State of New York
Supreme Court : County of Monroe

This opinion is uncorrected and is subject to revision in the official Reports

ANDREW V. SIRACUSE, J.

te: must audits to determine Medicaid reimbursement rates for nursing homes be commenced within six years, the time limit set out in the regulations of the Department of Social Services, or may they be conducted at any time? The statutory and regulatory provisions that bear on this question are difficult to coordinate, but the court has concluded that the six-year limitation period does indeed apply.

The rates paid to nursing homes for the care of Medicaid patients have been determined in various ways throughout the history of the program. This case involves the procedure that applies at present, and which was being introduced in the early 1990s. It attempts to establish a statistical measure that recognizes the care needs of the facility's population, paying more to nursing homes whose residents require greater medical attention.

The procedure, in brief, is for nursing homes to submit summaries of patient condition that place each patient in one of numerous categories. Each category is assigned a score, with higher scores corresponding to greater need for care. The results are then aggregated to give each facility a weighted score that reflects the population's overall level of health. Reimbursement is set by multiplying the score by a fixed amount per patient, and thus facilities with healthier populations receive less money than ones that must deal with extensive medical issues.

The paperwork used for these summaries are called Patient Review Instruments, or PRIs. It is obviously important for these documents to be accurate, and thus the PRIs submitted by each facility are subject to audit by the state. There is an elaborate multi-stage system for doing this. The audits are carried out by independent reviewers, and involve both inspection of paperwork and interviews on site with patients and care givers.

It is beyond dispute that the Department of Health does not trust Blossom View's PRIs. The petitioner's 1993 PRIs were audited in what turned out to be a lengthy investigation; it was not completed for some seven years. The investigation concluded that Blossom View's 1993 PRIs were unsatisfactory, and in September, 2002, after the conclusion of the 1993 audit, the Department notified petitioner that it wanted to audit 1994 and subsequent years' PRIs beginning in November 2002.

Blossom View protested, on the grounds that the Department was obligated to commence audits within six years of the filing of PRIs. It argued, as well, that because facilities are required to keep no more than six years' records the relevant documents might be unavailable. The Department rejected these arguments. Blossom View thereupon brought this Article 78 proceeding in the nature of prohibition, seeking to bar the Department from proceeding with audits for PRIs more than six years old. The Order to Show Cause as signed by this court granted a temporary restraining order to that effect, and this order remains in force.

The general statutory provisions regulating hospitals and long term care facilities are found in Article 28 of the Public Health Law. Before January 14, 1997, the regulations promulgated under that law contained an explicit six-year deadline for audits of nursing homes (former 10 NYCRR § 86-2.7 [c]; see, e.g., Matter of County of Monroe v Axelrod, 163 AD2d 847; former 10 NYCRR § 86.8 [c]; see, e.g., Matter of Grattan v Department of Social Services, 131 AD2d 191, 193-194). Effective that date, however, no specific time limit was set out in the Department of Health regulations.

It is the respondents' position that the absence of any such limitation period leaves the State free to conduct PRI audits at any time whatsoever. But this argument ignores the statutory change that lay behind the repeal of those regulations. Prior to 1997 the Department of Health was colorably empowered to audit medical care for Medicaid recipients, but that authority was removed by L 1996 ch 474, § 234. The same amendment added a subsection giving the Commissioner of Social Services responsibility for "auditing payments to providers of care, services and supplies under the medical assistance program" (§ 364 [1] [b]). Pursuant to that authority Social Services Law § 368-c states that "the commissioner shall conduct an annual review of financial and statistical reports with respect to residential health care facilities certified pursuant to article twenty-eight of the public health law. Where such review indicates substantial noncompliance, as defined in regulation by the commissioner, with the requirements of the medical assistance program the commissioner shall conduct or have conducted an on-site audit." Regulations promulgated under these sections are found in 18 NYCRR Part 517, and these contain the same six-year limitation period once found in the Department of Health regulations.

