Transitional Servs. of N.Y. for Long Is., Inc. v New York State Off. of Mental Health

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Transitional Servs. of N.Y. for Long Is., Inc. v New York State Off. of Mental Health 2019 NY Slip Op 33122(U) October 18, 2019 Supreme Court, Suffolk County Docket Number: 32928/2009 Judge: Sanford Neil Berland Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [* 1] - :rn~'~;,-~· ,~ ·I SHORT FQR~J!.R ~.\ . "l'{i •.. • . •.... ~ INDEX NO.: 32928/2009 .' • ..... ,...,.~..::.<..-;;·'l. } . ~~ 1 ~ ..__: __. SUPREME ~URT- STAT E OF NEW YORK PART 6- SUFFOLK COUNTY PRESENT: Hon. Sanford Neil Berland, A.J.S.C. TRANS ITIONAL SERVICES OF NEW YORK FOR LONG IS~AND. INC.. Petitioners, -aga instTHE NEW YORK STATE OFFICE OF MENTAL HEAL TH, MICHAEL HOGAN, Commissioner, MARTHA SCHAFER HA YES, Deputy Commissioner. and THE NEW YORK STATE DEPARTMENT OF HEALTH, ORIG. RETURN DATE: March 2, 2016 FINAL RETURN DATE: January 9, 2018 MOT. SEQ. #: 004-MD; CASEDISP PETITIONER'S ATTORNEY: ALAN POLSKY, ESQ. PO BOX 46 MEDFORD, NY 11763 RESPONDENTS' ATTORNEY: JOHN BELFORD IV. ESQ. ROOERT E. MORELLI, ESQ. NEW YORK STATE DEPT OF LAW 300 MOTOR PARKWAY, STE 230 HAUPPAUGE, NY 11788 Respondents. Upon reading and filing the follow ing papers in this action: (I) Order to Show Cause and Petition: (2) Notice of Amended Petition; (3) Verified Answer by Respondent; (4) Respondent's Return: (5) Affidavit in Opposition to Anicle 78 Petition by Respondent; (6) Affidavit of Bruno Laspina in Further Support of Petitioner's Peti1ion; and (7) Affirmation of Roy Breitenbach in Support of Petition. it is ORDERED that the Peti tion (motio n sequence #004) is hereby denied and the proceeding is dismissed. Petitioner, Transitio nal Services of New York For Long Island, Inc. c·TSLI'"). is a private, not-for-profit corporation that provides community-based residentia l and psychosocial rehabilitation services. housing and care to indi v iduals 'vvith mental illnesses. This is the fo urth proceeding that TSU has brought seeking to challenge the application to it of the .. Exempt Income Pol icy·· (the .. EIP.. ) that the New York State Office of Mental Health (..OM ff") employs to recoup a portion of the funding - equivalent to half of the so-called ··Medicaid-exempt income·' - that is received by entities that provide programs that are funded, licensed, regulated or otherwise overseen by OMH. By contracting w ith OMH in connection w ith the services they provide. those entities, including TS U , arc able, among other things, to receive a portion of their overall fundi ng through Medicaid, and they participate in a mandatory annual budget process [* 2] Transi\ional Services of New York. etc. v. NYS Office of Mental Health. et al. Index No. 3298-2009 Page 2 overseen by OMH. At least one purpose of the OMH budgeting process is to ensure that participating entities - which are eligible to receive funding from a number of public and private sources - have sufficient resources available to them during each fiscal year to carry on their programs. TSU maintains that by imposing a budgeting formula that assumes stated annual occupancy and collection rates - as high as 88% and 85%, respectively, in some years, lower in others - that is significantly lower than the occupancy rate that TSU actually experiences each year - approximately 99% - OMH deliberately underestimates TSLI's revenue for the year and. thus. creates an ostensibly artificial quantum of ·'Medicaid exempt income" for TSLI, thereby maximizing the amount of provider income OMH can recapture. In each of the fiscal years at issue in this proceeding - during which OMH required the use of this budgetary process - TSLl' s estimated and budgeted ··other source" income - that is, client fees. SSI, Medicaid reimbursement for services actually rendered. gifts and grants - was sufficient to meet TSLl's expected allowable annual operating expenses, and therefore TSU did not receive ''State aid" for its programs under the applicable State aid funding statute. MentaJ Hygiene Law §41.44. Because. in its view, the only legitimate purpose of recapturing exempt income is to allow the State