New York State Court of Claims

New York State Court of Claims

CONCOURSE v. THE STATE OF NEW YORK, #2002-015-293, Claim No. 101181, Motion Nos. M-65288, CM-65467


Synopsis


Claimant's summary judgment motion seeking a determination of liability on the part of the State for interest on delayed payment of Medicaid funds denied. Defendant's cross-motion to dismiss on grounds that interest is not recoverable upon late paid Medicaid funds granted.

Case Information

UID:
2002-015-293
Claimant(s):
CONCOURSE NURSING HOME The caption of this claim was amended by sua sponte order of the Court filed January 19, 2000 to reflect the only properly named defendant.
Claimant short name:
CONCOURSE
Footnote (claimant name) :

Defendant(s):
THE STATE OF NEW YORK
Footnote (defendant name) :
The caption of this claim was amended by sua sponte order of the Court filed January 19, 2000 to reflect the only properly named defendant.
Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
101181
Motion number(s):
M-65288
Cross-motion number(s):
CM-65467
Judge:
FRANCIS T. COLLINS
Claimant's attorney:
Neiman Ginsburg & Mairanz, P.C.By: Marvin Neiman, Esquire
Defendant's attorney:
Honorable Eliot Spitzer, Attorney General
By: Arthur Patane, EsquireAssistant Attorney General
Third-party defendant's attorney:

Signature date:
September 27, 2002
City:
Saratoga Springs
Comments:

Official citation:

Appellate results:

See also (multicaptioned case)



Decision


Claimant's motion (M-65288) for summary judgment pursuant to CPLR 3212 seeking a determination of liability against the defendant for interest due to the delayed payment of $3.3 million in Medicaid funds resulting from the application of an incorrect statistical rate by the defendant is denied. Defendant's cross-motion for summary judgment is granted and the claim is dismissed. The claim at issue here, denominated a "first amended claim" (Claimant's Exhibit A), appears to assert three causes of action: (1) damages stemming from breach of a provider agreement and the defendant's refusal to comply with an October 1989 letter agreement; (2) interest on monies allegedly due following the alleged breach of the provider agreement and the parties' October 1989 letter agreement; and (3) an alleged violation of claimant's rights under federal and state Medicaid laws. In its Wherefore clause the first amended claim also seeks equitable relief, viz., an accounting or alternatively a court order directing specific performance as well as an award of interest, reasonable attorneys fees and costs and disbursements of this action.

Critical to an understanding of the claim are certain facts which are not in dispute. Concourse Nursing Home was a sole proprietorship operated by Marvin Neiman and licensed by the State of New York to operate a 240 bed nursing home or residential health care facility located at 1072 Grand Concourse, Bronx, New York. According to claimant the New York State Department of Social Services (DSS) was the single state agency responsible for the operation of the state Medicaid Program pursuant to 42 USC § 1396 et seq. until 1999, at which time its function in this regard was merged into and assumed by the New York State Department of Health (DOH). Because some of the facts underlying this claim preceded the merger both DSS and DOH officials were involved. References made hereafter to the State should be deemed to refer to whichever of the two agencies were empowered to act at the time of the determination at issue. The state's Medicaid Program was developed pursuant to Title XIX of the federal Social Security Act (42 USC § 1396 et seq.) and operates as a joint federal and state Medicaid assistance program for persons found eligible for such assistance. In part the program provides for payment to residential health care facilities by state and local governments for services rendered to eligible persons. To obtain federal funds each participating state must operate its Medicaid program in accordance with a state plan meeting the requirements set forth in 42 USC § 1396a. The State Hospital and Planning Council, a body within DOH, adopts and amends rules and regulations governing the establishment by DOH of schedules of rates, payments and reimbursements for eligible services.

Reimbursement rates for services rendered by nursing homes to Medicaid eligible residents are paid at rates established by DOH and approved by the Director of the Budget (formerly established by the Commissioner of DSS or his agents) pursuant to Public Health Law § 2807 and are paid to providers who have established their eligibility to receive payment by the execution of a Medicaid Provider Agreement (see sample agreement, Claimant's Exhibit E). It is not disputed that claimant executed the necessary provider agreements during the time periods at issue here and was eligible for Medicaid reimbursement.

