Opinion
Index No.: 2146-16
11-17-2017
In the Matter of the Application of DRY HARBOR NURSING HOME, ET AL., Plaintiffs-petitioners, v. HOWARD ZUCKER, M.D., AS COMMISSIONER OF HEALTH OF THE STATE OF NEW YORK; ROBERT MUJICA, AS DIRECTOR OF THE BUDGET, AND ANDREW M. CUOMO, AS GOVERNOR OF THE STATE OF NEW YORK Defendants-respodents.
APPEARANCES: Harter Secrest & Emery, LLP Attorneys for Plaintiff-Petitioners (F. Paul Greene, Esq., of Counsel) 1600 Bausch & Lomb Place Rochester, New York 14604-2711 Office of the New York State Attorney General Attorneys for Defendant-Respondents (Denise P. Buckley, Esq., Assistant Attorney General) The Capitol Albany, New York 12224
At a Special Term of the Albany County Supreme Court, held in and for the County of Albany, in the City of Albany, New York, on the 17, day of November, 2017. PRESENT: DECISION, ORDER/JUDGMENT APPEARANCES: Harter Secrest & Emery, LLP
Attorneys for Plaintiff-Petitioners
(F. Paul Greene, Esq., of Counsel)
1600 Bausch & Lomb Place
Rochester, New York 14604-2711 Office of the New York State Attorney General
Attorneys for Defendant-Respondents
(Denise P. Buckley, Esq., Assistant Attorney General)
The Capitol
Albany, New York 12224
MCNALLY, J.
Plaintiffs-petitioners (hereinafter "plaintiffs") commenced this hybrid CPLR Article 78 proceeding and action seeking declaratory judgment relief, surrounding an emergency regulation promulgated by the New York State Department of Health (hereinafter "defendant" or "DOH") related to a program developed by DOH known as the New York State Nursing Home Quality Pool ("NYSNHQP" or the "Quality Pool"). Pursuant to the authority given to DOH under Public Health Law § 2808 (2-c) (d) the agency adopted, on an emergency basis, an addition to section 86-2.42 to Title 10 NYCRR ("emergency rule"). Plaintiffs seek a declaration from this Court that the emergency rule is null an void and an order permanently enjoining defendant from taking any action under the emergency rule. Respondents have filed an Answer and opposition to the Article 78 as well as a motion for summary judgment as it relates to the declaratory judgment action. Plaintiffs submitted a reply. The Court heard oral argument in this matter and thereafter accepted supplemental submissions.
The Quality Pool is a $50 million budget-neutral program that was established as part of the 2010-2011 final New York State budget. The Pool was created to improve the quality of care for residents housed in Medicaid-certified nursing facilities that exist throughout New York State. The pool is funded through an across the board medicaid rate reduction for all nursing home facilities funded by medicaid in New York State. The medicaid rate adjustments for the pool is accomplished for each year by a two-step process. Initially, there is an across the board reduction to every facility's medicaid rate. Next, the funds captured from the first step are then reallocated to the facilities that meet or exceed the established quality measures.
Under this program nursing homes are to be rated in several areas including quality measures, compliance reporting, and potentially avoidable hospitalizations. Then, points are awarded by DOH in each category to each facility. After the number of points are tallied, DOH ranks each nursing home in "quintiles" one through five. Quintile one representing nursing homes achieving the most points and quintile five representing nursing homes receiving the lowest number of points. The stated goal of this program is to reward facilities that meet established performance measures and provide an incentive for under-performing nursing home facilities thereby improving the overall quality of care.
The Department cites Public Health Law 2808 (2-c) (d) as the authority for the formation of the Pool program, which states as follows:
"The commissioner shall promulgate regulations, and may promulgate emergency regulations, to implement the provisions of this subdivision. Such regulations shall be developed in consultation with the nursing home industry and advocates for residential health care facility residents and, further, the commissioner shall provide notification concerning such regulations to the chairs of the senate and assembly health committees, the chair of the senate finance committee and the chair of the assembly ways and means committee. Such regulations shall include provisions for rate adjustments or payment enhancements to facilitate a minimum four-year transition of facilities to the rate-setting methodology established by this subdivision and may also include, but not be limited to, provisions for facilitating quality improvements in residential health care facilities. For purposes of facilitating quality improvements through the establishment of a nursing home quality pool, those facilities that contribute to the quality pool, but are deemed ineligible for quality pool payments due exclusively to a specific case of employee misconduct, shall nevertheless be eligible for a quality pool payment if the facility properly reported the incident, did not receive a survey citation from the commissioner or the Centers for Medicare and Medicaid Services establishing the facility's culpability with regard to such misconduct and, but for the specific case of employee misconduct, the facility would have otherwise received a quality pool payment. Regulations pertaining to the facilitation of quality improvement may be made effective for periods on and after January
first, two thousand thirteen."
