IMO Adoption of Regulations Governing the State Health Plan, N.J.A.C. 8:100, et seq.

SYLLABUS
 

(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).

In the Matter of the Adoption of Regulations Governing the State Health Plan, N.J.A.C. 8:100, et seq.
(A-29-93)

Argued September 27, 1993 -- Decided February 28, 1994

POLLOCK, J., writing for a unanimous Court.

(Please note that the history of this case and Paragraphs 4-6 of the Syllabus have been drawn from the opinion of the Appellate Division, which has been reported at 262 N.J. Super. 469 (1993).)
 
In 1971, the Legislature enacted the Health Care Facilities Planning Act, which conferred broad authority on the Department of Health over health planning. One of the central requirements of the Act was the creation of a requirement for a "certificate of need." The Act authorized the Commissioner of Health to adopt appropriate regulations governing such certificates.

On July 1, 1991, the Legislature amended the Act by passing the Health Care Cost Reduction Act, which created the State Health Planning Board. The Board was directed to create a "State Health Plan." The certificate of need process was to be consistent with health care needs identified in the State Health Plan.

The Planning Board drafted a State Health Plan, which was followed by Department of Health regulations. In June 1992, four days after the adoption of the regulations, the Legislature amended the Health Care Cost Reduction Act and the Health Care Facilities Planning Act over the veto of the Governor. The legislation deleted the requirement that the State Health Plan serve as the basis of certificate of need applications. Instead, the Plan is to serve as an "advisory document."

The Commissioner of Health asked the Attorney General for a formal opinion on the constitutionality of the June 1992 amendment. After review, the Attorney General concluded that the statute was unconstitutional and advised the Department of Health that it could adopt regulations that were based on the State Health Plan. The Department did so.

The New Jersey Hospital Association challenged the new regulations. On February 10, 1993, the Appellate Division filed an opinion that held the statute to be constitutional, rendering the regulations invalid. The Supreme Court granted the Department's petition for certification.

HELD: As between the Legislature and the Department of Health, the Legislature has the power to formulate state policy on the controversial issue of health-care planning.

1. Subject to some additional comment, the judgment is affirmed substantially for the reasons expressed in the Appellate Division's opinion. (p.3)

2. If the Legislature concludes that an administrative regulation exceeds the agency's delegated authority or is contrary to public policy, it may adopt legislation that overrides the regulation. To the same effect is the recent amendment to article 5, section 4, paragraph 6 of the New Jersey Constitution, which authorizes the Legislature to review agency rules and regulations. Although the constitutional amendment was passed after the legislative action in this case, it remains a strong statement of the allocation of power between a state department and the Legislature. (pp. 4-5)

3. The 1992 statutory amendment does not violate due-process standards. It includes sufficient standards, including permission to consider the State Health Plan, to withstand the Department's challenge on this ground. Although the Department's commitment to the formulation of state policy is commendable, any such policy is subject to legislative review. (pp. 5-7)

4. It is the Legislature that determines whether to delegate rule-making authority an administrative agency and, if so, the nature and scope of that authority. (262 N.J. Super. at 478-479)*
 
5. The 1992 statutory amendment is consistent with the principles of separation of powers. The Legislature does not lose the authority to control an agency's rule-making authority after it creates that agency. The 1992 amendment was a proper exercise of that authority. (at pp. 480-484)*

6. The statute permits the Department to adopt regulations relating to the certificate of need program, subject to the restrictions of the 1992 statutory amendment. Due process requirements have not been violated. (at pp. 485-486)

The judgment of the Appellate Division is AFFIRMED.

CHIEF JUSTICE WILENTZ and JUSTICES CLIFFORD, HANDLER, O'HERN, GARIBALDI, and STEIN join in JUSTICE POLLOCK's opinion.

*These are citations to the reported Appellate Division opinion.

SUPREME COURT OF NEW JERSEY
A- 29 September Term 1993

IN THE MATTER OF THE ADOPTION OF
REGULATIONS GOVERNING THE STATE
HEALTH PLAN, N.J.A.C. 8:100, ET
SEQ.

Argued September 27, 1993 -- Decided February 28, 1994

On certification to the Superior Court, Appellate Division, whose opinion is reported at 262 N.J. Super. 469 (1993).

Mark J. Fleming, Deputy Attorney General, argued the cause for appellant, State of New Jersey, Department of Health (Fred DeVesa, Acting Attorney General of New Jersey, attorney; Joseph L. Yannotti, Assistant Attorney General, of counsel; Donald M. Palombi, Deputy Attorney General, on the brief).

Frank R. Ciesla argued the cause for respondent, New Jersey Hospital Association (Giordano, Halleran & Ciesla, attorneys; Elizabeth Dusaniwskyj, on the brief).

The opinion of the Court was delivered by
POLLOCK, J.

The general issue is whether the Legislature may adopt a statutory amendment that prohibits an agency from adopting regulations that conflict with the amendment. More specifically, the issue concerns the constitutionality of an amendment to N.J.S.A. 26:2H-5.8(a) (codified as L. 1992, c. 31), a subsection of the Health Care Cost Reduction Act (the Act). The amendment

restricts the authority of the Department of Health (the Department or DOH) to adopt regulations pertaining to the State Health Plan.

Before the amendment, the Act provided that the Plan would serve as "the basis upon which all certificates of need applications shall be approved," L. 1991, c. 187, 34, and that "[n]o 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. The certificate of need is a legislative device for controlling the construction and expansion of health-care facilities. N.J.S.A. 26:2H-7. By the grant or denial of such certificates, DOH fulfills the legislative policy "that hospital and related health care services of the highest quality, of demonstrated need, efficiently provided and properly utilized at a reasonable cost are of vital concern to the public health." N.J.S.A. 26:2H-1.

