Opinion
Index No. 4864-14
05-16-2015
ST. BARNABAS HOSPITAL, Petitioner, For A Judgment Pursuant to Article 78 of the Civil Practice Law and Rules, v. STATE OF NEW YORK OFFICE OF THE MEDICAID INSPECTOR GENERAL, JAMES C. COX, as New York State Medicaid Inspector General, NEW YORK STATE DEPARTMENT OF HEALTH, and HOWARD ZUCKER, as Acting Commissioner of the New York State Department of Health, Respondents.
Appearances: Garfunkel Wild, P.C. Attorney For Petitioner 111 Great Neck Road Great Neck, NY 11021 Eric T. Schneiderman Attorney General State of New York Attorney For Respondent The Capitol Albany, New York 12224 (Louis Jim, Assistant Attorney General of Counsel)
Supreme Court Albany County Article 78 Term
Hon. George B. Ceresia, Jr., Supreme Court Justice Presiding
RJI # 01-14-ST6088
Appearances: Garfunkel Wild, P.C.
Attorney For Petitioner
111 Great Neck Road
Great Neck, NY 11021
Eric T. Schneiderman
Attorney General
State of New York
Attorney For Respondent
The Capitol
Albany, New York 12224
(Louis Jim,
Assistant Attorney General
of Counsel)
DECISION/ORDER/JUDGMENT
George B. Ceresia, Jr., Justice
The petitioner provides mental health services to individuals in Bronx County. The services are funded, in part, through the Medicaid program. On August 21, 2013 the respondent New York State Office of the Medicaid Inspector General (OMIG), issued a Final Audit Report to the petitioner for the three year period from July 1, 2002 through June 30, 2005. The Final Audit Report found that the petitioner had received Medicaid overpayments of over $5,384,053.36 during the time, and directed the recoupment of this amount from petitioner. An Administrative Law Judge found that the petitioner failed to timely demand a hearing to review the Final Audit Report. The petitioner seeks to overturn the determination of the Administrative Law Judge. It argues that its request for a hearing was timely; and that the respondents should be estopped from arguing it was not.
According to the petitioner, the Final Audit Report was preceded by a Draft Audit Report issued on June 25, 2009, which indicated that the petitioner had received $8,224,912.89 in overpayments during the 2002-2005 time period. Thereafter, on February 23, 2010, OMIG issued a Revised Draft Report which reduced the overpayment from $8,224,912.89 to $5,384,053.36. The petitioner indicates that discussions between the petitioner and OMIG continued through October 2011. During this period of time the OMIG Audit Division repeatedly granted the petitioner extensions of time to respond to the draft audit reports. Shortly after issuance of the Final Audit Report the petitioner and OMIG Audit Division allegedly resumed their negotiations
In order to obtain administrative review of a Final Audit Report, it is necessary to submit a written request within sixty days of the determination ("see Social Services Law ["SSL"] § 22 [4]; see also, § 519.7 of the Rules of the Department of Social Services, 18 NYCRR § 519.7). In this instance, on September 6, 2013 (within the 60-day period) the petitioner's attorney, by email addressed to Thomas Barone, the OMIG Audit Division officer, requested that the 60-day time limit be tolled. Mr. Barone responded in writing, confirming that the 60-day period to request a hearing would be tolled while the settlement negotiations were continuing. The petitioner indicates that negotiations came to an end on November 14, 2013. On November 20, 2013 Mr. Barone, in writing, confirmed that the 60-day period to request an administrative hearing would commence as of November 14, 2013.
Based upon the assurances given by Mr. Barone, the petitioner submitted its request for a hearing on January 7, 2014. OMIG took the position that the request was untimely, since it not submitted within 60 days of the August 21, 2013 Final Audit Report. Subsequent to that, on January 22, 2014, Ricja D. Rice, Senior Attorney, Office of Counsel of OMIG wrote a letter to James F. Horan, Chief Administrative Law Judge of the NYS Department of Health requesting a determination as to the timeliness of petitioner's hearing request. In a decision dated May 22, 2014, Administrative Law Judge Denise Lepicier found that the petitioner's request for a hearing was untimely.