On September 21, 2016, the Department filed with the Department of State notice of emergency/proposed rule making related to the Quality Pool. The emergency regulation was published in the State Register on October 12, 2016. The reason articulated by the DOH regarding the necessity of the emergency regulation was stated as follows:
"[t]he quality pool is needed to incentivize nursing facilities to maintain and improve the quality of care for their residents. The benefits of the quality pool include improving quality of care and, in turn, reducing overall health costs. Specific benefits that fall under the umbrella of improving quality of care include reducing the percent of residents with pressure ulcers, reducing antipsychotic medication use, reducing urinary tract infections, reducing depression, reducing pain, reducing unnecessary weight loss, and reducing avoidable hospitalizations. These quality of care improvements are associated with reductions in health care costs and improved quality of life for nursing home residents. The additional reimbursement provided by this adjustment will support the intent of the quality pool. Facilities can use the additional funds to facilitate quality improvements through activities including, but not limited to, increasing direct care staffing levels, providing training and education for staff, and utilizing technology."
To date, DOH has taken no action on the proposed adjustment under the Quality Pool for the year 2013. Since the onset of this litigation the DOH has renewed its notice of emergency rule making five (5) times. On August 23, 2017, defendant-respondents published a notice of revised rule making. As state above, plaintiffs contend DOH has no authority to promulgate the emergency rule and alleges it has done so in violation of SAPA. This matter ensued.
Initially, with respect to the relief sought in the petition, the Court's function in an Article 78 proceeding is to determine whether the action of an administrative agency had a rational basis or was arbitrary and capricious (Pell v Board of Educ. of Union School District No.1 of the Towns of Scarsdale and Mamaroneck, Westchester County, 34 NY2d 222, 230-231 [1974]). "Arbitrary action is without sound basis in reason and is generally taken without regard to the fact" (Pell, 34 NY2d at 231). A rational basis exists where the determination is "[supported] by proof sufficient to satisfy a reasonable [person], of all the facts necessary to be proved in order to authorize the determination" (Ador Realty, LLC v Division of Housing and Community Renewal, 25 AD3d 128, 139-140 [2d Dept 2005], quoting Pell, 34 NY2d at 231).
A reviewing court will not substitute its own judgment for that of the agency unless the agency's determination is arbitrary, capricious or contrary to law (Pell, 34 NY2d at 231; Diocese of Rochester v Planning Bd. of Town of Brighton, 1 NY2d 508 [1956]; Matter of Brockport Cent. School Dist. v New York State & Local Employees' Retirement System, 270 AD2d 706 [3d Dept 2000]). Pursuant to CPLR § 7803 (3), the question raised 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."
Further, it is well settled that "where . . . the judgment of the agency involves factual evaluations in the area of the agency's expertise and is supported by the record, such judgment must be accorded great weight and judicial deference" (Flacke v Onondaga Landfill Sys., 69 NY2d 355, 363 [1987]). Moreover, "[w]here the interpretation of a statute or its application involves knowledge and understanding of underlying operational practices or entails an evaluation of factual data and inferences to be drawn therefrom, the courts regularly defer to the governmental agency charged with the responsibility for administration of the statute" (In Re Claim of Gruber, 89 NY2d 225, 231 [1996] [citations omitted]).
Plaintiffs contend the Quality Pool as developed by DOH is arbitrary and capricious. Further, plaintiffs assert the methodology utilized by respondents is not reasonably related to the quality of care provided to nursing home residents, the program is not designed to facilitate quality improvements, and it overall lacks a rational basis.
In opposition, defendants have proffered the affidavit of Raina Josberger, Director of the Bureau of Quality Measurement of Special Safety, New York State Department of Health. Ms. Josberger states the Quality Pool was created to develop, evaluate, and modify the measures and methodology which will guide the distribution of the funds (Verified Answer, Affidavit of Raina Josberger ("Josberger Aff.") ¶ 4). Ms. Josberger asserts the nursing home industry has been a contributor in the development process involving the quality measures implemented (Josberger Aff. ¶¶ 5-64). Also, Ms. Josberger asserts the quality measures used are based on the federal quality measures provided by CMS which are publically available (id. at ¶ 65). Finally Ms. Josberger asserts improving the quality of care given to nursing home residents is undeniably a legitimate state interest (id. at ¶ 83).
