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NONPUBLIC RESIDENTIAL HEALTH CARE FACILITIES NEED PERMISSION TO WITHDRAW EQUITY OR TRANSFER ASSETS IN EXCESS OF 3% OF THE FACILITIES’ REVENUE; CORPORATE OWNERS NEED NOT INCLUDE FEDERAL AND STATE INCOME TAXES IN THE 3% CALCULATION; FACILITIES OWNED BY PASS-THROUGH ENTITIES (I.E., LIMITED LIABILITY COMPANIES) MUST INCLUDE FEDERAL AND STATE INCOME TAXES IN THE 3% CALCULATION (THIRD DEPT).

The Third Department, in two full-fledged opinions by Justice Lynch, determined that nonpublic residential health care facilities owned by pass-through entities (i.e., a limited liability company, S corporation, partnership or sole proprietorship) must include federal and state income taxes in the calculation of equity withdrawals. Public Health Law 2808 (5) prohibits the withdrawal of equity or transfer of assets in excess of 3% of the facility’s total revenue without prior written approval of the Commissioner of Health. If the residential health care facility is owned by a corporation, federal and state income taxes are not included in the 3% calculation:

Public Health Law § 2808 (5) (c) responds to the Legislature’s concern that a facility’s improvident withdrawal of substantial assets would compromise the facility’s operation and “occasion irreparable harm within an especially fragile and dependent resident population” … . Given this context, “[w]ithdrawals for facility purposes”  are necessarily those that concern a facility’s own financial obligations and expenses … . … . Petitioners do not dispute that, for a pass-through entity, income tax liability is borne by the owner, not the facility. Thus, given the regulatory scheme, income tax payments by such an entity would necessarily be equity withdrawals or asset transfers satisfying the obligation of the owner, not the facility … . In other words, even though such withdrawals are for tax payments, they are not “[w]ithdrawals for facility purposes” … . Matter of Brightonian Nursing Home, Inc. v Zucker, 2023 NY Slip Op 00008, Third Dept 1-5-23

Practice Point: Unlike nonpublic health care facilities owned by corporations, nonpublic health care facilities owned by pass-through entities (i.e., a limited liability company, S corporation, partnership or sole proprietorship) must include federal and state income taxes in their calculation of withdrawals from equity. Withdrawal of equity or transfer of assets in excess of 3% of revenue requires the permission of the Commissioner of Health pursuant to Public Health Law 2802 (5).

 

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PLAINTIFF NURSING HOME CAN BRING A PLENARY ACTION TO DETERMINE A RESIDENT’S MEDICAID ELIGIBILITY WITHOUT BEING BOUND BY THE RESIDENT’S FAILURE TO REQUEST AN ADMINISTRATIVE APPEAL OR THE FOUR-MONTH STATUTE OF LIMITATIONS (SECOND DEPT).

The Second Department, reversing Supreme Court, held plaintiff nursing home can bring a plenary action in its own right to determined the Medicaid eligibility of a resident. The nursing home is not bound by the resident’s failure to request an administrative appeal and is not constrained the the four-month statute of limitations in CPLR 217:

The plaintiff, an operator of a nursing home facility, commenced this action seeking a judgment declaring that one of its residents was entitled to Medicaid coverage for the period February 7, 2013, through August 31, 2014, with an appropriate transfer penalty. The defendant moved to dismiss the complaint on the grounds, inter alia, that the plaintiff failed to exhaust its administrative remedies, the statute of limitations had expired, and the plaintiff failed to join a necessary party. In an order dated November 26, 2019, the Supreme Court granted the motion. The plaintiff appeals.

The Supreme Court erred in granting the defendant’s motion pursuant to CPLR 3211(a) to dismiss the complaint. “It is well established that a nursing home may, as here, bring a plenary action in its own right against the agency designated to determine Medicaid eligibility” … . In such a plenary action, the nursing home is “not bound by the patient’s failure to request an administrative appeal of the local agency’s denial of medical assistance” or “by the four-month Statute of Limitations contained in CPLR 217” … . Moreover, authorizations executed by the resident allowing designated employees of the plaintiff to represent him “during the Medicaid eligibility process” and during “any Fair Hearings” did not impair the plaintiff’s right to commence its own plenary action … . Kings Harbor Multicare Ctr. v Pierre, 2022 NY Slip Op 06920, Second Dept 12-7-22

Practice Point: A nursing home can bring a plenary action in its own right to determine the Medicaid eligibility of its resident without regard for whether the resident pursued an administrative appeal and is not constrained by the four-month statute of limitations in CPLR 217.

