Adirondack Med. Center-Uihlein v. Daines

• Decision Date: 17 July 2014
• Parties: In the Matter of ADIRONDACK MEDICAL CENTER–UIHLEIN et al., Appellants, v. Richard F. DAINES, as Commissioner of Health, et al., Respondents.
• Court: New York Supreme Court — Appellate Division

119 A.D.3d 1175

990 N.Y.S.2d 325

2014 N.Y. Slip Op. 05386

In the Matter of ADIRONDACK MEDICAL CENTER–UIHLEIN et al., Appellants,

v.Richard F. DAINES, as Commissioner of Health, et al., Respondents.

Supreme Court, Appellate Division, Third Department, New York.

July 17, 2014.

Bond, Schoeneck & King, PLLC, Albany (Raul A. Tabora Jr. of counsel), for appellants.

Eric T. Schneiderman, Attorney General, Albany (Victor Paladino of counsel), for respondents.

Before: LAHTINEN, J.P., McCARTHY, GARRY, LYNCH and CLARK, JJ.

McCARTHY, J.

Appeal from a judgment of the Supreme Court (McNamara, J.), entered November 16, 2012 in Albany County, which granted respondents' motion to convert the action to a proceeding pursuant to CPLR article 78 and dismiss the petition.

Petitioners are the owners and operators of residential health care facilities that are licensed by the Department of Health (hereinafter DOH) pursuant to Public Health Law article 28. Respondent Commissioner of Health oversees DOH, which is responsible for determining Medicaid reimbursement rates for medical services provided at petitioners' facilities, and respondent Director of the Budget is responsible for approving such rates ( seePublic Health Law § 2807[3] ). In 2006, the Legislature amended Public Health Law § 2808 to change the base years for calculating reimbursement rates, and included an extended transition period ( see L. 2006, ch. 109, § 1, part C, § 47; Public Health Law § 2808[2–b] ). Petitioners commenced a declaratory judgment action seeking a declaration that the reimbursement rate calculations for the period of January 1, 2009 to March 31, 2009 incorrectly applied certain reduction provisions that had expired in 2006, and sought an order directing respondents to recompute their reimbursement rates for that time period. Following joinder of issue, petitioners moved for summary judgment. Respondents cross-moved to convert the action to a CPLR article 78 proceeding and for dismissal of the converted proceeding. Supreme Court granted respondents' cross motion to convert the proceeding and dismissed the petition as untimely. Petitioners appeal.

Supreme Court properly converted the declaratory judgment action to a proceeding pursuant to CPLR article 78. “Where, as here, governmental activity is being challenged, the immediate inquiry is whether the challenge could have been advanced in a CPLR article 78 proceeding” ( Spinney at Pond View, LLC v. Town Bd. of the Town of Schodack, 99 A.D.3d 1088, 1089, 953 N.Y.S.2d 314 [2012] [internal quotation marks and citation omitted]; accord Thrun v. Cuomo, 112 A.D.3d 1038, 1040, 976 N.Y.S.2d 320 [2013],lv. denied22 N.Y.3d 865, 2014 WL 1316287 [2014] ). Petitioners are not challenging any legislation, but are instead challenging the determinations of an administrative agency applying such legislation, rendering this the type of challenge that should be brought under CPLR article 78 ( see Walton v. New York State Dept. of Correctional Servs., 8 N.Y.3d 186, 194, 831 N.Y.S.2d 749, 863 N.E.2d 1001 [2007];Matter of Grand Manor Nursing Home Health Related Facility, Inc. v. Novello, 39 A.D.3d 1062, 1064, 835 N.Y.S.2d 473 [2007],lv. denied9 N.Y.3d 812, 846 N.Y.S.2d 602, 877 N.E.2d 652 [2007] ). Accordingly, the court properly converted the action to a proceeding and determined that a four-month statute of limitations applies ( seeCPLR 103 [c], 217[1] ).