In this state, DOH is charged with the administration of the Medicaid program and has the "inherent authority to protect the quality and value of services rendered by providers in that program" (Matter of Leadinggage New York, Inc., v Shah, 2017 NY Slip Op 05136 [3d Dept 2017]) (citations omitted). Given the stated rationale and development of the Quality Pool program as well as the deference afforded DOH surrounding the administration of the Medicaid program, the Court finds the Quality Pool program is rationally based and not arbitrary or capricious (CPLR § 7804 (3); Pell, 34 NY2d 222).
In its hybrid action, plaintiffs have raised a number of claims in which declaratory relief is sought. CPLR § 3001 provides that "[t]he supreme court may render a declaratory judgment having the effect of a final judgment as to the rights and other legal relations of the parties to a justiciable controversy whether or not further relief is or could be claimed." The general purpose of the declaratory judgment is often described as "to serve some practical end in quieting or stabilizing an uncertain or disputed jural relation either as to present or prospective obligations" (James v Alderton Dock Yards, 256 NY 298, 305 [1931]). Thus, a primary goal in seeking a declaratory judgment is a decisive determination as to the rights of the parties in ongoing or future collateral actions.
In response to plaintiffs' claims respondents filed a motion for summary judgment. It is well settled that "[s]ummary judgment is a drastic remedy that should not be granted where there is any doubt as to the existence of a triable issue" (Napierski v Finn, 229 AD2d 869, 870 [3d Dept 1996] [internal quotation marks and citations omitted]). In deciding whether summary judgment is warranted, the court's main function is issue identification, not issue determination (Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395 [1957]). The party seeking summary judgment has the burden of establishing its entitlement thereto as a matter of law (Winegard v New York Univ. Med. Ctr., 64 NY2d 851 [1985]). The evidence must be construed in a light most favorable to the party opposing the motion (Dykstra v Winridge Condominium One, 175 AD2d 482 [3d Dept 1991]). In order to defeat a motion for summary judgment, the party opposing the motion must produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact requiring a trial of the action (Alvarez v Prospect Hospital, 68 NY2d 320 [1986]; Zuckerman v City of New York, 49 NY2d 557 [1980]). Conclusory statements that maintain questions of fact exist are insufficient to defeat a properly made motion for summary judgment (Albany Medical Center Hospital v Huberty, 76 AD2d 949 [3d Dept 1980]).
First, plaintiffs argue the development of the Quality Pool by DOH is unconstitutional and an improper delegation of legislative authority to an administrative agency. The nature of the inquiry as it relates to such an allegation is whether the legislative branch of government intended, as evidenced by the scope and language of the enabling legislation, "to grant regulatory authority over a specific subject matter to an administrative agency which exists as part of the coequal executive branch" (Boreali v Axelrod, 71 NY2d 1, 15 [1987]).
The factors to be considered include (1) whether the agency merely "balance[d] costs and benefits according to preexisting guidelines," or instead made "value judgments entailing difficult and complex choices between broad policy goals to resolve social problems", (2) whether the agency wrote on "a clean slate, creating its own comprehensive set of rules without the benefit of legislative guidance," or whether it simply "fill[ed] in the details of broad legislation describing the over-all policies to be implemented", (3) "whether the legislature has unsuccessfully tried to reach agreement on the issue, which would indicate that the matter is a policy consideration for the elected body to resolve", and (4) whether any "special expertise or technical competence" was involved in the development of the challenged regulation (Greater N.Y. Taxi Assn. v New York City Taxi & Limousine Commn., 25 NY3d 600, 610 [2015]; Boreali v Axelrod, 71 NY2d 1)
As noted above, DOH is charged with the administration of the Medicaid program and has the "inherent authority to protect the quality and value of services rendered by providers in that program" (Matter of Leadinggage New York, Inc., v Shah, 153 AD3d 10, 10 [3d Dept 2017] [citations omitted]). To that end, the Legislature has vested the Commissioner of DOH with broad authority to promulgate regulations "for rate adjustments or payment enhancements to facilitate a minimum four-year transition of facilities to the rate-setting methodology . . . facilitating quality improvements in residential health care facilities . . . through the establishment of a nursing home quality pool . . . ." (PHL § 2808 (2-c) (d)). This statutory provision leads to the unambiguous conclusion that the Legislature intended to grant DOH regulatory authority over the development of the NYSNHQP program so long as its done in conjunction with nursing home industry and advocates for residential health care facility residents. Contrary to plaintiffs' argument, development of the Quality Pool by DOH is neither unconstitutional nor an improper delegation of legislative authority to an administrative agency.
