| Matter of Avenue Nursing Home & Rehabilitation Ctr. vShah |
| 2013 NY Slip Op 08488 [112 AD3d 1178] |
| December 19, 2013 |
| Appellate Division, Third Department |
| In the Matter of Avenue Nursing Home and RehabilitationCentre et al., Appellants-Respondents, v Nirav Shah, as Commissioner ofHealth, Respondent-Appellant. (Proceeding No. 1.) In the Matter of Absolut Center forNursing and Rehabilitation at Aurora Park, LLC, et al., Appellants-Respondents, v NiravShah, as Commissioner of Health, Respondent-Appellant. (Proceeding No.2.) |
—[*1] Eric T. Schneiderman, Attorney General, Albany (Kathleen M. Treasure of counsel),for respondent-appellant.
[*2]Garry, J. Cross appeals from two judgments ofthe Supreme Court (McGrath, J.), entered June 19, 2012 in Albany County, which,among other things, partially granted petitioners' applications, in two proceedingspursuant to CPLR article 78, to annul determinations of the Department of Healthadjusting petitioners' Medicaid reimbursement rates.
Pursuant to Public Health Law article 28, residential health care facilities, alsoknown as nursing homes, are reimbursed through the Medicaid program for the costsincurred per patient, per day with respect to their Medicaid-eligible patients (see10 NYCRR 86-2.10 [a] [6]). The costs are generated pursuant to a statutory base periodand are subject to a "case mix" adjustment with respect to the facilities' particular patientneeds (see 10 NYCRR 86-2.10 [a] [5]; 86-2.30), and are further adjusted toaccount for inflation that has occurred since the base year (see 10 NYCRR86-2.10 [a] [8]). There are four components that make up a facility's rate: direct, indirect,noncomparable and capital costs (see 10 NYCRR 86-2.10 [a] [6]; [b] [1] [ii]).The direct, indirect and noncomparable costs are trended for inflation by application ofthe "roll factor" and, as so calculated, constitute a facility's operating costs (see10 NYCRR 86-2.10 [a] [7]). The roll factor reflects the cumulative effect of inflationfrom the base year to the rate year and is calculated by multiplying each yearly rate ofinflation, known as a "trend factor," during that period (see 10 NYCRR 86-2.10[a] [8]).
The Department of Health is required to notify facilities such as petitioners of theirannual rates at least 60 days before those rates go into effect (see Public HealthLaw § 2807 [7]). Accordingly, in order to calculate the impending year's rates, theDepartment relies on an estimated rate of inflation for the coming year as determined bythe federal Consumer Price Index (hereinafter CPI) (see Public Health Law§ 2807-c [10] [c] [2]). After that calendar year has passed, and the actual rate ofinflation for that year can be determined, the difference between the estimated rate ofinflation and the final rate of inflation is reconciled and a "banking adjustment" isapplied to the current year's rates (see Public Health Law § 2807-c [10] [c][3]). Additionally, that final trend factor is included in the roll factor in order to calculatecurrent and future reimbursement rates (see Public Health Law § 2807-c[10] [c] [4]).
The Legislature amended Public Health Law § 2808 in 2006, changing thebase year for calculating rates from 1983 to 2002 (see L 2006, ch 109, § 1,part C, § 47; Public Health Law § 2808 [2-b] [b] [i]). This provision,commonly known as the "rebasing law," was intended to go into effect January 1, 2009(see L 2006, ch 109, § 1, part C, § 47). In 2007, Public Health Law§ 2808 was further amended to provide that the case mix classification systemwould only consider Medicaid patients, as opposed to the facility's entire population,beginning with the time period on or after April 1, 2009 (see L 2007, ch 58,§ 1, part C, § 36; Public Health Law § 2808 [2-b] [g]). Rebasing wasexpected to result in increased costs to the Medicaid program; these costs would be offsetin part by the savings achieved through the case mix amendment.