The decision of the Administrative Law Judge recites, in part, as follows:
"The crux of the Hospital's argument that its request for a hearing was timely is that an OMIG employee told the lawyer for the Hospital that the time for requesting a hearing to review the final audit report was tolled. More specifically, on September 6, 2013, an attorney for the Hospital contacted a member of the OMIG audit staff by email and asked '[W]hile I know we have sixty days to appeal, I wanted to confirm that our on going [sic] settlement discussions are tolling [the] sixty days' to appeal.FN1 The auditor replied by email stating 'I spoke with my Bureau manager who agrees that our on-going settlement discussions are tolling the 60 day appeal window.'[]. On November 20, 2013, the auditor contacted the attorney stating 'I
have been instructed to advise you that the sixty (60) day window for notifying the OMIG, in writing, of your request for an administrative hearing for the above audit commenced as of November 14, 2013, the date the OMIG requested that you facilitate a hardship request...' [].
"The regulation governing the request for a hearing to review a determination clearly states that the request must be made within sixty days of the date of the written determination. 18 NYCRR § 519.7 (a). Since the determination was dated August 21, 2013, the time for requesting a review hearing ran out on October 20, 2013. The Hospital's request was dated January 7, 2014.
"The Hospital's argument is essentially that because an OMIG employee told them their time to request a hearing was tolled that they were entitled to rely on that representation. The final audit report, however, contains the following paragraphs, in relevant part:
You have the right to challenge this action and determination by requesting an administrative hearing within sixty (60) days of the date of this notice....
If you wish to request a hearing, the request must be submitted in writing to:
General Counsel
Office of Counsel
New York State Office of the Medicaid Inspector General
800 North Pearl Street
Albany, New York 12204
Questions regarding the request for a hearing should be directed to Office of Counsel, at (518) 408-5845.
Three paragraphs later the following sentence appears:
Should you have any questions, please contact Mr. Thomas Barone at 518-486-7200 or through email at Thomas.Barone@omig.ny.gov.
"It has previously been held that the request for a hearing to
review a final audit report is jurisdictional and may not be waived. In the Matter of West Midtown Medical Group, Inc., decision on motion 11/19/2010, p. 4 (Horan, J.). See, Strack v Perales, 151 AD2d 903, 542 NYS2d 876 (3rd Dept. 1989) (Time limit to request a fair hearing jurisdictional). It was error for whoever made the decisions that the auditor relayed to assert that the time limitation was tolled. That time is governed by regulations that have been authorized by the legislature. SSL §§ 20 (3)(d), 34(3)(f) and 363-a(2). Moreover, case law makes clear that the errors of a State employee cannot bind the state when law mandates the employee is wrong.
"In a case where the former Department of Social Services, which was in charge of Medicaid payments to providers at the time, acting through a contractor, had not required transportation providers to seek prior approval for transportation claims in contravention of regulation before delivering services, the Court of Appeals found that the DSS could be found neither to be estopped from requiring compliance with the regulation, nor to have ratified the prior practice. In the Matter of New York State Medical Transporters Association, Inc. V Perales77 NY2d 126564 NYS2d 1007 (N.Y. 1990). [lengthy quote with footnote omitted]. See also, In the Matter of Mayflower Nursing Home v Office of Health Systems Management of the Department of Health, 88 AD2d 192 (3rd Dept., 1982) (errors by State employees could not bind the State or prevent recoupment of unauthorized overpayments, aff d 59 NY2d 935 [] (NY 1983); in the Matter of Sunset Nursing Home v DeBuono, 24 AD3d 927 [] (3d Dept. 2005) (where Department conforms practice to existing regulations, government agency cannot be prevented from discharging statutory duties even when there has been a prior different practice allowing essentially unauthorized appeals); Press v State of New York, 45 AD2d 397 [] (3d Dept., 1974) ("Errors by State employees cannot bind the State or prevent recoupment of unauthorized payments.")
"Despite the clear admonition in the Final Audit Report to address questions about the hearing to Counsel's Office, the Hospital's law firm , an experienced health law firm, asked a member of the audit department to confirm that 'ongoing settlement discussions are tolling [the] sixty days' to request a hearing to review the audit. It is uncontested that the OMIG auditor was a non-lawyer. [] A lawyer should not rely on the
legal interpretation of a non-lawyer with respect to the law.
"The Hospital's Final Audit report was dated August 21, 2013. Sixty days from the date of this report was October 20, 2013. 18 NYCRR § 519.7 (a), The Hospital sent its request for a hearing on January 7, 2014. The Hospital's request was too late."
FN1There is no evidence to suggest that this subject had previously been discussed by the parties.
