Opinion
6659/07.
Decided September 20, 2007.
Upon the foregoing papers in this CPLR article 78 proceeding, petitioner Lutheran Medical Center (petitioner or LMC) seeks a judgment annulling the determination of respondents Richard F. Daines, M.D., as Acting Commissioner of the New York State Department of Health and the New York State Department of Health (the DOH) (collectively respondents), dated October 25, 2006, which readjusted its Medicaid reimbursement rates from 1999 through 2003 and resulted in a recoupment of approximately $7 million, as arbitrary, capricious, and contrary to law, fully reimbursing the monies recouped by respondent, and awarding petitioner costs and disbursements.
Petitioner, a not-for-profit corporation, is a 476-bed hospital located in Brooklyn, New York, which provides various health care and support services, and is a participant in the Medicaid program. Respondent DOH is the state agency charged under Public Health Law (PHL) § 2807 with administering New York state's participation in the Medicaid Program. As such, the DOH is charged with the responsibility for setting Medicaid reimbursement rates for medical service providers. The methodology for computing such general hospital inpatient reimbursement rates is set forth in 10 NYCRR Part 86-1.1 et seq. of the Commissioner's Administrative Rules and Regulations.
As relevant to this proceeding, the state of New York participates in the Medicaid program, through which the federal government contributes funds to assist states in providing health care for the poor. Pursuant to the Medicaid Act, 42 USC §§ 1396 et seq., hospitals that offer care to Medicaid-eligible patients receive reimbursement funded jointly by federal and state authorities. Each participating state is required to adopt a State Plan for Medical Assistance, approved by the Secretary [of the Department of Health and Human Services], which establishes a methodology for determining a reimbursement rate ( 42 USC §§ 1396a, 1396b).
New York's State Plan, set forth in 10 NYCRR Part 86-1, is prospective in nature. Stated otherwise, the per diem rate that each hospital receives for treating Medicaid patients is determined in advance, on the basis of a formula derived from the costs actually incurred by that hospital in a prior year. The year which the hospital renders services is referred to as the "rate year"; the year from which the costs are analyzed to compute the rate-year payments is the "base year." This action involves reimbursement rates established for services rendered in rate years 1999 through 2003. The per diem rates were derived from costs incurred in base year 1998.
Computation of reimbursement rates under 10 NYCRR part 86-1 involves 1) determination by respondents of the total actual costs that a hospital incurred in a base year, and 2) subtraction from this figure amounts in excess of certain cost ceilings. The remainder represents the hospital's reimbursable costs. These costs are multiplied by an inflation factor, and the adjusted total is then divided by the number of patient-days the hospital records in the base year. This yields a per diem amount that each hospital is to receive for each day of inpatient service it renders to Medicaid patients in the prospective rate year.
If a hospital is new, and lacks actual cost data upon which to base actual costs prospectively, the hospital may initially receive reimbursements based upon a "budgeted rate," subject to readjustment based on actual costs ( 10 NYCRR § 86-1.19). Thereafter, the hospital's budgeted rate is eventually switched to a "cost based rate" upon the submission of the actual costs incurred in the base year. If there are any differences in the budgeted rate and the cost based rate, retroactive adjustments are prospectively factored into the current rate year.
10 NYCRR § 86-1.61(c) also provides for a cost ceiling to the cost based rate, known as the Group Average Ceiling (GAC). Under this regulation, "the revised operating per diem shall be no greater than 110 percent of the weighted average cost per day for the exempt unit service in the hospital's bad debt and charity care region." Stated otherwise, the cost per diem per day can be no greater than 110 percent of the weighted average cost per day for all such exempt units for hospitals in the region, and the hospital is held to that ceiling, even if its costs are greater than that amount. Once the GAC has been calculated for the base year, it is trended forward for subsequent years utilizing an inflation factor ( 10 NYCRR §§ 86-1.61[c], 86-1.17[a][4][ii]).
