CAPITAL HEALTH SYSTEM, INC., CENTRASTATE MEDICAL CENTER, HOLY NAME MEDICAL CENTER, INC., THE COMMUNITY HOSPITAL GROUP, INC., t/а JFK MEDICAL CENTER, KENNEDY HEALTH, OUR LADY OF LOURDES HEALTH CARE SERVICES, INC., ST. FRANCIS MEDICAL CENTER, INC., ST. LUKE‘S WARREN HOSPITAL, INC., TRINITAS REGIONAL MEDICAL CENTER, VALLEY HEALTH SYSTEM, and VIRTUA HEALTH, INC., Plaintiffs-Appellants, v. NEW JERSEY DEPARTMENT OF BANKING AND INSURANCE, Defendant-Respondent.
DOCKET NO. A-1211-15T3
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION
June 7, 2016
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
APPROVED FOR PUBLICATION June 7, 2016 APPELLATE DIVISION
Argued May 25, 2016 – Decided June 7, 2016
Before Judges Alvarez, Accurso and Haas.
Kerri Ann Law (Kramer Levin Naftalis & Frankel, LLP) of the New York bar, admitted pro hac vice, argued the cause for appellants (Greenberg Dauber Epstein & Tucker; Steven M. Goldman; Daniel Goldman (Kramer Levin Naftalis & Frankel, LLP) of the New York bar,
Richard E. Wegryn, Jr., Deputy Attorney General, argued the cause for respondent Department of Banking and Insurance (Robert Lougy, Acting Attorney General, attorney; Melissa Dutton Schaffer, Assistant Attorney General, of counsel; Mr. Wegryn, on the briefs).
Jeffrey S. Chiesa argued the cause for respondent Horizon Blue Cross Blue Shield of New Jersey (Chiesa Shahinian & Giantomasi, PC, attorneys; Mr. Chiesa, on the briefs).
Melinda Martinson, General Counsel, Medical Society of New Jersey and Edith M. Kallas, Joe R. Whatley, Jr., Ilze C. Thielmann (Whatley Kallas, LLP) attorneys for amicus curiae Medical Society of New Jersey (Ms. Martinson, of counsel and on the brief; Ms. Kallas, Mr. Whatley and Mr. Thielmann, on the brief).
Howard R. Rubin, Robert T. Smith and Eric T. Werlinger (Katten Muchin Rosenman, LLP) of the District of Columbia bar, admitted pro hac vice, and Scott A. Resnik (Katten Muchin Rosenman, LLP) attorneys for amicus curiae New Jersey Patient Care and Access Coalition (Mr. Rubin, Mr. Smith and Mr. Werlinger, of counsel; Mr. Resnik, of counsel and on the brief).
The opinion of the court was delivered by
HAAS, J.A.D.
Appellants, a group of ten New Jersey hospitals,1 appeal from the September 18, 2015 final decision of the New Jersey Department of Banking and Insurance (the Department), approving Horizon Blue Cross Blue Shield of New Jersey‘s (Horizon‘s) application to establish the OMNIA Health Alliance (OMNIA) network. OMNIA is a health benefits plan that contains a two-tiered network of hospitals and physicians under which a member‘s cost-share (deductibles, co-insurance, and co-payments) are lower if the member elects to use a Tier 1 provider. Horizon designated appellants as Tier 2 hospitals under the OMNIA tiered plan.
Appellants argue that the Department acted arbitrarily, capriciously and unreasonably in approving the OMNIA network because: the hospital network did not comply with the statutory and regulatory geographic access and availability standards (time and distance standards) for network adequacy; the hospital network is contrary to the public interest; the Department failed to conduct a meaningful analysis of the hospital network; and the approval was not supported by substantial evidence.
After evaluating these contentions in light of the record and the applicable law, we affirm the Department‘s decision in all respects.
I.
The Department is vested with the authority to administer and enforce the insurance
Among other things, the Legislature has granted the Department the authority to regulate fully insured health benefit plans sold in commercial markets, including the OMNIA plan offered by Horizon, a health service corporation.
Under the Health Care Quality Act (the HCQA),
a health benefits plan that integrates the financing and delivery of appropriate health care services to covered persons by arrangements with participating providers, who are selected to participate on the basis of explicit standards, to furnish a comprehensive set of health care services and financial incentives for covered persons to use the participating providers and procedures provided for in the plan.