Some history of claimant's pursuit of the Medicaid reimbursement at issue in this case is necessary. Following a lengthy strike by workers at claimant's nursing home a labor agreement was signed in 1981 between the workers' employer (an entity other than claimant, hereinafter the "employer") and the workers' union (Local 144 Hotel, Hospital & Allied Service Employees Union hereinafter the "union"). At that time the State had a policy which provided reimbursement for increased Medicaid costs occasioned by union contracts and had specifically agreed to reimburse residential health care facilities for such costs through a memorandum of agreement with various trade associations of which claimant was a member. The labor agreement between the union and the employer provided that its increased salary provision would become effective only if and when DOH implemented the increases and paid the contractually increased amounts to the claimant. DOH allegedly refused to pay the increases for non-union staff at claimant's facility (alleged to have been a large number of employees) and the union refused claimant's proposal to pay the wage parity monies received from DOH to the employer corporation which would then allocate the monies among claimant's union and non-union workers. The union thereafter commenced an arbitration proceeding which resulted in an award against the employer of approximately 12 million dollars for the period 1981-1987. Thereafter the union commenced an action in the United States District Court for the Southern District of New York against both the employer and the claimant herein. The District Court confirmed the arbitration award against the employer but denied such relief as against the claimant.

It is alleged that during this time DOH suspended consideration of several of claimant's Medicaid rate appeals. DOH's suspension of those rate appeals plus the reversal of an accrual on Concourse's cost report reduced Medicaid rates paid to claimant during the 1986-1991 period.

Marvin Neiman, claimant's sole proprietor, prepared a letter agreement dated October 6, 1989 (Claimant's Exhibit F) which was submitted to and accepted by William J. Gormley, Deputy Director of the Division of Health Facility Planning within DOH. Pursuant to that letter agreement DOH agreed to process claimant's rate appeals which were unrelated to the wage parity issue and which had been placed in pending or suspended status. DOH further agreed to restore the accrual previously eliminated from claimant's rate calculation. These agreed upon actions on behalf of DOH increased claimant's reimbursement rates by approximately 8.9 million dollars. Pursuant to the agreement claimant paid 7.1 million dollars of the amount received from DOH to the union to distribute to its members. In fact, claimant alleges that it ultimately paid 7.65 million dollars to resolve the dispute and that a total of 10.3 million dollars was paid to the union including amounts due for the intervening period.

As previously noted an appeal unrelated to the wage parity issue remained unresolved before DOH. According to claimant that appeal was "related to errors in the rate computation for claimant in connection with statistical issues for the proper adjustment factors for the application of the cost ceilings ('rate calculation statistical error monies')" (see Neiman affidavit, para 22). While it is not clear to the Court exactly what this language means, it appears that DOH acknowledged the existence of an unresolved appeal by Concourse which admittedly had a Medicaid impact of 3.3 million dollars and that such appeal was addressed at a meeting between Concourse representatives and DOH staff on April 16, 1991 (see Claimant's Exhibit G).

For reasons which are not immediately apparent but which claimant attributes to union displeasure (see Neiman affidavit, para 23) the 3.3 million dollars in Medicaid reimbursement was not paid to claimant. Claimant thereafter sought a Court order directing the payment from DOH in a Supreme Court action which was dismissed for lack of jurisdiction. That dismissal was affirmed by order of the Appellate Division, First Department, entered March 9, 1999 (Exhibit C). It appears that the Supreme Court's dismissal and the affirmance by the Appellate Division were based upon the fact that the Court of Claims has exclusive jurisdiction to hear and decide causes of action against DOH sounding in contract. The Appellate Division decision did not address the issue of interest payable upon delayed Medicaid fund reimbursement payments (see Exhibit C).

In July or August 1996 claimant received the 3.3 million dollars in Medicaid reimbursement which had been contested since 1991. Claimant's recovery was short lived, however, since it was informed that the wage parity monies previously received by Concourse had been incorrectly calculated. 2.1 million dollars of the 3.3 million paid to claimant in 1996 was thereafter recouped from monies payable to Concourse on subsequent Medicaid reimbursement invoices. Concourse disputed the State's decision to recalculate the wage parity monies in an administrative appeal which was decided in favor of Concourse and the 2.1 million dollars which had been recouped was paid to claimant pursuant to a stipulation of settlement dated October 30, 2000 (Claimant's Exhibit J).