Supreme Court erred in dismissing the proceeding as untimely. Respondents contend that the proceeding was untimely because it was commenced 11 months after DOH sent February 2009 letters to petitioners informing them of their interim 2009 reimbursement rates. Petitioners contend that this January 2010 proceeding was timely commenced less than four months after they received DOH's September 2009 letters informing them of their final reimbursement rates for 2009. The statute of limitations for a challenge to a governmental determination begins to run when “the determination to be reviewed becomes final and binding upon the petitioner” (CPLR 217[1] ), which occurs when the petitioner has been aggrieved because the determination has an impact upon that party ( see Matter of Edmead v. McGuire, 67 N.Y.2d 714, 716, 499 N.Y.S.2d 934, 490 N.E.2d 853 [1986];Matter of Resurrection Nursing Home v. New York State Dept. of Health, 298 A.D.2d 752, 753, 749 N.Y.S.2d 579 [2002],lv. denied100 N.Y.2d 502, 760 N.Y.S.2d 765, 790 N.E.2d 1194 [2003] ). “[W]hen an administrative body itself creates ambiguity and uncertainty” concerning the finality of a determination, however, “affected [parties] should not have to risk dismissal for prematurity or untimeliness by necessarily guessing when a final and binding determination has or has not been made. Under these circumstances, ‘the courts should resolve any ambiguity created by the public body against it in order to reach a determination on the merits and not deny a party his [or her] day in court’ ” ( Mundy v. Nassau County Civ. Serv. Commn., 44 N.Y.2d 352, 358, 405 N.Y.S.2d 660, 376 N.E.2d 1305 [1978], quoting Matter of Castaways Motel v. Schuyler, 24 N.Y.2d 120, 126–127, 299 N.Y.S.2d 148, 247 N.E.2d 124 [1969],adhered to on rearg.25 N.Y.2d 692, 306 N.Y.S.2d 692, 254 N.E.2d 919 [1969];see Matter of Edmead v. McGuire, 67 N.Y.2d at 716, 499 N.Y.S.2d 934, 490 N.E.2d 853;Matter of Catskill Regional Off–Track Betting Corp. v. New York State Racing & Wagering Bd., 56 A.D.3d 1027, 1029, 869 N.Y.S.2d 241 [2008];see also Matter of Board of Educ. of Kiryas Joel Vil. Union Free Sch. Dist. v. State of New York, 110 A.D.3d 1231, 1232–1233, 972 N.Y.S.2d 723 [2013],lv. denied22 N.Y.3d 861, 2014 WL 593184 [2014] ).

The February 2009 letters—which were sent to petitioners shortly after the Legislature amended Public Health Law § 2808 to extend the transition period for implementing the change in base years for reimbursement ( see L. 2009, ch. 2, § 1, part I, §§ 2, 3)—state that “[t]his rate is an interim 2009 rate that will be used solely for 2009 billing purposes and until an actual 2009 rate can be published in accordance with applicable law” (emphasis added). One reasonable inference to draw from the use of the word “actual” to describe the latter mentioned rate but not the former mentioned rate was that the interim rate was not an actual rate. The word “pending” appeared at the top of each page of the rate calculation sheets enclosed with those letters, which could reasonably be interpreted as suggesting that the 2009 rate was not yet settled. Because DOH created ambiguity and did not make clear in its February 2009 letters that the “interim” rates were final and binding on petitioners, we resolve the ambiguity against respondents ( see Mundy v. Nassau County Civ. Serv. Commn., 44 N.Y.2d at 358, 405 N.Y.S.2d 660, 376 N.E.2d 1305). As the statute of limitations did not start to run until petitioners received the September 2009 letters that included their final 2009 reimbursement rates, this proceeding was timely commenced.

Nevertheless, DOH's interpretation of Public Health Law § 2808, and its determinations regarding the rate reimbursement methodology, were not unreasonable. “DOH is entitled to a high degree of judicial deference,...