Tiered bеnefit plans, like the OMNIA plan that is the subject of this appeal, fall within this broad statutory definition, and have been offered over the past several years by a number of New Jersey carriers, including Horizon. Under a two-tiered benefit plan, the carrier provides a network of providers in both the preferred tier, (Tier 1), where consumers pay less than the standard level of cost-sharing, and the non-preferred (Tier 2), standard cost-sharing tier. If the consumer elects to use a Tier 1 provider, the cost-share is lower than the standard cost-share for a Tier 2 provider.
As defined in
A carrier shall maintain an adequate network . . . of [primary care providers (PCPs)], specialists and other ancillary providers to assure that covered persons are able to access services in-network and take full advantage of the in-network benefits levels when the pоlicy or contract specifies that there is a differential between the in-network and out-of-network
benefits levels for one or more covered services . . . .
As applied to an application for approval of a tiered network, the Department has interpreted this regulation to require the Department to review each tier to determine the “adequacy of the provider network with respect to the scope and type of health care benefits provided by the carrier, the geographic service area covered by the provider network and access to medical specialists[.]”
Under the Department‘s regulations, the carrier must meet specific time and distance standards for the various types of providers as to each plan offered.
For institutional providers, the carrier shall maintain contracts or other arrangements acceptable to the Department sufficient to meet the medical needs of covered persons, and maintain geographic accessibility of the services provided through institutional providers, subject to no less than the following:
i. The carrier shall have a contract or arrangement with at least one licensed acute care hospital with licensed medical-surgical, pediatric, obstetrical and critical care services in any county or service area that is no greater than [twenty] miles or [thirty] minutes driving time, whichever is less, from [90%] of сovered persons within the county or service area.
ii. The carrier shall have a contract or arrangement with surgical facilities, including acute care hospitals, licensed ambulatory surgical facilities, and/or Medicare-certified physician surgical practices available in each county or service area that are no greater than [twenty] miles or [thirty] minutes driving time, whichever is less, from [90%] of covered persons within the county or service area.
iii. The carrier shall have a contract or otherwise agree to cover medically necessary trauma services at a reasonable cost with all Level I or II trauma centers designated by the Department оf Health and Senior Services, with the provision of benefits at the in-network level.
iv. The carrier shall have contracts or arrangements for the provision of the following specialized services at in-network benefit levels (if covered by one or more of the carrier‘s health benefits plans in network, and determined to be medically necessary), so that services will be available within [forty-five] miles or [sixty] minutes average driving time, whichever is less, of [90%] of covered persons within each county or service area:
(1) At least one hospital providing regional perinatal services;
(2) A hospital offering tertiary pediatric services;
(3) In-patient psychiatric services for adults, adolescents and children;
(4) Residential substance abuse treatment centers;
(5) Diagnostic cardiac catheterizаtion services in a hospital;
(6) Specialty out-patient centers for HIV/AIDS, sickle cell disease, hemophilia, and cranio-facial and congenital anomalies; and
(7) Comprehensive rehabilitation services.
According to the Department, its analysis of network adequacy is an “iterative and continual process,” because it is “rare that a network submission is complete or adequate upon the initial filing.” Thus, the Department frequently asks carriers for additional information necessary to
II.
Beginning in January 2014, Horizon offered its subscribers a tiered benefit plan known as the Advance Tiered Network (“the Advance plan“). The network had 87,211 subscribers and was comprised of thirty-one hospitals in Tier 1, and thirty-seven hospitals in Tier 2. There was one Tier 1 hospital located in every county in New Jersey under the Advance plan, except Somerset and Cumberland counties. Appellants were participating providers in the Advance plan network: four hospitals were designated as Tier 1 (Kennedy, Lourdes, St. Francis, and Trinitas), and the other six hosрitals were designated as Tier 2 (Capital, Centrastate, Holy Name, JFK Medical Center, Valley Health, and Virtua).
On June 25, 2015, Horizon submitted its application to the Department for network adequacy approval of the OMNIA two-tiered provider network.2 OMNIA‘s hospital network was comprised of thirty-five hospitals in Tier 1 and thirty-two hospitals in Tier 2 (including all ten appellants). There is one Tier 1 hospital located in each county in New Jersey, except Warren and Burlington counties. At the time of the application, Horizon projected that 250,000 consumers would enroll in the OMNIA plan, which would represent approximately 6.6% of its total statewide market-share.3
Over the course of the next three months, the Depаrtment reviewed the adequacy of Horizon‘s OMNIA network pursuant to
Initially, Horizon only submitted its proposed physician network to the Department for review, not its proposed hospital network. As a result, by letter dated August 25, 2015, the Department asked Horizon to provide the completed General Acute Cаre Hospital tables (“hospital tables“), in addition to other information regarding physicians and specialists.
