over $ 60,000,000 in Medicaid reimbursement and $ 3,120,894 in Medicare part B payments. See Defendants' Statement Pursuant to Civil Rule 3(g) of the Material Facts Which are Not in Dispute ("Defts. Rule 3(g) Stmt.") PP 3, 7. The DSS' first audit involved the rate years of 1986 and 1987, and set the amount of recoupment at $ 806,622. See Pltf's Rule 3(g) Stmt. PP 43-45. The DSS' second audit involved the 1988 rate year, and set the amount of recoupment at $ 722,076. Id. P 46. The difference between the full Medicare part B amount, $ 3,120,894, and the total recoupment sought for all three years, $ 1,528,738, had already been carved out of Jewish Home's Medicaid rate. See Defts. Rule 3(g) Stmt. P 10.
Pursuant to 18 N.Y.C.R.R. § 519.4, Jewish Home requested a hearing to contest the audits, which was held on seven separate days, commencing on July 27, 1992, and concluding on March 29, 1994. See Pltf's Rule 3(g) Stmt. P 47; Decision After Hearing ("Decision"), attached as Exh. A to Plaintiff's Notice of Motion for Summary Judgment dated February 12, 1996. On March 6, 1995, a DSS administrative law judge ("ALJ") upheld the actions taken by the DSS and the new audit methodology. See Decision at 25-26. The ALJ observed that the direct costs of providing the services in dispute were provided for in the computation of the Medicaid rate for Jewish Home. Id. at 11. "All that matters is whether a Medicaid payment is received; the relationship of the amount of the payment to the cost of the service is irrelevant. None of the statutes and regulations concerning these rules create an exception for a facility for which the physician or ancillary service component of its Medicaid rate is less than the cost of providing the service." Id.
On July 10, 1995, Jewish Home commenced the instant action seeking a judgment declaring that (i) the DSS' new Part B audit methodology, as developed and applied to Jewish Home, and the Decision, violate (a) the federal Medicare Act; (b) the due process and equal protection clauses of the United States Constitution; (c) the New York State Constitution, Administrative Procedure Act §§ 202 and 203, Executive Law § 102, the NYSDOH's regulations, and common law; (ii) declaring null and void and without force and effect the DSS' new Part B audit methodology and the Decision; (iii) enjoining the DSS from utilizing the new Part B audit methodology in any pending or future Part B audits of Jewish Home; (iv) enjoining defendants from recouping Jewish Home's Medicare Part B receipts pursuant to the new Part B audit methodology; and (v) granting Jewish Home reasonable attorneys' fees and such other relief as the Court deems just.
Pursuant to Federal Rule of Civil Procedure 56(c), Jewish Home moves for summary judgment on the grounds that (1) the current DSS audit methodology violates the Medicare Act and contravenes the NYSDOH's reimbursement regulations; (2) the "payment in full" and the "payor of last resort" principles do not justify the DSS' recoupment of Jewish Home's Medicare Part B income; (3) the exemption of some nursing homes from the DSS' audit methodology violates the equal protection and due process clauses of the U.S. Constitution; and (4) the DSS audit methodology violates the New York State Constitution and New York's Administrative Procedure Act.
Defendants cross-move for summary judgment on the grounds that defendant Woodworth was not involved in the acts being challenged; that Jewish Home's Medicare Part B receipts are not insulated from Medicaid recoupment; that there is no merit to Jewish Home's equal protection and due process claims; that Jewish Home's pendent state claims should be dismissed together with the federal claims; and that Jewish Home's state claims lack merit.
Pursuant to Federal Rule of Civil Procedure 56(c), summary judgment is appropriate where "there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56 (c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-52, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). In considering a moving party's motion for summary judgment, the Court views all facts and construes all rational inferences derived therefrom in the light most favorable to the non-moving party. See United States v. Diebold, Inc., 369 U.S. 654, 655, 8 L. Ed. 2d 176, 82 S. Ct. 993 (1962). In this case, summary judgment must be granted on Jewish Home's claim that the DSS' audit methodology violates the Medicare Act.