 

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THE $40,000 PAID BY DECEDENT TO HER CAREGIVERS SHORTLY BEFORE DECEDENT ENTERED A NURSING HOME WAS PAYMENT FOR PAST SERVICES RENDERED PURSUANT TO A PERSONAL SERVICE AGREEMENT (PSA); IT WAS NOT AN “UNCOMPENSATED TRANSFER” SUBJECT TO THE 60-MONTH LOOKBACK FOR MEDICAID ELIGIBILITY (FOURTH DEPT). ​

The Fourth Department, reversing Supreme Court, determined the $40,000 paid to decedent’s caregivers shortly before decedent entered a nursing home was pursuant to a valid personal service agreement (PSA) for past services rendered. Therefore the payment was not an “uncompensated transfer” to which the Medicaid 60-month lookback applied:

“In determining the medical assistance eligibility of an institutionalized individual, any transfer of an asset by the individual . . . for less than fair market value made within or after the look-back period shall render the individual ineligible for nursing facility services” for a certain penalty period (Social Services Law § 366 [5] [d] [3]). The look-back period is the “[60]-month period[] immediately preceding the date that an [applicant] is both institutionalized and has applied for medical assistance” … . When such a transfer has occurred, a presumption arises that the transfer “was motivated, in part if not in whole, by . . . anticipation of a future need to qualify for medical assistance,” and it is the applicant’s burden to establish his or her eligibility for Medicaid by rebutting the presumption … . As pertinent here, “an applicant may do so by demonstrating that he or she intended to receive fair consideration for the transfers or that the transfers were made exclusively for purposes other than qualifying for Medicaid” … .

Here, petitioner submitted documentary proof of the PSA, which was entered into in 2015, more than three years before decedent entered the nursing home. As noted above, while the PSA contemplated monthly payments for the personal care services, it also contemplated that decedent may make payments in advance. In addition, petitioner submitted bank statements demonstrating that decedent did not have money to pay for the services until after she received cash value for the insurance policies. Petitioner also submitted a monthly calendar that documented the care provided to decedent during the relevant time period. While the calendar did not provide the number of hours spent on each task, “a daily log of hours worked and services rendered is not necessarily required” … . Matter of Boldt v New York State Off. of Temporary & Disability Assistance, 2022 NY Slip Op 06344, Fourth Dept 11-10-22

Practice Point: Here decedent entered a personal care agreement (PSA) in which she agreed to pay her caregivers $2500 per month. Shortly before decedent was admitted to a nursing home she paid $40,000 to the caregivers. It was demonstrated that the $40,000 was for past care rendered pursuant to the PSA. The $40,000 payment, therefore, was not an “uncompensated transfer” subject to the 60-month lookback for Medicaid eligibility.

 

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IN ACCORDANCE WITH THE NURSING HOME REFORM ACT (NHRA), THE ADMISSION AGREEMENT SIGNED BY THE NURSING-HOME RESIDENT’S GRANDDAUGHTER DID NOT IMPOSE PERSONAL LIABILITY UPON THE GRANDDAUGHTER FOR PAYMENT OF THE COSTS OF THE RESIDENT’S CARE; THE GRANDDAUGHTER’S MOTION TO VACATE THE DEFAULT JUDGMENT SHOULD HAVE BEEN GRANTED AND THE BREACH-OF-CONTRACT COMPLAINT SHOULD HAVE BEEN DISMISSED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the admission agreement signed by the nursing-home resident’s granddaughter (who was appointed guardian of her grandfather’s property) did not impose personal liability upon the granddaughter for payment of the cost of her resident’s care (provided by the plaintiff facility). Therefore, plaintiff should not have seized the granddaughter’s personal funds. The default judgment in favor of plaintiff should have been vacated, and the breach-of-contract complaint should have been dismissed:

… [t]he admission agreement in this case is subject to the Nursing Home Reform Act (hereinafter the NHRA). As relevant here, the NHRA provides that “[w]ith respect to admissions practices, a nursing facility must . . . not require a third party guarantee of payment to the facility as a condition of admission (or expedited admission) to, or continued stay in, the facility” … . However, that prohibition “shall not be construed as preventing a facility from requiring an individual, who has legal access to a resident’s income or resources available to pay for care in the facility, to sign a contract (without incurring personal financial liability) to provide payment from the resident’s income or resources for such care” … .