On September 3, 2015, the Department again asked Horizon to submit a completed copy of the hospital tables for the OMNIA plan. The Department stated that it assumed that the OMNIA and Advance hospital networks were identical, but if they were not, Horizon should provide a comparison of the networks under the plans. Horizon provided the Department with the completed hospital tables for both plans on that same date and, on September 11, 2015, Horizon submitted information regarding the proposed networks compliance with the adequacy standards. Horizon explained that the OMNIA and Advanсe networks were similar in that they each included a Tier 1 hospital in all but two counties and met geographic access requirements, but differed in that the Tier 1
Based on its review, the Department found a substantive deficiency in the OMNIA Tier 1 hospital network; obstetrical services in the Burlington County area only reached 88% of the projected membership, not the 90% required under
[w]ith regard to the acute care hospital requirements at
N.J.A.C. 11:24A-4.10(b)[(3)(i)] , the OMNIA Network satisfied the adequacy standard with [thirty-five] hospitals in Tier 1 and [thirty-two] additional in-network hospitals in Tier 2. This means that the OMNIA Network has at least one acute care hospital with medical-surgical, pediatric, obstetrical, and critical care services, within [twenty] miles or [thirty] minutes driving time for 90[%] or more of the OMNIA plans’ projected enrollment in each county or service area.
In a final decision issued on September 18, 2015, the Department‘s Chief of the Office of Managed Care, wrote that the Department had completed its review of Horizon‘s application to establish the OMNIA Network. This network is approved [statewide] as of September 15, 2015. On that date, the Department advised the Centers for Medicaid and Medicare Services that it was revising the QHP [qualified health plan] certification to indicate that the OMNIA network was approved.
Overall, any change in operations from those descriptions filed with this application are subject to prior review and approval by the Department. Horizon shall be subject to all provisions of
N.J.S.A. 26:2S-1 et seq. andN.J.A.C. 11:24A-1 et seq. . . . .4
On November 19, 2015, appellants filed their notice of appeal from the Department‘s September 18, 2015 final decision. Appellants also filed a motion for a stay of that decision with the Department. On November 30, 2015, the Department denied appellants’ motion, and issued a comprehensive forty-page written decision that thoroughly explained its decision approving Horizon‘s application and determining that the OMNIA plan met all applicable network adequacy requirements.5
On December 7, 2015, we denied appellants’ emergent motion for a stay of Horizon‘s implementation of the OMNIA tiered network plan, but granted appellants’ motion for acceleration.
III.
Established precedents guide our task on appeal. Our scope of review of an
Moreover, “[a]n agency‘s interpretation of its own rule is owed considerable deference because the agency that drafted and promulgated the rule should know the meaning of that rule.” N.J. Healthcare Coal. v. N.J. Dep‘t of Banking & Ins., 440 N.J. Super. 129, 135 (App. Div.) (quoting In re Freshwater Wetlands Gen. Permit No. 16, 379 N.J. Super. 331, 341-42 (App. Div. 2005)), certif. denied, 222 N.J. 17 (2015). A reviewing court “may not second-guess those judgments of an administrative agency which fall squarely within the agency‘s expertise.” In re Stream Encroachment Permit, Permit No. 0200-04-0002.1 FHA, 402 N.J. Super. 587, 597 (App. Div. 2008).
“An agency‘s determination on the merits ‘will be sustained unless there is a clear showing that it is arbitrary, capricious, or unreasonable, or that it lacks fair support in the record.‘” Saccone v. Bd. of Trs. of Police & Firemen‘s Ret. Sys., 219 N.J. 369, 380 (2014) (quoting Russo v. Bd. of Trs., Police & Firemen‘s Ret. Sys., 206 N.J. 14, 27 (2011)). In determining whether agency action is arbitrary, capricious, or unreasonable, an appellate court must examine:
(1) whether the agency‘s action violates express or implied legislative policies, that is, did the agency follow the law; (2) whether the record contains substantial evidence to support the findings on which the agency based its action; and (3) whether in applying the legislative policies to the facts, the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors.
[Stallworth, supra, 208 N.J. at 194 (quoting In re Carter, 191 N.J. 474, 482-83 (2007)).]
We are not, however, in any way “bound by the agency‘s interpretation of a statute or its determination of a strictly legal issue.” Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 93 (1973).
