Consumer Directed Choices, Inc. v. New York State Office of Medicaid Inspector General

Stein, J. Petitioner, a not-for-profit corporation, is a provider for the Consumer Directed Personal Assistance Program handling, among other things, payroll for persons with chronic illnesses or physical disabilities — the consumer. Petitioner also acts as a fiscal intermediary between the consumer and the Medicaid program. Petitioner’s revenues are derived from Medicaid payments in connection with the Consumer Directed Personal Assistance Program, which are based upon rates set by the Department of Health (hereinafter DOH). Respondent is an agency within DOH, charged with “detecting and combating Medicaid fraud and abuse and maximizing] the recoupment of improper Medicaid payments” (Public Health Law § 30). In April 2010, the Medicaid Fraud Control Unit (hereinafter MFCU) of the office of the Attorney General requested that respondent withhold 20% of the Medicaid payments requested by petitioner on the basis that MFCU was conducting a fraud investigation regarding claims allegedly resulting in a substantial overpayment to petitioner. Accordingly, respondent thereafter notified petitioner that 20% of current and future payments would be withheld on a temporary basis until such time as an amount reasonably calculated to satisfy the overpayment was recovered. Petitioner objected to the withholding, asserting that there was no ongoing investigation, and submitted information supporting its contention that any investigation was meritless. Respondent forwarded the information to MFCU. In response, MFCU confirmed the existence of the investigation, which indicated petitioner’s consistent upcoding of its Medicaid billings, and requested that the withholding be reduced to 10%. Respondent then implemented that request. Petitioner again objected and commenced the instant proceeding seeking to nullify the temporary withholding and to obtain reimbursement of monies [1272] withheld.1 Supreme Court dismissed the petition and this appeal ensued. We affirm. Initially, we reject petitioner’s contention that respondent’s notices of withholding were defective. The notices contained all of the required information including, among other things, a proper description of the reason for the withholding, citation of the proper regulatory basis for the withholding and the duration of the hold, and advised petitioner of its right to submit opposition to the withholding (see 18 NYCRR 518.7). Turning to the merits, petitioner’s assertion that respondent’s actions required reliable factual evidence to support MFCU’s basis for investigating petitioner is unpersuasive. DOH is entitled to withhold current and future payments from Medicaid providers “ ‘when it has reliable information that a provider is involved in fraud or willful misrepresentation involving claims submitted to the program, or has abused the program or committed an unacceptable practice’ ” (Matter of Kasin v Novella, 303 AD2d 910, 912 [2003], quoting 18 NYCRR 518.7 [a]). Reliable information “may consist of. . . information from a [s]tate investigating or prosecutorial agency or other law enforcement agency of an ongoing investigation of a provider for fraud” (18 NYCRR 518.7 [a]). Here, payments were withheld on the basis of a letter from MFCU that it was conducting a fraud investigation of petitioner and had determined that petitioner was “consistently upcoding its Medicaid billings,” a purported violation of 18 NYCRR 515.2 (b) (1) (i) (b) (see 18 NYCRR 518.7 [a]; compare Matter of Kasin v Novella, 303 AD2d at 913). According DOH’s interpretation of its own regulations the considerable deference to which it is entitled (see Matter of Deanna W. [Rosenblut], 76 AD3d 1096, 1097 [2010]; Matter of Cedar Manor Nursing Home v Novello, 63 AD3d 833, 834 [2009]), we do not agree with petitioner’s contention that respondent’s reliance on MFCU’s withhold request — without consideration of factual information from either MFCU or petitioner regarding the merits of MFCU’s investigation — was irrational, arbitrary or capricious. Moreover, to the extent that petitioner argues on appeal that respondent failed to comply with applicable federal regulations, the regulation in effect at the time MFCU requested respondent to withhold payments from petitioner did not require any independent investigation by respondent (compare former 42 CFR [1273] 455.23 [a] [1987] with 42 CFR 455.23 [2011];2 see also 42 CFR 405.902 [as defines “reliable evidence”]). Thus, although there is no indication on the record before us that respondent received specific factual information from MFCU or that respondent considered the merits of the information provided by petitioner, MFCU’s statement to respondent that it was investigating certain fraudulent activity on the part of petitioner was sufficient under the then-existing regulations to support respondent’s withholding of payments from petitioner in the first instance. Moreover, since the basis of the withholding was information from MFCU regarding its investigation, it was not necessary for respondent to do more with the information provided by petitioner in opposition to the withholding than to forward such information to MFCU for its consideration and determination whether to alter its withholding request. To hold otherwise would be to place upon respondent an obligation to independently investigate the alleged fraud, which was not required by the applicable regulations at that time. In our view, respondent properly implemented the regulatory procedures for withholding payment of Medicaid reimbursement claims,2 3 to “adequately safeguard the private interests of [providers], and minimize the risk of erroneous deprivation while serving the substantial government interest in safeguarding the integrity of the Medicaid program” (Matter of Medicon Diagnostic Labs. v Perales, 74 NY2d 539, 547 [1989]). Inasmuch as petitioner failed to demonstrate that respondent’s withholding was irrational, arbitrary or capricious, Supreme Court properly dismissed the petition. Petitioner’s remaining contentions have been considered and are unavailing. Mercure, A.EJ., and Egan Jr., J., concur. Footnotes [1] Respondent has voluntarily suspended the withholding and has escrowed the monies collected pending the determination of this appeal. As of May 2011, about $1.5 million had been withheld. [2] In contrast, the current version of this regulation, which became effective in March 2011, requires the withholding agency to “determine[ ] there is a credible allegation of fraud for which an investigation is pending” (42 CFR 455.23 [a] [1] [2011] [emphasis added]). The comments published in the Federal Register indicate that this requires some independent review of the evidence of fraud (see 76 Fed Reg 5862, 5936 [2011], codified at 42 CFR part 1007). [3] We recognize that our analysis could well be different under the current regulations, but must review respondent’s actions under the regulations then in place. We also note that any hardship to petitioner resulting from the duration of the withholding is best addressed by a prompt resolution of MFCU’s investigation and/or an appropriate proceeding to compel its completion.