| Matter of New York Foundling Hosp., Inc. v Novello |
| 2008 NY Slip Op 00029 [47 AD3d 1004] |
| January 3, 2008 |
| Appellate Division, Third Department |
| In the Matter of New York Foundling Hospital, Inc., et al.,Appellants, v Antonia C. Novello, as Commissioner of Health, et al.,Respondents. |
—[*1] Andrew M. Cuomo, Attorney General, Albany (Victor Paladino of counsel), forrespondents.
Mercure, J.P. Appeal from a judgment of the Supreme Court (McNamara, J.), entered August28, 2006 in Albany County, which, in a proceeding pursuant to CPLR article 78, grantedrespondents' motion to dismiss the amended petition.
In this CPLR article 78 proceeding, petitioners challenge respondents' computation ofMedicaid reimbursement rates during 1983 through 1985 for petitioner New York FoundlingHospital, Inc. (hereinafter petitioner), which operated a residential health facility forimpoverished children at that time. The proceeding was initially commenced in 1994 against theDepartment of Health (hereinafter DOH), the Division of Budget and the Department of SocialServices (hereinafter DSS) to challenge a DSS audit of petitioner's 1981 base year cost report thatwas used to set the 1983-1985 reimbursement rates.[FN*]In particular, the audit disallowed $581,702 [*2]in food servicecosts, concluding that the allowable costs were only $166,061. In 1996, petitioner and DSSentered into a stipulation of settlement in which petitioner agreed, in exchange for an upwardadjustment to its allowable food service and housekeeping costs, to withdraw all claims againstDSS relating to the 1981 base year audit. A separate stipulation withdrawing the claims providedthat "this stipulation is without prejudice to the petitioner pursuing whatever claims it feels itmay have against the remaining respondents with respect to the impact of such audit findings" onthe 1983-1985 rate years.
Thereafter, DSS's responsibilities for administering the Medicaid program and for auditingthe cost reports filed by nursing homes shifted to DOH (see Matter of Blossom View Nursing Home v Novello, 4 NY3d581, 591-592 [2005]). In 1999, petitioner and DOH entered into a stipulation settling asecond audit affecting added staff adjustments to petitioner's 1983-1985 rates. DOH issued finalaudited 1983-1985 rates in 2000.
In 2003 and 2004, petitioner requested again that DOH revise the 1983-1985 rates byrestoring the previously disallowed $581,702 that was the subject of the first audit. DOH deniedthe request and petitioners then served an amended petition challenging that denial. SupremeCourt granted respondents' motion to dismiss the amended petition and petitioners now appeal.
We affirm. Initially, we agree with respondents that the 1996 stipulation of settlement barsthe second cause of action in the amended petition. In both the original 1994 petition and theamended petition, the second cause of action alleges that the reduction of the $581,702 in foodservice costs in the 1983-1985 rate audit represented an improper retroactive adjustment ofDOH's initial rate determination. Respondents contend that DOH initially mislabeled the$581,702 as "ceiling relief," rather than food service costs; DOH corrected that error in March1985 upon petitioner's 1984 rate appeal. Consistent with that correction, DSS treated the$581,702 as food service costs and reduced the allowable amount of those costs. In contrast,petitioners argue that DOH did not merely relabel the $581,702 from ceiling relief to food servicecosts; rather, they maintain, DOH changed its methodology by eliminating ceiling relief that ithad previously granted. Petitioners assert that any error in initially granting the ceiling relief wasa "mistake of judgment" by DOH that precludes correction of the mistake or recoupment on thebasis of that mistake.
While DOH's " 'right of recoupment does not extend to payments made under a statute whichpredicates determination of the amount to be paid upon judgmental considerations involvingexpertise' " of a government agency, it is well settled that DOH may retroactively adjust rates andrecoup overpayments based on a "mistake of fact" (Matter of Westledge Nursing Home [*3]v Axelrod, 68 NY2d 862, 865 [1986] [citation omitted]; see Matter of Jarrett v Novello, 27AD3d 973, 974 [2006], lv denied 7 NY3d 715 [2006]). As respondents assert, theDSS audit findings—which rejected petitioner's argument that $581,702 representedceiling relief, as opposed to food service costs, and concluded that figure bore "no relationship tothe amount of ceiling cuts"—clarify that DOH simply made a mistake of fact inmislabeling the food service costs. Those audit findings therefore refute petitioners' currentcontention that DOH made a mistake of judgment. Inasmuch as petitioner expressly agreed to theaudit findings in the 1996 stipulation of settlement with minor modifications not relevant here,the second cause of action is precluded by the stipulation.
Further, to the extent that the remaining three causes of action are not barred by thestipulation of settlement, those claims are untimely. Those causes of action challengerespondents' refusal to adjust the audited rates to render them substantively adequate under stateand federal law. They accrued, at the latest, in September 2000 when DOH issued audited ratesimplementing the 1996 and 1999 settlements of the DSS audits. Inasmuch as the statute oflimitations for claims arising under CPLR article 78 is four months (see CPLR 217 [1])and petitioner's requests for reconsideration in 2003 and 2004 could not extend the limitationsperiod (see Holliswood Care Ctr. v Whalen, 58 NY2d 1001, 1003 [1983]; Matter of Properties of N.Y., Inc. vPlanning Bd. of Town of Stuyvesant, 35 AD3d 941, 943 [2006]), those claims aretime-barred. Contrary to petitioners' argument, the relation back doctrine is inapplicable herebecause the claims are based upon events that occurred after the filing of the initial petition,rather than upon the transactions giving rise to the claims in the initial petition (see CPLR203 [f]; Krioutchkova v Gaad RealtyCorp., 28 AD3d 427, 428 [2006]; cf. Bloomfield v Bloomfield, 97 NY2d 188,192-193 [2001]).
Petitioners' remaining arguments, to the extent not addressed herein, have been consideredand found to be lacking in merit.
Peters, Carpinello, Lahtinen and Kane, JJ., concur. Ordered that the judgment is affirmed,without costs.
Footnote *: Medicaid reimbursement ratesare generally computed based upon costs reported by the facility during a prior "base" periodtrended forward to account for inflation (see Matter of Blossom View Nursing Home v Novello, 4 NY3d581, 585 [2005]). Here, the relevant base period was 1981. During the time period at issue,DSS was responsible for auditing nursing home cost reports used in setting allowable base yearcosts; DOH was responsible for initially calculating the rates and then adjusting the rates afteraudits (see id. at 591).