Next, plaintiffs put forth a number of constitutional challenges to PHL § 2808 (2-c) (d) and seek an order from this Court deeming the statute unconstitutional. "Legislative enactments enjoy a strong presumption of constitutionality . . . [and] parties challenging a duly enacted statute face the initial burden of demonstrating the statute's invalidity beyond a reasonable doubt" (Overstock.com, Inc. v New York State Dept. of Taxation & Fin., 20 NY3d 586, 593 [2013] [internal quotation marks and citation omitted]).
Plaintiffs argue that PHL § 2808 (2-c) (d) permits unlawfully the retroactive authorization of the Quality Pool which violates the precepts of due process. "Regulations are not retroactive when made to apply to future transactions merely because such transactions . . . are founded upon antecedent events" (Matter of Acevedo v New York State Depart. of Motor Vehs., 29 NY3d 202 [2017] citing Forti v New York State Ethics Com. v Cuomo, 75 NY2d 596 [1990]).
Here, PHL § 2808 (2-c) (d) authorizes the promulgation of regulations "pertaining to the facilitation of quality improvement" (i.e. the Quality Pool) to be made effective for periods on or after January 1, 2013. Plaintiffs' medicaid rate has not been affected based on performance prior to January 1, 2013. Rather, the regulation applied only to DOH's prospective consideration of performance when considering its ranking of facilities and subsequent distribution of money to facilities that meet or exceed expectations. Thus, contrary to plaintiffs' argument, PHL § 2808 (2-c) (d) does not unlawfully authorize the retroactive implementation of the Quality Pool in violation of due process.
Plaintiffs also contend the Quality Pool program violates their rights to substantive due process. For a violation of substantive due process rights to exist, a party "must establish a cognizable . . . vested property interest" and "that the governmental action [taken] was wholly without legal justification" (Bower Assoc. v Town of Pleasant Val., 2 NY3d 617, 627 [2004]). As it relates to plaintiffs' case, Medicaid is a voluntary program and as such there is no vested property interest in receiving Medicaid reimbursement (Matter of Concerned Home Care Providers, Inc. v State of New York, 108 AD3d 151 [3d Dept 2013]). Additionally, there is no proof in this record that the action taken by DOH regarding the Quality Pool is without legal justification or unsupported by a rational legislative purpose. Accordingly, PHL § 2808 (2-c) (d) does not violate plaintiffs' substantive due process rights.
In addition, plaintiffs argue the Quality Pool violates their right to procedural due process. It is well established that procedural due process guarantees notice and an opportunity to be heard before a claimant is deprived of liberty or a recognized property interest (In re Quinton A., 49 NY2d 328, 334 [1980]). As stated above, plaintiffs do not have a vested property interest in a Medicaid reimbursement rate. Thus, the Quality Pool does not violate the precepts of procedural due process.
Likewise, plaintiffs' equal protection argument, regarding PHL § 2808 (2-c) (d), is equally unavailing. In order to "support an equal protection argument, plaintiffs must show that any discriminatory effect of the regulation was the result of respondents' "evil eye" ' toward discrimination against plaintiff (Matter of 303 W. 42nd St. Corp. v Klein, 46 NY2d 686, 695 [1979]) Here, the record is devoid of any proof that the Quality Pool as administered by DOH has been done with a motive to discriminate against plaintiffs in this case.
Plaintiffs' final Constitutional challenge involves an alleged Civil Rights violation. 42 USC § 1983 provides a remedy for the deprivation of Federal rights by any person or entity who acts under color of state law. Here, plaintiffs are not entitled to relief under 42 USC § 1983 as this Court has rejected all other arguments made by plaintiffs and has determined that no Constitutional violation exist.
Turning now to the argument posed by plaintiffs regarding the emergency rule making engaged in by DOH, which they collectively argue fails to comply with SAPA § 202 (6) (a). Specifically, the notice of emergency rule making did not contain (i) the agency's findings as to why the requirements of § 202 (6) (a) have been met; (ii) a description of the cause, consequences, and expected duration of such need; (iii) an explanation of why compliance with the requirements of notice rule making, which include a 45-day notice and comment period, would be contrary to the public interest; and (iv) an explanation of why the current circumstances necessitates that the public and interested parties be given less then the minimum 45-day notice and comment period (citing SAPA § 202 (6) (a) (iv)).