In New York City Health and Hospitals v. Perales, 954 F.2d 854, 860 (2d Cir.), cert. denied, 506 U.S. 972, 121 L. Ed. 2d 369, 113 S. Ct. 461 (1992), the Second Circuit invalidated a regulation by which New York State would not pay its Medicare Part B cost-sharing under its buy-in arrangement with the federal government except when the 80% Medicare reimbursement share was less than the Medicaid rate. The Second Circuit stated that the regulation, by deeming dual eligibles to be primarily Medicaid rather than Medicare patients, prevented health care providers from collecting their reasonable costs or charges, and as a result, was fundamentally at odds with Congress' vision in enacting the Medicare Act. Id. at 859. "As we hold today, a Medicare provider need not be satisfied with inadequate payment, i.e., less than reasonable costs or charges, even when that provider is treating a Medicare patient who happens also to be poor." Id. at 860.
In the instant action, defendants attempt to distinguish Health and Hospitals by arguing that the court never addressed whether a provider is entitled to both Medicare Part B and 100% Medicaid reimbursement for dual eligibles. Defendants further argue that Health and Hospitals never stated or suggested that Medicaid's "payor of last resort" and "payment in full" principles do not apply to Medicare Part B.
Defendants arguments are without merit. In James Square Nursing Home, Inc. v. Wing, 897 F. Supp. 682 (N.D.N.Y. 1995), aff'd, 84 F.3d 591 (2d Cir.), cert. denied, 136 L. Ed. 2d 252, 117 S. Ct. 360 (1996), a district court annulled the same DSS Part B audit methodology involved in the instant case. There, the court rejected the DSS' rationale that New York State has the prerogative to recoup all Medicare part B receipts under the Medicaid principles of "payor of last resort" and "payment in full." In accord with Health and Hospitals, the court held that dual eligible patients are primarily Medicare patients and a provider is entitled to receive the full Medicare rate for providing ancillary services to those patients. Id. at 686-87. After the parties had appeared for Oral Argument on the instant motions, the Second Circuit affirmed that decision for substantially the reasons given by the district court, and the Supreme Court denied certiorari. See James Square Nursing Home, Inc. v. Wing, 84 F.3d 591 (2d Cir. 1996); Wing v. James Square Nursing Home, Inc., 136 L. Ed. 2d 252, 117 S. Ct. 360 (1996).
This Court finds the reasoning articulated in both Health and Hospitals and James Square dispositive. Jewish Home does not dispute defendants' right to be subrogated to that portion of the payments that reflects what amounts to double coverage. See Transcript of Oral Argument dated April 12, 1996, at 3. However, the DSS may not, through its audit methodology, deprive Jewish Home from collecting 100% of its reasonable costs and services, as calculated under Medicare. Because the Court rejects defendants' argument that the Medicaid rate constitutes payment in full so as to preclude collection of costs and expenses under the Medicare Act, summary judgment must be granted for Jewish Home on that ground.
Defendants argue that defendant Woodworth is separately entitled to summary judgment because she was not involved in the DSS' acts or the Hearing. In its complaint, Jewish Home alleges that Woodworth, as Director of the Budget of the State of New York, is responsible for approving the Medicaid reimbursement rates determined and certified to her by the Commissioner of Health. Complaint P 10. However, Jewish Home, in the instant case, does not challenge those actions. Nor does Jewish Home discuss how defendant Woodworth was involved in the DSS' March 6, 1995 Decision. Indeed, Jewish Home did not respond to defendants' argument addressed to this issue in its Memorandum of Law in Opposition to Defendants' Cross-Motion for Summary Judgment or at Oral Argument. Therefore, the action must be dismissed as against defendant Woodworth.
The Court need not reach Jewish Home's other arguments that the DSS' new Part B audit methodology violates the due process and equal protection clauses of the United States Constitution, the New York Constitution, or New York statutory and common law.
For the reasons set forth above, Jewish Home's motion for summary judgment is granted against defendant Wing and denied against defendant Woodworth, defendant Woodworth's cross-motion for summary judgment against Jewish Home is granted, and defendant Wing's cross-motion for summary judgment against Jewish Home is denied. The Court declares the DSS' new Part B audit methodology, as developed and applied to Jewish Home, and the Decision, violative of the Medicare Act, and therefore null and void and without force and effect. The DSS is enjoined from utilizing the new Part B methodology in any pending of future Part B audits of Jewish Home. Defendant Wing is enjoined from recouping Jewish Home's Medicare Part B receipts pursuant to the new Part B audit methodology. The Court denies Jewish Home's request for attorneys' fees pursuant to 42 U.S.C. § 1988. The Clerk of Court is directed to enter judgment accordingly and close the above-captioned action.
It is SO ORDERED.
DATED: New York, New York
February 11, 1997
John E. Sprizzo
United States District Judge