| Matter of Board of Educ. of the Kiryas Joel Vil. Union Free Sch.Dist. v State of New York |
| 2013 NY Slip Op 06770 [110 AD3d 1231] |
| October 17, 2013 |
| Appellate Division, Third Department |
| In the Matter of Board of Education of the Kiryas JoelVillage Union Free School District et al., Appellants, et al., Petitioner, v State of NewYork et al., Respondents. |
—[*1] Eric T. Schneiderman, Attorney General, Albany (Robert M. Goldfarb of counsel),for respondents.
McCarthy, J. Appeal from a judgment of the Supreme Court (Gilpatric, J.), enteredSeptember 14, 2012 in Albany County, which dismissed petitioners' application, in acombined proceeding pursuant to CPLR article 78 and action for declaratory judgment,to review determinations of the Department of Health amending and clarifying theMedicaid reimbursement methodology for school supportive health services.
As permitted by federal law (see 42 USC § 1396b [c]), New Yorkenacted a statute to govern Medicaid reimbursement for school supportive health servicesprogram (hereinafter SSHSP) assistance that school districts provide to children, ages 5to 21, who have disabilities (see Social Services Law § 363-d). After afederal investigation and audit of SSHSP providers in New York revealed deficientcompliance with Medicaid requirements, in July 2009 the federal government andrespondent State of New York entered into an SSHSP compliance agreement that, amongother things, required the State to terminate its existing Medicaid reimbursement [*2]methodology and propose a new State Plan Amendment(hereinafter SPA) to implement a methodology consistent with federal requirements (see Matter of Tomarken v State ofNew York, 100 AD3d 1072, 1073 [2012]). The SPA then had to be approved bythe Centers for Medicare and Medicaid Services. The State Education Department(hereinafter SED) notified school districts of a freeze on Medicaid reimbursement claims,but advised them to maintain documentation in accordance with Medicaid policy.
In June 2010, SED posted a set of questions and answers (hereinafter Q & As) on itsMedicaid in Education website. As relevant here, question Nos. 24 and 25 addresseddocumentation requirements and stated that, to submit claims for SSHSP Medicaidreimbursement, providers must make available upon request, among other things, sessionnotes of each student encounter, and described what must be included in a session note.In August 2010, the Centers for Medicare and Medicaid Services approved the SPA withan effective date of September 1, 2009. SED issued a Medicaid alert to notify all SSHSPproviders that the SPA had been approved, a copy of it was made available on theMedicaid in Education website, and it required a new methodology and clarifieddocumentation requirements. The alert also stated that billings—for the periodstarting September 1, 2009—would resume once necessary changes were in place.
In December 2010, SED posted another set of Q & As. Question Nos. 100, 102 and106 concerned session notes and billing, stating that session notes must be created at orabout the time of the completion of a session, a separate session note is required for eachstudent in a group therapy setting and Medicaid reimbursement requests should not besubmitted for services if the required supporting documentation is not available.Question No. 75 stated that, as providers may only bill for services included in a student'sindividualized education program (hereinafter IEP), if an IEP calls for group therapy butthe student is provided with individual therapy due to, for example, the absence of otherstudents from the group, Medicaid reimbursement is not available. Question No. 77states that for a make-up session to be reimbursable, it must occur within the same weekthat the original session was scheduled.
In April 2011, petitioners—four school districts that deliver SSHSP servicesas enrolled Medicaid providers—commenced this combined CPLR article 78proceeding and declaratory judgment action. In their second amended petition,petitioners alleged that question Nos. 24 and 25 in the June 2010 Q & As and questionNos. 75, 77, 100, 102 and 106 in the December 2010 Q & As were issued in violation ofthe State Administrative Procedure Act and were arbitrary and capricious in substanceand in their retroactive application. Supreme Court dismissed the petition. PetitionersBoard of Education of the Kiryas Joel Village Union Free School District, Board ofEducation of the Washingtonville Central School District and Board of Education of theEast Ramapo Central School District (hereinafter collectively referred to as petitioners)appeal.
