Source: https://law.justia.com/cases/federal/appellate-courts/F2/960/6/350112/
Timestamp: 2020-08-05 14:24:54
Document Index: 561122100

Matched Legal Cases: ['§ 504', '§ 504', '§ 504', '§ 504', '§ 504', '§ 504', '§ 504', '§ 504', 'art 515', '§ 504', '§ 515', '§ 1002', '§ 504', 'art. 78', '§ 7801']

Medicare & Medicaid Guide P 40,091fsk Drug Corp., Plaintiff-appellant, v. Cesar A. Perales, Commissioner of the New York Department Ofsocial Services, Defendant-appellee, 960 F.2d 6 (2d Cir. 1992) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Second Circuit › 1992 › Medicare & Medicaid Guide P 40,091fsk Drug Corp., Plaintiff-appellant, v. Cesar A. Perales, Commissi...
Medicare & Medicaid Guide P 40,091fsk Drug Corp., Plaintiff-appellant, v. Cesar A. Perales, Commissioner of the New York Department Ofsocial Services, Defendant-appellee, 960 F.2d 6 (2d Cir. 1992)
US Court of Appeals for the Second Circuit - 960 F.2d 6 (2d Cir. 1992) Argued Feb. 28, 1992. Decided March 19, 1992
This appeal raises equal protection challenges to the re-enrollment provisions of New York State's Medicaid regulations. Finding the challenges foreclosed by the reasoning in our recent decision in 701 Pharmacy Corp. v. Perales, 930 F.2d 163 (2d Cir.), cert. denied, --- U.S. ----, 112 S. Ct. 67, 116 L. Ed. 2d 42 (1991), we affirm the dismissal of the action on motion for summary judgment.
In determining whether to grant such an application, the Department is guided by the standard of "the best interest of the medical assistance program." Id. § 504.4(e) (2). Most of the relevant factors concern the applicant's past or current conduct and competency. Id. § 504.5(a) (1)-(13). The regulations also provide a catchall provision that allows the Department to consider "any other factor which may affect the effective and efficient administration of the program, including, but not limited to, the current availability of medical care, services or supplies to recipients (taking into account geographic location and reasonable travel time)." Id. § 504.5(a) (14). Thus, in some instances, an enrollment or re-enrollment application may be denied even if the applicant has engaged in no wrongdoing and is otherwise qualified.
If an application is denied, the applicant has 60 days to appeal the denial by filing a written request for reconsideration with the Department. Id. § 504.5(e) (1). A timely request stays any action to terminate a provider's current participation in the program. Id. The request for reconsideration may include all information which the applicant wishes to have considered, including any documentation or arguments that "controvert the reason for the denial or disclose that the denial was based upon a mistake of fact." Id. § 504.5(e) (2). The appeal is reviewed by an appeals committee consisting of three persons from the Department's Division of Administration and Medical Assistance who did not participate in the initial determination. The panel's recommendation is made to the Deputy Commissioner for Medical Assistance, who renders the Department's final decision within 60 days of receipt of the appeal. Id. § 504.5(e) (3). The decision is final for purposes of exhaustion of administrative remedies and for availability of Article 78 review. Id. If the application has been denied, the applicant may reapply upon correction of the factors leading to the denial. Id. § 504.5(d).
The Company contends that the Department's failure to provide a hearing prior to denying a provider's re-enrollment application under section 504.5 violates the Equal Protection Clause of the United States Constitution. The Department currently affords a hearing prior to terminating a provider for cause pursuant to 18 NYCCRR § 504.7(b). The Company reasons that because the Department has the same objective--preservation of Medicaid's financial and qualitative integrity--when it terminates a provider as when it denies an application for re-enrollment, the Department lacks a rational basis for denying an enrollment or re-enrollment application under section 504.5 without a hearing. See generally Western & Southern Life Insurance Co. v. State Board of Equalization, 451 U.S. 648, 668, 101 S. Ct. 2070, 2083, 68 L. Ed. 2d 514 (1981) (to sustain an equal protection challenge, plaintiff must demonstrate that classifications are not rationally related to any legitimate state objective). We disagree.
In 701 Pharmacy Corp. v. Perales, 930 F.2d 163 (2d Cir.), cert. denied, --- U.S. ----, 112 S. Ct. 67, 116 L. Ed. 2d 42 (1991), this Court upheld, against an equal protection challenge, New York's statutory scheme that affords a hearing prior to the termination of a provider for cause pursuant to section 504.7(b), but not prior to a termination without cause under section 504.7(a). A provider may be terminated for cause under section 504.7(b) only "if the department finds that the provider has engaged in an unacceptable practice as set forth in Part 515 of this Title." 18 NYCCRR § 504.7(b). Termination for engaging in an "unacceptable practice" may result in serious collateral consequences for the terminated provider, such as censure or exclusion from the Medicaid program for a reasonable time. See id. § 515.3(a), (b). Pursuant to federal regulations, formal notice of the exclusion must be given to the public and the federal government. See 42 C.F.R. § 1002.206(c). In upholding the availability of a hearing prior to a termination for cause, we explained, "The regulatory scheme of New York's Medicaid program in providing a hearing under § 504.7(b) is tailored to prevent the unwarranted imposition of these consequences, which do not ensue when a provider is terminated without cause." 701 Pharmacy, 930 F.2d at 167.
The reasoning in 701 Pharmacy is equally applicable to the instant case. Like a termination without cause, the denial of a re-enrollment application does not impose the collateral consequences that result from a termination for cause under section 504.7(b). Faced with this directly analogous situation in 701 Pharmacy, we explained that " [t]here is nothing anomalous about treating rule violations in a manner proportionate to the violation and providing enhanced procedural protections to those charged with more serious infractions." Id. at 167.
A claim of selective application of a facially lawful state regulation requires a showing that: (1) the person, compared with others similarly situated, was selectively treated, and (2) the selective treatment was motivated by an intention to discriminate on the basis of impermissible considerations, such as race or religion, to punish or inhibit the exercise of constitutional rights, or by a malicious or bad faith intent to injure the person. Wayte v. United States, 470 U.S. 598, 608-09, 105 S. Ct. 1524, 1531-32, 84 L. Ed. 2d 547 (1985); LeClair v. Saunders, 627 F.2d 606, 609-10 (2d Cir. 1980), cert. denied, 450 U.S. 959, 101 S. Ct. 1418, 67 L. Ed. 2d 383 (1981). Because the Company does not allege discriminatory treatment based on either an impermissible factor or on its exercise of constitutional rights, we review the record for evidence of a malicious or bad faith intent to injure.
This Court lacks jurisdiction to hear the Company's claim that the Department's substantive decision was arbitrary and capricious. A federal court's review of state administrative proceedings is limited to whether the state has provided adequate avenues of redress to review and correct arbitrary action. Alfaro Motors, Inc. v. Ward, 814 F.2d 883, 888 (2d Cir. 1987). A section 1983 action is not an appropriate vehicle to consider whether a state or local administrative determination was arbitrary or capricious. Id. This claim could have been, but was not, raised in a state court proceeding under N.Y.Civ.Prac.L. & R., art. 78, §§ 7801-06 (McKinney 1981). See 701 Pharmacy Corp. v. Perales, 930 F.2d at 166 ("Judicial review of the Department's termination decision ... is available under Article 78 of the New York Civil Practice Law and Rules.").