to recover at least a portion of the State aid funding that the participating provider received but ultimately did not require to meet its budgeted annual operating expenses - thus rationalizing such recapturing as simply requiring the provider to disgorge a portion of the excess State aid it received - TSU maintai ns that as it received no State aid during the fiscal period that is at issue, utilizing a budgeting formula that applies a counter-factual occupancy and collection rate that deliberately understates TSU's anticipated Medicaid revenue and then, as a result of that understated estimate 1, requiring it to relinquish to OMH amounts that were properly billed to and In a letter dated July 13. 2009, OMH informed providers, among other things, that starting January l, 20 l 0 for upstate and Long Island providers (and July 1. 2010 for New York City 1 providers): 01 IM will be simplifying the process ... adjusting the budgeted models to more accurately reflect current occupancy levels. This will result in a lower Medicaid rate, offset by a change in OMH's policy allowing providers to retain I 00 percent of the Medicaid income above the budgeted model. This wi 11 ensure that providers receive the full fiscal benefit for increasing occupancy levels and also eliminate the need to track exempt income liabilities for accounting purposes. a longstanding concern expressed by many providers. In the same letter, OM! I also announced that it was "officially waiving all exempl income liabilities for the period 1996 through 2002" and that providers that had already paid those liabilities would have the amounts so paid credited against "future exempt income collections ... A few days later, in a Jetter dated July 16, 2009, OMH repeated. in summary form, the substance of its July 13, 2009 letter. infom1ed [* 3] Transitional Services of New York, etc. v. NYS Of'ficc of Mental Health, ct al. Index o. 3298-2009 Page 3 paid to it by 1edicaid. and not by OM! I - is fiscally unfair and irrational. beyond OM ! l' s stntutory authority and contrary to the terms of the contractual arrangement between TSU and OMH. and. therefore. arbitrary and capricious. The respondents disagree, arguing. among other things. that they are statutorily authorized to adopt and apply regulations that allow OMJ I to capture a portion of a regulated provider's overall or other revenue for any annual period in which the reimbursement the provider has actually recei ved in the form of Medicaid reimbursements exceeds the amount of Medicaid reimbursement OMH had estimated as a component of the provider's OMH-approved .. Gross Income et .. - or ·'G l ·· - budget for that annual period. One of the principal anomalies in the OMH budgetary process that was utilized during the period relevant to the current proceeding - which is highlighted by the rationale offered by th<.: respondents for allowing OMH to capture a portion of a regulated provider's ..excess .. or "exempt .. Medicaid income whether or not State aid has been granted in order to enable the pn.n ider to close a projected budgetary shortfall in the affected annual period. and which in large measure is the source of the dispute bet\\een the parties - is that a provider·s Medicaidrcimbursablc daily bed-rate for a given annual period is calculated by spreading the provider's projected applicable annual costs against the estimntcd occupancy and collect ion races for th<.: facility in question. Because elements of the provider's annual costs that arc factored into the daily bed rate calculation do not vary in direct proportion to the level of occupancy. an estimated occupancy rate that is lower than the occupancy rate that actually occurs yields a higher than actual dail y bed rate for purposes of Medicaid reimbursement. The result is that over the course o f the year, the provider bills to and collects from Medicaid an aggregate amount of Medicaid reimbursement that. together with the provider's revenue from other sources. including client foes. federal SSI payments and grants and gifts - yields a total amount of income that exceeds the provider's budgeted allowable costs. To the extent that this