Opinion
December 11, 1997
Appeal from the Supreme Court (Teresi, J.).
Petitioner is a licensed residential health care facility in Albany County. As a provider of Medicaid services, petitioner receives reimbursement through a combination of Federal and State funds. Reimbursement rates are established by the State Department of Health (hereinafter the Department) (see, Public Health Law art 28) pursuant to State regulations (see, 10 N.Y.CRR subpart 86-2). Following receipt of its Medicaid reimbursement rates for reimbursement years 1982 through 1985, petitioner filed a rate appeal with the Department seeking increases to cover the costs of additional full-time equivalent employees hired during those years. Petitioner claimed that it was entitled to be reimbursed for these additional staff members because such hirees were specifically mandated by the Department.
The Department partially approved petitioner's appeal in December 1988. In the explanatory documents attached to the determination, the Department made clear that its partial approval was based upon its review and analysis of a variety of information, including annual cost reports, "Determination of Medical Status" data, "Research Utilization Groups-II" data, survey documentation provided by petitioner and Department recommendations dated June 6, 1980 and June 29, 1984. The Department allowed a total of 44.91 additional full-time equivalents at this time, 61.13 less than petitioner was requesting.
Following further administrative review, the Department granted further partial approval of petitioner's request (allowing an additional 6.07 full-time equivalents); it did not, however, permit petitioner to be reimbursed for all full-time equivalent employees actually hired. Petitioner commenced this CPLR article 78 proceeding challenging this determination contending, as it did at the administrative level, that it is entitled to reimbursement for all full-time equivalent employees hired during the rate years 1982 through 1985 (petitioner claims it was "under-reimbursed" by a total of 55.06 full-time equivalents). Supreme Court's dismissal of the petition has prompted this appeal.
Because petitioner did not overcome its heavy burden of demonstrating that the Department's determination is arbitrary and capricious (see, Matter of County of Monroe v. Kaladjian, 83 N.Y.2d 185, 189; Matter of Grace Plaza v. Axelrod, 157 A.D.2d 953, 954), we affirm Supreme Court's judgment dismissing the petition. Inasmuch as Medicaid rates are prospective in nature (i.e., based upon prospective, rather than actual, costs), "the pertinent issue is not whether petitioner has experienced increased labor costs but, rather, whether it was entitled to reimbursement for these costs under the prevailing regulations" (Matter of Silver Lake Nursing Home v. Axelrod, 156 A.D.2d 789, 790; see, Matter of Bassett Hosp. v. Axelrod, 127 A.D.2d 260, 262 ["entitlement to an increased reimbursement rate is not automatic even in those instances where valid costs have been incurred which exceed those projected when the reimbursement rate was established"]).
To obtain an increase, petitioner was obligated to demonstrate significant increases in the over-all operating costs of its facility "resulting from the implementation of additional programs, staff or services specifically mandated for the facility by the commissioner" ( 10 NYCRR 86-2.14 [a] [3] [emphasis supplied]). Fundamentally, the Department's interpretation of this regulation will be accorded deference by this Court unless it is irrational (see, Matter of Howard v. Wyman, 28 N.Y.2d 434, 438; Matter of Silver Lake Nursing Home v. Axelrod, supra, at 790). While there is no dispute that petitioner was cited for staffing deficiencies subject to penalties for continued violations in 1980, there is no evidence of a Department "mandate" to hire a specific number of employees.
Petitioner was initially required to develop and implement a plan to maintain a minimum of 3.03 nursing care hours per patient per day. This was later reformulated to 3.1 care hours per patient per day. It was recommended that petitioner maintain a direct care staff of 129 full-time equivalents; its staffing levels, however, rose to 138.46, 147.14, 150.04 and 147.18 between 1982 and 1985, respectively. Subsequent to the management assessment completed by the Department and its notification to petitioner of the violations, the Department warned petitioner that its nurse staffing levels continued to be inadequate. Notably, the Department's warnings to petitioner were directed at "insufficient staffing to meet the needs of patients" and not the actual amount of personnel on the payroll available for service.
As an example, petitioner was notified in November 1984 that certain shifts were not being adequately covered with a licensed nurse.
While the inadequacy of petitioner's staff warranted the hiring of additional employees, as the Department itself recognized by twice partially approving petitioner's request for a rate reimbursement, petitioner has failed to prove that all of the full-time equivalents hired were "specifically mandated" by the Department. In short, the mere fact that petitioner was not reimbursed for all hirees, in the absence of a specific mandate directing same, does not render the determination "`without sound basis in reason and * * * without regard to the facts'" (Matter of County of Monroe v. Kaladjian, 83 N.Y.2d 185, 189, supra, quoting Matter of Pell v. Board of Educ., 34 N.Y.2d 222, 231). The Department's determination need only be supported by a rational basis (see generally, Matter of Eden Park Mgt. v. Axelrod, 152 A.D.2d 844, 846; Matter of Bassett Hosp. v. Axelrod, 127 A.D.2d 260, supra).
Finally, petitioner contends that the Department's determination is irrational because it is based upon an outdated management assessment review. Despite petitioner's awareness by, at the latest, December 1988 that the Department utilized, in part, a June 6, 1980 management assessment review in calculating the necessary nursing staff levels for the 1982 through 1985 reimbursement years, petitioner never objected to such use at the administrative level. The failure to raise such claim at the administrative level precludes our consideration of it now (see, e.g., Matter of Henry v. Wetzler, 82 N.Y.2d 859, 861, cert denied 511 U.S. 1126; Matter of Budget Tire Ctr. v. Jackson, 235 A.D.2d 975; Matter of Mera v. Tax Appeals Tribunal, 204 A.D.2d 818, 821; Matter of Friesch-Groningsche Hypotheekbank Realty Credit Corp. v. Tax Appeals Tribunal, 185 A.D.2d 466, 469, lv denied 80 N.Y.2d 761; Matter of Sasson v. Commissioner of Educ., 127 A.D.2d 875, 876). We further note that there is no claim in the petition itself that the Department's determination is irrational because it is based on this outdated management assessment review (see, e.g., Matter of Miller v. McMahon, 240 A.D.2d 806, 807-808; Matter of Cocozzo v. Ward, 162 A.D.2d 202, 203). Rather, the claim was raised for the first time in a reply affidavit (see, Matter of Crawmer v. Mills, 239 A.D.2d 844, 844-845, appeal dismissed 90 N.Y.2d 934).
Crew III, J. P., Yesawich Jr., Peters and Spain, JJ., concur.
Ordered that the judgment is affirmed, without costs.