Concourse Rehabilitation & Nursing Center Inc. v. DebuonoConcourse Rehabilitation & Nursing Center Inc. v. Debuono
Barbara K. Hathaway, Assistant Attorney General, New York, New York (Dennis C. Vacco, Attorney General of the State of New York, John W. McConnell, Deputy Solicitor General, Michael S. Belohlavek, Assistant Attorney General, New York, New York, of counsel), for Appellee.
Cornelius D. Murray, Albany, New York (Pamela A. Nichols, O‘Connell and Aronowitz, P.C., Albany, New York, of counsel), filed a brief for Amicus Curiae New York State Health Facilities Association, Inc.
Evelyn Huang, New York, New York, filed a brief Amicus Curiae for The Greater New York Health Care Facilities Association.
Harvey Weinberg, Garden City, New York (John F. Kaley, Weinberg, Kaley, Gross & Pergament, L.L.P., of counsel), filed a brief Amicus Curiae for The Southern New York Association, Inc.
OPINION
CARDAMONE, Circuit Judge:
Plaintiff, Concourse Rehabilitation & Nursing Center, Inc. and Concourse Nursing Home (collectively Concourse, plaintiff or appellant), is a 240-bed residential health care facility in the Bronx, New York. Concourse was found as a result of a State audit to have been reimbursed for care of Medicaid patients in an amount greater than that to which it was entitled. It thereafter brought a
A State administers its Medicaid plan pursuant to the provisions of Title XIX of the Social Security Act,
BACKGROUND
A. The Medicaid Program
We deal on this appeal with the Medicaid Program, a program that pays the costs of medical services for indigent persons who cannot afford such care and that is jointly funded by the federal and State governments. While participation by a State is optional, if a State chooses to join the Medicaid Program, it must submit a plan to the U.S. Secretary of Health and Human Services (Secretary) for approval. The plan must be in writing and must comprehensively describe the nature and scope of the State‘s Medicaid program. Upon approval of the plan by the Secretary, the State becomes entitled to receive reimbursement from the federal government for a percentage of the monies it pays to residential health care facilities for their care of Medicaid patients. The balance of the costs for such care is furnished by State and local governments.
The joint program is administered by the federal and State governments pursuant to the Medicaid Act found in Title XIX of the Social Security Act. The federal money distributed to individual States for the operation of State-formulated medical assistance plans must be approved by the Health Care Financing Administration (Health Financing Agency), a division of the Department of Health and Human Services, according to standards contained in
Pursuant to the Boren Amendment, the Secretary issued regulations requiring further federal approval of certain amendments to State plans. These regulations, currently in effect, require that the State plan provide for amendments to the plan itself:
(c) Plan amendments. (1) The [State Medicaid] plan must provide that it will be amended whenever necessary to reflect--
...
(ii) Material changes in State law, organization, or policy, or in the State‘s operation of the Medicaid program.
(a) State assurances. In order to receive [Health Financing Agency] approval of a State plan change in payment methods and standards, the [State] Medicaid agency must make assurances satisfactory to [the Health Financing Agency] that the requirements set forth in paragraphs (b) through (i) of this section are being met....
(b) Findings. Whenever the Medicaid agency makes a change in its methods and standards, but not less often than annually, the agency must make the following findings:
(1) Payment rates. (i) The Medicaid agency pays for inpatient hospital services and long-term care facility services through the use of rates that are reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers to provide services in conformity with applicable State and Federal laws, regulations, and quality and safety standards.