conservative budgeting methodology. by limiting the consequences of potential fiscal underperfonnance by the provider in a given budgetary period. can be viewed as serving the stated statutory goal o!' administering state aid to .. community residences for the mentally ill" according to 0\-11 I ··guidelines ... designed to enable the effccti\ e and cflicient operation of such residences . . . :· (Ml IL 4 I .44rc]). it is salutary. As discussed below. however. the same statute does not pem1it OM! I to provide state aid that exceeds a community residence's ·'net operating costs" {id.). * Prior to 1992, community residential programs for the mentally ill in New York did not receive Mctlicaid reimbursement, and OMI I provided state aid to fill in what would otherwise be providers of its planned three-year time line for the collection of ..exempt income.. for the period 2003 through 2008. and enclosl!d worksheets showing amounts due for 2003 and 2004 and credits for exempt income payments that had been made in prior years. [* 4] Transitional Services of New York, etc. v. NYS Office of Mental Ilea Ith. et al. · Index o. 3298-2009 Page 4 gaps in their funding. In 1992. OMH received approval from the federal goYemment to permit certain residential programs - in particular, those with fewer than 17 beds. the threshold at which residential facilities are deemed by the federal government to be "institutions for mental diseases" - to bill Medicaid fo r ..restorative services" provided to clients in community residential programs2. In 1995. when OMJ I first issued guidelines uimed at allowing it to recoup from qualified service providers an amount equal to 50 percent of each provider's Medicaid excmrt income. it relied upon the authority granted to the Commissioner of Menta l Health under Mental I lygicm: Law A rticle 41. apparently including what is now~ 4 I .44[cl, to "provide state ai<l to local governments and to voluntary agencies in an amount not to exceed one hundred percent or net operating costs of community residences for the mentally ill'" and the statute· s direction that " lt]he commissioner shall establish guidelines fo r determ ining the amount or state aid provided pursuant to this section," including guidelines "for retention and use of income exceeding the anticipated amount ... .''(Id.) (emphasis added). In 2002. OMH revised its rccoupment policy, announcing that the provider's retained 50 pcrcent share in one program would be applied to defray expenses beyond budget in another program without reducing the 50 percent share that OMH was entitled to recoup. Litigation followed. including. in 2004. the first proceeding filed by TSU. Transitional Servs. of N. Y. for long Is., lite. v. New York State Off. of Mental Health. Index No. 04-12114 [Sup. Ct.. SuITolk County]. in which TSU challenged. among other things 3 . OMH ·s deduction from TSLl"s current Medicaid allowances of amounts purportc<lly attributable to excess \llcdicaid income received hy TSLI for the years 1999 through 2002~. The . upreme Court (Costello. J.) found. as here pertincnt 5, that "[t]here is neither a rational basis nor statutory authorization for the recovery of earned revenue from legitimately implement that change, beginning o n April I. 1992, New York 's Commissioner of Mental I lea Ith promulgated, on an emergency basis, a new set of regul ations. embodied in 14 NYC RR Pa rt 593. entitl ed Medical Assistance Payments.for Cnmmuni1y Rehabilitation Services Within 2 To /{esi<femiul l 'rogram s .for Adults and C liildren llmi Aclofescems. One :>tutcd p urpose of the new regulations was to establish "standa rds for reimbursement under the medical assistance program for community rehabilitation services provided by residential programs for adults with mental illness and children and adolescents with serious emotional distu rbance:" ( 14 NYC RR§ 593. I [aj). In that proceeding. TSLI also challenged OMll's disal!O\\ance or expenses related to certain staff housing it maintained. 