Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.


August 27, 1985

JACK FRIEDMAN, et al, Plaintiffs, against CESAR PERALES, et al., Defendants

The opinion of the court was delivered by: GAGLIARDI



Plaintiffs, doing business as Franklin Nursing Home ("Franklin"), have brought these two consolidated actions alleging that defendants, state officials administering the New York Medicaid program, violated federal and state law in setting the 1979, 1980 and 1981 reimbursement rates of Franklin. *fn1" Plaintiffs seek an order directing defendants to reimburse Franklin for the 1979-1981 period according to a corrected rate of reimbursement. Plaintiffs also request declaratory and injunctive relief against the continued use of rate ceilings with regard to certain items of reimbursement. Each side has moved for summary judgment pursuant to Rule 56, Fed. R. Civ. P.


 Pursuant to a stipulation of facts entered into by the parties, the following facts are undisputed except where otherwise noted. Plaintiffs are the licensed operators of Franklin, a 320 bed proprietary residential health care facility (RHCF) in Flushing, New York, that began operations in April, 1974. At all relevant times, Franklin has participated in the Medicaid program as a provider reimbursed by federal and state funds for the costs of services to eligible patients pursuant to Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq. ("Title XIX").

 Pursuant to 42 U.S.C. § 1396a, a state must administer the Medicaid program according to a state plan that meets certain federal requirements. Under section 1396(a)(13), the state plan must provide for the reasonable payment of qualifying RHCF services. *fn2" The New York Department of Social Services has filed a set of regulations, 10 N.Y.C.R.R. § 86-2, with the Secretary of Health and Human Services as the state plan for the reimbursement of RHCFs. Franklin has received reimbursement for services rendered to eligible patients pursuant to its provider agreement and the approved rates of reimbursement under the state plan.

 Under New York's system of prospective reimbursement, the rates for a current year ("rate year") are based on the costs incurred by the RHCF during a previous year ("base year"). Such base year costs must be reported to the state by the RHCF in accordance with generally accepted accounting principles ("GAAP"). See section 86-2.4. The base year operating costs that are allowed by the state are "trended forward" to account for inflation between the base year and rate year. Base year fixed costs are not trended forward.

 Since rate year reimbursement is tied to costs incurred in the base year, the RHCF will not normally be reimbursed for the costs of new services that commence during the rate year. However, the RHCF may apply for a rate revision if the new costs represent a significant increase in total expenditures.

 In their complaints, filed in August 1982 and March 1983, plaintiffs challenge defendants' reimbursement decisions regarding (1) "start-up" costs, (2) accounting and reporting costs, (3) salary ceilings, (4) real property costs ceilings, and (5) moveable equipment costs ceilings.

 1. Start-up Costs

 From the date of its opening in April 1974, Franklin had a certified bed capacity of 320. The Department of Health ("DOH"), however, limited the number of new patients that Franklin could admit to its facility each day. *fn3" It was not until the end of 1974 that Franklin reached 99% occupancy; Franklin's average occupancy rate for its first rate year was about 68%.

 In its 1976 cost report, Franklin reported a $191,598 loss in 1974 from underutilization. Franklin subsequently sought reimbursement for amortization of the $191,598 expense over a 60-month period beginning in April, 1974. The DOH denied any reimbursement. *fn4" Plaintiffs claim, inter alia, that such denial violated Franklin's right to equal protection, since voluntary not-for-profit RHCFs under Public Health Law Article 28-A receive start-up cost reimbursement. *fn5"

 2. Accounting and Reporting Costs

 In 1978 the DOH notified RHCFs of extensive new accounting and reporting requirements and directed that the facilities substantially comply with the new requirements in 1980 and fully comply in 1981. In 1979 Franklin acquired a computer, under a lease-purchase agreement, for the purpose of complying with the new requirements. Franklin did not receive reimbursement in 1979 for the computer costs incurred in that year; rather, such costs were reimbursed according to the standard base year-rate year methodology. Franklin's ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.