New York Hospital v. Krauskopf

Four orders, Supreme Court, New York County (I. Rubin, J.), entered September 29, 1982, October 4, 1982 and October 6, 1982, denying defendants-appellants’ motions to dismiss the complaints, are unanimously modified, on the law, to the extent that the motions of defendant-appellant Barbara Blum, as Commissioner of the Department of Social Services of the State of New York, to dismiss the complaints as to her are granted on the ground of failure to state a cause of action against said defendant, and the orders are otherwise affirmed, without costs. The complaints fail to state a cause of action against the State commissioner. They fail to allege that the State commissioner has failed to perform any duty imposed upon her. It is clear that at a minimum the action is premature as against the State commissioner. There is further a serious question whether, insofar as the action purports to be directed against the State commissioner, it is really one against the State for payment of a sum of money, as to which only the Court of Claims would have jurisdiction. There appears to be no statutory basis for requiring plaintiff, as defendants suggest, to first make a diligent effort to obtain from the patients a power of attorney to prosecute the claim in an administrative fair hearing procedure. In any event, such a proceeding might vindicate or determine the patients’ claims but would not be a proceeding to determine plaintiff’s independent claim. Plaintiff hospital is a provider of medical services to patients under the State’s medical assistance program. It has rendered medical assistance to certain patients who have thereafter been declared to be ineligible for medical assistance benefits by the New York City Department of Social Services. The patients have not chosen to ask for administrative review of this determination by the “fair hearing” procedure. Plaintiff contends it has an independent right to recover for those services from the appropriate public parties or agencies on the theory that as provider of medical services it has a contractual relationship with the public authorities under which it is to be paid for those medical services by the public authorities. If it has such a right, there should be some legal remedy for enforcing it. The case presents difficult problems as to the appropriate procedure for determination and enforcement of this right. In Matter of Peninsula Gen. Nursing Home v Sugarman (44 NY2d 909, revg 57 AD2d 268, 277, on dissenting opn of Lane, J.), the Court of Appeals held that providers of services under the Medicaid program do not have a right to the “fair hearing” procedure to determine the liability of the public authority to reimburse the provider for such services. In the course of his opinion, Justice Lane said (at p 280): “If, as in the case at bar, it develops that services have been provided to one deemed ineligible for benefits, a cause of action may be spelled out against that ineligible or even against the governmental agency designated to declare 668 ineligibility. However, vindication of that claim, available as it is in a plenary suit, need not be afforded through the medium of administrative review.” This decision in turn has given rise to a number of procedural problems, e.g., is some form of administrative relief (other than the “fair hearing” procedure) available, perhaps reviewable in a CPLR article 78 proceeding? To the extent that the remedy is by plenary suit, what kind of plenary suit? Does it mean anything other than an ordinary action at law for reasonable value of services rendered? Plaintiff has chosen to cast the present action in the form of a declaratory judgment; it is difficult to see the difference between an action for a declaratory judgment to direct the defendants to approve and process the plaintiff’s claim on the one hand, and an article 78 proceeding requesting the same relief on the other hand. There are the usual problems arising from having two separate judicial or administrative proceedings involving the same questions of fact or law. Suppose, for example, the agency determines, perhaps through full administrative review and “fair hearing,” and perhaps judicial review in an article 78 proceeding brought by the patient, that the patient is ineligible for medical assistance, can the hospital, or other provider, now bring an independent action in which the same issues will be involved? And shall that action be governed by the six-year Statute of Limitations applicable to actions on a contract rather than the four-month limitation applicable to proceedings under article 78? At the time that the Peninsula case was decided, local agencies were responsible for making payments to providers. In 1978 however, the responsibility for making payments was vested in the State Department of Social Services (Social Services Law, § 367-b, subd 2). The statute became effective as to New York City on June 1, 1978. (18 NYCRR 540.6 [b] [1] [iv].) But the determination of whether the patient to whom the services were rendered was eligible for benefits (a fact upon which the provider’s right would depend) remained with the local agency, subject to a fair hearing review by the State commissioner. As to responsibility for payment, can the State or its officers be sued otherwise than in the Court of Claims? Must the hospital pursue a divided procedure to enforce its claim, first against the city, and if successful against it (in determining in the litigation against the city the preliminary question of eligibility), then against the State, perhaps in the Court of Claims? All these procedural complexities require and will no doubt receive authoritative resolution by the Court of Appeals or the Legislature. For the present, adhering to our role as an intermediate appellate court, we find it sufficient to say that in this action at the present stage the State commissioner cannot be sued. Concur — Sandler, J. P., Silverman, Fein and Milonas, JJ.