1 OMI I sought recovery of a total of$56J.820, 50% of the total "Medicaid excess·· for the period based upon a desk audit conducted by OM I I. 4 Suprenle Court also "annulled. vacated and set aside'' OM I l"s reduction - "without basis or a hearing" - of reimbursements previously granted TSU for costs of supervisory staff ap~tments, as "irrational. arbitrary, capricious and contrary to law·· (id. at 4 ). s [* 5] Transi tional Services of New York, etc. v. NYS Office of Mental Health, et al. Index No. 3298-2009 Page 5 appropriated proYider funds for allowable costs under the OMH Spending Plan Guidelines (14 NYCRR 593.9, 593.8):· and ··vacated annulled and set aside·· OM H' s attempt to recover the amounts at issue through deductions from TSLl's ongoing Medicaid Payments '"as unreasonable. arbitrary. capricious and contrary to law.. (Tra11silio11al Servs. of N. Y.for Long Is., Inc. v. New J'ork State Off. of Mental Health, supra, Memorandum Decision dated March 31. 2005. al 3). The Second Deparrmcnt , however, disagreed and reversed that part of Supreme Cotu1 's ruling, holding that IT]hc recoupmcnt policy was contained in OM I l's guide lines. which were issued pursuant to Mental Hygiene Law§ 4 I .44(c). and the petitioner agreed to tht: gu idel ines. Furthermore, the recoupmenl policy serves a valid purpose, as it cfTccti vely allows OMH to recoup an overpayment of state funds. Thus, OMH's determination dated January 26. 2004, which was based on the rccoupment policy's application, had a rational basis, and therefore. should not have been annulled .... (Tra11sitio11al Services of New York for Long Is., inc. ,. New York State Off. of Mental Health . 44 A03d 673. 675-76 [2d Dept 2007] (citation omitted). Leave to appeal was granted (see 11 NY3<l 713 l 2008]). but after OMH informed TSU and other providers that it was ·~officially waiving all exempt income liabilities for the period 1996 through 2002:· and that providers that had already paid those liabilities would have the amounts so paid credited against .. future exempt income collections'· (letter dated July 13. 2009 (see footnote 1. supra)). the Court of Appeals granted OMI l's motion to dismiss as mod) T u·s cross appeal from the Appellate Division·s holding in favor of OM I-rs rccoupment policy (Transitional Services of New York for Long Is., In support or its motion to dismiss TSLl's appea l. OM! I argued that notwithstanding its stated intt:ntion to pursue its exempt income recoupment policy for years 2003 through 2009. because "TSl.I's clnims concern only years 1999 through 2002," OHM's waiver of exempt income liabilities for those years and crediting of amounts paid for prior years (for which, as it admitted, TSLI was also seeking redress) gave "TSU all of the relief it could receive on its cross-appeal .. 6 (Tra11sitin11al Services of Ne w York/or Long Is., Inc. v New York State Off of Me11tal Health. OM! I Motion to Dismiss Cross-Appeal. Memorandum of Law at 5 and I, respectively). and, therefore. there was ..no longer a live dispute between OM I I and TSU about the excess Medicaid income policy.. (id.. at 5). rendering TSLI's cross-appeal moot (id.). Thus. although maintaining that the fact that the ··excess Medicaid income poliC)' will remain in effect for the years 2003 through 2009'" was insufficient to "create a present live controversy between the parties:· OMH necessarily- and explicitly - conceded that •·[i]f and \.Vhen TSU contests a repayment claim for any other year, then the issue of the policy's validity may be presented for judicial rcvicw" (id.). [* 6] Tran:;itional Services of New York, etc. v. NYS Otlice of Mental Health. et al. Index No. 3298-2009 Page 6 Ju e. v New York StMe Off. of Mental Health , 13 NY3d 810 [20091). 7 Thus. although the Court of Appeals had indicated - by granting TSl.I leave to appeal - that the Appellate Division's reversal of the Supn.:mc Court 's order invalidating OMl-rs recoupment policy, at least in the circumstances presented by TSU. merited review, the issues raised by TSU with respect to that policy were not addressed by the Court of Appeals8. Similarly. although TSU also broughc an action in federal District Court. in 2013. pursuant to 42 USC § 1983. alleging that OM H' s recouprnent policy violated the anti-factoring provision of the Medicaid Act. 42 USC § I 396[a][21, that action was dismissed on the grounds that Section I 396[a][2l confers no private right of action and that the conduct about which TSU was complaining was not, in any event, encompassed by the statute~ the District Court. explicitly, did "not pass on the overall lawfulness of' the State's efforts to recapture TS f.l's Medicaid income" (Transitional Services of New York for long l s., Inc. v New York State Off. of Mental Hen/tit , 91 F Supp 3d 438. 