United States ex rel. Feldman v. City of New York

• Decision Date: 01 September 2011
• Docket Number: No. 09 Civ. 8381 (JSR).,09 Civ. 8381 (JSR).
• Citation: 808 F.Supp.2d 641
• Parties: UNITED STATES of America ex rel. Dr. Gabriel FELDMAN, Plaintiff–Relator, v. The CITY OF NEW YORK, Defendant.United States of America, Plaintiff–Intervenor, v. The City of New York, Defendant.
• Court: U.S. District Court — Southern District of New York

808 F.Supp.2d 641

UNITED STATES of America ex rel. Dr. Gabriel FELDMAN, Plaintiff–Relator,

v.The CITY OF NEW YORK, Defendant.United States of America, Plaintiff–Intervenor,

v.The City of New York, Defendant.

No. 09 Civ. 8381 (JSR).

United States District Court, S.D. New York.

Sept. 1, 2011.

Allison D. Penn, Daniel Post Filor, Rebecca C. Martin, United States Attorney's Office, Li Yu, New York, NY, for Plaintiff–Intervenor.

Bryce Leigh Friedman, Susan Marie Cordaro, Simpson Thacher & Bartlett LLP, Stephen Edward Kitzinger, New York City Law Depart. Office of the Corporation Counsel, Nicholas Stoloff Goldin, U.S. Attorney's Office, New York, NY, for Defendant.

OPINION

JED S. RAKOFF, District Judge.

Relator Dr. Gabriel Feldman filed this qui tam action, alleging that the City of New York (the “City”) violated Section 3729(a)(1) of the False Claims Act (the “FCA”), 31 U.S.C. § 3729 et seq., by presenting false claims for payment, and making false statements material to false claims, in connection with the City's administration of certain Medicaid program benefits. Subsequently, the United States (the “Government”) intervened, and both the Relator and the Government filed amended complaints, which the City moved to dismiss in their entirety. After careful consideration of the parties' written submissions, as well as their oral arguments, the Court, by Order dated April 13, 2011, (a) dismissed the Relator's Amended Complaint in its entirety, (b) dismissed the two New York common law claims in the Government's Amended Complaint, and (c) denied the City's motion seeking dismissal of the Government's claims arising under the FCA. This Opinion explains the reasons for those rulings.

The pertinent allegations, taken from the Amended Complaints of the Relator and the Government, from documents expressly referenced in those complaints, and from materials in the public record that are subject to judicial notice, are as follows. Medicaid is a joint federal-state program that helps provide medical assistance to low-income individuals. See Social Security Act of 1965, 42 U.S.C. § 1396 (stating that Medicaid was established “[f]or the purpose of enabling each State ... to furnish ... medical assistance on behalf of families ... whose income and resources are insufficient to meet the costs of necessary medical services”). The basic structure of Medicaid is as follows. Each State establishes its own “plan” for the provision of Medicaid services to eligible individuals,¹ and the State directly pays health care providers for services rendered under their plans. See 42 U.S.C. § 1396(a). Though State plans are subject to federal approval and review, each State is responsible for the administration of its own plan. See 42 C.F.R. §§ 430.0 et seq. The federal government then makes quarterly grants to each such State to reimburse the State for the federal share of Medicaid expenditures. See 42 C.F.R. §§ 430.30. This share is determined primarily on the basis of a formula set forth in the Social Security Act, which sets the federal share anywhere from 50% to 83% of total Medicaid expenditures, depending on the per-capita income of the particular State. See 42 U.S.C. § 1396d; see also First Amended Complaint–in–Intervention of Plaintiff–Intervenor the United States of America (“Gov. Am. Compl.”) ¶ 1 (noting that the federal share of Medicaid expenditures made by New York State is roughly 50%).

Federal law also permits States to derive a portion of the non-federal share of Medicaid expenditures from local sources of revenue. 42 U.S.C § 1396a(a)(2); 42 C.F.R. § 433.53. In New York State, local governments such as the City must fund a part of the non-federal portion of the State's Medicaid expenditures. See N.Y.L. 2005, ch. 58, Pt. C. However, since 2005, New York State has capped the amount in Medicaid expenses that a local social services district, such as the City, can be required to pay for a given year, with the excess to be borne by the State. See id. § 1[b].