The admissions agreement set forth the relevant contractual obligations of the granddaughter, and the admissions agreement demonstrates as a matter of law that it did not render the granddaughter a “third party guarantee of payment” … .”The admission[s] agreement merely required the [granddaughter] to facilitate payment from the . . . resident’s available income and resources, and only to the extent that the [granddaughter] had access to such income and resources and only if [the granddaughter] could do so without incurring any personal financial liability” … . …

.. [T]he plaintiff failed to adequately allege a breach of the granddaughter’s contractual obligation to facilitate payment to the plaintiff from the resident’s “income or resources” … . Nassau Operating Co., LLC v DeSimone, 2022 NY Slip Op 04029, Second Dept 6-22-22

Practice Point: The Nursing Home Reform Act (NHRA) prohibits holding a third-party who signs an admission agreement personally liable for the costs of a resident’s care. The agreement may only obligate the third party to pay the costs from the resident’s assets (over which the third party exercises control).

 

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THE DEPARTMENT OF HEALTH’S DETERMINATION THE 91-YEAR-OLD PETITIONER WAS NOT ENTITLED TO CONTINUOUS CARE WAS NOT SUPPORTED BY THE EVIDENCE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the Department of Health’s (DOH’s) finding that the 91-year-old petitioner was not entitled to continuous care was not supported by the evidence:

“In reviewing a Medicaid eligibility determination made after a fair hearing, the court must review the record as a whole to determine if the agency’s decisions are supported by substantial evidence and are not affected by an error of law”… . Substantial evidence “means such relevant proof as a reasonable mind may accept as adequate to support a conclusion or ultimate fact” … . Here, since the subject determination was made after a quasi-judicial fair hearing, the substantial evidence standard applies, and not the arbitrary and capricious standard … .

The DOH’s determination that the petitioner failed to establish that she met the criteria for continuous personal care services was not supported by substantial evidence (see 18 NYCRR 505.14[a][2]). “Continuous personal care services means the provision of uninterrupted care, by more than one personal care aide, for more than 16 hours in a calendar day for a patient who, because of the patient’s medical condition, needs assistance during such calendar day with toileting, walking, transferring, turning and positioning, or feeding and needs assistance with such frequency that a live-in 24-hour personal care aide would be unlikely to obtain, on a regular basis, five hours daily of uninterrupted sleep during the aide’s eight hour period of sleep” … . Matter of Gurariy v Zucker, 2021 NY Slip Op 04356, Second Dept 7-15-21

 

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FUNDS FOR PERSONAL CARE SERVICES ARE MEDICAID FUNDS SUBJECT TO THE AUDIT AND RECOUPMENT AUTHORITY OF THE CITY OF NEW YORK HUMAN RESOURCES ADMINISTRATION; APPELLATE DIVISION REVERSED (CT APP)..

The Court of Appeals, reversing the Appellate Division, determined funds paid for personal care were Medicaid funds which were subject to the audit and recoupment authority of the City of New York Human Resources Administration (HRA). The facts are explained in the Appellate Division decision:

For the reasons stated in the dissenting opinion below (Matter of People Care Inc. v City of New York, 175 AD3d 134, 147-152 [1st Dept 2020] [Richter, J.P., dissenting]), we conclude that the funds for personal care services paid to petitioner People Care, Inc. under the Health Care Reform Act (Public Health Law §§ 2807-v [1] [bb] [i], [iii]) are Medicaid funds subject to the audit and recoupment authority of the City of New York Human Resources Administration (HRA) in accordance with the parties’ 2001 contract. Matter of People Care Inc. v City of N.Y. Human Resources Admin., 2021 NY Slip Op 01834, CtApp 3-25-21

 

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CERTAIN TRANSFERS AND LOANS SHOULD NOT HAVE BEEN INCLUDED IN THE CALCULATION FOR THE PERIOD OF MEDICAID INELIGIBILITY (FOURTH DEPT).

The Fourth Department, reversing (modifying) the NYS Department of Health (DOH), determined several transfers and loans made before petitioner was diagnosed with Parkinson’s in 2016 should not have been included in the calculation for the period of Medicaid ineligibility. The facts are too complex to summarize here:

… “T]he relevant standard is not whether [petitioner] could or should have foreseen that nursing home placement might eventually become necessary, but whether she made the requisite showing that the transfers were made ‘exclusively for a purpose other than to qualify for medical assistance’ (Social Services Law § 366 [5] [e] [4] [iii] [B]). The fact that a future need for nursing home care may be foreseeable for a person of advanced age with chronic medical conditions is not dispositive of the question whether a transfer by such a person was made for the purpose of qualifying for such assistance” … . Matter of Underwood v Zucker, 2021 NY Slip Op 00951, Fourth Dept 2-11-21

 

