| Matter of Tomarken v State of New York |
| 2012 NY Slip Op 07245 [100 AD3d 1072] |
| November 1, 2012 |
| Appellate Division, Third Department |
| In the Matter of James L. Tomarken, as Commissioner of theSuffolk County Department of Health Services, et al., Appellant, v State of New York,Respondent. |
—[*1] John Ciampoli, County Attorney, Mineola (Jackie L. Gross of counsel), for Maria TorroellaCarney and another, appellants. Jeffrey J. Fortunato, Acting County Attorney, New City (Thomas M. Mascola of counsel),for Joan H. Facelle and another, appellants. Eric T. Schneiderman, Attorney General, Albany (Robert M. Goldfarb of counsel), forrespondents.
McCarthy, J. Appeal from a judgment of the Supreme Court (Devine, J.), entered June 10,2011 in Albany County, which dismissed petitioners' applications, in a consolidated combinedproceeding pursuant to CPLR article 78 and action for declaratory judgment, to reviewdeterminations of the Department of Health which, among other things, made the requirementsfor Medicaid reimbursement pursuant to State Plan Amendment No. 09-61 retroactive toSeptember 1, 2009.
The Federal Individuals with Disabilities Education Act (hereinafter IDEA) requires states toensure, among other things, that preschool children with disabilities are provided a "freeappropriate public education" (20 USC § 1400 [d]; see § 1401 [3]). To fulfillits [*2]obligations in that regard, respondent State of New Yorkimposed on the counties the responsibility to provide necessary services to preschool children(see Education Law § 4410). After Congress authorized the use of state Medicaidfunds to provide reimbursement for medically necessary services rendered pursuant to a disabledchild's individualized education program where all Medicaid coverage requirements weresatisfied, the Legislature enacted Social Services Law § 368-e to address Medicaidreimbursement to counties for services furnished to preschool children withdisabilities.[FN1]To effectuate this School Supportive Health Services Program (hereinafter SSHSP), the Statepromulgated a State Plan Amendment (hereinafter SPA) to add these services to its stateMedicaid program, with approval granted by the Centers for Medicare and Medicaid Services(hereinafter CMS) in June 1995 retroactive to May 1992.
Following an investigation and audit of the SSHSP that uncovered widespread deficiencies incompliance with federal requirements, the State and federal authorities entered into a compliancesettlement that required the State to reimburse the federal government approximately $440million, terminate the existing Medicaid State Plan reimbursement methodology and promulgatea new SPA that would implement a methodology consistent with federal requirements. Thecompliance agreement signed in late July 2009 provided that, effective July 1, 2009, federalfunds would only be available for SSHSP under the terms of a revised SPA that had to beapproved by CMS. Pursuant to the agreement, the State submitted a proposed SPA to CMS inSeptember 2009, requesting an effective date of July 1, 2009. CMS requested additionalinformation and advised the State that, because notice of the proposed changes had not beenpublished until August 26, 2009 and the notice listed September 1, 2009 as the effective date, theSPA could not be effective as of July 1, 2009. On April 26, 2010, CMS approved SPA No. 09-61with an effective date of September 1, 2009.
Meanwhile, on July 30, 2009, the State Education Department (hereinafter SED) issuedMedicaid Alert No. 09-03 to inform SSHSP providers of the settlement agreement. The alertadvised providers that claims for services rendered after July 1, 2009 could not be submitted untila new SPA was developed, but that providers should maintain Medicaid documentation for newclaims in accordance with the then-current Medicaid handbook. On May 17, 2010, SED issuedMedicaid Alert No. 10-1, informing providers that SPA No. 09-61 had been approved and that itrequired a new reimbursement methodology. The alert informed providers that "Medicaidbillings for these services provided on or after September 1, 2009 will resume once the necessarychanges are in place and providers have met all requirements for compliance with the new SPA."Additionally, the alert stated that further information would be forthcoming, and that SED andthe Department of Health (hereinafter DOH) would conduct training on policy andreimbursement changes. Petitioners—certain counties that provide SSHSP services andtheir commissioners of health—sent their employees to those trainings, where they allegethat they first became aware that the counties would not be reimbursed for services provided inJuly 2009 and August 2009 and that new procedures and documentation would be required forclaims for services performed after September 1, 2009.[*3]
Petitioners commenced hybrid CPLR article 78proceedings and declaratory judgment actions, which Supreme Court consolidated. The courtdismissed the petitions. Petitioners appeal.