445 [EDNY 2015)). Thus. the upshot of the lengthy, and arguably complex, history of TSLrs effort to defeat OMI-rs recoupment efforts is that TSU was relieved of any repayment obligation for the period involved in the 2004 litigation - 1999 through 2002 - and received credit for amounts it may have paid or been assessed in prior years. T hi! only outcome ultimately adverse to it was the narrow ruling in the federal Districl Court action it brought in 2013 pursuant ro 42 USC § 1983, that OMH"s rccoupment policy does not nm afoul of the Medicaid anti-factoring statute, 42 USC ~ l 396[a)[2]. a statute that does not in any event. as the District Court held, create a private right 1 The Court of Appeals did. however. decide OM H's appeal from the portion of the Appellate Di vision· s decision that held that Supreme Court had annulled OM H's denial of reimbursement for the rental cost of the staff apartments, holding that It was not irrational or unreasonable for OMH to determine that, fo r reimbursement purposes, under the Mental I lygiene Law and the regulations promulgated thereunder (see Mental I Jygiene Law§ 41.38: 14 NYC RR 595.12). the expenses TSLI incun·ed in leasing residential apru1ments it used as offices must be accounted for as operating costs rather than as housing costs. Tra11sitio11a/ Services of New York for Long Is., luc. "New York State Off. of Mental Health . 13 1Y3d 801. 802 [20091. 8 In 2006. after Justice Costello ruled in its favor in the 2004 action but before the Appellate Division. Second Department rendered partial reversal of that ruling, TSU filed another action in this court, seeking to enjoin OMH from collecting the amounts it was contesting in its earliertiled action. J lowcvcr. after the Appellate Division reversed so much of his prior decision and order as had invalidated OM H' s recoupment policy, Justice Costello granted OMH' s motion to dismiss TSLrs injunction action . [* 7] Transitional Services of New York, etc. v. NYS Office of Mentnl Health, et al. Index No. 3298-2009 Page 7 of action. Thus. to the extent that OMH contends that TSLrs current claims are wholly precluded by the prior litigation between the parties, its reasoning is patently fallacious and its contention utterly meritless. First. with respect to the 2004 action. both as a practical matter. but also de jurc, TSLI was the prevailing party in that litigation with respect to the propriety of OMH's recoupment policy, as the outcome, as OMI I represented to the Court if Appeals when it moved that court - successfully - to dismiss TSLI"s appeal to that court as moot, was that TSLI achieved ·"all of the relief it possibly could ... :·9 once OM! I rdinquished any claim to recoupmcnt for the years at issue in that litigation. Second. not only was the Appellate Division\ ruling in the 2004 action rendered nugatory by virtue of OMH's reversing course and affording TSLI all of the relief it was seeking with respect to that issue, the conceded mooting by OMI I or TSLI's appeal from that ruling and, consequently, of TSLI's claims concerning the recoupment policy in that action, necessarily vi tiuted any direct or collateral preclusive effect that ruling might otherwise have had, as an action ultimately deemed moot can have no res ju<licata or collateral estoppel effect (see Farkas v New York State Dept. of Civ. Serv.. 114 A02d 563. 565 !3d Dept 1985].favorably cited by Rica/to v lV/ap/iedi. l 33 A03d 737, 738 f2d Dept 2015]). For the same reasons. the dismissal of the 2006 injunction action. which simply applied the ultimately moot 2007 Second Department ruling with respect to OMH's recoupment policy. is also n~cessarily without preclusivc effect. 