There is no parallel authorization for the Department of Health. Article 28 of the Public Health Law, as it currently stands, makes no provision for auditing of reimbursement rates. The post-1996 division of responsibility between the two departments in Social Services Law § 364 (2) authorizes the Department of Health to enforce the program by:

(a) establishing and maintaining standards for all hospital and related services pursuant to article twenty-eight of the public health law, and for all medical care and services furnished in an institution operated by the department of health pursuant to other provisions of the public health law;

(b) establishing and maintaining standards for all non institutional health care and services rendered pursuant to this title, including but not limited to procedural standards relating to the revocation, suspension, limitation or annulment of qualification for participation as a provider of care and services, on a determination that the provider is an incompetent provider of specific services or has exhibited a course of conduct which is either inconsistent with program standards and regulations or which exhibits an unwillingness to meet such standards and regulations, or is a potential threat to the public health or safety pursuant to section two hundred six of the public health law;

(c) reviewing and approving local social services medical plans;

(d) establishing by regulation requirements for a uniform system of reports relating to the quality of medical care and services furnished pursuant to this title;

(e) reviewing the quality and availability of medical care and services furnished under local social services medical plans, to assure that the quality of medical care and services is in the best interest of the recipients;

(f) providing consultative services to hospitals, nursing homes, home health agencies, clinics, laboratories, and such other institutions as the secretary of the federal department of health and human services may specify in order to assist them: to qualify for payments under the provisions of this title and title XIX of the federal social security act; in providing information needed to determine such payments; in establishing and maintaining such fiscal records as may be necessary for the proper and efficient administration of medical assistance;

(g) establishing standards of eligibility for medical assistance, consistent with the provisions of this title; and

(h) making policy, rules and regulations for maintaining a system of hearings for applicants and recipients of medical assistance adversely affected by the actions of the department or social service districts and for making final administrative determinations and issuing final decisions concerning such matters.

It is consistent with this division of responsibility that the sole subsection of Public Health Law § 2807 which speaks of audits does so in the context of the Social Services Law:

Audit authority. The commissioner [of Health] shall make available to the commissioner of social services, in a mutually satisfactory manner, all information necessary to conduct or have conducted, on a cost sharing basis among payors, an appropriate review or audit of a hospital necessary to implement the provisions of this article (Public Health Law § 2807 [7]).

This is an obvious parallel with 18 NYCRR § 517.3. Under that regulation a facility's PRIs are subject to audit for a period of six years, unless tolled by a written request within that period. Such a request gives the Department 60 days to commence an audit, and allows a single 60-day extension of that period. If the audit is not commenced within that period the notification lapses. The "limitation does not apply to situations in which fraud may be involved or where the provider or an agent thereof prevents or obstructs the commissioner from performing an audit" (18 NYCRR § 517.3 [a] [2], [b] [2]) and "the period within which to commence an audit may be indefinitely extended on account of delays in the commencement of the audit caused or requested by the provider or a representative of the provider" (18 NYCRR § 517 [e]). Since the reports must be filed periodically, it is clear that the system runs on a regular cycle, with each filed report starting a new six-year period. Nothing in any section suggests that there is any interplay between one audit and the next.

As noted above, the respondents claim that no provisions setting a time limit for PRI audits exist. This is inconsistent with the post-1996 statutory scheme. It would also lead to inequitable results, as the department could act ten or twenty or even fifty years in the future. Six years is ample time to commence an audit, regardless of the state's staffing problems. While it is open for the court to hold that the six-year limit is directory, not mandatory (see, e.g., Matter of Grattan, supra, 131 AD2d at 195), a holding that the period is discretionary only would result in different periods under different circumstances, frequent and difficult to-resolve litigation, and substantial uncertainty in facility record keeping. Nor are there acceptable alternatives to the six-year period. The mere fact that medical records must be kept until six years after a patient's discharge or death does not suggest a different limitation period; the date would of course be different for every patient involved. To make the period extend to cover whatever records are available, as respondents' counsel suggested at oral argument, would create further problems and might lead to wholesale destruction of documents as soon as is legally permissible.

The petitioner correctly argues that the regulations under the Social Services Law apply and that they mean what they say. Every time the facility files a PRI, or when one is due and is not filed, the state has six years to commence an audit. Each one of these is separate. The state's audit of the 1993 records does not toll the six-year period for any other set of reports. There is no suggestion here of fraud or any attempt to obstruct or delay the audit; indeed, the state repeatedly apologized for the length of time the 1993 audit took. The six-year limitation period then holds, and any report filed more than six years before the state notified Blossom View that it wished to audit its post-1993 PRIs is beyond review.

The petitioner is thus entitled to the judgment under CPLR Article 78, with costs, barring review of these PRIs and deeming them proper. It has not pursued its cause of action under the Federal Civil Rights Law, and the court finds no merit in that claim. Counsel for the petitioner may prepare the order.

DATED: Rochester, New York

January 3, 2003

Andrew V. Siracuse, J.S.C.

This opinion is not available for publication in any official or unofficial reports, except the New York Law Journal, without the approval of the State Reporter or the Committee on Opinions (22 NYCRR 7300.1)

Design © 1997 Michael Steinberg. No copyright subsists in the decision texts, which are government documents.

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