In 1997, petitioner opened an inpatient 26-bed psychiatric unit approved by the DOH. As such, petitioner was entitled to seek reimbursement for treating Medicaid-eligible patients in its inpatient psychiatric unit on a prospective basis. Since the psychiatric unit was new, and petitioner therefore lacked sufficient historical cost data, it was reimbursed for Medicaid-eligible patients on a budgeted rate.
In July, 2001, petitioner requested, among other things, a rate adjustment based upon actual costs (a cost-based rate) and provided respondents with the actual costs for the 1998, 1999, and 2000 operating years in support of its request.
On February 21, 2002, respondents approved petitioner's application for a cost-based rate and notified petitioner of their determination by letter dated March 1, 2002. Specifically, respondents used a cost report filed by petitioner for its 1998 calendar year, which was used by the DOH in 2002 to establish cost base rates retroactively for years 1998 through 2002. In its letter, respondents also informed petitioner that "the 1998 psychiatric rate was recalculated using actual 1998 costs and statistics. The operating rate was then held to the facility's group average ceiling calculation which was $687.37." Thus, the GAC was retroactively applied to adjust the 1998 rate year.
In May, 2002, after having received notice of the rates, petitioner requested respondents' work papers to verify the 2002 rates. After further discussions and requests for information, respondents provided its rate calculation to petitioner on or about May 8, 2003.By letter dated June 11, 2003, petitioner informed respondents that it had reviewed the retroactive rate adjustments. Specifically, petitioner questioned whether the GAC should have been applied to all years (1998-2001), rather than just the 1998 rate year. Respondents disagreed, maintaining that the GAC was correctly applied solely to the 1998 reimbursement rate. In this regard, respondents stated:
"The 1998 was held to the 110% group ceiling of $687.37. It appears on Line 7 of the 1998 rate sheet which is an override to the actual costs that are on sch. 11. This is only done for first year. called Mr. Valentine on 6/30/03 + explained this to him" (emphasis added). By letter dated January 5, 2004, petitioner again questioned whether respondents had failed to apply the GAC correctly. According to John W. Gahan, Jr., Assistant Director of the DOH's Bureau of Primary and Acute Care Reimbursement, the DOH realized the error in the application of the GAC when reviewing petitioner's January 5, 2004 letter. As a result, on January 22, 2004, respondents initiated an internal administrative appeal (C-40201) to address the issue. The misapplication of the GAC resulted in an overpayment to petitioner of approximately $6,982,807. Petitioner was notified of respondents' appeal determination by letter dated February 24, 2004. Specifically, the cover letter states the following:
The appeal determination resulted in another overpayment made by respondents to petitioner with respect their failure to apply a "volume adjustment." However, petitioner does not challenge the "volume adjustment" recoupment in this proceeding.
"It is the purpose of this letter, pursuant to Part 86-1.17 and 86-1.61 of the Commissioner's Rules and Regulations, to inform you of the action taken by this office concerning your application for a revised Medicaid rate.
Enclosed please find an explanation of the action taken in relation to the item(s) of your appeal. Also enclosed are copies of your revised rate calculation sheets, if applicable."
The explanation states:
"This appeal was initiated by the Bureau of Primary and Acute Care Reimbursement.
The facility had previously submitted an appeal (No. 202902) to revise their 1998 Psychiatric Rate from budget to actual costs and statistics. That appeal was deferred to appeal #C-10720 and approved on 2/21/02.
Subsequently, a technical error on Schedule 11 was discovered which affected the 110% ceiling calculation. Original base year 1998 costs were used instead of the ceiling calculation of $687.37 times the psychiatric non-Medicare days of 6051 per Part 86-1.61(c). The actual costs were $5,476,874 and when the revised ceiling calculation is used, the costs become $4,159, 276. The error has been corrected per this appeal and will be included in the January 2004 statewide publication of rates."