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A CORPORATION OPERATING A SKILLED NURSING FACILITY MAY BRING A PLENARY ACTION BASED UPON THE DENIAL OF MEDICAID BENEFITS FOR ONE OF ITS RESIDENTS; NO NEED TO EXHAUST ADMINISTRATIVE REMEDIES AND NOT SUBJECT TO THE FOUR-MONTH STATUTE OF LIMITATIONS (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined the corporation that operates a skilled nursing facility may bring a plenary action based on the denial of Medicaid benefits for one of its residents:

Plaintiff, a domestic corporation that operates a skilled nursing facility, commenced this action seeking a declaratory judgment or money damages for expenses it allegedly incurred in providing care for one of its residents after the resident was determined to be ineligible for Medicaid benefits during a penalty period of 11.74 months. Defendant moved to dismiss the complaint on the grounds, inter alia, that plaintiff failed to exhaust its administrative remedies and that the statute of limitations had expired … .

… [A]skilled nursing facility such as plaintiff “may bring a plenary action in its own right against the agency designated to declare Medicaid eligibility” … . In such a plenary action, the facility is “not bound by the patient’s failure to request an administrative appeal of the local agency’s denial of medical assistance” or “by the four-month Statute of Limitations contained in CPLR 217” … . VDRNC, LLC v Merrick, 2021 NY Slip Op 00945, Fourth Dept 2-11-21

 

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ALTHOUGH THE TWO INDICTMENTS ALLEGED THE SAME MODUS OPERANDI FOR MEDICAID FRAUD, THE CHARGES INVOLVED DIFFERENT PARTIES AND TIME PERIODS; THE WRIT OF PROHIBITION SEEKING TO PRECLUDE PROSECUTION ON DOUBLE JEOPARDY GROUNDS DENIED OVER A DISSENT (FIRST DEPT).

The First Department, over a dissent, denied the writ of prohibition seeking to preclude a second prosecution for Medicaid fraud on double jeopardy grounds. Although the alleged scheme to defraud was the same, the two indictments involved different parties and different time periods:

In essence, the wrongdoing charged in each indictment is the filing of fraudulent Medicaid reimbursement claims and related misconduct, such as payment of kickbacks. However, the indictments charge different specific criminal acts, which were perpetrated on different dates and over different time periods. Moreover, the indictments do not allege fraudulent billing of any of the same managed care organizations. While it appears that the different fraudulent acts charged in the two indictments had a similar modus operandi and were part of a common plan, this alone does not suffice to render them part of the same “criminal transaction” under CPL 40.10(2)(b) … . Matter of Dieffenbacher v Jackson, 2020 NY Slip Op 08015, First Dept 12-29-20

 

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THE ARBITRATOR’S AWARD, REINSTATING NURSING HOME EMPLOYEES WHO WERE FIRED AND INDICTED FOR ALLEGEDLY IGNORING A RESIDENT IN RESPIRATORY DISTRESS, VIOLATED PUBLIC POLICY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the arbitrator’s award, reinstating the employees to their former positions as care providers at a nursing home, violated public policy. The employees were fired and indicted for allegedly ignoring an alarm indicating a resident on a ventilator was in distress:

… [T]he record reflects that after the employees were indicted, inter alia, on felony charges, OMIG [Office of Medicaid Inspector General] notified the employees that they were excluded “from participation in the New York State Medicaid program based on New York State regulations authorizing the immediate exclusion of a person who has been charged with committing an act which would be a felony under the laws of New York and which relates to or results from,” among other things, “the furnishing of or billing for medical care, services or supplies.” Pursuant to 18 NYCRR 515.5(c), “[a] person who is excluded from the program cannot be involved in any activity relating to furnishing medical care, services or supplies to recipients of medical assistance for which claims are submitted to the program, or relating to claiming or receiving payment for medical care, services or supplies during the period.” The regulations also preclude reimbursement for medical care, services, or supplies provided by an excluded person (see 18 NYCRR 515.5[b]), and the Department of Health’s published Medicaid Update instructs Medicaid providers “to ensure that they do not employ, or are affiliated with, any individual who has been excluded from either the Medicare or the Medicaid program” … . There is no evidence in the record that the exclusion was vacated. Therefore, the final result of the arbitrator’s award, reinstating the employees to their former positions, creates an explicit conflict with the subject regulations and their attendant policy concerns … . Civil Serv. Employees Assn., A.F.S.C.M.E. Local 1000, A.F.L.-C.I.O. by its Local 830 v Nassau Healthcare Corp., 2020 NY Slip Op 06777, Second Dept 11-18-20

 

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