Cortlandt Nursing Home v. Axelrod

• Decision Date: 17 October 1985
• Citation: 495 N.Y.S.2d 927,66 N.Y.2d 169,486 N.E.2d 785
• Parties: , 486 N.E.2d 785, Medicare & Medicaid Guide P 35,063 In the Matter of CORTLANDT NURSING HOME, Respondent, v. David AXELROD, as Commissioner of Health of the State of New York, et al., Appellants. In the Matter of HIGHLAND NURSING HOME, INC., Respondent, v. David AXELROD, as Commissioner of Health of the State of New York, et al., Appellants, et al., Respondent. In the Matter of KING STREET HOME, Inc., Respondent, v. David AXELROD, as Commissioner of Health of the State of New York, et al., Appellants. In the Matter of BROADACRES SKILLED NURSING FACILITY, Respondent, v. David AXELROD, as Commissioner of Health of the State of New York, et al., Appellants.
• Court: New York Court of Appeals Court of Appeals

Page 927

495 N.Y.S.2d 927

66 N.Y.2d 169, 486 N.E.2d 785,

Medicare & Medicaid Guide P 35,063

In the Matter of CORTLANDT NURSING HOME, Respondent, v.David AXELROD, as Commissioner of Health of the State of New

York, et al., Appellants.

In the Matter of HIGHLAND NURSING HOME, INC., Respondent, v.David AXELROD, as Commissioner of Health of the State of New

York, et al., Appellants, et al., Respondent.

In the Matter of KING STREET HOME, Inc., Respondent, v.David AXELROD, as Commissioner of Health of the State of New

York, et al., Appellants.

In the Matter of BROADACRES SKILLED NURSING FACILITY, Respondent, v.David AXELROD, as Commissioner of Health of the State of New

York, et al., Appellants.

Court of Appeals of New York.

Oct. 17, 1985.

Robert Abrams, Atty. Gen. (Clifford A. Royael, Robert Hermann and Peter H Schiff, Albany, of counsel), for appellants in the first, second, third and fourth above-entitled proceedings.

Cornelius D. Murray, Thomas F. Gleason and Salvatore D. Ferlazzo, Albany, for respondents in the first, second and third above-entitled proceedings.

Cornelius D. Murray and Thomas F. Gleason, Albany, for respondent in the fourth above-entitled proceeding.

OPINION OF THE COURT

JASEN, Judge.

The critical issue common to these appeals is whether administrative delay in adjudicating the final rate of Medicaid reimbursement violated the directive of the State Administrative Procedure Act that hearings be conducted within a reasonable time.

Petitioners are residential health care facilities licensed by the Commissioner of Health pursuant to Public Health Law article 28.At the times relevant to these proceedings, petitioners participated in the joint Federal-State Medicaid program.(Social Security Act, tit XIX,42 U.S.C. § 1396 et seq.;Social Services Law § 363 et seq.)The facilities were compensated for services provided to eligible Medicaid recipients by local Social Services districts, at rates established by the Commissioner of Health and approved by the Director of the Budget.The rate-making methodology of the Department of Health, ¹ a cost-based prospective reimbursement system, required each facility to submit an annual report of actual costs to the Department of Health.The reported costs for the base period were audited by the Department to determine which costs were allowable under Department regulations.The allowable reported costs, adjusted to account for inflation, were then used to establish a facility's rate for the following rate year.

Upon completion of the audit, each residential health care facility is afforded a closing conference, at which time the facility may produce additional documentation in support of its stated position.(10 NYCRR 86-2.7 A facility may initiate a bureau review of the audit to challenge specific items of the audit report.(10 NYCRR 86-2.7 Within 30 days of receipt of the determination of the bureau review, a facility may initiate a hearing to refute those items of the audit report adverse to the interests of the residential health care facility.(10 NYCRR 86-2.7[f].)

CORTLANDT NURSING HOME

The Cortlandt Nursing Home (Cortlandt) filed cost reports with the Department of Health(Department) for the years 1969 and 1970, which, respectively, were used to calculate the facility's Medicaid reimbursement rates for the periods July 1, 1970 through June 30, 1971, and July 1, 1971 through June 30, 1972.On or about March 30, 1976, the Department advised Cortlandt that it had completed the audit of its 1969 and 1970 reported costs and that based upon the audit, it was disallowing certain expenses that the facility had claimed during 1969 and 1970, and for which Cortlandt had been reimbursed for rate period ending June 30, 1972.Cortlandt thereafter administratively appealed the Department's determination, and the Department issued a notice of hearing on May 1, 1979.The administrative hearing was commenced on June 25, 1979, and continued intermittently through July 1, 1980.The administrative law judge issued his report on August 28, 1981, and the Commissioner of Health issued his order on January 26, 1982.The Commissioner's order upheld many of the disallowances set forth in the audit, and directed that a Medicaid rate be promulgated for the facility reflecting the retroactive adjustments set forth therein.