In March, 2004, petitioner was due approximately $7 million from respondents based upon a separate, unrelated reimbursement issue, and well as $1.4 million for regular claims. However, the State's Medicaid Management Information System (MMIS) recouped the overpayment of $6,982,807 made as a result of respondents' misapplication of the GAC by offsetting the overpayment from funds owed petitioner. Thus, according to petitioner, rather than receiving a total of $8.4 million, petitioner only received $1.4 million which, it claims, caused it significant financial harm. Petitioner states that it learned of the basis of the recoupment only when it inquired as to why it had not received its expected $7 million payment.
Nicholas R. Meister, Director of the Medicaid Financial Management Unit, explains in his affidavit that at the time, petitioner's account reflected a negative adjustment of $8 million (including the $6,982,807 in overpayments for the GAC error) and a positive adjustment of approximately $7 million. As a result of offsetting the $8 million negative adjustment with the $7 million positive adjustment, petitioner was left with a negative balance of $909,958.98, which was recouped over the next two weeks. According to Mr. Meister, petitioner was informed of this process when it received its weekly detailed remittance statement from respondents, which included a line-by-line explanation of each claim that had been adjusted.
By letter dated March 26, 2004, petitioner appealed respondents' determination and requested a hearing, arguing, among other things, that respondents' appeal with respect to their GAC error was untimely and that therefore the rate adjustment and recoupment were void as a matter of law. By letter dated October 25, 2006, respondents stated that the review "solely to determine whether the issue being appealed was one of fact and therefore warrant[ed] an Administrative Hearing," and that:
Petitioner also argued that if the adjustment in rates had been based upon an audit, the audit was not performed in accordance with relevant regulations.
"What is in dispute is whether the Department of Health's initiated appeals were untimely and therefore the resulting rate adjustments and recoupments are void as a matter of law and must be reversed. The Department has asserted that its actions in the above referenced appeals were not the result of any audit. It is determined that this appeal raises an issue of law and not one of fact."
Thus, the DOH denied the appeal on the ground that no issues of fact were presented.
On February 23, 2007, petitioner filed a notice of petition, an affidavit, exhibits, and a memorandum of law, but did not file a petition. On March 7, 2007, petitioner filed an amended notice of petition which included an amended verified petition and the papers previously filed with the notice of petition. Respondents interposed an answer to the petition.In addressing the petition, the court notes that the standard of review in an Article 78 proceeding is "whether a determination was made in violation of lawful procedure, was affected by an error of law or was arbitrary and capricious or an abuse of discretion" ( Matter of Board of Educ. of Monticello Cent. School Dist. v Commissioner of Educ., 91 NY2d 133). Arbitrary and capricious has been defined as "without sound basis in reason and generally taken without regard to the facts" ( Pell v Bd of Educ., 34 NY2d 222, 231). The petitioner bears a heavy burden of demonstrating that the agency's determination is arbitrary and capricious ( University Heights Nursing Home v Chassin, 245 AD2d 776, 777). Moreover, "the interpretation given to a regulation by the agency which promulgated it and is responsible for its administration is entitled to deference if that interpretation is not irrational or unreasonable" (427 W. 51st St. Owners Corp. v Div. of Hous. Cmty. Renewal , 3 NY3d 337, 342; Blossom View Nursing Home v Novello , 4 NY3d 581, 594-595).
