SUPREME COURT OF THE STATE OF NEW YORK

Appellate Division, Fourth Judicial Department

1302 

CA 11-01204 

PRESENT: CENTRA, J.P., PERADOTTO, CARNI, LINDLEY, AND SCONIERS, JJ. 

 

IN THE MATTER OF PRESBYTERIAN HOME FOR 

CENTRAL NEW YORK, INC., PETITIONER-APPELLANT, 

 

V MEMORANDUM AND ORDER

 

COMMISSIONER OF HEALTH OF THE STATE OF NEW 

YORK AND DIRECTOR OF BUDGET OF THE STATE OF 

NEW YORK, RESPONDENTS-RESPONDENTS.

 

RUFFO, TABORA, MAINELLO & MCKAY, P.C., ALBANY (JOHN F. DARLING OF

COUNSEL), FOR PETITIONER-APPELLANT.

ERIC T. SCHNEIDERMAN, ATTORNEY GENERAL, ALBANY (VICTOR PALADINO OF

COUNSEL), FOR RESPONDENTS-RESPONDENTS. 

 

Appeal from a judgment (denominated order) of the Supreme Court,

Oneida County (Anthony F. Shaheen, J.), entered October 25, 2010 in a

proceeding pursuant to CPLR article 78. The judgment, among other

things, denied petitioner’s motion for partial summary judgment. 

It is hereby ORDERED that the judgment so appealed from is

unanimously affirmed without costs.

Memorandum: Petitioner owns and operates a nursing home in

Oneida County that receives reimbursement of its capital and operating

costs from the State of New York through the Medicaid program. We

note at the outset that petitioner purported to commence a declaratory

judgment action when in fact the relief it sought was the adjustment

of its Medicaid reimbursement rates from the State of New York. 

Moreover, petitioner does not challenge the constitutionality of any

statutes or regulations, and we thus conclude that the parties and

Supreme Court have acted properly in ultimately treating this as a

CPLR article 78 proceeding (see generally Matter of Custom Topsoil,

Inc. v City of Buffalo, 63 AD3d 1511). 

Petitioner alleged in its fifth cause of action that respondents

did not fully reimburse petitioner for the conversion of 80 healthrelated facility (HRF) beds to skilled nursing facility (SNF) status

in 1990 when the distinction between HRF and SNF beds was eliminated

pursuant to the Omnibus Budget Reconciliation Act of 1987 ([OBRA] Pub

L 100–203, 101 US Stat 1330; see generally Matter of Grand Manor

Nursing Home Health Related Facility, Inc. v Novello, 39 AD3d 1062,

1063, lv denied 9 NY3d 812). As a result of OBRA, the New York State

Department of Health (DOH) changed its regulations with respect to
-2- 1302 

CA 11-01204 

Medicaid reimbursement rates. One of the newly adopted regulations

included subdivision (s) of 10 NYCRR 86-2.10, which provides that each

facility’s new reimbursement rate would be calculated based on a

weighted average of its SNF to HRF beds. That regulation also

included subdivision (t), which allows for an adjustment of a

facility’s base year costs if its proportion of SNF to HRF beds

changed since the beginning of the base year, i.e., January 1, 1983. 

In moving for partial summary judgment, petitioner contended that

it was entitled to a bed conversion adjustment pursuant to 10 NYCRR

86-2.10 (t) for 40 SNF beds that had been added in July 1983. 

According to petitioner, in adjusting its base year costs due to the

40 SNF beds in question, respondents gave petitioner credit for having

added only 21 SNF beds, 19 short of what petitioner claimed should

have been added. As the court determined, however, that contention

was not raised in petitioner’s administrative appeals. We thus

conclude that the court properly denied the motion and granted in part

the cross motion on the ground that petitioner failed to exhaust its

administrative remedies with respect to the bed conversion adjustment

issue raised in the motion (see Watergate II Apts. v Buffalo Sewer

Auth., 46 NY2d 52, 57; Young Men’s Christian Assn. v Rochester Pure

Waters Dist., 37 NY2d 371, 375-376; Matter of Nelson v Coughlin, 188

AD2d 1071, appeal dismissed 81 NY2d 834). Without a final

administrative decision on an issue, in which the agency develops the

factual record, judicial review is not available (see Matter of Saint

Mary’s Hosp. of Troy, 108 AD2d 1068, 1069). Indeed, “ ‘[i]t is

hornbook law that one who objects to the act of an administrative

agency must exhaust available administrative remedies before being

permitted to litigate in a court of law’ ” (Watergate II Apts., 46

NY2d at 57). 

In its initial administrative appeal, petitioner in relevant part

raised only the issue of the “transition of 80 o[f] our existing beds

from HRF to SNF [beds] in the early 1990s.” No mention was made of

the 40 SNF beds added in July 1983, nor was there a reference to 10

NYCRR 86-2.10 (t). Nor did petitioner raise that particular issue in

its second-stage administrative appeal. The issue whether respondents

properly adjusted petitioner’s rates based on the mandatory conversion

of beds pursuant 10 NYCRR 86-2.10 (s) is separate and distinct from

the issue whether respondents properly adjusted petitioner’s rates

pursuant to 10 NYCRR 86-2.10 (t) based on the SNF beds added after

January 1, 1983. We thus conclude that petitioner’s “failure to

obtain prompt administrative review on the basis of the objection

which it now seeks to assert . . . precludes petitioner from seeking

judicial review” (Saint Mary’s Hosp. of Troy, 108 AD2d at 1069). 

Moreover, the court had “no discretionary power to reach” the

unexhausted issue (Nelson, 188 AD2d at 1071), and it is therefore

irrelevant that respondents did not raise the defense of exhaustion of

administrative remedies in their answer. In any event, we note that

the amended “complaint” did not allege that petitioner was improperly

reimbursed for the 40 SNF beds added in July 1983; that issue was

raised for the first time in petitioner’s motion for partial summary

judgment, and thus there was no basis for respondents to have raised

the failure to exhaust administrative remedies as a defense with
-3- 1302 

CA 11-01204 

respect to that issue (see generally Held v Kaufman, 91 NY2d 425,

430). 

Because the court properly denied the motion based on

petitioner’s failure to exhaust its administrative remedies, we do not

address the merits of petitioner’s underlying contention. 

Entered: December 30, 2011 Frances E. Cafarell

Clerk of the Court