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July 27, 1983

FLORENCE NIGHTINGALE NURSING HOME, Plaintiff, against BARBARA B. BLUM, individually and as Commissioner of the New York State Department of Social Services, et al. Defendants.

The opinion of the court was delivered by: OWEN


OWEN, District Judge

 Plaintiff Florence Nightingale Nursing Home ("Nightingale") is a duly licensed, skilled nursing facility and provider of medical services, and a participant in the federal Medicaid program, 42 U.S.C. § 1396, et seq. Defendant Barbara B. Blum (the "State") is the Commissioner of the New York State Department of Social services. Defendant Stanley Brezenoff (the "City") is the Administrator/Commissioner of the New York City Human Resources Administration. From January 1, 1976 until December 1, 1978, the New York City Human Resources Administration acted as the administering agent of the Medicaid program within its jurisdiction pursuant to the State's delegation of authority *fn1" For the remainder of the period covered by plaintiff's complaint, the State directly administered the program. The legal liability of the State for actions taken by the City during its period of administration is at issue in this action.

 Plaintiff's claims arise from its participation as a provider of medical services in the Medicaid program. Under that program the federal government allocates funds to participating states in order that those states may channel the allocated monies to provide health care for qualifying individuals. Among the specific uses to which Medicaid money is applied is the reimbursement of certain health-related facilities ("providers") for costs incurred by them in servicing the medical needs of individuals qualified to receive assistance under the program ("recipients").

 New York State participates in the Medicaid program. Nightingale participates in the program as a provider and is party to a contractual agreement with the State, known as a Provider Agreement, which together with the federal statute and regulations sets the terms of the relationship between the State and Nightingale. Nightingale, in this action, has sought relief against the State on both contractual and statutory grounds.

 At the heart of plaintiff's complaint are two contentions which raise questions under the reimbursement portions of the statute and Provider Agreement. First, plaintiff complains that the State, in contravention of its statutory and contractual duties, has left it to bear the cost of the residual liabilities that arise when a recipient of Medicaid benefits, who is also personally liable for part of the cost of medical services, fails to make good on this debt. As a corollary to this claim, plaintiff asserts that the State has left it with the burden and cost of collecting these obligations. Second, plaintiff contends that both the City and State defendants have wrongfully refused to pay on duly submitted bills for services it provided to qualifying Medicaid recipients.

 Now before me is the motion of the State defendant to dismiss this action, in whole or in part. It contends (1) that subject matter jurisdiction is lacking; (2) that the Eleventh Amendment prohibits federal district courts from taking jurisdiction of so much of plaintiff's action as seeks the retroactive payment of state funds, e.g., Edelman v. Jordan, 415 U.S. 651, 39 L. Ed. 2d 662, 94 S. Ct. 1347 (1974); and (3) that even if federal subject matter jurisdiction attaches, plaintiff has failed to state a claim.

 Plaintiff's complaint raises complex questions of federal statutory interpretation. Plaintiff, in sum, is seeking a declaration from the Court to the effect that the State defendant is not administering its Medicaid program in conformity with the guidelines set forth by the Medicaid statute, supra. Having raised issues pursuant to that statute, the Supremacy Clause of the United States Constitution, and § 1983, plaintiff's federal claims have jurisdictional basis under 28 U.S.C. § 1343. Cf. Seneca Nursing Home v. Kansas State Board of Social Welfare, 490 F.2d 1324 (10th Cir. 1974) at 1328 (wherein the Court of Appeals considered whether jurisdiction lay to hear an analogous question of law and concluded that the "claims of conflict between the Kansas [State Plan] and the federal statutes... are not so wholly insubstantial that federal jurisdiction does not exist.")

 Jurisdiction of plaintiff's complaint is barred to the extent that the Eleventh Amendment prohibits the prosecution of suits seeking the retroactive payment of state funds in the federal courts. Edelman v. Jordan, supra.

 Upon this record, however, it is unclear whether the State will be ultimately liable for total, partial, or any reimbursement or whether such reimbursement is, in fact, chargeable to federal or city funds. Therefore, the State's motion to dismiss on Eleventh Amendment grounds is denied at this time without prejudice to its renewal at a later time upon a more complete record.

 Turning to the substantive claims, I find that Nightingale has adequately pleaded claims for relief. The State first contests the so-called N.A.M.I. reimbursement procedure. Certain recipients of Medicaid, although eligible for some assistance under the program, also have financial assets of their own. These assets have been termed Net Available Monthly Income ("N.A.M.I."). Recipients with N.A.M.I. are required by Medicaid to bear part of the cost of the medical services they receive. At issue here is whether the State should be responsible for collecting N.A.M.I. and bearing the loss for uncollected N.A.M.I. or whether the providers should bear those burdens.

 New York has not always dealt with the N.A.M.I. question in the way that it does today. Between July 1, 1976 and July 2, 1978, the State and its providers, including Nightingale, treated N.A.M.I. collection in the following manner. The State imposed the initial collection burden on providers but, where a provider was unable to collect the funds due, the State permitted the provider to resubmit its bill and the State then reimbursed the provider for uncollected N.A.M.I. Thus, for that two-year period, the State acted as a guarantor.

 On or about July 2, 1979, however, the State changed its procedures. It informed providers, including Nightingale, that they would no longer be reimbursed for uncollected N.A.M.I. Further, the State announced that this new policy would be retroactive to June, 1978 and that it would also apply to any unpaid bills for services rendered prior to that date. Since June, 1978 the State has continued to deduct an amount equal to recipients' N.A.M.I. from reimbursements paid to Nightingale. In those instances where Nightingale has been unable to collect its N.A.M.I., the State has refused and continues to refuse to reimburse it.

 The State's motion on the N.A.M.I. issue, therefore, poses the following dispute. On the one hand, Nightingale claims that the Medicaid statute requires that providers be reimbursed for their services on a cost-related basis, that is, that the State pay providers for the reasonable expenses incurred to provide care. On the other hand, the State contends that the Medicaid statute either calls for reimbursement on the basis of recipients' means or is silent on this aspect of the program and leaves to the State the determination of who is to bear the burden of collecting N.A.M.I. Because I find that ...

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