1 onetheless. the Second Department's 2007 decision in the 2004 action does continue to articulate governing authority on the precise legal issues that it addressed: that the then-existing OMI I guidelines embodying OMH"s recoupment policy had been "issued'' pursuant to Mental 1lygienc Law § 4 l .44[c] and. therefore. did not lack statutory authorization, and that OMH's implementation and application of that policy. at least for the period 1999 through 2002. had a rational basis (See also Assn. for Com1111111ity Liviug, /11 c. v New York State Off. of Melttal Health . 92 AD3d 1066, 1067 (3d Dept 20 12], Iv. to appeal den., 19 NY3d 815 (2012).) That decision did not, however, address explicitly and as a matter of Jaw TS Lr s contention in the current uction that the recoupment sought by OMH for years subsequent to 2002 is inconsistent wi th the terms or the recoupment policy as arti culated in the guidelines. Specifically. TSU argues that neither tht: guidelines nor, for that matter, the contract into which it annually enters with OMI I pro\'idc "that any portion of Medicaid revenues are subject to recapture by OMH in che C'\'Cnt actual Medicaid revenues exceed projected Medicaid revenues." Rather, TSLI contends. the guidelines ..provide that 50% of the amount of actual Medicaid revenues that exceed projected Medicaid revenues may be e:rempted from being included in the calculation to dctem1inc whether any funds arc subject to recapture by OM I I" (emphasis added). According to TSl.I. the guidelines permit only the recapLUre by OMI I of funds ··thnt were actually provided by OM! I to TSLI to bridge an anticipated shortfall.'' and as TSLJ had no projected shortfall and therefore received no such funding directly from OMH. "OMH should not be allowed to recapture funds'· that it never provided to TSU. 9 See footnote 6. supra. [* 8] Transitional Services of New York. etc. v. NYS Office of Mental Health, et al. Index No. 3298-2009 Page 8 There are two significant impediments to TSLI 's contention. The first stems from the language of the relevant gujdelines. First, although TSLl's claimed interpretation is not wholly inconsistent \Nith OMH-required reporting procedures (see New York State Budget and Claiming Manual, Appendix Q. Guidelines for OMH Residential Exempt Income, ·'Medicaid Exempt Income," face page (June I, 2005) 10) , and at least one of the stated objectjves of the policy - to afford providers that generate Medicaid exempt income with a quantum of funds '"to enhance programming efforts and to directly improve the quality of life of residents'' (id., at 9, " Community Residences Funding and Policy Guidelines." I. Medicaid-Related Information, C. Exempt Income Policy for Medicaid. ~J) - the language of the applicable guideline is precise that ''fa]gencies may retain as exempt income 50 percent of all Medicaid income in excess of the fiscal model income expectation" as set forth in the agencies· respective '·GJ ., budgets (id., at 10 (emphasis added)), and that .. [c]ollection of' excess Medicaid for Department of Health is not to be commingled with State Aid Funds. This process will be followed up by a letter from the bureau of Contracts and Claims indicating when and where to send these funds'' (id., at 10 (italic in o riginal)). OMH represents that these provisions have been part of the applicable guidelines throughout the relevant period and incorporated by reference during that time in provider contracts. including those with TSU. Although TSU takes issue with OMH's incorporation in gross of the guidelines. many of which nave no appl ication to it, and both disagrees with OMH"s interpretation of those provisions that articulate and implement the recoupment policy and disputes OMH"s authority to adopt and enforce them. it does not cite to any different or differently worded provisions in the guidelines to support its alternative interpretation. Nor does it offer any expla.natjon for how it could reasonably have harbored any expectation that its interpretation of the guidelines was correct and could be made to govern OMH's application of its recoupment policy when OMH had repeatedly made clear in direct communications with providers that it intended to recoup half of each provider's Medicaid exempt, or excess. income. or, for that matter, why il continued to renew its contractual arrangement with OMH in the face 10 ln pe1tinent part, this section of Appendix Q provides ... As noted in the CR Contract Policy and Guidelines, exempt income has been defined as being that amount by which actual income received exceeds the amount or the Fiscal Model with 50 percent of all Medicaid income in excess of the Fiscal Model expectation.