Relying on 10 NYCRR § 86-1.17(a)(1)(ii) and § 86-1.61(a), petitioner argues that respondents were time-barred from recouping the approximately $7 million overpayment and that therefore, the recoupment was arbitrary, capricious, in violation of lawful procedure and otherwise affected by an error of law. In opposition, respondents assert, among other things, that their recoupment was not time-barred because the regulatory time-frames relied upon by petitioner do not apply to appeals initiated by the DOH. Respondents also contend that they were entitled to recoup the overpayment based upon statutory authority and the common-law right of recoupment. In addition, respondents maintain that this proceeding is time-barred because petitioner failed to file a petition within the four-month statute of limitations period. Petitioner replies, among other things, that respondents are precluded from arguing, and the court is precluded from adopting their argument that they acted pursuant to the common-law right of recoupment since respondents did not rely upon this theory at the administrative level to justify the recoupment. Petitioner also asserts that in any event, the common-law right of recoupment does not apply here since the error which resulted in the overpayment was the product of judgmental considerations involving expertise, as opposed to a mere mathematical or computer error. In addition, petitioner contends that the petition was timely commenced because the notice of petition contained an affidavit which set forth in detail the factual predicate of its legal claims.
As an initial matter, respondents' argument that the petition is time-barred is rejected. "An article 78 proceeding must be brought within four months after the determination to be reviewed becomes final and binding upon the petitioner'" ( Best Payphones, Inc. v Dep't of Info. Tech. Telecomms. , 5 NY3d 30, 34, quoting CPLR 217). "A special proceeding is commenced by filing a petition" (CPLR 304). In Article 78 proceedings, "there shall be a verified petition" (CPLR 7804[d]).
Here, respondents' determination became final and binding on approximately October 25, 2006, when the DOH sent its determination to petitioner by certified mail. (Petitioner concedes that the four-month statute of limitations expired on February 26, 2007). On February 23, 2007, petitioner commenced this proceeding by filing the notice of petition, an affidavit of Sean Cavanaugh, Vice President for Financial Planning of petitioner, supporting exhibits, and a memorandum of law, but inadvertently failed to file a verified petition. The failure to file the verified petition was discovered on or about March 7, 2007, and petitioner filed and served an amended notice of petition on or about that time, which included an amended verified petition and the papers previously filed with the court.
Contrary to respondents' argument, although the notice of petition was not accompanied by a document designated a "petition," the papers annexed to and in support of the notice of petition, namely the affidavit of Mr. Cavanaugh, the exhibits, and the memorandum of law, "fulfilled all of the requirements of a petition and afforded the [respondents] adequate notice of the claim and of the relief requested" ( Guarneri v Town of Oyster Bay, 224 AD2d 695; see also Billone v Huntington, 188 AD2d 526; Johnson v City of New York, 38 AD3d 336, 338; Page v Ceresia, 265 AD2d 730, 731). As such, petitioner's failure to timely file a document designated a petition was merely a defect in form which does not mandate dismissal ( Billone, 188 AD2d at 526).
On the merits, petitioner's argument that respondents' act of recoupment was time-barred under the commissioner's own regulations is rejected. 10 NYCRR § 86-1.61, entitled "Adjustments to case based and exempt unit rates of payment" provides, in subdivision (a), that:
" The Commissioner of Health shall consider only those applications for adjustments to established rates of payments in the rate year which are in writing and have one or more of the following bases.
(a) . . . [M]athematical or clerical errors made by the Department of Health. Revised data submitted by a facility must meet the same certification requirements as the original data and the Commissioner may require verification of revised UDS data by an independent review agent at the cost of the facility. Appeals pursuant to this subdivision must be submitted within 120 days of receipt of the applicable title XIX and/or article 43 corporation initial rate computation sheet. Section 86-1.16 of this Subpart shall apply to such appeals not commenced within such time" (emphasis added)
10 NYCRR 86-1.17, entitled "Revisions in certified rates," provides in section (a)(1)(ii) that:
"(a) The State Commissioner of Health shall consider only those applications for prospective revisions of certified rates and any established revenue cap in the current year which are in writing and are based on one or more of the following:
(1) Errors, whether mathematical or clerical or otherwise, made by the department . . . in the rate calculation process, or in the development of groups, including but not limited to the following areas related to the development of reimbursable costs:
* * *
(ii) nonallowable costs, such as revenue recoveries. Applications brought pursuant to this paragraph must be submitted within 120 days of the receipt of the applicable title XVIII, title XIX and/or article 43 corporation program initial rate computation sheet. . ."
