Mid Island Therapy Assocs., LLC v. N.Y. State Educ. Dep't, 519926

• Decision Date: 04 June 2015
• Docket Number: 519926
• Citation: 10 N.Y.S.3d 688,2015 N.Y. Slip Op. 04707,129 A.D.3d 1173
• Parties: In the Matter of MID ISLAND THERAPY ASSOCIATES, LLC, Doing Business as All About Kids, Appellant, v. NEW YORK STATE EDUCATION DEPARTMENT, Respondent.
• Court: New York Supreme Court — Appellate Division

129 A.D.3d 1173
10 N.Y.S.3d 688
2015 N.Y. Slip Op. 04707

In the Matter of MID ISLAND THERAPY ASSOCIATES, LLC, Doing Business as All About Kids, Appellant
v.
NEW YORK STATE EDUCATION DEPARTMENT, Respondent.

519926

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

June 4, 2015.

10 N.Y.S.3d 689

Shebitz Berman Cohen & Delforte, P.C., New York City (Frederick J. Berman of counsel), for appellant.

Eric T. Schneiderman, Attorney General, Albany (Julie Sheridan of counsel), for respondent.

Before: LAHTINEN, J.P., ROSE, DEVINE and CLARK, JJ.

Opinion

LAHTINEN, J.P.

129 A.D.3d 1173

Appeal from a judgment of the Supreme Court (Melkonian, J.), entered December 17, 2013 in Albany County, which dismissed petitioner's application, in a proceeding pursuant to CPLR article 78, to review a determination of respondent setting petitioner's reconciliation rates for certain school years.

Petitioner contracted with the New York City Department of Education (hereinafter NYCDOE) and the Counties of Westchester, Nassau and Suffolk¹ to provide special education itinerant teacher services to preschool children with disabilities. A percentage of the municipalities' payments to petitioner are reimbursed by respondent based on rates that respondent sets in accordance with its regulations. As we explained in an earlier case involving a rate dispute between the parties,

129 A.D.3d 1174

petitioner's services are measured in 30–minute service units, petitioner is paid a prospective rate during the school year and a reconciliation rate is determined after the school year based on actual costs (Matter of Mid Is. Therapy Assoc., LLC v. New York State Dept. of Educ., 99 A.D.3d 1082, 1082, 952 N.Y.S.2d 658 [2012] ). Where the reconciliation rate differs from the prospective rate that was used, the service provider must pay back funds if it was overpaid and it receives additional reimbursement if underpaid. The most recent certified reconciliation rate is used in determining the next prospective rate. Significantly, the reconciliation rate, which is established per service unit, is calculated by dividing a service provider's total costs by total service units for a school year.²

10 N.Y.S.3d 690

This rate is calculated after a provider, such as petitioner, supplies respondent with an independently audited Consolidated Fiscal Report (hereinafter CFR) and supporting independently audited financial statements.

For the school years 2008–2009 and 2009–2010, petitioner had been paid prospective rates of $49 and $50 per service unit, respectively, and its subsequent CFR and financial data reportedly resulted in reconciliation rates of $50 per service unit for each of those years, but respondent calculated the respective reconciliation rates as $49 and $47 per service unit. The key reason for the difference in rates is that respondent used total service units reported by the municipalities, which were higher than those reported by petitioner, thus resulting in the lower rate per service unit.³ Petitioner disputed these rates and started the process of reconciling the discrepancies between service units that it had reported and those reported by the municipalities. Before it submitted its information, the disputed rates were finalized and certified by the Department of Budget. Moreover, since the Department of Budget had set a zero growth factor on reimbursement rates, respondent set the 2010–2011 prospective rate payable to petitioner at $47 per service unit. Petitioner commenced this proceeding challenging the reconciliation rates for the 2008–2009 and 2009–2010 school years, as well as the prospective rate for 2010–2011. Supreme Court dismissed the petition and petitioner now appeals.

Petitioner contends that respondent failed to follow its own

129 A.D.3d 1175

regulations and otherwise acted arbitrarily primarily by relying upon unaudited information from the municipalities, disregarding petitioner's audited CFR and financial data, and refusing to consider petitioner's explanation for the discrepancies between its audited information and the municipalities' data. Our review of an administrative agency's determination is limited to “ascertain[ing] whether there is a rational basis for the action in question or whether it is arbitrary and capricious” (Matter of Gilman v. New York State Div. of...