[sic] to be applied against budgeted Gross Budget Expenses; and 50 percent of that amount to be excluded from application against budgeled Gross Budget Expenses in determining net deficit (and is retained by the service provider).... [* 9] Transitional Services of New York, etc. v. N YS Office of Mental Health, et al. Index No. 3298-2009 Page 9 or OMH 's repeatedly stated intention to recoup such <m1ounts based upon its interpretation of the guidelines 11 . Second, as was noted when the court denied TSU 's motion. inter alia, for leave to amend its petition a second time to allege that the statute of limitation would bar recoupment claims against it for 2005 and earlier periods, and for partial summary judgment on that ground (Decision and Order dated December 17, 2013 (Martin. J.)), in 2010 - that is, after the Court of Appeals had dismissed TSU's cross-appeal in the 2004 litigation as moot - the Legislature, in order to '"clarify the Office of Mental Health's authority with regard to the recovery of overpayments made to certain community residences and family based treatment programs·· and to facilitate "the recovery of $4.5 million of overpayments in 2010-11" (fntroducer's Memorandum in Support. 2010 S8169 (emphasis supplied)). enacted L. 2010 ch. 111. Part D, which authorized OMH, as applicable to providers that operate, as does TSLI, outside the City of ew York, for the period January 1, 2003 through December 3 I, 2009, to recover funding from community residences and fami ly-based treatment providers licensed by the office of mental health, consistent with contractual obligations of such providers, and notwithstanding any other inconsistent provision of Jaw to the contrary. in an an1ow1t equal to 50 percent of the income received by such providers which exceeds the fixed amount of annual Medicaid revenue lim itations, as established by the cornmissioner of mental heal th. (Id.,§ I (emphasis supplied). 12 TSLI alleges, and the respondents do not dispute, that during the years relevant to the current action, TSLI's revenue consisted entirely of amounts received from One possible explanation, of course, is that while pursuant to the recoupment policy as appl ied by OMII, TSLI would be required to relinquish half of any excess Medicaid income it would be generating by achieving occupancy and collection rates higher than projected by its GIN budget, it would be retaining the baJance with only limited restrictions on how the retained amounts could be applied. (See New York State Budget and Claiming Manual, Appendix Q, Guidelines.for OMH Residential Exempt Income, '·Medicaid Exempt Income." supra, at 9, '·Community Residences Funding and Policy Guidelines," I. Medicaid-Related Information, C. Exempt [ncome Policy for Medicaid, ~3 . ) 11 Similar provisions have been enacted in subsequent years, including L. 2013 ch. 56, Part Land L. 2019. ch. 57, Part W, in each instance extending the time period for which such funding may be recovered. Pursuant to 14 NYCRR § 593.8[g], recovery of overpayments or excess reimbursements held by residential providers of mental health-related rehabilitation services is to he pursued by the New York State Department of Health upon notification by OMH. Thus, L. 12 [* 10] Transitional Services of New York, etc. v. Index No. 3298-2009 Puge 10 YS Office of Mental l lealth, et al. client fees. S ·1. Medicaid reimbursement. gifts and grants. TSU asserts that because 1hose amounts consistently exceeded its projected allowable annual operating expenses. so that there was no "anticipated shortfall benveen [TSLl's] estimated operating costs and estimaied income" in any of those years. TSU