As noted immediately above, both regulations make reference to "applications" that the "Commissioner of Health shall consider," and thus the regulations clearly imply that those dealing with the commissioner and the Department of Health are the parties who would bring applications to the attention of the commissioner ( see University of Rochester Strong Memorial Hospital v Whalen, 61 AD2d 867, 867). "A contrary construction would imply that if the commissioner discovers errors in the rate computation process, he must bring them to his own attention within [120 days] of the receipt of the commissioner's rate sheet," which is unreasonable ( id.). Further, the 120-day time frame in which to file an application for a revision of a certified rate begins to run when the rate calculation sheet is received. According to Mr. Gahan, it is the medical provider which receives the rate sheet, which is prepared and sent to the DOH. The DOH does not receive the rate sheet — it sends the rate sheet to the medical provider. Also, other sections of these regulations indicate that their focus is on appeals commenced by hospitals, as opposed to those commenced by the DOH. In this regard, 10 NYCRR § 86-1.17(c) describes the form in which applications for rate reviews requested by hospitals must be submitted, yet there is no such requirement with respect to appeals commenced by the DOH. Similarly, 10 NYCRR § 86-1.17(e) describes the Commissioner's authority to refuse to accept or to consider an appeal from a medical facility, but does not address the Commissioner's discretion to refuse to consider an internal appeal. "[I]t is well settled that an agency's construction of its own rules and regulations is entitled to deference and will not be disturbed unless clearly irrational or unreasonable" ( Matter of Patel v New York City Hous. Auth ., 26 AD3d 172, 173; Blossom View Nursing Home v. Novello , 4 NY3d 581, 594). Here, respondents' construction of the subject regulations is clearly not unreasonable. Since petitioner has failed to demonstrate that the 120-period applies to the DOH, petitioner's argument that respondents' acted arbitrarily in violating the regulations must be rejected.
Notably, in citing the regulations, petitioner omitted the first sentences of the regulations referencing the commissioner.
Petitioner argues that case law supports its contention that such regulatory time-bars are to be given force and vitality. However, the cases upon which petitioner relies involve regulations which explicitly apply to agencies, in contrast to the regulations at issue here.
Petitioner also contends that the failure to apply the 120-day time limitation to respondents is arbitrary and capricious because it gives rise to an impermissible double standard. Specifically, petitioner asserts that since courts have rejected claims by providers where regulatory deadlines for challenging reimbursement rates have expired, respondents must similarly be subject to the same time limitations when seeking reimbursements for overpayments. Petitioner fails to provide any support for this claim. In any event, "[l]imits in regard to the time in which an agency must act are generally construed as discretionary in the absence of express limits on the authority of the agency to act after the time period ( Clifford v New York State Employees Retirement System, 123 AD2d 1, 4 citing Huff v Graves, 277 NY 115, 119).
Petitioner also argues that respondents cannot be permitted to violate their own regulations. This argument is also without merit since, as noted above, a plain reading of the regulations supports the conclusion that the time limitations do not apply to respondents.
Relying primarily upon Solnick v Whalen ( 49 NY2d 224, 232), petitioner also asserts that respondents' recoupment undermined the public policy "behind the rigid enforcement of limitations periods relating to reimbursement rates," namely that "financial planning of the providers of services . . . would be benefited by prompt resolution of controversies with respect to the final reimbursement rate determinations" ( id.). This claim is rejected. Solnick held that the four-month statute of limitations, as opposed to a six-year limitations period, applied to challenges to retroactive Medicaid reimbursement rates to avoid imposing "stale litigations and stale determinations" upon the government. In doing so, the Court did not pronounce a public policy relating to the "rigid enforcement of limitations periods relating to the issue of reimbursement rates," as petitioner suggests. Rather, the Court merely suggested, in dicta, that the shorter limitations period would benefit service providers as well.
