The Court affirms the Appellate Division’s invalidation of N.J.A.C. 10:72-4.4(d)(1) as inconsistent with its state enabling legislation and contrary to legislative intent. But the Court has grave concerns that the regulation’s method of operation is also inconsistent with the federal Medicaid law. The Court accordingly vacates that portion of the Appellate Division’s analysis that rejected the federal-law argument by cross-petitioners.