Generally, state agencies must comply with the provisions of SAPA prior to the adoption of rules and regulations. Here, in enacting PHL § 2808 (2-c) (d), the legislature specifically provided that the Commissioner "shall promulgate regulations, and may promulgate emergency regulations," in order to implement the quality pool. Although the legislature, in this case, directed that regulations "shall" be promulgated, it did not require that their promulgation be done on an emergency basis (PHL § 2808 (2-c) (d)). However, this Court finds that given the decision made by the agency to proceed with rule making on an emergency basis, the agency was not exempt from compliance with SAPA 202 (6) (a) and SAPA 202 (6) (d) (iv). SAPA § 202(6), in pertinent part, states:
"Notice of emergency adoption. (a) Notwithstanding any other provision of law, if an agency finds that the immediate adoption of a rule is necessary for the preservation of the public health, safety or general welfare and that compliance with the requirements of subdivision one of this section would be contrary to the public interest, the agency may dispense with all or part of such requirements and adopt the rule on an emergency basis."SAPA § 202(6)(d)(iv) provides that a notice of emergency adoption shall:
"Contain the findings required by paragraph (a) and (c) of this subdivision and include a statement fully describing the specific reasons for such findings and the facts and circumstances on which such findings are based. Such statement shall include, at a minimum, a description of the nature and if applicable, location of the public health, safety or general welfare need requiring adoption of the rule on an emergency basis; a description of the cause, consequences, and expected duration of such need; an explanation of why compliance with the requirements of subdivision one of this section would be contrary to the public interest; and an explanation of why current circumstance necessitates that the public and interested parties be given less than the minimum period for notice and comment provided for in subdivision one of this section."
Here, the statement highlighted by defendants articulating the need for an emergency rule is devoid of any facts upon which to base a finding that an emergency existed (Matter of Law Enforcement Officers Union, District Council 82, AFSCME, AFL-CIO v State of New York (168 Misc2d 781 [Sup. Ct. Albany County 1995]; cf Empire State Association of Adult Homes, Inc. v Novello, 193 Misc2d 543 [Sup. Ct. Albany County 2002]). As such, the Courts finds that the emergency regulation was promulgated in violation of SAPA.
The Court has reviewed the parties remaining contentions and concludes they either lack merit or are unpersuasive given the Court's determination (Hubbard v County of Madison, 71 AD3d 1313 [3d Dept 2010]). The Court need not address plaintiffs-petitioner's request for an permanent injunction given the Court's determination.
Accordingly, it is
ORDERED and ADJUDGED, that the portion of the petition/complaint seeking relief pursuant to CPLR Article 78 be and hereby is dismissed; and it is
ORDERED, that defendants' motion for summary judgment is granted; and it is further
ORDERED and DECLARED, that the emergency rule is hereby declared null and void; and it is further
ORDERED and ADJUDGED, that all other injunctive and declaratory relief sought by plaintiffs' is hereby denied and dismissed.
This shall constitute the Decision and Order of the Court. The signing of this Decision and Order shall not constitute entry or filing under CPLR 2220. Counsel are not relieved from the applicable provision of that rule relating to filing, entry and notice of entry. Dated: November 17, 2017
Albany, New York
/s/_________
RICHARD J. MCNALLY, JR.
Supreme Court Justice Papers Considered: 1. Notice of Second Amended Article 78 Verified Petition and Verified Complaint dated November 4, 2016 with annexed exhibits, Affirmation of Paul Greene, Esq., dated November 4, 2016 with annexed exhibits, Memorandum of Law. 2. Verified Answer dated December 5, 2016, Notice of Cross-Motion for Summary Judgment dated December 5, 2016, Affirmation of Denise P. Buckley, Esq., dated December 5, 2016, Affidavit of Steven Simmons dated December 2, 2016 with annexed exhibits, Affidavit of Raina Josberger dated December 5, 2016 with annexed exhibits, Memorandum of Law. 3. Affirmation in Opposition to Cross-Motion for Summary Judgment of Paul F. Greene, Esq., dated January 5, 2017 with annexed exhibits, Affidavit of Bridgett Reed dated January 6, 2017 with annexed exhibit, Affidavit of Elizabeth Kaneb dated January 5, 2017, Memorandum of Law. 4. Supplemental Affidavit of Raina Josberger dated January 31, 2017 with annexed exhibits, Supplemental Affidavit of Ann Foster dated January 31, 2017 with annexed exhibits, Memorandum of Law. 5. Letter of Paul Greene, Esq., dated March 22, 2017 with annexed exhibit. 6. Letter of Denise P. Buckley, Esq. dated March 20, 2017. 7. Letter of Denise P. Buckley, Esq., dated May 2, 2017. 8. Letter of Paul Greene, Esq., dated May 2, 2017 with annexed exhibits. 9. Letter of Paul Greene, Esq., dated July 20, 2017 with annexed exhibits. 10. Letter of Paul Greene, Esq., dated August 25, 2017 with annexed exhibits.