Court Opinion

ID: 5840373
Source: CourtListenerOpinion
Date Created: 2022-01-12 22:58:40.671919+00
Date Added: 2024-06-11T08:43:44.837608
License: Public Domain

Garry, J. (dissenting).
We respectfully dissent. Initially, we agree that respondent properly imposed the first withholding order, based upon the communication from the Medicaid *1274Fraud Control Unit (hereinafter MFCU) that it was conducting a fraud investigation involving petitioner’s alleged “consistent! ] upcoding” of its bills. Respondent failed to act rationally thereafter, however, in granting MFCU’s second request to continue withholding payments. At that time, respondent’s information no longer consisted merely of MFCU’s assertion that it was investigating petitioner’s billing practices; petitioner had also submitted information revealing that the underlying practices alleged were neither fraudulent nor improper. MFCU was given an opportunity to respond, but its response entirely failed to refute petitioner’s proof, neither stating any basis upon which it might be found that petitioner’s practices were fraudulent nor indicating any other good faith basis for the investigation.
Upon receiving respondent’s first notification that its payments were being withheld, petitioner exercised its “right to submit written arguments and documentation in opposition to the withholding” (18 NYCRR 518.7 [c] [4]), submitting a letter from its counsel advising that petitioner’s dispute with MFCU involved a question of law as to whether petitioner was billing at the correct rate rather than any accusations of fraudulent or criminal conduct, and that petitioner had never been advised that its billing practices violated any statute, regulation or directive. Petitioner further provided a letter from a Department of Health official describing the applicable billing requirements and stating that petitioner’s procedures fully complied with these requirements from 2001 through 2007, when the rules were changed, and thereafter complied with the altered directive. Significantly, the official stated that petitioner did not select the rates at which it billed, but was instead required to use rates designated by local social service districts.1
Respondent forwarded these documents to MFCU, which responded only by repeating its previous conclusory assertions that petitioner was “upcoding” its bills and that MFCU was investigating it for fraud, and requesting that the withholding continue in a reduced amount. This response — making no claim that petitioner’s practices involved fraudulent intent or violated any statute, regulation or agency directive — was insufficient to provide respondent with the requisite “reliable information” (18 NYCRR 518.7 [a]). To hold otherwise deprives the word “reliable” of meaning. “Although it is true that an agency’s interpretation of its own regulation generally is entitled to deference, courts are not required to embrace a regulatory construc*1275tion that conflicts with the plain meaning of the promulgated language” (Matter of Visiting Nurse Serv. of N.Y. Home Care v New York State Dept. of Health, 5 NY3d 499, 506 [2005] [citation omitted]; see Matter of County of St. Lawrence v Daines, 81 AD3d 212, 218 [2011], lv denied 17 NY3d 703 [2011]). As commonly understood, “reliable” means “that may be relied on . . . information that can be depended upon with confident certainty” (Webster’s Unabridged Dictionary 1628 [2d ed 1998]). In the absence of any shred of proof or even any relevant assertion by MFCU, respondent could not find “with confident certainty” that the mere existence of an investigation constituted “reliable information” of some undefined underlying fraud, following receipt of petitioner’s submissions. MFCU’s mere repetition of its initial claim was simply not sufficient, in a manner clearly apparent.
Fraud is defined in the pertinent regulations as “an intentional deception or misrepresentation made with the knowledge that the deception could result in an unauthorized benefit to the provider or another person” (18 NYCRR 515.1 [b] [7]). Petitioner’s submissions were sufficient, at minimum, to demonstrate on a prima facie basis that even if its billing practices were in some way erroneous, it had committed no “intentional deception or. misrepresentation” and, further, that it had not acted with knowledge that its practices could result in payment of any “unauthorized benefit” (18 NYCRR 515.1 [b] [7]). As the information before respondent when it imposed the second hold could not rationally be read to “reliabl[y]” indicate that petitioner was “involved in fraud or willful misrepresentation” (18 NYCRR 518.7 [a]), respondent lacked authority to grant MFCU’s request to continue to withhold payments.
The governing regulation provides that respondent “may” find that an ongoing investigation constitutes reliable evidence of fraud (18 NYCRR 518.7 [a]), not that it must do so. The exercise of some discretion on respondent’s part is required. The regulation clearly imposes the responsibility of determining whether reliable information exists on respondent, and not on MFCU, which has no regulatory authority to withhold payments. Accepting respondent’s argument that it was not required to give any consideration to the content of the submissions, but sufficiently discharged its regulatory responsibilities by merely forwarding them to MFCU, will render meaningless the regulatory provision granting providers the right to submit opposing arguments and documentation (see 18 NYCRR 518.7 [c] [4]; Matter of Bonded Concrete v Zoning Bd. of Appeals of *1276Town of Saugerties, 268 AD2d 771, 774 [2000], lv denied 94 NY2d 764 [2000]).2
Nonetheless, this determination does not impose an obligation on respondent to conduct a full-fledged investigation. Under the state and federal regulations then in effect, respondent had no affirmative obligation to undertake such an investigation, but merely an obligation to determine whether “reliable information” existed that petitioner was engaged in fraudulent activity before withholding its payments (18 NYCRR 518.7 [a]). This obligation could have been readily discharged by the simple expedient of requiring MFCU to provide a brief statement of the factual and/or legal underpinnings for its claim. Such a statement need not have been detailed or comprehensive. We have previously approved temporary withholding of Medicaid payments based on information provided to the withholding agency that a provider had violated a federal regulation by failing to furnish certain records to the Attorney General upon request (see Matter of Kasin v Novella, 303 AD2d 910, 913 [2003]), and on the existence of signed statements from physicians denying that they had ordered tests for which a provider had submitted claims (see Matter of Medicon Diagnostic Labs. v Perales, 145 AD2d 167, 173 [1989], affd 74 NY2d 539 [1989]). Requiring MFCU to provide a similar statement establishing some factual basis for its claim that petitioner was involved in fraudulent conduct would not have been unduly burdensome either for respondent or for MFCU and, given respondent’s regulatory role, was affirmatively required on this record.
Respondent is charged with the regulatory responsibility to withhold payments only when it has reliable information of fraud, willful misrepresentation, unacceptable practices or abuse because these “are objective, definable standards preventing the agency from taking arbitrary action” (id. at 171 [citations omitted]). This purpose is disregarded if respondent may withhold payments merely because it has been advised that an investigation is in process where, as here, the provider has made an unrefuted demonstration that the basis claimed for the investigation is unfounded. Under such an interpretation, an unscrupulous agency could defeat the purpose of the reliable information requirement by knowingly commencing a baseless *1277investigation as a pretext for the confiscation of a provider’s payments for retaliatory, political, or other improper reasons, or simply to recover payments that resulted from a good faith error or interpretive disagreement involving no fraud — as petitioner argues has occurred here.
Accordingly, we would reverse Supreme Court’s judgment and grant petitioner’s application to annul respondent’s determinations withholding its Medicaid payments.
Peters, J., concur. Ordered that the judgment is affirmed, without costs. [Prior Case History: 2010 NY Slip Op 33118(U).]

. Thus, the “upcoding" was not at petitioner’s direction.

. Respondent does not claim to have reviewed or considered petitioner’s submissions, asserting only that it received them and turned them over to MFCU. As to petitioner’s submission in response to the second withholding notice (which similarly advised petitioner of its right to submit opposing information), respondent acknowledges only that the document was received, but does not claim that it was forwarded.