Petitioners' proceeding was timely commenced, including the portion challengingsome of the June 2010 Q & As. The four-month statute of limitations for a CPLR article78 proceeding begins to run when a determination "becomes final and binding upon [a]petitioner" (CPLR 217 [1]), meaning that "the agency must have reached a definitiveposition on the issue that inflicts actual, concrete injury" (Matter of Best Payphones, Inc. vDepartment of Info. Tech. & Telecom. of City of N.Y., 5 NY3d 30, 34 [2005];see Matter of Dugan vLiggan, 90 AD3d 1445, 1446-1447 [2011]). If an agency creates any ambiguityas to whether its decision is final and binding, courts should resolve that ambiguityagainst the agency and reach the merits of the controversy (see Matter of Carter vState of N.Y., Exec. Dept., Div. of Parole, 95 NY2d 267, 270[*3][2000]; Matter of Catskill Regional Off-Track Betting Corp. v New YorkState Racing & Wagering Bd., 56 AD3d 1027, 1029 [2008]). The June 2010 Q& As addressed session notes, but it was not until the December 2010 Q & As that SEDclarified that session notes could not be altered or updated if they did not originallycontain all of the required information, thereby clearly informing petitioners that theycould not submit bills for Medicaid reimbursement for certain services that had alreadybeen provided. Additionally, the June 2010 Q & As did not inflict any actual injurybecause petitioners remained subject to a billing freeze until April 2011. Thus, SupremeCourt properly held that the petition was timely and should be resolved on the merits.
The documentation and reimbursement eligibility requirements reflected in thechallenged Q & As were not required to be promulgated as rules under the StateAdministrative Procedure Act. For purposes of rule-making notice and filingrequirements (see State Administrative Procedure Act § 202), a rule isdefined as "the whole or part of each agency statement, regulation or code of generalapplicability that implements or applies law, or prescribes . . . the procedureor practice requirements of any agency, including the amendment, suspension or repealthereof" (State Administrative Procedure Act § 102 [2] [a]). Expressly excludedfrom the definition are "rules concerning the internal management of the agency whichdo not directly and significantly affect the rights of or procedures or practices available tothe public" (State Administrative Procedure Act § 102 [2] [b] [i]), and "forms andinstructions, interpretive statements and statements of general policy which in themselveshave no legal effect but are merely explanatory" (State Administrative Procedure Act§ 102 [2] [b] [iv]). The Court of Appeals has recognized "that there is no clearbright line between a 'rule' or 'regulation' and an interpretative policy" (Cubas v Martinez, 8 NY3d611, 621 [2007]). Courts have previously found administrative directives to beinterpretive statements when they rely on and constitute reasonable interpretations ofexisting regulations or statutes, or merely address the type of documentation needed toestablish whether a predetermined test of eligibility has been met (see id. at 621;Matter of Elcor Health Servs. v Novello, 100 NY2d 273, 279 [2003]; Lewis v New York State Dept. ofCiv. Serv., 60 AD3d 216, 224 [2009], affd 13 NY3d 358 [2009]).
Social Services Law § 368-d (2) provides that "[c]laims for payment under thissection shall be made in such form and manner, at such times, and for such periods as the[D]epartment [of Health] may require." To be eligible to receive Medicaidreimbursement at all, petitioners were required to enroll in the Medicaid program asproviders, which in turn obligated them "to prepare and maintain contemporaneousrecords demonstrating [their] right to receive payment under the medical assistanceprogram" and to furnish those records upon request (18 NYCRR 504.3 [a]). QuestionNos. 24 and 25 make clear that the contemplated contemporaneous records are sessionnotes, and question Nos. 100, 102 and 106 provide further detail regarding the nature andparticulars of those session notes. The billing guidance in the Q & As interprets theregulation requiring that providers of Medicaid services support their billing requestswith contemporaneous documentation describing the service that was provided anddemonstrating that the claim is legitimate (see 18 NYCRR 504.3 [a]).[FN1][*4]
One regulation provides that Medicaid serviceproviders will only submit claims for services that are "medically necessary" or otherwiseauthorized by the Social Services Law (18 NYCRR 504.3 [e]). Question Nos. 75 and 77explain that SSHSP providers may generally only bill for services that are included in astudent's IEP; specifically, individual sessions are not reimbursable if an IEP onlyprovides for group therapy, and make-up sessions in a subsequent week are notreimbursable when the IEP provides for only a certain number of sessions in each week.These Q & As are merely interpretations or clarifications of what is considered"medically necessary," namely, only services included in the IEP. As the Q & As wereinterpretive statements of existing regulations requiring contemporaneous records andclaims for only medically necessary services, these documentation and eligibilityrequirements were exempt from the definition of rules under the State AdministrativeProcedure Act and its rule-making requirements (see State AdministrativeProcedure Act § 102 [2] [b] [iv]; Cubas v Martinez, 8 NY3d at 621;Matter of Pharmacists Socy. of State of N.Y., Inc. v Pataki, 58 AD3d 924,926-927 [2009], lv denied 12 NY3d 710 [2009]; compare Matter of HD Servs., LLCv New York State Comptroller, 51 AD3d 1236, 1237-1238 [2008]).