The challenged statutory amendment relegates the plan to "an advisory document which may be considered when certificate of need applications are reviewed for approval." L. 1992, c. 31, 1; N.J.S.A. 26:2H-5.8(a). It further prohibits the Department from adopting "any regulation which implements any goals, objectives or any other health planning recommendations that have been included in the State Health Plan." Ibid.

Underlying the conflict between the amendment and the regulations is the question whether the Legislature or the Department has the ultimate responsibility for the State Health Plan. We hold that as between the Legislature and the Department, the Legislature has the power to formulate state policy on the controversial issue of health-care planning. Our recognition of the Legislature's authority, however, should not be construed as endorsing its plan over that of the Department.

In a well-reasoned opinion by Judge Skillman, the Appellate Division reached the same conclusion. 262 N.J. Super. 469 (1993). We granted the State's petition for certification, 133 N.J. 442 (1993), and now affirm substantially for the reasons stated by the Appellate Division.

To those reasons, we add the following observations. The activities of state government are so numerous and so complex that the Legislature has prudently delegated regulation of them to various state departments, such as DOH. State government could not meet its responsibility to the public without those departments. As a practical matter, the departments need to adopt regulations to discharge their delegated responsibilities. On rare occasions, a department will adopt regulations that reflect a different policy choice from that of the Legislature. When such cases arise, they remind us of fundamental principles of separation of powers.

Administrative agencies owe their existence to the Legislature, which retains plenary power over them. Thus, if the Legislature concludes that it "has given away too much power, it may by statute take it back or may in the future enact more specific delegations." Consumer Energy Council of Am. v. Federal Energy Regulatory Comm'n, 673 F.2d 425, 476 (D.C. Cir. 1982), aff'd without opinion sub nom. Process Gas Consumers Group v. Consumer Energy Council of Am., 463 U.S. 1216, 103 S. Ct. 3556, 77 L. Ed. 2d 1402 (1983). Additionally, the Legislature may limit an agency's authority in specified areas. See Immigration & Naturalization Serv. v. Chadha, 462 U.S. 919, 953 n.16, 103 S. Ct. 2764, 2785 n.l6, 77 L. Ed. 2d 317, 346 n.16 (1983) (finding that "[e]xecutive action is always subject to check by the terms of the legislation that authorized it; and if that authority is exceeded it is open to judicial review as well as the power of Congress to modify or revoke the authority entirely"). Thus, if the Legislature concludes that an administrative regulation exceeds the agency's delegated authority or is contrary to public policy, it may adopt legislation that overrides the regulation. Kimmelman v. Burgio, 204 N.J. Super. 44, 53 (App. Div. 1985).

To the same effect is an amendment to article 5, section 4, paragraph 6 of the New Jersey Constitution, which was adopted in 1992 after the Legislature amended the Act. The constitutional amendment authorizes the Legislature to "review any rule or regulation to determine if the rule or regulation is consistent with the intent of the Legislature as expressed in the language

of the statute which the rule or regulation is intended to implement." Under the amendment, if the Legislature finds that "an existing or proposed rule or regulation is not consistent with the legislative intent," it may invalidate that rule or regulation or prevent it from taking effect. Although the amendment to the Act preceded the electorate's approval of the amendment to the Constitution, the constitutional amendment remains a strong statement of the allocation of power between the state department and the Legislature.

The Department asserts that in the absence of implementing regulations the Act lacks sufficient standards to satisfy the requirements of due process. We agree with the Appellate Division, however, that the Act "contains general standards to guide the Department's review of certificate of need applications . . .." 262 N.J. Super. at 485. N.J.S.A. 26:2H-8, as amended by chapter 31, provides:

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, will not have an adverse economic or financial impact on the delivery of health care services in the nation or Statewide, and will contribute to the orderly development of adequate and effective health care services. In making such determinations there shall be taken into consideration (a) the availability of facilities or services which may serve as alternatives or substitutes, (b) the need for special equipment and services in the area, (c) the possible economies and improvement in services to be anticipated from the operation

of joint central services, (d) the adequacy of financial resources and sources of present and future revenues, (e) the availability of sufficient manpower in the several professional disciplines, and (f) such other factors as may be established by regulation. The State Health Plan may also be considered in determining whether to approve a certificate of need application.

In the case of an application by a health care facility established or operated by any recognized religious body or denomination the needs of the members of such religious body or denomination for care and treatment in accordance with their religious or ethical convictions may be considered to be a public need.

Subsections (a) to (e) provide general standards to guide the Department. Subsection (f), moreover, permits the Department to adopt limited regulations. The subsection continues by stating that "[t]he State Health Plan may also be considered in determining whether to approve a certificate of need application." We conclude that the express statutory standards, the delegated authority to adopt non-conflicting regulations, and the permission to consider the State Health Plan constitute sufficient safeguards to withstand the Department's due-process challenge.

Few issues are more controversial than the regulation of health care. Health-care reform is now a matter of paramount national concern. See generally Health Security: The President's Health Care Plan (1993) (emphasizing need for and benefits of sweeping health-care changes). The Department has

conscientiously served the cause of health care. Although its commitment to the formulation of state policy is commendable, any such policy is subject to legislative review.

The judgment of the Appellate Division is affirmed.

Chief Justice Wilentz and Justices Clifford, Handler, O'Hern, Garibaldi, and Stein join in this opinion.

- -