The question in this case is whether the New York City Human Resources Administration can audit and recover overpayments of reimbursements to a personal-care provider under the Health Care Reform Act.
This case arises in the context of Medicaid, a joint federal-state program that provides medical services to low-income people. Rather than reimbursing Medicaid recipients directly, States typically reimburse medical providers that treat Medicaid recipients. In New York, the State Department of Health (DOH) administers the Medicaid program, in conjunction with local social services districts, which help administer the program at the local level. The New York City Human Resources Administration (HRA) oversees the Medicaid program for New York City, which comprises a single social services district.
In 2001, HRA contracted with People Care, a provider of personal-care services—such as feeding, bathing, and meal preparation—to elderly Medicaid recipients. Under the contract, HRA agreed to reimburse People Care based on its projected expenses, including its employees’ salaries, and allowed HRA to conduct annual audits and recoup the amount by which People Care’s projected expenses exceeded its actual expenses. The contract also provided that if the DOH’s method for reimbursing People Care changed during the term of the contract, the contract would be modified to reflect the new reimbursement.
One year later, in 2002, the Legislature passed the Health Care Reform Act, which provided funds for the recruitment and retention of personal-care workers, such as those People Care employs. The Act contemplated that DOH and local social services districts would enter into memoranda of understanding to govern precisely how the funds would be distributed under the Act. DOH and HRA entered into such a memorandum in late 2002. That memorandum specified a single role for HRA: receiving from providers a written certification that the funds received under the Act would be used solely for recruiting and retaining personal care workers.
HRA later audited People Care and determined that People Care owed the Administration nearly $7 million in funds that People Care had received under the Health Care Reform Act for payment of its employees. People Care unsuccessfully appealed the determination administratively and then sought to annul the audit determination under CPLR article 78. People Care argued that HRA lacked authority to recoup payments that People Care received under the Act.
Supreme Court initially dismissed the petition and, in 2011, the First Department reversed. According to the First Department, neither the Act nor HRA’s memorandum of understanding with DOH gave HRA an audit right. Still, the court remanded so that HRA could develop the record on whether DOH had otherwise authorized HRA to audit People Care.
On remand, Supreme Court granted the petition and annulled the audit determination, and this time the First Department affirmed. While recognizing that HRA was authorized to audit disbursements of Medicaid funds, the court held that funds disbursed under the Health Care Reform Act are not Medicaid disbursements. The court also held that HRA offered no evidence that DOH had otherwise delegated to HRA the responsibility to audit and recoup funds paid under the Act.
A single judge dissented. In the dissenter’s view, the contract between HRA and People Care contained “broad language” giving HRA authority to audit People Care’s receipt of Medicaid funds. And funds paid under the Health Care Reform Act, in the dissenting judge’s view, are “merely a subset of Medicaid funds,” since the Act states that the funds “were earmarked for the express purpose of ‘supporting the state share of adjustments to Medicaid rates of payment for personal care services,” and HRA’s memorandum of understanding with DOH referred to the funds as “Medicaid rate adjustments.”
The First Department granted HRA leave to appeal to the Court of Appeals.
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