The Q & As regarding documentation requirements are not arbitrary or capriciouseither in their retroactive application or in substance. Initially, this Court has recentlyheld that "the determination to apply the new Medicaid requirements retroactively toSeptember 1, 2009 was not arbitrary or capricious," as the State was merely "[c]omplyingwith requirements imposed by the federal government" in fixing the effective date(Matter of Tomarken v State of New York, 100 AD3d at 1075). Regarding thesubstance of the Q & As, petitioners allege that they were previously instructed that onlyquarterly progress notes were required as proof, rather than session notes, and theirprevious claims were paid and withstood audits when supported by that documentation.While an agency's change from a previous position or precedent without adequateexplanation will be considered arbitrary and capricious (see Matter of Canfora v GoldmanSachs Group, Inc., 93 AD3d 988, 989 [2012]; Matter of Huff v Department ofCorrections, 52 AD3d 1003, 1004 [2008]), respondents adequately set forth arational explanation for the more stringent documentation requirements. After the federalinvestigation and audit, "[f]ederal funding would have been denied if respondents hadnot applied the new methodology to claims for services rendered after execution of thecompliance agreement. Indeed, the compliance agreement was necessary because thefederal government's investigation and audit revealed a lack of compliance withMedicaid rules by SSHSP providers under the former methodology, primarily a lack ofproper documentation for services to verify that reimbursement was appropriate"(Matter of Tomarken v State of New York, 100 AD3d at 1075).[FN2] It is rational to require specific session notes for each student to document that theSSHSP provider delivered the necessary services to an eligible student on the particulardate noted, [*5]thereby establishing that reimbursement isappropriate.
The Q & As regarding billing for group and make-up therapy sessions are also notarbitrary or capricious. Question No. 75 explains that the definition of group means morethan one student, so a student did not receive group therapy if he or she was the onlystudent present for the therapy session. If the student's IEP only includes group therapy,there is no proof of medical necessity for an individual therapy session. Accordingly,question No. 75 contains a rational explanation for the prohibition on billing for grouptherapy when only one student shows up. Although an SSHSP provider may not be ableto anticipate when other students in a group may be ill or otherwise unable to participatein a group therapy session, thereby placing the provider in an untenable position of beingunable to provide the service included in the present student's IEP, the potential for sucha situation does not render irrational the overarching guideline set forth in question No.75.
Similarly, question No. 77 requires strict adherence to the services contained in theIEP and only permits reimbursement for a certain number of sessions during the timeperiod prescribed in the IEP. Thus, any make-up sessions must fall within the prescribedperiod (i.e., the same week) or the claim for reimbursement will include services thatwere provided in a manner that is inconsistent with the IEP. While this may seem unfairunder certain scenarios, such as if a student misses a session on a Friday and it cannot bemade up during that same week, requiring strict adherence to the IEP as proof of medicalnecessity is a rational way to interpret the Medicaid requirements. As the agency'sinterpretations in the Q & As were not irrational, arbitrary or capricious, we affirmSupreme Court's dismissal of the petition (see Matter of Elcor Health Servs. vNovello, 100 NY2d at 280; Matter of Taher v Novello, 278 AD2d 809, 810[2000], lv denied 96 NY2d 712 [2001]).
Rose, J.P., Stein and Garry, JJ., concur. Ordered that the judgment is affirmed,without costs.
Footnote 1: Petitioners' argumentthat the Q & As are inconsistent with prior guidance and requirements for payment doesnot affect whether the Q & As are rules subject to the State Administrative Procedure Actbut, rather, whether the Q & As are arbitrary and capricious, as discussed below.
Footnote 2: We previously rejectedthe argument that a retroactive change in documentation requirements is arbitrary orcapricious because it is unfair; although petitioners cannot now create the necessarycontemporaneous records and they were unaware of the requirements at the time theservices were provided, the new requirements for reimbursement are rational and wereestablished without regard to fault (see Matter of Tomarken v State of NewYork, 100 AD3d at 1075 n 3).