In August 2008, among other deficit reduction measures, the Legislature passed partF of section 1 of chapter 497 of the Laws of 2008, providing that, in determining rates ofpayments for services provided on or after January 1, 2009, respondent was to "apply atrend factor projection equal to the otherwise applicable trend factor projectionattributable to the period January 1, 2009 through December 31, 2009 in accordance with[Public Health Law § 2807-c (10) (c)] less one percentage point" (L 2008, ch 497,§ 1, part F, § 5 [1]). In February 2009, the Legislature postponed theeffective date of the rebasing law, moving it from January 1, 2009 to April 1, 2009(see L [*3]2009, ch 2, § 1, part I,§§ 2, 3). Subsequently, in April 2009, the Legislature reduced the 2009trend factor to zero with respect to "services provided on and after April 1, 2009,"notwithstanding Public Health Law § 2807-c (10) (c) (L 2009, ch 58, § 1,part B, § 48). Additionally, in December 2009, the reduction to zero of the trendfactor was extended to cover the period from January 1, 2010 through March 31, 2010(see L 2009, ch 503, § 1, part C, § 2).
In April 2009, the Legislature also enacted part D of section 1 of chapter 58 of theLaws of 2009, known as the "scale back law" (see L 2009, ch 58, § 1, partD, § 2). This law provided that, notwithstanding the rebasing law, or any othercontrary provision of law, "with regard to adjustments to [M]edicaid rates of payment forinpatient services provided by residential health care facilities for the period April 1,2009 through March 31, 2010, made pursuant to [the rebasing law]," respondent waspermitted to make proportional adjustments to the reimbursement rates in order to ensurethat the aggregate increase in rates did not exceed, nor fall below, $210 million (L 2009,ch 58, § 1, part D, § 2). The reduction to zero of the trend factor was alsocontinued through 2010 (see L 2010, ch 109, § 1, part B, § 1). Sincethe scale back law constituted a change to the Medicaid State Plan, federal approval wasrequired to enforce this provision (see 42 CFR 447.256). Such approval, soughtin 2009, was granted in 2011, after which the Department apprised facilities of their ratesfor various periods between April 1, 2009 and January 1, 2011.
In December 2008, the Department notified facilities, including petitioners, of their2009 Medicaid reimbursement rates. The 2009 rates were calculated to include thechanges due to rebasing from 1983 to 2002 and the adjustment of the case mixclassification system. The initial trend factor for 2009, according to the CPI, was 3.1%and, after deducting one percentage point (see L 2008, ch 497, § 1, part F,§ 5), the trend factor applied to petitioners' 2009 rates was 2.1%. After rebasingwas postponed to April 1, 2009, the Department had to recalculate petitioners' rates forthe first three months of 2009 and, in the meantime, the Department based the rates onthose for December 31, 2006, as adjusted for inflation in accordance with Public HealthLaw § 2807-c (10) (c) (see L 2009, ch 2, § 1, part I, §§2, 3). Subsequently, in September 2009, the Department notified petitioners of their new2009 rates, which were derived from the 1983 base costs trended for inflation. At thattime, the rates continued to reflect an initial trend factor of 2.1%, which was incorporatedinto the roll factor.
In 2010, the final trend factor for 2009 was determined to be -.4%; however, thistrend factor only applied to the first quarter of 2009, as the remainder of the year wassubject to a zero trend factor (see L 2009, ch 58, § 1, part B, § 48).The Department reconciled the final trend factor with the initial trend factor of 2.1% andagain deducted one percentage point (see L 2008, ch 497, § 1, part F,§ 5), thus arriving at a final trend factor of -3.5% for the first quarter of 2009. Therate periods on and after April 1, 2009 were not subject to any trends (see L2009, ch 503, § 1, part C, § 2). In June 2011, after obtaining federalapproval of the scale back law, the Department notified petitioners of their Medicaidreimbursement rates for periods including January 1, 2010 through March 31, 2010 andApril 1, 2010 through December 31, 2010. After determining the dollar impact of the-3.5% banking adjustment as applied to the 2.1% trend factor used to calculate rates forthe first quarter of 2009, a miscellaneous charge was included in petitioners' 2010 rates.The 2009 banking adjustment resulted in a total reduction of approximately $53 millionin reimbursement.