B. The New York State Medicaid Plan
Under Article 28 of the New York Public Health Law, the Commissioner of the New York State Department of Health is responsible for setting State Medicaid reimbursement rates for nursing homes, more formally known as “residential health care facilities.” See
Under the present approach, the direct cost component of Medicaid reimbursements for a particular nursing home is gauged according to a “case mix index,” which reflects the number of patients in the facility, the severity of each patient‘s diagnosis, and the consumption of resources required by patients with similar diagnoses. See
To ensure that the case mix index is kept up-to-date, the Department requires health care facilities to evaluate their patients periodically using a form known as the “Patient Review Instrument” (Patient Review). See
Patient Review employs a number of standards, formally called “documentation qualifiers.” These standards draw inferences regarding a patient‘s medical condition based upon documentation contained in the patient‘s medical record and are then used to calculate the case mix index. The instant controversy, for example, centers on a dispute as to the Patient Review qualifiers relevant to classifying a patient as needing either “maintenance therapy” or “restorative therapy,” depending on the level of physical and/or occupational therapy that the patient receives.
As a prerequisite to classifying a patient at “maintenance therapy,” the qualifiers state that the patient‘s medical record must indicate the patient receives therapy meeting the following description:
Therapy is provided to maintain and/or retard deterioration of current functional/ADL [“Activities of Daily Living“] status. Therapy plan of care and progress notes should support that patient has no potential for further or any significant improvement.
There is positive potential for improved functional status within a short and predictable period of time. Therapy plan of care and progress notes should support that patient has this potential/is improving.
In addition to these Patient Review qualifiers, the Department has promulgated an “Audit Tool“--not originally included in the State plan approved by the Health Financing Agency--as a guide to help the Foundation audit the Patient Review process. The Audit Tool provides the following standard by which the Foundation‘s assessors are to evaluate whether a nursing home has properly classified a patient at restorative therapy as opposed to at maintenance therapy:
Patient‘s condition is realistically expected to improve significantly within a reasonable (and generally predictable) period of time.
In 1991 and 1993 Concourse was audited by the New York State Department of Health. It passed these audits. In March 1996 the Department notified Concourse that another audit had been scheduled with reference to Patient Reviews Concourse had prepared and submitted in May 1995. Over the next several months, the audit was conducted in three stages, with each stage giving increased scrutiny to the patient evaluations made by Concourse.
Following the final stage of the audit, conducted in June 1997, the Department concluded that Concourse had erroneously classified a number of patients at restorative therapy instead of at maintenance therapy. Upon reclassifying these patients, the Department found that, as a result of the misclassifications, Concourse had been overpaid $514,000 in Medicaid reimbursements. It proposed to recoup this overpayment by withholding future Medicaid reimbursement payments due Concourse.
On April 21, 1997 plaintiff filed suit in federal district court against Barbara A. DeBuono, both individually and as Commissioner of the Department, for alleged violations of
On February 2, 1998 District Judge Kimba M. Wood issued a Temporary Restraining Order against recoupment of the alleged overpayment of Medicaid funds. The case was then transferred to District Judge Samuel Conti, who held a bench trial and on June 11, 1998 issued an opinion. See Concourse Rehabilitation & Nursing Ctr. Inc. v. DeBuono, No. 97 Civ. 2851 (S.D.N.Y. June 11, 1998). Judgment on the merits was entered against Concourse the next day. On June 30, 1998 Judge Wood issued a stay of judgment pending appeal, conditioned upon Concourse‘s pursuit of an expedited appeal. This appeal followed.
DISCUSSION
I Standard of Review
The threshold issue in this, and every case, is whether a federal court has subject matter jurisdiction over the suit before it. We are obliged to review that issue de novo, regardless of whether the parties invite us to do so. See Air Espana v. Brien, 165 F.3d 148, 151 (2d Cir.1999). Beyond that, on appeal from this bench trial, we examine the trial court‘s conclusion of law de novo and its factual findings under the clearly erroneous standard.
II Jurisdiction
A. State Plan Violations
Concourse reasserts on appeal its argument that the manner in which the Department conducted its audits of the May 1995 Patient Reviews violated the State Medicaid plan. Appellant complains that in reclassifying patients to “maintenance therapy,” the auditors failed both to give the requisite deference to the diagnoses made by Concourse‘s licensed therapists and to limit review of the patients’ medical documentation to the 28-day “snap shot” period on which Patient Reviews originally were based. It contends, in addition, that the auditors violated State procedural requirements when they allegedly prevented Concourse from presenting proof at the exit conferences, which followed the audits, that its patients met the “restorative therapy” standard.