In the petitioner's first claim for relief, it is argued that the agreement of Thomas Barone was not a waiver of the 60-day time limitation, but rather merely an agreement to temporarily toll commencement of the 60-day time limit. It is argued "[b]ecause OMIG's promise to toll the 60-day time period was not a waiver, the ALJ Decision erred in holding that St. Barnabas may be deprived of an administrative hearing on the purported ground that the time period is jurisdictional and could not be waived." (¶ 56 of the petition)
In the petitioner's second claim for relief, the petitioner argues that SSL § 22 does not specifically create a right to a hearing with respect to medical assistance providers such as the petitioner; and thus petitioner's right to a hearing to challenge a recoupment arises exclusively through 18 NYCRR § 519.4. The petitioner maintains that "because there is no statute that both creates a medical assistance provider's right to a hearing and also incorporates the time limit for requesting such hearing, the ALJ Decision errs in holding that [petitioner] may be denied an administrative hearing on the purported ground that the 60-day time period provided for in 18 NYCRR 519.7 is jurisdictional and may not be waived by the State." (¶ 68 of the petition)
Petitioner's third claim for relief alleges, inter alia, that the OMIG Audit Division possessed both actual and apparent authority to bind OMIG; and that Thomas Barone possessed actual and apparent authority to bind OMIG, including entering into an agreement to toll the time period within which the petitioner could request an administrative hearing. The petitioner points out that the Final Audit Report expressly advised the petitioner to contact Mr. Barone with any questions, It is alleged that the petitioner reasonably relied upon he representations and agreements of Mr. Barone. The petitioner argues that by virtue of all of the foregoing, the Administrative Law Judge erred in finding that the request for a hearing was untimely.
In petitioner's fourth claim for relief, the petitioner alleges that OMIG should be estopped from asserting that its request for a hearing is untimely, and that Administrative Law Judge erred in not so finding. In the petitioner's view, "estoppel in this case is justified by the facts and necessary to prevent manifest injustice." (¶ 103 of the Petition)
The Court observes that the Court's role in reviewing an administrative determination is not to substitute its judgment for that of the agency, but simply to ensure that it is not made in violation of lawful procedure or affected by an error of law, and was not irrational, arbitrary and capricious or an abuse of discretion (see CPLR 7803 [3]; Matter of Peckham v Calogero, 12 NY3d 424, 431 [2009]; In the Matter of Terrace Court, LLC v. New York State Division of Housing and Community Renewal, 18 NY3d 446, 454 [2012]; Matter of Warder v Board of Regents, 53 NY2d 186, 194; Matter of Flacke v Onondaga Landfill Sys., 69 NY2d 355, 363). "'An action is arbitrary and capricious when it is taken without sound basis in reason or regard to the facts'" (In the Matter of Murphy v New York State Division of Housing and Community Renewal, 21 NY3d 649, [2013], quoting Peckham v Calogero, 12 NY3d 424 [2009] at 431, which cited Matter of Pell v Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 NY2d 222, 231 [1974]).
The requirement for demanding a hearing within sixty (60) days is found in Social Services Law ("SSL") § 22 (4) which recites:
"(a) Except as provided in paragraph (c) of subdivision two of section four hundred twenty-four-a of this chapter and in paragraph (b) of this subdivision, any appeal pursuant to this section must be requested within sixty days after the date of the action or failure to act complained of." (SSL § 22 [4] [a])
SSL 424-a (2) (c) provides a 90 day period to request a hearing where an individual is denied employment or terminated by reason that he/she was the subject of an indicated child abuse or maltreatment report. Paragraph (b) of SSL § 22 provides a 90 day period to request a hearing for denial or loss of food stamp benefits.
SSL § 22 (3) recites:
"Persons entitled to appeal to the department pursuant to this section shall include: []
(g) Other persons entitled to an opportunity for fair hearing pursuant to regulations of the department."
"§ 519.4 of the Rules of the Department of Social Services recites:
"Right to a hearing
(a) A person is entitled to a hearing to have the department's final determination reviewed if the department:
(1) imposes a sanction; or
(2) requires the repayment of an overpayment or restitution; or
(3) seeks to impose a penalty pursuant to Part 516 of this Title. []" (18 NYCRR § 519.4, emphasis supplied)
§ 519.7 of the Rules of the Department of Social Services recites:
"(a) Any clear, written communication to the department by or
on behalf of a person requesting review of a department's final determination is a request for a hearing if made within 60 days of the date of the department's written determination.Thus, SSL § 22 (3) (g) authorizes the Department of Social Services, by regulation, to designate the parties who may request a fair hearing. The foregoing is implemented (as relevant here) in § 519.4 (a) (2) of the Rules of the Department of Social Services.