Claimant's affidavit in support of the motion makes clear that although originally fashioned as a claim for breach of contract the claim has "reduced itself to a claim only for interest on the State's delayed payment of the 3.3 million" (Neiman affidavit, paragraph 32), monies which Mr. Neiman identifies as "related to the incorrect statistical rate" (Neiman affidavit, paragraph 31). This proposition is made evident in paragraphs 7[1] and 17[2] of the amended claim. The claim thus distills to claimant's assertion that it is entitled to $2,718,606.25 in interest based upon the State's delay in paying Medicaid reimbursement monies due the claimant as the result of errors in calculating and applying inappropriate statistical rates (see, Neiman affidavit, para 31; Kaufman affidavit, para 4-9).

Binding precedent prohibits the award of interest where it is alleged that Medicaid reimbursement monies have been wrongfully withheld. As the Appellate Division, Third Department noted more than twenty years ago in Demisay v Whalen, 84 AD2d 902, 903, "[w]hile it seems equitable that the position taken by plaintiff should be affirmed and interest paid, there is no statute authorizing payment of interest in this type of action, nor can any be inferred. It is for the Legislature to statutorily authorize such payments if, in its wisdom, it so ordains." It is equally settled that interest is unavailable where Medicaid rates are required to be recalculated (and monies paid) due to errors or omissions affecting the establishment of a reimbursement rate (see, Trustees of Masonic Hall & Asylum Fund, Matter of, v Commissioner of New York State Dept. of Health, 193 AD2d 249, appeal dismissed 83 NY2d 802; see also, Rye Psychiatric Hosp. Ctr., Matter of v Surles, 218 AD2d 853, lv to appeal denied 87 NY2d 803, cert denied 517 US 1233). The same is true regarding Medicaid claims given pending status which were extended beyond the time constraints fixed by regulation for resolution of such claims (see, Ostrow, Matter of, v Bane, 213 AD2d 651).

Claimant has not demonstrated on this motion that there is any statutory basis under which interest is recoverable upon the delayed payment of Medicaid reimbursement funds as alleged herein. Claimant seeks to rely upon CPLR § 5001(a) which in relevant part provides:
(a) Actions in which recoverable. Interest shall be recovered upon a sum awarded because of a breach of performance of a contract, or because of an act or omission depriving or otherwise interfering with title to, or possession or enjoyment of, property, except that in an action of an equitable nature, interest and the rate and date from which it shall be computed shall be in the court's discretion.

Section 5001 (a) is inapplicable under the current facts of this case. Although originally asserting a cause of action for breach of the October, 1989 agreement between the parties, the record reveals and the claimant confirms that all amounts allegedly due the claimant thereunder have been paid pursuant to the October 30, 2000 stipulation of settlement. There is, therefore, no currently pending underlying contract cause of action upon which a sum may be awarded and as to which interest may be payable pursuant to CPLR § 5001(a). Section 5001 does not create a cause of action for interest but merely establishes the circumstances wherein interest may be paid and the manner in which it shall be computed.

Absent statutory authorization the instant claim for interest on Medicaid reimbursement funds is without merit requiring that the defendant's cross-motion be granted and the claim be dismissed.

September 27, 2002
Saratoga Springs, New York

HON. FRANCIS T. COLLINS
Judge of the Court of Claims


The Court considered the following papers:
  1. Notice of motion dated May 28, 2002;
  2. Affidavit of Marvin Neiman "affirmed" May 28, 2002 with exhibits;
  3. Affidavit of Aaron Kaufman "affirmed" May 28, 2002 with exhibits;
  4. Notice of cross-motion dated July 3, 2002;
  5. Affidavit of Arthur Patane sworn to July 3, 2002 with exhibits;
  6. Affidavit of John Tighe sworn to July 3, 2002 with exhibit;
  7. Reply affidavit of Marvin Neiman "affirmed" July 17, 2002;
  8. Reply affidavit of John Tighe sworn to August 5, 2002 with exhibit.

[1]Paragraph 7 reads: "Because of this recent payment which paid all the principal of the contracts, the Claim is now for an accounting of the performance of the State under the provider agreement contract and the October 1989 contract and for interest on the delayed payments and for related damages."
[2]Paragraph 17 reads: "Because of the recent payment the amount of damages is interest on $3.3 million for the delay in payment from a date to be determined by the Court but in no instance a date later than July 1991 until the $3.3 million in monies were paid by DOH, in or about June 1997 and thereafter from the date the $2.2 million was recovered by DSS in or about July 1997 and until it was paid in January 2001."