Applying these principles, and for the reasons that follow, we discern no reason to disturb the Department‘s decision approving the OMNIA plan.
A.
Appellants argue that the OMNIA network did not meet the network adequacy requirements set forth in
Horizon was statutorily authorized to enter into contracts with the hospitals or “participating” providers.
It is undisputed that at the time of the Department‘s approval, Horizon had automatically renewable contracts (“Network Hospital Agreements“) in place with all of the hospitals participating in the OMNIA network, including all the Tier 1 hospitals, as well as appellants and the other hospitals in Tier 2. As the Department explained in its November 30, 2015 decision, it was “important to note that . . . all of the Tier 1 and Tier 2 hospitals participating in the OMNIA Network were already contracted with Horizon and considered in-network. Establishment of the OMNIA Network did not require re-contracting with these hospitals.”
Thus, contrary to appellants’ assertions, Horizon fully complied with
Further, the Department properly found that ”
B.
Appellants next argue that at the time of the approval the OMNIA Tier 1 hospital network did not meet the adequacy standards, set forth in
As noted above,
Although the OMNIA hospital network did not initially meet the adequacy requirements, Horizon responded to the Department‘s determination by committing to apply Tier 1 cost-sharing for obstetrical services at Virtua, a Tier 2 hospital located in Burlington Cоunty. Thus, contrary to appellants’ contention, there was no longer a deficiency in the OMNIA network because at the time of the Department‘s approval, Horizon had an agreement with Virtua -- a licensed Tier 2 hospital located within twenty miles or thirty minutes driving time of 90% of the persons covered -- to provide obstetrical services to Burlington County subscribers.
C.
Appellants next contend that the OMNIA Tier 1 hospital network failed to meet the network adequacy standards established by the Department for trauma centers. Again, we disagree.
Thе Department of Health has designated three hospitals in New Jersey as Level I trauma centers (UMDNJ-University Hospital, Robert Wood Johnson University Hospital, and Cooper Hospital/University Medical Center), and seven hospitals as Level II trauma centers (Hackensack University Medical Center, St. Joseph‘s Hospital and Medical Center, Jersey City Medical Center, Morristown Memorial Hospital, Capital Health, Jersey Shore Medical Center, and AtlantiCare Regional Medical Center).
Horizon fully satisfied this requirement. Horizon contracted with the ten trauma centers to place them in-network; eight trauma centers were designated as Tier 1 providers (RWJ, Cooper, Jersey City Medical Center, Hackensack, Jersey Shore Medical Center, Morristown Memorial, St. Joseph‘s Hospital, and AtlantiCare); and two trauma centers were designated as Tier 2 providers (Capital Health and UMDNJ).
Contrary to appellants’ contention, and as the Department expressly found, “[n]othing in the regulation requires that all trauma centers be placed in the most preferred tier, only that they be in-network.” It is undisputed that Horizon has a contract with the ten trauma centers to provide benefits at the “in-network level” as required by
Appellants assert that before determining whether the OMNIA network was adequate, the Department was required to consider and make a specific finding that the public interest would be served by approving Horizon‘s proposal. Appellants contend that OMNIA‘s two-tiered hospital network “endangers” them and the other hospitals that Horizon selected for Tier 2, and interferes with the “continuity of patient care.” Appellants also complain that Horizon was not “transpаrent” with regard “to the OMNIA plan‘s tiering decisions,” which “makes informed health care choices impossible.” These contentions lack merit.
The Department‘s role in approving a health service corporation‘s proposed tiered benefit network is limited by the HCQA to the establishment of standards for the “adequacy of the provider network with respect to the scope and type of health care benefits provided by the carrier, the geographic service area covered by the provider network[,] and access to medical specialists, when appropriate[.]”
It is well established that an administrative agency, like the Department, may “only act reasonably within the scope of its delegated authority.” Jersey Cent. Power & Light Co. v. Melcar Util. Co., 212 N.J. 576, 600 (2013). Thus, “an agency may not issue a regulation that is outside ‘the fair contemplation of the delegation of the enabling statute,’ or that is otherwise ‘inconsistent with [its] legislative mandate.‘” N.J. Healthcare Coal., supra, 440 N.J. Super. at 136 (citation omitted) (quoting N.J. State League of Municipalities v. Dep‘t of Cmty. Affairs, 158 N.J. 211, 222-23 (1999)).