Cortlandt then commenced this article 78 proceeding seeking a judgment declaring the order of the Commissioner of Health dated January 26, 1982 null and void and prohibiting respondents from recouping or attempting to recoup overpayments established by the Commissioner's order of January 26, 1982.The gravamen of Cortlandt's petition was that respondents' efforts to recoup Medicaid overpayments were time-barred under the doctrine of laches and the Statute of Limitations.Supreme Court, Albany County, granted Cortlandt's petition and permanently enjoined respondents from undertaking any further action to recover Medicaid overpayments.The Appellate Division, Third Department, 99 A.D.2d 105, 472 N.Y.S.2d 737(1984), modified the judgment of Supreme Court by reversing the determination declaring the actions of respondents illegal, but affirmed the permanent injunction against any recoupment of Medicaid overpayments.This court granted leave to appeal.

HIGHLAND NURSING HOME

The Highland Nursing Home (Highland) filed cost reports with the Department for the years 1970, 1971 and 1972, which were utilized to calculate its Medicaid reimbursement rate for the periods beginning July 1, 1972 and ending December 31, 1974.On or about June 2, 1976, the Department advised Highland that it had completed an audit of its 1970, 1971 and 1972 reported costs and that based upon the audit, adjustments would be made in the facility's Medicaid reimbursement rates for the periods beginning July 1, 1972 and ending December 31, 1974.Thereafter, Highland initiated an article 78 proceeding to enjoin any attempted retroactive revision in rates without affording the facility a hearing.Supreme Court, Albany County, on March 9, 1977, enjoined any recoupment without a hearing.The Appellate Division, Third Department, 99 A.D.2d 105, 472 N.Y.S.2d 737(1984), modified the judgment of Supreme Court on November 2, 1978 and ordered the matter to be remanded to the Commissioner of Health for the purpose of affording Highland a full administrative hearing.(Portnick v. Whalen, 65 A.D.2d 827, 409 N.Y.S.2d 840.)

The Commissioner of Health mailed a notice of hearing to Highland in June of 1980.Although no hearing has been held, it has been noted by respondents, and has not been rebutted by petitioners, that any failure to conduct a hearing in accordance with the order of the Appellate Division has been upon the mutual consent of the involved parties.On or about January 25, 1982, Highland was advised by respondent, Commissioner of Social Services of St. Lawrence County, that recoupment of Medicaid overpayments, a sum of $83,319.33, would be commenced.Contending that recoupment would be time-barred, Highland commenced this article 78 proceeding to prevent respondents from effectuating recoupment of Medicaid overpayments as proposed in the January 25, 1982 letter of respondent.Supreme Court, Albany County, granted Highland's petition, thus enjoining recoupment.This judgment was modified by the Appellate Division, Third Department, by reversing so much of Supreme Court's judgment as held respondents' actions illegal, and affirmed the permanent injunction upon recoupment by respondents of Medicaid overpayments.Leave to appeal was granted by this court.

KING STREET HOME

The King Street Home (King Street) filed cost reports with the Department for the years 1970, 1971, 1972 and 1973, which were used, respectively, to calculate King Street's Medicaid reimbursement rates for the periods July 1, 1971 through June 30, 1972, July 1, 1972 through December 31, 1973, and the calendar years 1974 and 1975.Thereafter, the Department completed an audit of the foregoing cost reports and determined that certain reported expenses should be disallowed.By letter dated March 21, 1977, King Street received an audit report and revised rate computation sheet relating to its 1970 cost reports.By letter dated April 19, 1978, King Street received another audit report and revised rate computations sheet relating to its 1971, 1972 and 1973 cost reports.King Street requested a bureau review (10 NYCRR 86-2.7), and was notified by the Department of the results of the review by letter dated January 21, 1980.Thereafter, the King Street facility requested an administrative hearing (10 NYCRR 86-2.7).On or about May 4, 1982, the Department served a notice of hearing upon King Street, scheduling a hearing to commence on June 2, 1982 to address whether the Department correctly disallowed certain expenses in its audit.King Street, asserting that recoupment was barred under the doctrine of laches and the Statute of Limitations, commenced this article 78 proceeding to preclude respondents from recouping Medicaid overpayments.As in the Cortlandt and Highland proceedings, Supreme Court, Albany County, granted King Street's petition, the Appellate Division, Third Department, 99 A.D.2d 105, 472 N.Y.S.2d 737(1984), modified the judgment of Supreme Court, yet upheld the permanent injunction, and leave to appeal was granted by this court.

BROADACRES SKILLED NURSING FACILITY

The Broadacres Skilled Nursing Facility (Broadacres) filed cost reports with the Department for the years 1971, 1972, 1973 and 1974, which, respectively, were used to calculate the facility's Medicaid reimbursement rates for the periods July 1, 1972 through December 31, 1973, the calendar year 1974, the calendar year 1975, and January 1, 1976 through March 31, 1977.In 1981, the Department advised Broadacres that it had completed the audit of the facility's reported costs for the years 1971-1974, and that based upon the audit, it was...