Daleview Nursing Home v. Axelrod

• Decision Date: 10 May 1984
• Citation: 475 N.Y.S.2d 826,62 N.Y.2d 30,464 N.E.2d 130
• Court: New York Court of Appeals Court of Appeals
• Parties: , 464 N.E.2d 130, 5 Soc.Sec.Rep.Ser. 930, Medicare & Medicaid Guide P 33,993 In the Matter of DALEVIEW NURSING HOME, Appellant, v. David AXELROD, as Commissioner of Health of the State of New York, et al., Respondents.

Page 826

475 N.Y.S.2d 826

62 N.Y.2d 30, 464 N.E.2d 130, 5

Soc.Sec.Rep.Ser. 930,

Medicare & Medicaid Guide P 33,993

In the Matter of DALEVIEW NURSING HOME, Appellant, v. David AXELROD, as Commissioner of Health of the State of New York, et al., Respondents.

Court of Appeals of New York.

May 10, 1984.

Thomas F. Gleason and Cornelius D. Murray, Albany, for appellant.

Robert Abrams, Atty. Gen., Albany (Alan W. Rubenstein and Peter H. Schiff, Asst. Atty. Gen., Albany, of counsel), for respondents.

OPINION OF THE COURT

MEYER, Judge.

The overpayment of Medicaid reimbursement paid to a residential health care facility as a result of computer error in fixing the rate of reimbursement may be recovered by the State notwithstanding that the operator of the facility had no way of discovering the error and was not advised of it until seven months after State officials became aware of it. The order of the Appellate Division should, therefore, be affirmed, with costs.

The facts are not in dispute. Petitioner Daleview Nursing Home operates a combined nursing and health care facility in Farmingdale, Long Island. Both nursing and health-related care are covered by the Medicaid program (U.S.Code, tit. 42, § 1396ff), participation by any given facility being a matter of choice for the provider. Reimbursement rates for both facilities were fixed for 1980 and 1981 approximately 60 days prior to the commencement of the particular year. In reliance upon those rates, petitioner elected to continue participation in the Medicaid program.

On June 22, 1981, petitioner was advised by the State's Office of Health Systems Management that its 1980 and 1981 reimbursement rates had been computed incorrectly due "to electronic data processing problems" and that it had been overpaid to the extent of $150,961 during the 18-month period the incorrect rates had been in effect. It is undisputed that although petitioner did not receive notice of the error until June, 1981, it had been discovered by the State in November, 1980 and that on April 1, 1981, petitioner entered into a new union contract which raised employees' salaries.

To review and enjoin the retroactive reduction and reimbursement thus imposed upon it, petitioner commenced this article 78 proceeding. Relying upon Matter of Hamptons Hosp. & Med. Center v. Moore, 52 N.Y.2d 88, 436 N.Y.S.2d 239, 417 N.E.2d 533, and Matter of University of Rochester-Strong Mem. Hosp. v. Whalen, 61 A.D.2d 867, 402 N.Y.S.2d 232, mot. for lv. to app. den. 44 N.Y.2d 646, 406 N.Y.S.2d 1026, 378 N.E.2d 126, Special Term dismissed the petition. On similar reasoning the Appellate Division affirmed, with one Justice dissenting on the ground that the State's failure to act for seven months after discovery of the error "should be classified as a considered judgment" and that the failure to notify petitioner was "egregious and inexcusable." We affirm.

We have held many times that estoppel is not available against a governmental agency in the exercise of its governmental functions (Matter of City of New York v. City Civ. Serv. Comm., 60 N.Y.2d 436, 449, 470 N.Y.S.2d 113, 458 N.E.2d 354; Granada Bldgs. v. City of Kingston, 58 N.Y.2d 705, 708, 458 N.Y.S.2d 906, 444 N.E.2d 1325; Public Improvements v. Board of Educ., 56 N.Y.2d 850, 852, 453 N.Y.S.2d 170, 438 N.E.2d 876; Matter of Hamptons Hosp. & Med. Center v. Moore, 52 N.Y.2d 88, 93, 436 N.Y.S.2d 239, 417 N.E.2d 533, supra; Matter of Galanthay v. New York State Teachers' Retirement System, 50 N.Y.2d 984, 986, 431 N.Y.S.2d 472, 409 N.E.2d 945; Board of Supervisors v. Ellis, 59 N.Y. 620, 625). And, as was made clear in Moore, 52 N.Y.2d, at p. 93, n. 1, 436 N.Y.S.2d 239, 417 N.E.2d 533, such exception as has been made to that rule is of "very limited application" and has been "addressed to an unusual factual situation."

Petitioner does not dispute that the overpayment which the State seeks to recoup resulted from a computer error by reason of which not all of the factors required to be considered in fixing petitioner's reimbursement rate were taken into account. Nor does it seek to contest the common-law right of action, also long recognized in this State (People v. Journal Co., 213 N.Y. 1, 8, 106 N.E. 759; Board of Supervisors v. Ellis, 59 N.Y. 620, 624 ff, supra; People v. Fields, 58 N.Y. 491, 505; Matter of Fahey v. Whalen, 54 A.D.2d 1097, 388 N.Y.S.2d 960, app. dismd. 41 N.Y.2d 900, 393 N.Y.S.2d 1029, 362 N.E.2d 641), to recover an overpayment of governmental moneys.

It argues, rather, (1) that respondent was not engaged in a governmental function, (2) that petitioner budgeted on the basis of the rate fixed by the computer and had no way of discovering during the 18 months it was being overpaid at the rate of almost $9,000 a month that the computer had erred, and (3) that at least as to the seven months after the State discovered the error but withheld informing petitioner of it, what is involved is not an error in calculation but an error of judgment.

The first two contentions can be quickly disposed of. In contracting with petitioner pursuant to the Medicaid program for skilled nursing care and health-related care for persons in need of those services, the Commissioner of Health was acting in a governmental capacity (Schaubman v. Blum, 49 N.Y.2d 375, 379, 426 N.Y.S.2d 230, 402 N.E.2d 1133; Matter of Carillo v. Axelrod, 88...