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IN THE MATTER OF ENGLEWOOD MEDICAL CENTER'S SFY 2014 CHARITY CARE SUBSIDY APPEAL, A-1145-14T2 (2016)

Court: Superior Court of New Jersey Number: innjco20160520285 Visitors: 2
Filed: May 20, 2016
Latest Update: May 20, 2016
Summary: NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION PER CURIAM . In these consolidated cases, eight New Jersey hospitals appeal from final determinations of the Commissioner of Health (Commissioner), who dismissed on jurisdictional grounds their constitutional challenges to the statutory mandate that they provide care to all persons regardless of their ability to pay and the source of payment, and the alleged inadequate State subsidies for providing such care. We affirm. I.
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NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

In these consolidated cases, eight New Jersey hospitals appeal from final determinations of the Commissioner of Health (Commissioner), who dismissed on jurisdictional grounds their constitutional challenges to the statutory mandate that they provide care to all persons regardless of their ability to pay and the source of payment, and the alleged inadequate State subsidies for providing such care. We affirm.

I.

The New Jersey Health Care Cost Reduction Act (the Act), N.J.S.A. 26:2H-18.51 to-18.69, provides in part that "[n]o hospital shall deny any admission or appropriate service to a patient on the basis of that patient's ability to pay or source of payment." N.J.S.A. 26:2H-18.64. Such care is referred to as "charity care" when provided at so-called "disproportionate share" hospitals, which serve a disproportionately large number of Medicare patients. N.J.S.A. 26:2H-18.51(d); N.J.S.A. 26:2H-18.52. The Act establishes a Health Care Subsidy Fund, from which charity care subsidies are disbursed. N.J.S.A. 26:2H-18.58(a)(1).

Each year, the State appropriates an amount for the charity care subsidies and the Department of Health (DOH) determines the amount of charity care subsidies that eligible hospitals will receive, using the formula prescribed by law. N.J.S.A. 26:2H-18.59. A hospital may file an administrative appeal with the DOH to challenge the amount of its subsidy based on a calculation error or other reason. N.J.A.C. 10:52-13.4(f)(1)-(2).

For fiscal year 2014, the Legislature appropriated $675,000,000 for the charity care subsidies, and in July 2013, the DOH informed hospitals of the subsidy allocations for that fiscal year. Thereafter, Englewood Medical Center (Englewood) filed an administrative appeal with the DOH.

On October 11, 2013, the Commissioner issued a decision on Englewood's appeal. The Commissioner noted that Englewood was not challenging the manner in which its charity care subsidy had been calculated. Instead, Englewood was asserting that the statutory requirement that it provide charity care and the alleged inadequate charity care subsidy constituted an unconstitutional taking of its property.

The Commissioner noted that Englewood claimed projected losses of $17,191,691 for providing charity care in the 2014 fiscal year. The Commissioner decided that the DOH lacked jurisdiction to address Englewood's constitutional claim, and stated that Englewood should raise that claim directly in this court. Englewood thereafter filed a notice of appeal from the Commissioner's decision.

For fiscal year 2015, the Legislature appropriated $650,000,000 for charity care subsidies, and in July 2014, the DOH informed the hospitals of the charity care subsidy allocations. Eight hospitals filed administrative appeals: Englewood; Hoboken University Medical Center (Hoboken); Palisades Medical Center (Palisades); JFK Medical Center (JFK); Capital Health System — Regional Medical Center (Regional); Capital Health Medical Center — Hopewell (Hopewell); Our Lady of Lourdes Medical Center — Camden (Lourdes); and Lourdes Medical

Center of Burlington County (Lourdes-Burlington). In their appeals, the hospitals noted that they could not yet determine the actual cost of providing charity care in fiscal year 2015. They estimated their charity care costs for the fiscal year based upon data from calendar years 2012 and 2013, and the cost methodology that the State uses for general Medicaid reimbursement.

The hospitals estimated that they would sustain the following losses in providing charity care:

Englewood: $16,770,268 JFK: $13,469,877 Palisades: $12,105,159 Lourdes: $11,316,573 Hoboken: $ 9,038,245 Regional: $ 6,602,122 Hopewell: $ 4,838,863 Lourdes-Burlington: $ 979,827

On October 3, 2014, the Commissioner issued decisions on the eight appeals. The Commissioner noted that the hospitals had not challenged the manner in which their charity care subsidies had been calculated. Rather, the hospitals claimed that the statutory obligation to provide charity care and the alleged inadequate subsidies constituted unconstitutional takings of their property without just compensation. The Commissioner determined that the DOH lacked jurisdiction to address the hospital's constitutional claims, and again stated that the hospitals should raise these claims directly in this court. The hospitals' appeals followed.

II.

In their appeals, the hospitals do not challenge the Commissioner's determination that the DOH lacked jurisdiction to consider their constitutional claims.