(b) A hearing may be requested by writing:
New York State Department of Social Services
Bureau of Special Hearings
40 N. Pearl Street
Albany, NY 12243" (18 NYCRR § 519.7)
As stated in Piasecki v Blum (78 AD2d 950 [3d Dept., 1980]), SSL § 22 (4) "is a statutory time limit and may not be waived by the commissioner" (id., citing Matter of Garcia v Blum, 66 AD2d 781; see also Strack v Perales, 151 AD2d 903 [3d Dept. 1989], footnote 2, where it was stated: "(t)he question of untimeliness was never raised at the hearing. Although the parties do not address this point, we note that this court has specifically determined that since the 60-day time limitation is statutory, it may not be waived by respondent [see, Matter of Piasecki v Blum, 78 AD2d 950]").
The Court recognizes that under certain limited circumstances a statute of limitations maybe tolled (see General Obligations Law 17-103, not applicable to the instant proceeding; John J. Kassner & Co. v Citv of New York, 46 NY2d 544 [1979]; Matter of Stantec Consulting Group v. Fonda-Fultonville Cent. School Dist., 36 AD3d 1051, 1052-1053 [3d Dept., 2007] mot for lv denied 9 NY3d 806 [2007]; WYS Design P'ship Architects, P.C. v. Bd. of Mgrs. of the 285 Lafayette St. Condominium, 29 Misc. 3d 1201(A), 1201A [Sup. Ct. 2010], citing HSBC Bank USA v. Bond, Schoeneck & King, PLLC, 16 Misc3d 813, 814 (N.Y. Sup. Ct. 2007) reversed in part on other grounds 55 AD3d 1426 [4th Dept., 2008]).
In this instance, the email dated September 9, 2013 from Thomas Barone to Lourdes Martinez, attorney for the petitioner recites;
"[] I spoke with my Bureau manager who agrees that our ongoing settlement discussions are tolling the 60 day appeal window. []?"
The email dated November 20, 2013 from Thomas Barone to Lourdes Martinez, attorney for the petitioner recites:
"[] I have been instructed to advise you that the sixty (60) day window for notifying the OMIG, in writing, of your request for an administrative hearing for the above audit commenced as of November 14, 2013, the date of the OMIG requested that you facilitate a hardship request[]."
From a review of the September 9, 2013, it is not readily apparent that an extension or tolling of the 60-day time limitation was granted by OMIG. Rather, it can also be construed as merely expressing the personal view or opinion of Mr. Barone and his bureau manager. Similarly, the November 20, 2013 email is not much better, in that it remains unclear with regard to whether OMIG agreed to toll the provisions of SSL § 22 (4). In addition, the latter email is dated approximately 91 days after issuance of the Final Audit Report.
On these facts, it is unclear whether OMIG ever intended to enter into a binding agreement to toll the 60-day limitation. The burden of proof was on the petitioner. The Administrative Law Judge, from the documentary record, could properly conclude that the burden was not met.
Turning to the doctrine of equitable estoppel, "[i]t is well settled that 'estoppel cannot be invoked against a governmental agency to prevent it from discharging its statutory duties'" (Matter of Mitchell Schorr v New York City Department of Housing Preservation and Development, 10 NY3d 776, 779 [2008], quoting Matter of New York State Med. Transporters Assn. v Perales, 77 NY2d 126, 130 [1990] (remaining citations omitted). With regard to time limitations, "[e]quitable estoppel is an extraordinary remedy which applies where [a party] is prevented from filing an action within the applicable statute of limitations due to his or her reasonable reliance on deception, fraud or misrepresentations by the [other]" (Pulver v Dougherty, 58 AD3d 978 [3rd Dept., 2009], at 979-980 , quotations and citations omitted). "[E]stoppel may apply in certain 'exceptional cases in which there has been a showing of fraud, misrepresentation, deception, or similar affirmative misconduct, along with reasonable reliance thereon' (Matter of Atlantic States Legal Found., Inc. v New York State Dept. of Envtl. Conservation, 119 AD3d 1172 [3d Dept., 2014], at 1173, quoting Stone Bridge Farms. Inc. v County of Columbia, 88 AD3d 1209, 1212 [2011]). Notably, "[]erroneous advice by a government employee does not constitute the type of unusual circumstance[s] contemplated by the exception to this general rule" (Matter of Amsterdam Nursing Home Corp. (1992) v Daines, 68 AD3d 1591 [3d Dept., 2009], at 1592).