did not receive any "state aid" from OMll pursuant to MI IL § 41.44 11 during the relevant years and. therefore. there is no "state aid'' subject to recoupment from it by OMI I. To the extent tha1 TSU is coniending that there is a distinction between ''Medicaid." on the one hand, and "state aid." on the other, thut. by operation of MHL § 4 I .44[c]. limits OM I f' s standing. jurisdiction or authority to pursue recoupment of Medicaid-re lated amounts. it is c lear that the Legislature enacted L. 20 I0 ch. 11I, Part D and like statutes in subsequent years fo r the express purpose of making plain thut OMH does. so far as New York Siate is com:emcd, have such authority, and that it has such authority "notwithstanding any other inconsistent provision of law to the contrary" (id). As the Third Department held in Assn. for Com1111111i~)' lilting, Ille. v New York State Off. of Mental Health , supra, tbe enactment of Part D of L. 2010 § 1 "expressly confirms OM H's existing authority to recoup Medicaid exempt income·· and renders moot any claim that "OY1H's Medicaid exempt income recoupment policy lacks statutory or regulatory authority and OMH's reliance on guidel ines. rather than a rule or regulation. violates APA'' (92 AD3d al 1067). To the extem that TSU is contending. more broadly. that Medicaid is a federal program in origin and that rccoupment of paid benefits is. therefore. beyond the purview of the State or any State agency, the simple response is that although 1cdicaid exists in the first instance under the auspices of fedt:ral law (see Title XIX of the Social 'ecurity Act. 42 USC §§ 1396. et seq.). it is in fact a "cooperative federal-state program" (Douglas v lud. Living Ctr. of S. California, Inc., 565 US 606, 610 f2012]), that is, in its application. largely administered at the state level (see, e.g.. Social Services Law § 363-a. 363-c: DougltB' v Ind. living Ctr. of S. California, luc. , 565 US at 610: see also Managed 20 I 0 ch. I I I. Pa11 D and the subsequent like enactments extended recovery powers direc tl y to OM!!. 13 Ml IL§ 4 l .44[c'j, the pertinent subsection of the statute. provides as fo llows: re) Within amounts available therefor and subject to regulations established by him and 1101'' ithstanding any other provisions of this article, the corn missioner may provide state aid to local governments and to voluntary agencies in an amount not to exceed one hundred percent of net operating costs of communit) re!'.idcnccs for the mentally ill. The commissioner shall establish guidelines for detcnnining the amount of state aid provided pursuant to this section. The guidelines shall be designed to enable the effective and efficient operation of such residence and shall include, but need not he lirni!ed to standards for detem1ining anticipa!ed revenue, fo r retention and use of income exceeding the anticipated amount and for detcm1ining reasonable levels of uncolkctible income. Such state aid to voluntary agencies shall not be granted unlt:ss there has been prior approval of the proposed community residence by the local go, ernmcntal unit. [* 11] Trarui~ional Services of Index No. 3298-2009 Page 11 C\\ York, etc. v. 1 YS Office of Mental Health. et al. Pl1llrm. Care v Sebelius. 716 F3d 1235. I 252 [9th Cir 20 I 3) (rejecting a provider's federal Takings Clause claim on the grounds that ·'lb]ecause participation in Medicaid is voluntary. providers do not have a property interest in a particular reimbursement rate:'). In sum. it cannot be said that the application of OM H' s Exempt lncome Policy about which TSU complains. for the period and in the circumstances here presented, was arbitrary or capricious. or inconsistent with the parties· respective rights and obligat ions under the contractual arrangements hetween them or under applicable law. Accordingly, and fo r all of the reasons discussed above, the petition must be denied and the proceeding dismissed. The foregoing constitutes the decision and order of the court. Dated: a#= ",f}_ Z<?/? Riverhead, New York XX FIN A L DISPOSITION HON. SANFO RD NEIL BE RLAND, A ..J.S.C. NON-FINAL DISPOSITION

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