In October 2011, petitioners commenced these two proceedings pursuant to CPLRarticle 78 seeking to annul respondent's determination to make that adjustment to their2010 [*4]Medicaid reimbursement rates. Supreme Courtpartially granted the petitions, finding that respondent was permitted to apply the 2009banking adjustment to the 2010 rates, but further determining that the appropriate finaltrend factor for 2009 was -2.5%, not -3.5%. Petitioners now appeal from that part of thejudgments dismissing the petitions to the extent that they sought an annulment ofrespondent's determination to make any banking adjustment to petitioners' 2010Medicaid reimbursement rates. Respondent cross-appeals from the judgments, arguingthat Supreme Court erred by determining that the final trend factor was -2.5% instead of-3.5%.
Petitioners have failed to meet their heavy burden of demonstrating that themethodology utilized by the Department in calculating their rates for the period inquestion was unreasonable or unsupported by any evidence (see Matter of Nazareth Home ofthe Franciscan Sisters v Novello, 7 NY3d 538, 544 [2006]; Matter ofSociety of N.Y. Hosp. v Axelrod, 70 NY2d 467, 473 [1987]; Matter of Brooklyn Hosp. Ctr. vShah, 101 AD3d 1546, 1547 [2012], lv denied 21 NY3d 851 [2013]).We reject petitioners' contention that the scale back law provided for an aggregateincrease to the Medicaid reimbursement rates which was not subject to any furtheradjustments, including adjustments for trending. The plain language of the scale backlaw substantively applies only to those adjustments "made pursuant to [Public HealthLaw § 2808 (2-b) (b)]"—the rebasing law (see L 2006, ch 109,§ 1, part C, § 47)—and provides that such adjustments must equal$210 million (L 2009, ch 58, § 1, part D, § 2). This language indicates thatthe Legislature intended to limit the increase in costs attributable to rebasing (seeL 2009, ch 58, § 1, part D, § 2). Notably, the scale back law did not applyuntil the period on or after April 1, 2009 (see L 2009, ch 58, § 1, part D,§ 2). Similarly, the rebasing law, although originally expected to go into effect inJanuary 2009 (see L 2006, ch 109, § 1, part C, § 47), was postponeduntil April 1, 2009 (see L 2009, ch 2, § 1, part I, § 3). Thus, as thebase year for January 1, 2009 through April 1, 2009 remained 1983, the limitingprovisions of the scale back law did not apply to those rates and, therefore, the period ofJanuary 1, 2009 through March 31, 2009 was properly subject to the trending provisionsof Public Health Law § 2807-c (10) (c).
