| Matter of Brooklyn Hosp. Ctr. v Shah |
| 2012 NY Slip Op 09127 [101 AD3d 1546] |
| December 27, 2012 |
| Appellate Division, Third Department |
| In the Matter of Brooklyn Hospital Center, Appellant, v Nirav R.Shah, as Commissioner of Health, et al., Respondents. (Proceeding No. 1.) In the Matter ofNassau University Medical Center, Appellant, v Richard F. Daines, as Commissioner ofHealth, et al., Respondents. (Proceeding No. 2.) In the Matter of Sound Shore Medical Center ofWestchester, Appellant, v Richard F. Daines, as Commissioner of Health, et al., Respondents.(Proceeding No. 3.) In the Matter of Beth Israel Medical Center, Appellant, v Nirav R. Shah, asCommissioner of Health, et al., Respondents. (Proceeding No. 4.) |
—[*1] Eric T. Schneiderman, Attorney General, Albany (Kathleen M. Treasure of counsel), forrespondents.
Mercure, J.P. Appeals from four judgments of the Supreme Court (Devine, J.), enteredAugust 25, 2011 in Albany County, which dismissed petitioners' applications, in fourproceedings pursuant to CPLR article 78, to review determinations of respondents settingpetitioners' Medicaid reimbursement rates.
Petitioners provide detoxification and medically-supervised withdrawal services to patientswho are suffering from alcohol or drug addiction (see Public Health Law § 2807-c[4] [l]; 10 NYCRR 86-1.23 [g]). They commenced these CPLR article 78 proceedingschallenging their per diem Medicaid reimbursement rates for the period of December 1, 2008through December 31, 2009.
Prior to December 1, 2008, respondent Department of Health (hereinafter DOH) calculatedthe detoxification reimbursement rate on a "per discharge" basis, involving a fixed payment forspecific, diagnosis-related services provided to a patient, without regard to the length of stay. Inorder to reduce the costs associated with detoxification services, the Legislature directed that thereimbursement rate be calculated on a "per diem" basis for patients discharged after December 1,2008, with the operating cost component of the new rate to be calculated using the regionalaverage operating costs for such services as reported by participating hospitals in 2006(see Public Health Law § 2807-c [4] [l]). The regional average operating costmethodology was to be phased in over a 16-month period, with the per diem rate to "reflect theoperating cost component of rates of payment effective [December 31, 2007]"—[*2]i.e., the hospital-specific, per discharge rate for 2007 converted to aper diem rate—on a gradually decreasing scale during the phase-in period (seePublic Health Law § 2807-c [4] [l] [i], [ii]). Petitioners challenged the manner in whichDOH converted the 2007 per discharge rate into a per diem rate during the phase-in period. DOHdenied their rate appeals, and Supreme Court dismissed the CPLR article 78 petitions, promptingthese appeals.
We affirm. Inasmuch as " 'rate-setting actions of [respondent Commissioner of Health are]quasi-legislative in nature,' " they will " 'not be annulled except upon a compelling showing thatthe calculations from which [they] derived were unreasonable' " (Matter of Nazareth Home of the FranciscanSisters v Novello, 7 NY3d 538, 544 [2006], quoting Matter of Society of N.Y. Hosp.v Axelrod, 70 NY2d 467, 473 [1987]; accord Matter of Reconstruction Home & Health Care Ctr., Inc. vDaines, 65 AD3d 786, 787 [2009], lv denied 14 NY3d 706 [2010]). When theLegislature is unambiguous but general in its directive regarding reimbursement rates, therebyleaving interpretation and the development of a computation methodology to DOH's discretion,DOH acts in its area of expertise in considering, interpreting and applying the complexrate-setting formulas involved in effectuating the statutory directive (see Matter ofReconstruction Home & Health Care Ctr., Inc. v Daines, 65 AD3d at 787-788; Matter ofEllis Ctr. for Long Term Care v DeBuono, 261 AD2d 791, 794 [1999], appeal dismissedand lv denied 93 NY2d 1037 [1999]). Thus, "DOH is entitled to a 'high degree of judicialdeference' . . . and . . . petitioners bear the 'heavy burden of showing'that DOH's rate-setting methodology 'is unreasonable and unsupported by any evidence' "(Matter of Nazareth Home of the Franciscan Sisters v Novello, 7 NY3d at 544, quotingMatter of Consolation Nursing Home v Commissioner of N.Y. State Dept. of Health, 85NY2d 326, 331-332 [1995]).