As we repeatedly have explained, the failure of a State authority to comply with State regulations cannot alone give rise to a § 1983 cause of action. See Concourse Rehabilitation & Nursing Ctr. Inc. v. Wing, 150 F.3d 185, 187-89 (2d Cir.1998) (Wing); Kostok v. Thomas, 105 F.3d 65, 68 (2d Cir.1997). To state a federal cause of action, a plaintiff must allege a “specific conflict between a state plan or practice on the one hand and a federal mandate on the other.” Oberlander v. Perales, 740 F.2d 116, 119 (2d Cir.1984).
In this light, we look in vain to find any specific federal provision that appellant cites as conflicting with the State audit practices described above. To the extent we understand Concourse to be alleging a conflict with constitutional Due Process, plaintiff has adduced nothing to suggest that the review provided under Article 78 of New York‘s Civil Practice Law & Rules is an inadequate postdeprivation remedy. Whether negligent or intentional, the deprivation of property through the random and unauthorized acts of a State or federal employee does not constitute a violation of the procedural requirements of due process “if a meaningful postdeprivation remedy for the loss is available.” Hudson v. Palmer, 468 U.S. 517, 533, 104 S.Ct. 3194, 82 L.Ed.2d 393 (1984).
To the extent that appellant alleges a conflict with federal Medicaid regulations requiring that State plans provide for prompt administrative review, see, e.g.,
In the end, appellant‘s argument reduces to the contention that the Department has failed to comply with the New York State Medicaid plan and that this failure somehow violates either constitutional Due Process or the federal Medicaid regulations. But, as explained above, absent the assertion of a specific conflict between the State plan or practices and federal law, such allegations fail to give rise to a federal cause of action. Because Concourse‘s allegations fail to assert such a specific conflict, and because the Eleventh Amendment bars our consideration of purely State law claims, see Wing, 150 F.3d at 189, we lack jurisdiction to decide appellant‘s claim.
B. De Facto Amendment
Concourse further declares that the Department‘s interpretation of the New York State Medicaid plan departs so far from the terms of the plan as to constitute a de facto amendment to the plan, requiring federal approval prior to implementation. Specifically, appellant asserts that the Audit Tool, both on its face and as applied, parts from the terms of the qualifier for restorative therapy to such a pronounced degree as to effect a de facto amendment to the State plan. First, it points to the Audit Tool‘s requirement that a patient be expected to improve “significantly” and notes that the restorative therapy qualifier speaks only of potential for improvement, without the strong adverb “significantly,” which connotes an important or weighty improvement. In addition, Concourse points to the Department‘s interpretation of the qualifier to require evidence of actual improvement in a patient‘s medical condition subsequent to diagnosis, and urges that this view contradicts the qualifier‘s requirement that there merely be “positive potential for improved functional status” (emphasis added). For these reasons, appellant maintains that the Department has changed the restorative therapy qualifier by de facto amendment, and in that way has brought into play the amendment approval provisions of
1. Requirement of Change
As a preliminary matter, common sense, precedent, and the text of the regulations dictate that there must be some “change” in a State‘s Medicaid plan before the amendment provisions of
Addressing the first question, the district court found the Department has not “changed” the Audit Tool since its adoption ten years ago. See Concourse, slip op. at 10-11. Further, the court also made a finding that it was a change in Concourse‘s practices in 1994--a new emphasis on providing patients with restorative therapy--that made the critical difference between the favorable audits in 1991 and 1993 and the unfavorable audit of the 1995 Patient Reviews. See id. Concourse has presented nothing suggesting that these findings were clearly erroneous; accordingly, we leave them untouched.
