intended to be applied generally and uniformly to all similarly situated persons; (3) is designed to operate only on future cases, that is, prospectively; (4) prescribes a legal standard or directive that is not otherwise expressly provided by or clearly and obviously inferable from the enabling statutory authorization; (5) reflects an administrative policy that (i) was not previously expressed in any official and explicit agency determination, adjudication or rule, or (ii) constitutes a material and significant change from a clear, past agency position on the identical subject matter; and (6) reflects a decision on administrative regulatory policy in the nature of the interpretation of law or general policy. These relevant factors can, either singly or in combination, determine in a given case whether the essential agency action must be rendered through rule-making or adjudication.
[Metromedia, Inc. v. Dir., Div. of Taxation, 97 N.J. 313, 331-32 (1984).]
The Metromedia factors do not weigh in Bartley's favor. Bartley's claims that the Department's decision in this case would have widespread impact impose a legal standard not contemplated by statute and mark a clear and unexpected shift in agency policy are without support in the record. Even accepting Speranza's commentary, we are not persuaded that this particular adjudication would have a widespread impact in the industry. The agency decision was based on an ALJ's particularized findings of fact regarding two particular Bartley employees.
More important, the decision does not conflict with applicable regulations or Procedures #2 and #5.3 The record supports the ALJ's determination that the Management and Relations VPs function "in an administrative capacity" involving "oversight, management, supervision and lack of any specific daily tasks." This finding is consistent with N.J.A.C. 8:85-3.6(b)(2)(iii), which requires allocation of all "employees acting in an administrative capacity" to the management cost center.
The ALJ's decision also reconciles with Procedure #5's definition of management, which requires "responsib[ility] for the direction, control, or supervision of an organization," and Procedure #2, which includes within "management costs" the "costs of employees at home offices who exercise general direction and control over either the chain organization or some identifiable part [thereof]."4 Procedure #2 also lists "Vice President" and "Manager" as examples of "management" employees. Even if the titles were changed, they could be classified as "managers" under this provision.
We conclude that the determination here was not de facto rulemaking. See Metromedia, supra, 97 N.J. at 331-32. The decision was unique to appellant and the two employees involved. The Metromedia factors weigh heavily in the Commissioner's favor, and we reject appellant's argument in this regard without the necessity of further comment.
The ALJ applied the appropriate summary judgment standard and correctly concluded that there was no genuine issue of material fact in this case. Although the initial decision incorrectly suggested that deference should be given to agency interpretations in a Level II appeal, this error did not prevent the ALJ from performing a thorough factual and legal analysis, rendering the misstatement harmless. Finally, the Department's decision was in accord with its enabling statute and regulations and its own stated policies and procedures.
We conclude that the ALJ and Commissioner's determinations were neither arbitrary, capricious or unreasonable.
Affirmed.
1 This form includes "Management and Administration" as a distinct cost center within general services expenses.
2 Prior to 2006, the CARE Guideline relating to general services expenses was codified at N.J.A.C. 10:63-3.6. See 36 N.J.R. 4702 (October 18, 2004) (proposing recodification); 38 N.J.R. 703 (January 17, 2006) (adopting change).
3 Much of Speranza's affidavit and Bartley's arguments concerned Bulletins 85-4 and 85-6. As these documents were superseded by Procedures #2 and #5, they are no longer relevant to interpretation of the CARE Guidelines.
4 Procedure #2 concerns chain organizations only. Bartley operates two facilities owned by a single entity. However, such a finding is not essential to the resolution of this case.
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