IN RE: ELDERWOOD AT AMHERST (2020)

MEMORANDUM AND ORDER

It is hereby ORDERED that the judgment so appealed from is unanimously reversed on the law without costs and the petition is dismissed.

Memorandum: Petitioner commenced this CPLR article 78 proceeding seeking, inter alia, to annul the determination of the Administrative Law Judge (ALJ), made after a hearing, affirming the determination of the New York State Office of the Medicaid Inspector General (OMIG) after a final audit of Medicaid claims paid to petitioner. Specifically, the ALJ affirmed OMIG's determination finding that the New York State Department of Health is entitled to recover from petitioner Medicaid overpayments for certain therapy services determined not to be medically necessary. Supreme Court granted the petition on the ground that the ALJ's decision was, inter alia, affected by an error of law and was arbitrary and capricious, annulled the decision of the ALJ, and remitted the matter to the ALJ for a new determination in accordance with the court's judgment. We now reverse the judgment and dismiss the petition.

We agree with respondents that the court erred in concluding that the ALJ applied an impermissible “expectation of improvement” standard in rendering his decision. Rather, the ALJ's decision is based on the fact that petitioner failed to establish that the medical basis and specific need for therapy services for two of petitioner's residents were “fully and properly documented” in the residents' respective medical records (18 NYCRR 518.3[b]; see Matter of Hurlbut, LLC v. New York State Off. of Medicaid Inspector Gen., 174 A.D.3d 1303, 1303-1304, 103 N.Y.S.3d 239 [4th Dept. 2019]; see also Matter of Zuttah v. Wing, 243 A.D.2d 765, 766, 674 N.Y.S.2d 130 [3d Dept. 1997]). The ALJ's remarks concerning the incremental changes in the physical and functional conditions of the two residents before and after receiving the therapy services were made in the context of his observation that the residents received the therapy services only during a certain evaluation period relevant to the calculation of Medicaid reimbursement rates applicable to those residents, after which the therapy services were discontinued.

We further agree with respondents that the court erred in holding that the ALJ improperly determined that petitioner was required to produce interdisciplinary documentation in the residents' medical records to establish the medical basis and specific need for the therapy services. The ALJ properly recognized that respondents' interpretation of their own regulations to require such documentation was entitled to deference inasmuch as the interpretation was not irrational or unreasonable (see Andryeyeva v. New York Health Care, Inc., 33 N.Y.3d 152, 174, 100 N.Y.S.3d 612, 124 N.E.3d 162 [2019]; Matter of County of Oneida v. Zucker, 147 A.D.3d 1338, 1339, 46 N.Y.S.3d 741 [4th Dept. 2017]). In light of that interpretation, we conclude that respondents' determination is supported by a rational basis (see Matter of Peckham v. Calogero, 12 N.Y.3d 424, 431, 883 N.Y.S.2d 751, 911 N.E.2d 813 [2009]; see also Andryeyeva, 33 N.Y.3d at 174, 100 N.Y.S.3d 612, 124 N.E.3d 162). We reject petitioner's position, accepted by the court, that respondents' interpretation constitutes an unpromulgated rule (see Bloomfield v. Cannavo, 123 A.D.3d 603, 606, 999 N.Y.S.2d 397 [1st Dept. 2014]; see also Matter of Elcor Health Servs. v. Novello, 100 N.Y.2d 273, 279, 763 N.Y.S.2d 232, 794 N.E.2d 14 [2003]). We likewise reject petitioner's position, also accepted by the court, that petitioner did not have fair notice that respondents would seek interdisciplinary notes in the residents' medical records as part of the auditing process. Indeed, before the audit took place, OMIG advised petitioner that it would need documentation to support the medical necessity of the services underlying the reimbursement rates applicable to the residents, reports of the residents' activities of daily living, and nurse's notes, and it more specifically advised that it would “need any nurse's notes if the [resident] was not a new admission and required restorative services.”