Addressing the second question, the district court ruled that the Audit Tool‘s use of the term “significantly” did not constitute a “change” in the qualifier for restorative therapy. See id., slip op. at 8-10. It reasoned that inasmuch as the qualifier for maintenance therapy requires the absence of a “potential for further or any significant improvement,” it is consistent that the qualifier for restorative therapy, by way of contrast, should insist on the presence of a potential for “significant improvement.” Any other interpretation might eliminate the distinction between the two categories and render much of the qualifier language superfluous. Applying a de novo standard of review to this conclusion of law, we think the trial court‘s reasoning sound.
The remaining issue--one apparently not addressed by the district court--is whether the Department‘s requirement of actual improvement constitutes a “change” in the qualifier for restorative therapy. At first blush, the restorative therapy qualifier appears to embody a prospective viewpoint, in the sense that classification of a restorative therapy patient requires “potential” for improvement at some point in the future. Read in this manner, the qualifier is arguably inconsistent with the Department‘s adoption of a retrospective view requiring that, on audit, the patient show actual improvement after treatment to justify reimbursement for restorative therapy. The Department believes the two standards reconcilable. It points out that the phrase “patient has potential/is improving” is read to mean that newly admitted patients must show “potential” for improvement while patients admitted to the health care facility for some time should show signs that they are actually “improving.”
2. Change: Interpretation versus Amendment
On a more fundamental level, determining whether the Department‘s interpretation constitutes a “change” to the State Medicaid plan implicates the analytical difficulty of distinguishing between an interpretation and an amendment generally. To some degree, every construction of a State Medicaid plan necessarily effects a “change” to the plan, since a construction that added nothing to the plan‘s terms would be redundant. On the other hand, insisting that an interpretive change be “significant” as a predicate to triggering the plan amendment regulations would be wholly inconsistent with the history of those provisions. See Medicaid Program, Revisions to Medicaid Payments for Hospital and Long-Term Care Facility Services, 52 Fed.Reg. 28,141, 28,142-43, 28,147 (July 28, 1987) (eliminating the requirement that changes be “significant” under
One approach to resolving this difficulty might be to analogize to federal administrative rulemaking and its longstanding distinction between “interpretive rules” (which are exempt from notice and comment requirements) and “legislative rules” (which are not) under the Administrative Procedure Act,
Indeed,
3. Interpretation Generally Does Not Constitute Change
Accordingly, we hold that a State‘s interpretation of its own Medicaid plan cannot constitute a “change” as that term is used in
Turning to the case at hand, we can hardly say that the Department‘s interpretation clearly and unequivocally alters the terms of the restorative therapy qualifier. Concourse does not dispute that the terms of that qualifier remain intact, and on its face the interpretation does not purport to rewrite, to supersede, or to delete those terms. Although the Department‘s interpretation is perhaps not the most obvious reading, we cannot say that it constitutes a de facto amendment to the terms of the qualifier.
Because there has been no “change” in the State Medicaid plan such as to precipitate the federal Medicaid amendment provisions, Concourse has failed to demonstrate the sort of “specific conflict” with federal law necessary to support a federal cause of action. And, because the Eleventh Amendment bars our consideration of the purely State law claim that a State has misapplied its own regulations, we lack jurisdiction to decide this claim as well.
Nothing in our decision today, however, should be construed to preclude a health care provider from challenging a State‘s interpretation of its Medicaid plan insofar as the substance of that interpretation raises doubts whether the State‘s rates of reimbursement are “reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities” under the Boren Amendment.
Finally, one of the amici curiae to the appeal raises a novel argument suggesting that the Department‘s interpretation of the restorative therapy qualifier may be preempted by federal law insofar as its practical effect is to prevent health care providers from complying with
CONCLUSION
Accordingly, the judgment of the district court is vacated and remanded with instructions to it to dismiss plaintiff‘s complaint for lack of federal jurisdiction. In so ruling, we do not intend to foreclose plaintiff, if so advised, from further pursuing the Boren Amendment and preemption questions alluded to earlier.