We note that "[a]dministrative agencies have [the] power to pass on constitutional issues only where relevant and necessary to the resolution of a question concededly within their jurisdiction." Christian Bros. Inst. of N.J. v. N. N.J. Interscholastic League, 86 N.J. 409, 416 (1981) (citing Hunterdon Cent. High Sch. Bd. of Ed. v. Hunterdon Cent. High Sch. Teachers' Ass'n, 174 N.J.Super. 468, 474-75 (App. Div. 1980), aff'd o.b., 86 N.J. 43 (1981)).

The DOH has jurisdiction to consider challenges to the manner in which the hospitals' charity care subsidies are calculated, based on some computational error or other reason. The DOH does not, however, have authority to declare the statutory requirement that they provide charity care and the related subsidies unconstitutional.

Furthermore, the DOH does not have authority to grant relief to address the alleged constitutional violations. The DOH cannot relieve the hospitals of their statutory obligation to provide care to all persons regardless of their ability to pay, and it cannot provide the hospitals with charity care subsidies greater than those appropriated by the Legislature. See In re Deborah Heart & Lung Ctr., 417 N.J.Super. 25, 30-31 (App. Div. 2010).

We therefore conclude that the Commissioner correctly determined that the DOH does not have jurisdiction to address the constitutional claims presented by the hospitals in their administrative appeals.

III.

The hospitals argue that the statutory mandate to provide charity care and the related subsidies result in unconstitutional takings of their property without just compensation. We do not have jurisdiction to consider these claims.

Rule 2:2-3(a)(2) provides in part that a party may appeal to this court as of right from final decisions or actions of any state administrative agency or officer. In addition, Rule 2:2-3(a)(1) generally provides that appeals may be taken to this court as of right from final judgments of the Superior Court's trial divisions and the Tax Court.

Here, the Commissioner did not make any decision on the hospitals' constitutional claims. Furthermore, the hospitals did not assert these claims in the Superior Court, and there is no trial court judgment addressing them. Thus, the hospitals' constitutional claims do not fall within this court's jurisdiction under Rule 2:2-3(a).

Moreover, the hospitals' claims are not appropriate for the exercise of our original jurisdiction. Rule 2:10-5 states that an appellate court "may exercise such original jurisdiction as is necessary to the complete determination of any matter on review." Here, the only "matters" before this court are the Commissioner's decisions that the DOH lacked jurisdiction to consider the hospitals' constitutional claims. A decision on the merits of those claims is not necessary for the complete determination of the appeals from those decisions.

In addition, an appellate court should not exercise its original jurisdiction when fact-finding is required. See Price v. Himeji, LLC, 214 N.J. 263, 294-95 (2013); see also Vas v. Roberts, 418 N.J.Super. 509, 523-24 (App. Div. 2011) (exercising original jurisdiction when the issue presented was "purely one of law" and there were no relevant facts in dispute); O'Shea v. N.J. Schs. Constr. Corp., 388 N.J.Super. 312, 319 (App. Div. 2006) (holding that exercise of original jurisdiction is appropriate when an issue is a question of law, no facts bearing upon that issue are in dispute, and the issue implicates the public interest). As we explain herein, the hospitals' constitutional claims cannot be resolved without fact-finding.

IV.

Both the United States Constitution and the New Jersey Constitution protect against government takings of private property "without just compensation." U.S. Const. amend. V; N.J. Const. art. I, ¶ 20. New Jersey courts apply the same analysis for state takings claims, viewing the federal and state constitutional provisions as "coextensive." Klumpp v. Borough of Avalon, 202 N.J. 390, 405 (2010).

A. Per Se Takings.

The Supreme Court of the United States has identified two types of regulatory action that are generally deemed per se takings. Lingle v. Chevron U.S.A., Inc., 544 U.S. 528, 538, 125 S.Ct. 2074, 2081, 161 L. Ed. 2d 876, 887 (2005). The first occurs when the government requires an owner "to suffer a permanent physical invasion of [its] property — however minor." Id. at 538, 125 S. Ct. at 2081, 161 L. Ed. 2d at 887. The other occurs when regulations "completely deprive an owner of `all economically beneficial us[e]' of [the] property." Id. at 538, 125 S. Ct. at 2081, 161 L. Ed. 2d at 887-88 (quoting Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1019, 112 S.Ct. 2886, 2895, 120 L. Ed. 2d 798, 815 (1992)).

The hospitals claim they have suffered a per se taking of their real and personal property. They rely upon Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 102 S.Ct. 3164, 73 L. Ed. 2d 868 (1982). In that case, the Court held that a New York law requiring landlords to permit cable television companies to install cable equipment on their rental properties constituted a taking of property without just compensation. Id. at 421, 102 S. Ct. at 3168, 73 L. Ed. 2d at 873.

The hospitals also rely upon Nollan v. Cal. Coastal Comm'n, 483 U.S. 825, 107 S.Ct. 3141, 97 L. Ed. 2d 677 (1987). There, the Court determined that the public entity had taken private property without just compensation when it conditioned the issuance of a permit to build a beach house upon the granting of an easement that allowed the public to pass to a nearby public beach. Id. at 827-32, 107 S. Ct. at 3143-46, 97 L. Ed. 2d at 683-86.