Despite the foregoing, the court nevertheless finds that respondents were not authorized to recoup of the overpayment in question. In this regard, respondents argue that the DOH has the statutory authority to adjust established reimbursement rates to correct computation errors (Public Health Law § 2807-c[a][ii]), as well as a common law authority to protect the public fisc by recovering overpayments of Medicaid reimbursements, and rely solely on the latter basis to justify their recoupment. In this regard, "where a facility's [Medicaid] reimbursement rates were based upon mathematical miscalculation, computer error, or the submission of false information, the [DOH] may retroactively adjust the rates and recoup overpayments" ( Westledge Nursing Home v Axelrod, 68 NY2d 862, 864-865; see also Matter of Dale Nursing Home v Axelrod, 62 NY2d 30, 33; Matter of Schwartfigure v Hartnett, 83 NY2d 296, 300; Matter of Jarrett v Novello , 27 AD3d 973, 974; Faxton Sunset-St. Luke's Skilled Nursing Facility v Dowling, 233 AD2d 865, 866; Matter of Mayflower Nursing Home v Office of Health Sys. Mgmt., 88 AD2d 192, 196; Matter of Univ. Of Rochester Strong Mem'l Hosp., 61 AD2d 867, 867). However, the "right of recoupment does not extend to payments made under a statute which predicates determination of the amount to be paid upon judgmental considerations involving expertise'" ( Westledge Nursing Home, 68 NY2d at 864-865, quoting Matter of Daleview Nursing Home, 62 NY2d at 34; Matter of Jarrett, 27 AD3d at 974; Faxton Sunset-St. Luke's Skilled Nursing Facility, 233 AD2d at 866; Matter of Mayflower Nursing Home, 88 AD2d at 196; Matter of Univ. Of Rochester Strong Mem'l Hosp., 61 AD2d at 867).
Public Health Law § 2807-c[9][a][ii] provides: "Adjustments. For annual rate periods beginning on or after January first, nineteen hundred eighty-eight: (a) The commissioner shall on his own initiative, or on the basis of a request from a general hospital, adjust an established rate to reflect:
(i) the reduction of costs related to the elimination of a general hospital inpatient service in instances where the costs of such service were included in the rate established; and
(ii) the correction of errors or omissions of data or in computation."
As an initial matter, petitioner asserts that respondents may not rely upon the common-law right to recover overpayments to justify their recoupment because they did not invoke this ground to justify their action at the administrative level. In particular, petitioner argues that respondents' right of recoupment argument was only raised for the first time in their memorandum of law in opposition to the instant petition. This argument is rejected. As noted above, respondents' informed petitioner by letter dated February 24th, 2004 of their "technical error" in applying the GAC solely to the 1998 rate year. Further, even petitioner states that in an internal DOH memorandum dated October 26, 2005, Ms. Jaynne DeCarlo, Associate Health Care Fiscal Analyst, Bureau of Primary and Acute Care Reimbursement, notes that the recoupment stemmed from the rate adjustment appeals. Petitioner also concedes that respondents cite their error in failing to properly apply the GAC. Thus, although respondents did not explicitly state, at the administrative level, that their recoupment was based upon their common law right of recoupment, respondents' explanation for their recoupment at the administrative level is, in fact, one and the same with this theory since respondents clearly indicated that they were entitled to recoupment based upon a technical error.
