Visiting Nurse Service of New York Home Care v. New York State Department of Health

840 N.E.2d 577, 5 N.Y.3d 499
CourtNew York Court of Appeals
DecidedNovember 17, 2005
StatusPublished
Cited by41 cases

This text of 840 N.E.2d 577 (Visiting Nurse Service of New York Home Care v. New York State Department of Health) is published on Counsel Stack Legal Research, covering New York Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Visiting Nurse Service of New York Home Care v. New York State Department of Health, 840 N.E.2d 577, 5 N.Y.3d 499 (N.Y. 2005).

Opinion

OPINION OF THE COURT

Graffeo, J.

The issue in this case is whether a home health care provider is entitled to notice and an opportunity to be heard before the State acts to recover Medicaid payments it claims were improperly paid to the provider. Based on regulations promulgated by the New York State Department of Health, we agree with the courts below that a hearing must be held regarding recoupment of the Medicaid funds in dispute.

Medicare and Medicaid are two primary sources of payment for home health care services rendered by providers such as petitioner Visiting Nurse Service of New York Home Care (VNS). There are, however, significant differences between these government-sponsored programs. Medicare is a federal program that provides reimbursement for the medical expenses of persons eligible for Social Security benefits; it is administered exclusively by the United States Department of Health and Human Services (see Social Security Act tit XVIII [42 USC § 1395 et seq.J). Providers submit claims to the federal agency’s fiscal intermediary for evaluation (see 42 CFR 424.32 [a] [1]) and this [503]*503assessment process uses criteria established by federal law and regulations. Providers can pursue an administrative appeal procedure for rejected claims (see e.g. 42 CFR 405.710 et seq.; 42 CFR 405.724).

The Medicaid program pays for medical and health services supplied to individuals who fall below a certain income threshold (see Social Security Act tit XIX [42 USC § 1396 et seq.]). Unlike Medicare, which is fully funded by the federal government, in New York, the State and its counties contribute to the payment of Medicaid-eligible claims (see 42 USC § 1396a [a] [2]; §§ 1396b, 1396d [b]). Because of this joint participation, in addition to providing Medicaid coverage for an array of medical and health services specified under federal law, a state may establish its own eligibility criteria, expand the types of services that qualify for coverage and set rates for reimbursement (see generally 42 USC § 1396d [a]; § 1396o [c] [1]; [d]; § 1396r-l [a]; 42 CFR 440.225, 460.2 [b]).

Health care providers file Medicaid reimbursement claims with the New York State Department of Health (DOH) in accordance with state law and regulations (see Public Health Law §201 [1] [v]; Social Services Law § 363-a [1]). Medicaid is referred to as a “ ‘payor of last resort’ ” under federal law because other potential sources of payment, such as Medicare, must be exhausted before claims are paid by Medicaid (Gold v United Health Servs. Hosps., 95 NY2d 683, 690-691 [2001], quoting S Rep No. 146, 99th Cong, 2d Sess, at 1, 312, reprinted in 1986 US Code Cong & Admin News, at 42, 279; see 42 USC § 1396a [a] [25]). Accordingly, participating providers are required to determine whether health care expenses can be submitted in the first instance to Medicare or some other payor before submission to Medicaid (see 18 NYCRR 540.6 [e] [1], [2], [6]). This assessment is particularly critical for persons who are dually eligible for health services under both Medicare and Medicaid.

At the time of Medicaid claim submission, the State does not know what efforts were taken by providers to secure payment from other sources, including Medicare. Medicaid claims are therefore subject to postpayment review through the Medicaid Maximization program (MedMax). New York has contracted with a private entity—the Center for Medicare Advocacy (CMA)—to perform MedMax claim eligibility review. CMA is charged with evaluating whether health care claims that were paid by Medicaid should have been submitted for reimburse[504]*504ment to Medicare or another payor. If CMA identifies improperly disbursed payments, it assists DOH in recovering the funds previously paid to providers.

During the time frame relevant to this appeal (October 1993 to September 1998), VNS billed Medicaid for approximately $1.7 billion in health care services. After conducting the Med-Max review and finding that certain recipients were dually eligible, CMA concluded that $38.2 million of those Medicaid payments should have qualified for reimbursement by Medicare or other third-party payors. Upon resubmission to Medicare, the federal program paid about $28.4 million to VNS and, in turn, VNS refunded an almost identical amount to the State to satisfy the improper Medicaid charges. Medicare did not, however, accept the remaining approximately $10 million of VNS claims because too much time had elapsed from the date the health care services were rendered,1 or due to errors by the provider. These so-called “provider liability” claims—those disputed Medicaid payments for which VNS was not able to receive compensation by Medicare or another payor—are the subject of this dispute.

DOH began to offset the outstanding $10 million in alleged improper Medicaid payments by withholding other Medicaid revenue due VNS. As a consequence, by December 2002, DOH had recouped over $2 million. VNS responded by initiating this CPLR article 78 proceeding challenging the State’s withholding of Medicaid funds, asserting that it was not obligated to repay Medicaid unless it had actually received payment for the services provided from Medicare or some other source. VNS also contested DOH’s recoupment procedures on the ground that no administrative hearing had been available for VNS to contest DOH’s actions.

Supreme Court granted the provider’s petition, concluding that VNS had a property interest in the Medicaid payments that was protected by due process and, as such, DOH was required to conduct a hearing before recovering Medicaid funds from VNS. The Appellate Division affirmed, similarly ruling that VNS was entitled to a hearing to determine if reasonable measures had been undertaken to assess whether the disputed claims were eligible for payment by Medicare or other third-[505]*505party payors before submission to Medicaid. State recoupment efforts were stayed by the Court because DOH had failed to comply with its own regulatory time frames for conducting hearings. The Appellate Division did, however, agree with DOH’s contention that recoupment of provider liability claims was permissible in those instances where VNS failed to engage in reasonable efforts to ascertain whether services were Medicaid-eligible and to satisfy any conditions of approval by that program. Upon the Appellate Division’s certification of a question to us,2 we conclude that a hearing must be held on the issue of whether VNS took reasonable measures to ensure the proper designation and processing of claims.

DOH argues that notice and an opportunity to be heard need not be provided to VNS before recoupment efforts are undertaken because Medicaid payments to home health care providers are conditional pending postpayment MedMax review. But this contention is inconsistent with the regulatory scheme promulgated by DOH. Nothing in the relevant regulations indicates that payments to home health care providers are contingent on postpayment audits (see 18 NYCRR 505.23 [e]; see also

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Bluebook (online)
840 N.E.2d 577, 5 N.Y.3d 499, Counsel Stack Legal Research, https://law.counselstack.com/opinion/visiting-nurse-service-of-new-york-home-care-v-new-york-state-department-ny-2005.