In Amsterdam Nursing Home Corp., the petitioning nursing homes were notified by the New York State Department of Health that their adjusted Medicaid reimbursement rates would include an offset for the subsidy they would receive from the federal government for prescription drugs for Medicaid eligible recipients. A high-ranking official of the Department of Health stated that the petitioners should file administrative rate appeals with regard to the offset, which they did. Over a year later, the Department of Health ruled that the rate appeal procedure, which is limited to review of computational errors or errors in the submission of fiscal or statistical data, was inapplicable to the Medicaid prescription drug offset, by reason that the latter was a challenge to the methodology used in calculating the reimbursement rate, for which direct review was available under CPLR Article 78. The petitioning nursing homes thereafter commenced a CPLR Article 78 proceeding, which was dismissed as untimely (see id.).
In the Atlantic States Legal Foundation case (supra), the petitioner sought to challenge issuance of a Freshwater Wetlands permit issued by the Department of Environmental Conservation ("DEC"). A DEC regional director informed the petitioner's president that review of issuance of a Freshwater Wetlands permit was governed by the four month statute of limitation under CPLR 217, rather than the 30 day time limitation under Environmental Conservation Law § 24-0705 (6). The Court found the shorter statute of limitations to be applicable, and affirmed dismissal of the petition. The Court made a point of mentioning that because petitioner's president was aware of the 30-day statute of limitations, "petitioner could not have reasonably relied on the alleged representation made by [the DEC regional director], despite the longstanding working relationship between [petitioner's president and the DEC regional director]" (id., at 1174).
The estoppel doctrine, in the Court's view, would only apply to the first email, since that was issued within the initial 60-day period. As noted, however, it could easily be construed as being merely the personal opinion of Mr. Barone and his supervisor, thereby constituting only a mistake in their understanding of the law. In this instance, the Administrative Law Judge, reviewed relevant case law with regard to the doctrine of equitable estoppel. She specifically found, however, that the petitioner had failed to demonstrate that the petitioner's attorney reasonably relied upon the representations of Thomas Barone, a non-attorney. The Court finds the situation at bar to be very similar to that found in Amsterdam Nursing Home Corp. (supra) and Matter of Atlantic States Legal Found., Inc. v New York State Dept. of Envtl. Conservation (supra), where it was held that the doctrine of equitable estoppel did not apply.
Lastly, the Court notes that the petitioner has made a motion for discovery with regard to the following topics:
"(1) the manner in which OMIG divides responsibilities and authority among its divisions and officials concerning requests for extensions of time generally, and, in particular, concerning requests to extend and/or toll the time period within which a medical service provider may request an administrative hearing; (2) any previous instances in which OMIG has agreed to extend or toll the time period within which a medical service provider may request an administrative hearing; (3) internal OMIG communications concerning any manifestation of authority by OMIG to OMIG auditor Thomas Barone, to Mr. Barone's OMIG bureau manager, and/or to the OMIG Audit Division generally, concerning requests for extensions of time generally, and, in particular, concerning requests to extend and/or toll the time period within which a medical service provider may request an administrative hearing; (4) internal and external OMIG communications concerning the decision by the OMIG Division of Medicaid Audit to grant St. Barnabas an extension of the time limit within which to request an administrative hearing in this instance; and (5) internal and external OMIG communications concerning any decision by OMIG to grant and/or decline to grant an extension or tolling of the time limit within which to request an administrative hearing in other instances concerning other Medicaid providers."
The Court is also mindful that the Administrative Law Judge, in her decision, noted that "the parties submitted documents and agreed to have this issue decided on papers." In the Court's view the various issues raised now could have been explored at a hearing, had one been held. Here, the Administrative Law Judge was bound by the documents submitted by the parties, found in the record before her. The Court, in reviewing the actions of the Administrative Law Judge, must confine itself to the same record. For this reason, the motion must be denied.
Under all of the circumstances, the Court is constrained to find that the determination of the Administrative Law Judge was not made in violation of lawful procedure, is not affected by an error of law, and is not irrational, arbitrary and capricious, or constitute an abuse of discretion. The Court concludes that the petition must be dismissed.
Accordingly, it is
ORDERED and ADJUDGED, that the petition be and hereby is dismissed.
This shall constitute the decision, order and judgment of the Court. The original decision/order/judgment is returned to the attorney for the respondents. All other papers are being delivered by the Court to the County Clerk for filing. The signing of this decision/order/judgment and delivery of this decision/order/judgment does not constitute entry or filing under CPLR Rule 2220. Counsel is not relieved from the applicable provisions of that rule respecting filing, entry and notice of entry.
ENTER Dated: May 16, 2015
Troy, New York
/s/_________
George B. Ceresia, Jr.
Supreme Court Justice
Papers Considered:
1. Notice of Petition dated September 18, 2014, Petition, Supporting Papers and Exhibits