First Baptist Church of Crown Heights Center for Nursing & Rehabilitation, Inc., Petitioner,
Antonia Novello, as Commissioner of Health of the State of New York, Respondent. (Action No. 1.) Urban Strategies, Inc., Petitioner,
Antonia Novello, as Commissioner of Health of the State of New York, Respondent. (Action No. 2.)
Goldberg & Cohn, P. C., Brooklyn (Elliot S. Martin of counsel), Gerard A. Walters, New York City, and Tenzer & Lunin, New York City, for petitioners.
Eliot Spitzer, Attorney General, New York City (Mona Jha of counsel), for respondent.
Margaret Cammer, J.
In this CPLR article 78 proceeding, petitioners First Baptist Church of Crown Heights Center for Nursing & Rehabilitation, Inc. (First Baptist) in action No. 1 and Urban Strategies, Inc. (Urban Strategies) in action No. 2 move, individually, by separate orders to show cause, for: (1) a judgment declaring that the Department of Health of the State of New York (the Department) has an affirmative duty to process their applications for the establishment and construction of their nursing homes in conformity with applicable statutes, regulations and its own practices, patterns and procedures; (2) an order directing the Department to process their applications in conformity with applicable statutes, regulations and its own practices, patterns and procedures; (3) a judgment declaring that the Department's announced policy of declining to process all pending nursing home establishment applications (the moratorium) is in the nature of a rule as defined in and subject to the State Administrative Procedure Act; and (4) an order declaring the moratorium ineffective due to noncompliance with State Administrative Procedure Act § 202.
Facts and Procedural History
In 1990, as a result of the recognition of the need for residential health care facilities in minority communities, the State established an initiative (the Initiative) to develop such facilities, with such projects to be completely funded through the issuance of bonds and the provision of mortgage insurance.  In furtherance of their corporate purposes and in reliance upon the Initiative, First Baptist and Urban Strategies, both minority not-for-profit corporations located in Brooklyn, each submitted to respondent in 1990 and 1991, respectively, a Certificate of Need application (CON), pursuant to article 28 of the Public Health Law, to establish, construct and operate a residential health care nursing home, each to be located in Brooklyn, New York.
Pursuant to article 28 of the Public Health Law, which governs the establishment and construction of nursing homes (see generally, Public Health Law §§ 2800, 2801 ), separate approval processes exist for review of applications for nursing
home establishment and construction.H owever, these processes are combined when an applicant seeks the Department's approval to both establish and construct a nursing home. Briefly, the Public Health Council (PHC), established pursuant to Public Health Law § 220, acts on nursing home establishment applications with the advice of the State Hospital Review and Planning Council (SHRPC) (Public Health Law § 2904) and the health systems agency having geographical jurisdiction of the area where the proposed nursing home is to be located (Public Health Law § 2801-a ). The PHC may disapprove the application, affording the applicant a public hearing, or approve the application with or without contingencies, which the applicant must satisfy before the Department will issue an operating certificate (Public Health Law § 2801-a ).
Nursing home construction applications require the prior approval of the Commissioner (Public Health Law § 2802). As with the PHC, the Commissioner acts on nursing home construction applications with the advice of the SHRPC and the health systems agency (Public Health Law § 2802 , ). The Commissioner may not act upon such an application unless the SHRPC and the health systems agency have submitted their recommendations, the applicant has obtained the necessary approvals required for its incorporation and establishment, and, as particularly relevant here, the Commissioner is " satisfied as to the public need for the construction" (Public Health Law § 2802  [b]). As with the PHC, the Commissioner may disapprove the application, entitling the applicant to a hearing, or approve or contingently approve the application (10 NYCRR 710.2 [e]). Approval or contingent approval of a construction application does not authorize construction to begin; it merely allows the applicant to proceed in the construction approval process that may or may not result in approval of actual construction (10 NYCRR 710.2 [e] ).
Upon the Department's receipt of First Baptist's application, and after seeking and ultimately receiving additional information because the application was incomplete, the PHC advised First Baptist, in November 1992, that it had contingently approved its application for establishment of the nursing home. Thereafter, by letter dated December 30, ...