Turning to the arguments raised by appellants in this portion of their brief, there is no provision in any of the governing statutes that requires the Department to make a specific finding that a tiered benefit network is “in the public intеrest” before it can be approved. Indeed, none of the statutory provisions cited by appellants that mention the “public interest” relate to network adequacy. For example, appellants cite
However, the HCQA contains no similar requirement. Thus, the Department is not currently statutorily authorized to review Horizon‘s selection of network providers under the amorphous “public policy” standard asserted by appellants.
That having been said, we recognize that “the public interest is an added dimension in every administrative proceeding . . . , and, in a sense, the public is an omnipresent party in all administrative actions.” City of Hackensack v. Winner, 82 N.J. 1, 30 (1980). However, the public interest is plainly served when an administrative agency follows the governing statutes аnd regulations, conducts a prompt and timely review of an applicant‘s proposal, and renders a fully supported, thoughtful final decision that withstands appellate review. That is the case here.
Appellants’ other arguments on this point also lack merit. The Legislature has not authorized the Department to review a carrier‘s hospital selection criteria for a tiered benefit network, except to ensure that subscribers have sufficient access to care under the plan because the network is adequate. See Radiological Soc. of N.J., supra, 175 N.J. Super. at 384 (Commissioner “has not been given the power to become so involved in Blue Shield‘s activities that he [or she] controls the way the plan operatеs“).
There is also no statutory or regulatory procedure for the Department to determine the financial impact of the tier designation on a hospital, or to compel carriers to include, for example, all faith-based or urban hospitals in Tier 1. In fact, “the Legislature specifically recognized the right of Horizon to enter into provider contracts wherein it could exercise some leverage as to price in return for direct payment.” Somerset Orthopedic Assocs., supra, 345 N.J. Super. at 420. Nor, as the Department correctly points out, does it have the authority to require Horizon to allow appellants to apply for Tier 1 status. The Legislature only requires carriers to grant pharmacies and pharmacists “the right tо participate as a preferred provider or as a contracting provider, under the same terms and conditions currently applicable to all other preferred or contracting providers[.]”
Contrary to appellants’ next contention, the HCQA does not require the Department to consider possible “continuity of care issues” when it reviews an application for approval of a tiered benefit network. However, because provider networks are fluid,
Moreover, before purchasing a tiered product like OMNIA, the consumer has the ability to review the hospitals and health care providers in each network tier.
There is also no requirement in the HCQA that a carrier publicly disclose the criteria it used to evaluate the hospitals for inclusion in, or exclusion from, a particular tier. Instead,
E.
Finally, appellants assert that the Department conducted a rushed review of Horizon‘s application, did not fully explain its decision, and improperly failed to permit their input. We disagree.
The record reflects that the Department‘s review of Horizon‘s application was both extensive and deliberate. Horizon submitted its application on June 25, 2015 and the Department did not complete its review and approve the OMNIA network until September 18, 2015. During this period, the Department obtained the nеcessary information to conduct a meaningful review of the adequacy of the hospital network under
Contrary to appellants’ contention, the fact that an entity may be impacted by an agency decision does not, in and of itself, give rise to a right to notice and participation in the administrative procеss. Elizabeth Fed. Sav. & Loan Ass‘n v. Howell, 24 N.J. 488, 505 (1957). Moreover, an administrative agency must conduct a “contested case” hearing only when “the legal rights, duties, obligations, privileges, benefits[,] or other legal relations of specific parties are required by constitutional right or by statute to be determined by an agency by decisions, determinations, or orders, addressed to them or disposing of their interests, after opportunity for an agency hearing[.]”
As for the balance of any of appellants’ arguments not expressly discussed above, they are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(D) and (E).
IV.
In sum, we conclude that the Department‘s decision approving Horizon‘s application to establish the OMNIA network was accomplished in strict accordance with the current statutes and regulations applicable to its review. Under these circumstances, appellants’ contention that the HCQA should be amended to reflect their view of how tiered benefit networks should be implemented can only be addressed by the Legislature. “We do not pass judgment on the wisdom of a law or render an opinion on whether it represents sound public policy. That is the prerogative of our electеd representatives.” Caviglia v. Royal Tours of Am., 178 N.J. 460, 476 (2004) (citations omitted). Stated simply, “courts do not act as a super-legislature.” Trautman ex re. Trautman v. Christie, 211 N.J. 300, 307 (2012) (quoting Newark Superior Officers Ass‘n v. City of Newark, 98 N.J. 212, 222 (1985)).
Having determined that the record fully supports the Department‘s decision that the OMNIA network was adequate under
Affirmed.