Respondents waived their argument that petitioners lack capacity to sue them, as thisaffirmative defense was not raised in the answers or a pre-answer motion to dismiss (seeCPLR 3211 [a] [3]; [e]; BicountyBrokerage Corp. v Burlington Ins. Co., 88 AD3d 833, 834 [2011]; Security Pac. Natl. Bank v Evans, 31AD3d 278, 280 [2006], appeal dismissed 8 NY3d 837 [2007]).
Petitioners' proceedings were untimely to the extent that they challenge the unavailability ofreimbursement for services provided in July 2009 and August 2009. SED issued Medicaid AlertNo. 10-1 on May 17, 2010, informing providers that SPA No. 09-61 had been approved anddirecting them to the SED website to view a copy of the SPA. The alert stated that billing wouldresume for services "provided on or after September 1, 2009," indicating that reimbursementwould not be available for services provided in July 2009 or August 2009. State law providesthat reimbursement through SSHSP is available only when "all necessary approvals under federallaw and regulation have been obtained to receive federal financial participation in the costs ofhealth care services provided" (Social Services Law § 368-e [2]). The SPA itself statedthat it had an effective date of September 1, 2009, putting providers on notice that no SPA was ineffect for July or August 2009. As approval had not been granted for federal funding during thattime period, petitioners were on notice as of May 17, 2010 that respondents would not beproviding reimbursement for those two months. Because petitioners did not commence theseproceedings until more than four months after the May 2010 alert, that portion of their challengeis untimely.
The May 2010 alert stated that more information would be forthcoming on the requirementsfor compliance and documentation. Petitioners commenced the proceedings within four monthsof the training sessions where they allegedly received this information for the first time.Therefore, the portion of petitioners' applications challenging the retroactive effect of the newdocumentation standards is timely.
Respondents' determination to apply the new Medicaid requirements retroactively toSeptember 1, 2009 was not arbitrary or capricious. CMS, the federal agency responsible foradministering the Medicaid program, informed respondents that September 1, 2009 was theappropriate effective date for the new SPA, consistent with federal regulations (see 42CFR 430.20).[FN2]If SPA No. 09-61 was not given retroactive effect, no SPA would have been in effect from June30, 2009 until April 26, 2010, leaving no Medicaid reimbursement for SSHSP providers duringthat much lengthier time period. Social Services Law § 368-e (2) provides thatreimbursement for SSHSP providers "shall be made in such form and manner, at such times, andfor such periods as [DOH] may require," and that the reimbursement provisions "shall be of noforce and effect" unless all necessary federal approvals were "obtained to receive federalfinancial participation."[FN3]The compliance agreement also required respondents to implement a [*4]new methodology consistent with federal requirements. Federalfunding would have been denied if respondents had not applied the new methodology to claimsfor services rendered after execution of the compliance agreement. Indeed, the complianceagreement was necessary because the federal government's investigation and audit revealed alack of compliance with Medicaid rules by SSHSP providers under the former methodology,primarily a lack of proper documentation for services to verify that reimbursement wasappropriate. To obtain federal Medicaid reimbursement, respondents were required by CMS toimpose a retroactive September 1, 2009 effective date for implementation of the documentationstandards. Complying with requirements imposed by the federal government cannot beconsidered arbitrary or capricious.
Petitioners' constitutional argument—that respondents' failure to provide Medicaidreimbursement for July and August 2009 violated NY Constitution article XVII's requirementthat the State provide for the needy—was not included in the petitions, so it is not properlybefore us (see Matter of Association forCommunity Living, Inc. v New York State Off. of Mental Health, 92 AD3d 1066, 1068[2012], appeal dismissed 19 NY3d 874 [2012]). The parties' remaining contentions havebeen reviewed and are unpersuasive.
Rose, J.P., Spain, Kavanagh and Stein, JJ., concur. Ordered that the judgment is affirmed,without costs.
Footnote 1: Counties can also obtain partialreimbursement for the cost of services for disabled children, including children who are noteligible for Medicaid, from state education funds and federal IDEA funds. Those sources offunding are not at issue here.
Footnote 2: Similarly, the SPA containingthe prior methodology was approved in June 1995, but made retroactive to May 1992.
Footnote 3: We acknowledge that petitionerscomplied with SED's directive to maintain documentation as required under the then-currentMedicaid handbook and are, they allege, unable to now provide the necessary documentationunder the new standards because they were unaware of those standards at the time when thedocumentation was created. Despite the apparent unfairness to petitioners, the Legislature setforth the requirements for reimbursement without regard to fault (see Social ServicesLaw § 368-e [2]; Matter of Spanov Novello, 13 AD3d 1006, 1008-1009 [2004], lv denied 4 NY3d 819 [2005]).