Additionally, we are not persuaded that the Legislature's reduction of the 2010 trendfactor to zero precludes application of the 2009 banking adjustment to petitioners' 2010rates. Significantly, the language of these unconsolidated laws does not eliminatetrend factors or roll factors, or otherwise leave inflation out of the equation; rather, itestablishes a zero percent trend factor for the time period on or after April 1, 2009(see L 2010, ch 109, § 1, part B, § 1; L 2009, ch 503, § 1, partC, § 2; L 2009, ch 58, § 1, part B, § 48). Moreover, nothing in theselaws implicates an abandonment of the recovery that would be achieved by application ofthe 2009 banking adjustment (see L 2010, ch 109, § 1, part B, § 1; L2009, ch 503, § 1, part C, § 2; L 2009, ch 58, § 1, part B, § 48).Significantly, the laws at issue here involved efforts by the Legislature to reduce the costsassociated with Medicaid reimbursement during a particularly trying economic period.As Public Health Law § 2807-c (10) (c) (3) requires that the difference betweenthe initial trend factor and the actual inflation rate for a prior calendar year "be includedin the prospective trend factor for the current year," here, the final trend factor of -3.5%for 2009 could mathematically be included in the zero trend factor for 2010 as a negativeamount. Thus, petitioners have failed to make a compelling showing that either the scaleback law or the reduction of the 2010 trend factor to zero precluded the application of the2009 banking adjustment to their 2010 rates (see Matter of Brooklyn Hosp. Ctr. vShah, 101 AD3d at 1548-1549; Matter of Reconstruction Home & Health Care Ctr., Inc. vDaines, 65 AD3d 786, 787 [2009], lv denied 14 NY3d 706 [2010]; Matter of New Franklin Ctr. forRehabilitation & Nursing v Novello, 64 AD3d 1132, 1135-1136 [2009], lvdenied 13 NY3d 716 [2010]).[*5]
Turning to respondent's cross appeal, we agreethat the Department was authorized by these laws to reduce both the initial and the finaltrend factor by one percentage point. The Legislature provided, as relevant here, thatnotwithstanding the statutory trend factor procedures, the rebasing law or any othercontrary provision of law, when determining rates of payments for services provided onand after January 1, 2009, the Department "shall apply a trend factor projection equal tothe otherwise applicable trend factor projection attributable to the period January 1, 2009through December 31, 2009 in accordance with [Public Health Law § 2807-c (10)(c)] less one percentage point" (L 2008, ch 497, § 1, part F, § 5). Where, ashere, "the statutory language is special or technical and does not consist of commonwords of clear import, courts will generally defer to the agency's interpretative expertiseunless that interpretation is unreasonable, irrational or contrary to the clear wording ofthe statute" (Kennedy v Novello, 299 AD2d 605, 607 [2002], lv denied99 NY2d 507 [2003] [internal quotation marks and citations omitted]). Additionally, asthe law at issue is susceptible to different interpretations, the Department's past practiceis given great weight in determining the law's meaning (see Matter of County of St.Lawrence v Daines, 81 AD3d 212, 218-219 [2011], lv denied 17 NY3d703 [2011]; see also Barrett v Lubin, 188 AD2d 40, 44 [1993]; McKinney's ConsLaws of NY, Book 1, Statutes § 129). Here, the record confirms that theDepartment has previously amended both the initial and the final CPI pursuant tolegislative directives containing the phrase "trend factor projection" (see e.g. L2007, ch 58, § 1, part C, § 29 [1]). We are therefore persuaded that theDepartment's interpretation of this law is in accord with its historical practice (seeMatter of Brooklyn Hosp. Ctr. v Shah, 101 AD3d at 1548-1549; Matter ofCounty of St. Lawrence v Daines, 81 AD3d at 218-219). Moreover, we note thatsuch an interpretation effectuates the Legislature's intent to achieve cost savings in theMedicaid program (seeSignature Health Ctr., LLC v State of New York, 92 AD3d 11, 16 [2011], lvdenied 19 NY3d 811 [2012]).
Finally, we find that the Department improperly applied the banking adjustment topetitioners' 2010 rates by listing it as a miscellaneous adjustment on the rate sheets.Public Health Law § 2807-c (10) (c) (3) requires that the final 2009 trend factor be"included in the prospective trend factor for [2010]"; instead, however, the Departmentcalculated a roll factor using the zero trend factor statutorily established for 2009 andadded the banking adjustment as a miscellaneous charge on petitioners' rate sheets. Thisapplication of the banking adjustment failed to comport with the requirements of PublicHealth Law § 2807-c and, therefore, exceeded the parameters set by theLegislature (compare Matter of Brooklyn Hosp. Ctr. v Shah, 101 AD3d at 1549).Accordingly, the matter must be remitted to respondent for a proper application of thebanking adjustment.
Rose, J.P., Spain and Egan Jr., JJ., concur. Ordered that the judgments are modified,on the law, without costs, by reversing so much thereof as revised the trend factor from-3.5% to -2.5%; matter remitted to respondent for further proceedings not inconsistentwith this Court's decision; and, as so modified, affirmed.