To obtain reimbursement for the federal share of program expenditures, a State must submit a quarterly expenditure report (the “CMS–64 Report”) stating the amount the State expended on services during the relevant quarter. The CMS–64 Reports are submitted to the Centers for Medicare and Medicaid Services (the “CMS”), the branch of the Department of Health and Human Services (“HHS”) that administers federal aspects of the Medicaid program. See 42 C.F.R. § 430.30. As a general matter, the United States must reimburse the States for the federal share of any expenditure allowable under the State's plan that is included on a CMS–64 Report, and, accordingly, there is no prescribed limit on the federal government's Medicaid expenditures. See id. However, under federal rules and regulations, States may only seek reimbursement for expenditures that are incurred in accordance with applicable state statutes and regulations. See OMB Circular A–87 codified at 2 C.F.R. § 225, Appx. A(C)(1)(c). Further, after October 2001, each CMS–64 Report that a State submitted to HHS contained the express certification that the “report only includes expenditures ... that are allowable in accordance with applicable implementing federal, state, and local statutes, regulations, policies.” See Gov. Am. Compl. Ex. C.

In New York State, Medicaid is administered by the New York State Department of Health (the “DOH”), which established, and now oversees, an extensive regulatory scheme governing the administration of New York State Medicaid. See N.Y. Pub. Health Law § 201(1)(v); see also 18 N.Y.C.R.R. § 505.14 (“DOH Reg. § 505.14”). One of the programs so administered is the Personal Care Services (“PCS”) program, a Medicaid-funded program designed to provide services to individuals with “disabilities and chronic conditions” who require assistance performing the activities of daily living, such as “eating, bathing, dressing, toileting ... light housework ... meal preparation, transportation, grocery shopping ... and money management.” CMS, The State Medicaid Manual, Pub. No. 45, Ch. 4, § 4480; see also 42 CFR § 440.167; DOH Reg. § 505.14(a)(1) (defining PCS as “assistance with personal hygiene, dressing and feeding; and nutritional and environmental support functions”). In New York State, the PCS Program provides services ranging from a few hours per week, where a beneficiary needs limited assistance with specific functions or tasks, to 24–hour care, where a beneficiary's physical or cognitive limitations are such that he or she requires constant attention and assistance. See DOH Reg. § 505.14(a).

There are two kinds of 24–hour care available under the PCS Program in New York State. First, a patient in the PCS program may receive “sleep-in” service, which entails continuous care from a single personal care aide who provides daytime and limited nighttime care and which costs approximately $75,000 per year per patient. Gov. Am. Compl. ¶ 17. Second, the PCS program also provides a more intensive level of care, commonly referred to as “continuous 24–hour care” or “split-shift” service, which typically requires two or more aides who provide uninterrupted 24–hour care and which costs approximately $150,000 per year per patient. See id. ¶ 18; see DOH Reg. § 505.14(a)(3).

New York State delegates Medicaid benefit eligibility determinations to local social services districts, such as the City. See DOH Reg. § 505.14(b). The City, in turn, charges the New York City Human Resources Administration (“HRA”) with administration of the PCS program. Gov. Am. Compl. ¶ 18 (also noting that HRA carries out its PCS-related responsibilities through its Community Alternative Systems Agency (“CASA”) system). HRA contracts with a variety of for-profit and not-for-profit vendors, which provide direct services to PCS program beneficiaries within the City. Id. ¶ 20. Once the City determines that an individual qualifies for services under the PCS Program, it issues authorization notices to that individual and to a designated PCS vendor, describing the types and duration of services that are authorized. Id. ¶ 22. In addition, on a weekly basis, the City electronically transmits to DOH a “weekly authorization list” identifying (a) each individual for whom the City authorized personal care services during the previous week, (b) the level, amount and duration of services authorized, and (c) the vendor designated to provide those services. Id. ¶ 23. Relying exclusively on the City's weekly authorization lists, DOH grants “prior authorization” for PCS vendors to commence, and bill for, PCS program services authorized by the City. Id. ¶¶ 24, 37 (noting that DOH “prior authorization” is the only means by which PCS vendors can provide, bill, and be paid for PCS program services); see also DOH Reg. § 505.14(b)(5) (“the authorization for personal care services shall be completed prior to the initiation of services.”).

New York Medicaid regulations set forth detailed specifications for how the City must authorize and reauthorize personal care services. See DOH Reg. 505.14 et seq. In particular, the regulations provide that PCS Program benefits may only be provided if the City (a) finds that the services are “medically necessary,” (b) “reasonably expects that the patient's health and safety in the home can be maintained by the provision of such services,” and (c) determines that the patient's medical condition is sufficiently “stable” that he or she is “self-directing.” Id. § 505.14(a)(4) (defining “stable” as a patient who, inter alia, “is not expected to exhibit either sudden deterioration or improvement” and “self-directing” as a patient who is “is capable of making choices about his/her activities of daily living, understanding the impact of the choice, and assuming responsibility for the results of the choice.”).

Further, under New York State regulations, the City's determination as to whether to authorize 24–hour PCS Program...