However, on the merits, contrary to respondents' contention, the record reveals that the overpayments at issue were not based on computational mistakes made by State employees, but were the product of "judgmental considerations involving expertise" ( Daleview Nursing Home, 62 NY2d at 34). As noted above, after respondents approved petitioner's application for a cost-based rate, they also advised petitioner, by letter dated March 1, 2002, that the GAC was retroactively applied to adjust the 1998 rate year. Specifically, respondents advised petitioner that the "1998 psychiatric rate was recalculated using actual 1998 cost and statistics" and that "[t]he operating rate was then held to the facility's group average ceiling calculation which was $687.37." Thereafter, by letter dated June 11, 2003, petitioner's Vice President of Finance, Mr. Robert Valentine, informed respondents that it had reviewed the rate calculations and had flagged three potential issues with the 2002 psychiatric rates, one of which involved the issue of whether the GAC had been properly applied to the years 1999 through 2001. According to Mr. Cavanaugh, and the record before this court, by telephone conversation and fascimile handwritten notations dated June 30, 2003, respondents disagreed with petitioner's suggestion that the GAC had not been properly applied and explicitly confirmed the accuracy of the 2002 psychiatric rates. With respect to the application of the GAC to the base year costs of the 2002 rate year, respondents confirmed that the GAC was only applied to rate year 1998. In this regard, respondents stated:
"The 1998 rate was held to the 110% group ceiling of $687.37. It appears on Line 7 of the 1998 rate sheet which is an override to the actual costs that are sch. 11. This is only done for the first year" (emphasis added).
Thus, respondents deliberately issued the July 2003 rates without applying the GAC. Thereafter, by letter dated February 24, 2004, respondents advised petitioner that an appeal had been taken and that they had discovered their error in failing to properly apply the GAC. As noted above, respondents stated:
". . . a technical error on Schedule 11 was discovered which affected the 110% ceiling calculation. Original base year 1998 costs were used instead of the ceiling calculation of $687.37 times the psychiatric non-Medicare days of 6051 per Part 86-1.61(c). The actual costs were $5,467,874 and when the revised ceiling calculation is used, the costs become $4,159,276. The error has been corrected for this appeal and will be included in the January 2004 statewide publication of rates."
Thus, the record reveals that the overpayment was not the product of a mathematical, computer, or data entry error but was based upon respondents' deliberate determination, based upon its interpretation of its own regulations, to limit application of the GAC to the 1998 rate year alone. Because any overpayment was the result of an error of judgment rather than fact, respondents have no right of recoupment ( Faxton Sunset-St. Luke's Skilled Nursing Facility, 233 AD2d at 866).
Based upon the foregoing, petitioner's application for a judgment annulling the determination of respondents, dated October 25, 2006, as arbitrary, capricious, and contrary to law, and for a full reimbursement of the monies recouped by respondents is granted.
Lastly, in light of the court's determination, petitioner's claim that it was denied due process has been rendered moot. In any event, the court rejects this claim. As an initial matter, petitioner has failed to establish that it has a constitutionally-protected property interest in the subject overpayments. Further, "[i]t is well established that the Commissioner of Health need not hold a hearing before acting to recoup Medicaid payments" ( Fahey v Perales, 141 AD2d 934, 936). Moreover, the regulations relied upon petitioner to support its contention that it was entitled to a hearing before respondents were entitled to recoup the subject overpayment are inapplicable to the case at bar since they involve overpayments relating to improper claims submitted by Medicaid providers ( see 18 NYCRR § 518.1 et seq.), as opposed to the circumstances presented here, namely an error made in the context of calculating Medicaid reimbursement rates. In any event, the DOH gave petitioner notice of the recoupment by letter dated February 24, 2004, before it recouped the subject overpayment. Finally, even assuming petitioner had a constitutionally protected property interest in the overpayments, the instant Article 78 proceeding provides an adequate post-deprivation remedy to challenge respondents' recoupment of the subject overpayment ( see Concourse Rehabilitation Nursing Ctr. Inc. v DeBuono, 179 F3d 38, 44).
Petitioner's remaining contentions are either are improperly raised for the first time in its reply memorandum of law, are without merit, or have been rendered moot by the court's determination.
In sum, petitioner's application for a judgment annulling the determination of respondents, dated October 25, 2006, as arbitrary, capricious, and contrary to law, and for a full reimbursement of the monies recouped by respondents, is granted.
This constitutes the decision, order and judgment of the court.