In further support of their claims, the hospitals rely upon Horne v. Dep't of Agric., 576 U.S., 135 S.Ct. 2419, 192 L. Ed. 2d 388 (2015). In that case, the federal agency required raisin growers to turn over to the government a percentage of their crops, without compensation, for such use as the government deemed appropriate. Id. at, 135 S. Ct. at 2424, 192 L. Ed. 2d at 394. The Court held that the mandated transfer of personal property was an unconstitutional taking. Id. at ___, 135 S. Ct. at 2428, 192 L. Ed. 2d at 398-99.

Here, the hospitals allege that the charity care mandate effectively appropriates their real and personal property for public use. The hospitals claim the appropriation of their property is "extremely broad" and "not limited in duration or quantity." The hospitals further claim that although their facilities and personal property may not be permanently occupied by any specific charity care patient, the requirement that charity care patients have continuing access to their real and personal property is sufficient to constitute a taking.

We are convinced, however, that the record is insufficient to resolve the hospitals' claims. We note that the hospitals have been provided with subsidies for providing care to charity care patients, although they insist that the subsidies are inadequate. Thus, the hospitals' reliance upon cases in which the government appropriated property without any compensation is misplaced.

Moreover, there is no specific evidence in this record concerning the manner and extent to which the facilities and property of each affected hospital have been devoted to the provision of care to charity care patients in the relevant fiscal years. The hospitals assert in conclusory fashion that the appropriation of their property is "extremely broad," but they have not presented the hospital-specific factual bases for that assertion. The hospitals also have not presented any evidence from which it could be determined that they have been deprived of all economically beneficial use of any particular property.

B. Regulatory Takings.

The hospitals further allege that, even if the charity care mandate and the alleged inadequate charity care subsidies do not result in a per se taking of their property, the mandate and subsidies result in unconstitutional regulatory takings under the analysis in Penn Cent. Transp. Co. v. New York City, 438 U.S. 104, 98 S.Ct. 2646, 57 L. Ed. 2d 631 (1978).

In Penn Central, the Court identified three factors that should be considered in determining whether a regulatory taking has occurred: (1) "[t]he economic impact of the regulation" on the property owner; (2) "the extent to which the regulation has interfered with distinct investment-backed expectations"; and (3) "the character of the governmental action." Id. at 124, 98 S. Ct. at 2659, 57 L. Ed. 2d at 648.

The Penn Central Court recognized that "in a wide variety of contexts . . . government may execute laws or programs that adversely affect recognized economic values." Id. at 124, 98 S. Ct. at 2659, 57 L. Ed. 2d at 648. The Court noted that takings are more likely to be found in regulations that may be characterized as physical takings, as opposed to "some public program adjusting the benefits and burdens of economic life to promote the common good." Id. at 124, 98 S. Ct. at 2659, 57 L. Ed. 2d at 648.

Furthermore, in Penn Central, the Court indicated that the impact of a regulation upon certain property is assessed by considering the impact of the regulation on the property as a whole. Id. at 130-31, 98 S. Ct. at 2662, 57 L. Ed. 2d at 652. The Court stated, "`Taking' jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated." Id. at 130, 98 S. Ct. at 2662, 57 L. Ed. 2d at 652.

Instead, the focus must be upon "the character of the action and on the nature and extent of the interference with rights in the parcel as a whole." Id. at 130-31, 98 S. Ct. at 2662, 57 L. Ed. 2d at 652. In addition, the Penn Central analysis requires consideration of the economic impact of the regulation, specifically its effect upon investment-backed expectations. Id. at 124, 98 S. Ct. at 2659, 57 L. Ed. 2d at 648.

The record does not include sufficient facts to allow us to address the Penn Central factors. As noted, in their administrative appeals the hospitals relied upon estimates of the costs they anticipated they would sustain in providing charity care in the relevant fiscal years. The hospitals' claims thus rest upon projections of economic impact, not actual facts detailing such impact. The hospitals also estimated their charity care costs using their Medicaid reimbursement rates. However, they have not provided any explanation justifying the use of Medicaid rates in the Penn Central analysis.

The hospitals also provided no evidence as to the economic impact the charity care mandate and subsidies have had upon their properties and operations as a whole. In addition, the hospitals presented no evidence whatsoever concerning the impact of the statutory mandate and subsidies on their "investment-backed expectations."

Furthermore, the hospitals presented no evidence upon which this court could weigh the character of the government's action and the extent to which the statute and subsidies effect a "physical invasion by government" rather than an adjustment to "the benefits and burdens of economic life [adopted] to promote the common good." Id. at 124, 98 S. Ct. at 2659, 57 L. Ed. 2d at 648.

We therefore conclude that the present record is insufficient to warrant the exercise of our original jurisdiction to resolve the hospitals' constitutional claims. We are convinced the hospitals' claims should be raised, in the first instance, by way of complaints filed in the trial court. See City of Camden v. Whitman, 325 N.J.Super. 236, 243 (App. Div. 1999) (action challenging the constitutionality of statute is cognizable in the trial court).

Affirmed.

Source:  Leagle

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