The Legislature directed that, during the phase-in period, a portion of the per diemreimbursement rate "shall reflect the operating cost component of rates of paymenteffective for [December 31, 2007]"—the per discharge rate converted to a per diemrate—"as adjusted for inflation" (Public Health Law § 2807-c [4] [l] [i], [ii][emphasis added]). The "operating cost component" of the per discharge rate is defined by theLegislature as "the product of the average reimbursable inpatient operating cost perdischarge . . . and the weighting factors determined in accordance with [PublicHealth Law § 2807-c (3) (c)]" (Public Health Law § 2807-c [5] [a] [emphasisadded]). The "average reimbursable inpatient operating cost per discharge" for the relevantperiod was calculated by dividing the total non-Medicare patient costs by the total non-Medicarepatient discharges (see 10 NYCRR former 86-1.54 [a] [3]);[FN1]the "weighting factors" are based upon the level of resources needed to treat the specificdetoxification and withdrawal diagnosis assigned to each individual patient receiving services(Public Health Law § 2807-c [3] [c]).
In order to convert the per discharge operating cost component to a per diem figure asdirected by the statute, DOH divided the "average reimbursable inpatient operating cost perdischarge"—as noted, an amount representing the cost per discharge of allnon-Medicare [*3]patients, not just those receiving detoxificationservices—by the average length of stay for all non-Medicare patients. DOH thenmultiplied that number, i.e., the per diem operating cost for all non-Medicare cases, by theapplicable 2007 "weighting factors" in order to produce a detoxification-specific per diem figure.Petitioners argue that DOH erred in using the average days per discharge for allnon-Medicare patients, as opposed to the average days per discharge for non-Medicaredetoxification patients specifically, as the denominator when converting to a per diemfigure. As they assert, the methodology used by DOH resulted in a lower reimbursement ratebecause detoxification patients have a shorter average length of stay.
DOH's method of calculating the per diem operating cost component, however, mirrors themanner in which it previously calculated the per discharge figure. As explained above, DOHcalculated the per discharge rates based on operating costs associated with all non-Medicarepatients divided by the number of all non-Medicare discharges, and then applied thedetoxification-specific weighting factors in the final step. The conversion methodology isconsistent with that historical approach—the operating component is based on costsassociated with all non-Medicare patients divided by the average length of stay for all patients,and then the detoxification-specific weighting factors are applied in the final step.[FN2]Accordingly, in our view, petitioners have failed to meet their burden of demonstrating that DOHacted irrationally in setting their per diem rates during the period in question; "[w]ithin theparameters set by the Legislature, DOH has advanced ample explanation for setting rates"consistent with its historical practice (Matter of Nazareth Home of the Franciscan Sisters vNovello, 7 NY3d at 545; see Matterof St. Margaret's Ctr. v Novello, 23 AD3d 817, 819 [2005]; Matter of Ellis Ctr. forLong Term Care v DeBuono, 261 AD2d at 794; Matter of A. Holly Patterson SNF vChassin, 196 AD2d 155, 159-160 [1994]).
Finally, inasmuch as DOH's conversion computation methodology was an interpretation ofan express statutory mandate, it was not a formal rule within the meaning of State AdministrativeProcedure Act § 102 (2) (see Matter of Ellis Ctr. for Long Term Care v DeBuono,261 AD2d at 794-795; Matter of A. Holly Patterson SNF v Chassin, 196 AD2d at 161).
Spain, Malone Jr., Stein and McCarthy, JJ., concur. Ordered that the judgments are affirmed,without costs.
Footnote 1: Specifically, the "averagereimbursable inpatient operating cost per discharge" was defined in DOH regulations as ahospital's base year operating costs for all non-Medicare inpatient care, divided byall non-Medicare patient discharges during the base year, then further adjusted by the"case mix index" for all non-Medicare cases treated by that specific hospital (see10 NYCRR former 86-1.54 [a] [3]).
Footnote 2: To the extent that petitionerscontend that DOH's explanation of the methodology does not match the manner in which thecalculation was presented on their rate sheets, DOH presented evidence that the rate sheets didnot reflect the order in which the calculations were actually performed and, in any event, theresult remains the same regardless of petitioners' challenge to the order.