State Comptroller's office had sought to audit a medical provider to find if the state overpaid for a series of medical claims. Photo: Si Barber/Bloomberg News

The New York State Comptroller's Office doesn't have to obtain written permission from patients before seeking their records through a subpoena to a medical provider for an audit on state-issued payments to that company, the New York Court of Appeals ruled Tuesday.

A subpoena issued from the Comptroller's Office to The Plastic Surgery Group in Albany, New York, was upheld by the state high court because the inquiry was made as part of an investigation. 

The case was a test of the auditing powers of New York State Comptroller Thomas DiNapoli, whose office had sought to audit The Plastic Surgery Group to find if the state overpaid the provider for a series of medical claims.

The Plastic Surgery Group had challenged a set of subpoenas from the Comptroller's Office for records related to that audit, arguing that each patient involved had to consent to the probe.

Associate Judge Eugene Fahey wrote in a unanimous opinion from the Court of Appeals that a section of law The Plastic Surgery Group claimed would require written approval from those patients didn't apply in this case.

That's because, Fahey wrote, the Comptroller's Office would only need written permission from patients if the subpoenas were part of litigation. That's not required for an audit, he wrote.

"The comptroller of the dtate of New York has a constitutional and statutory duty to audit payments of state money, including payments to private companies that provide health care to beneficiaries of a state insurance program," Fahey wrote. 

"Here, the comptroller carried out that obligation by means of investigatory subpoenas duces tecum directed to a medical provider, seeking patients' records," he continued.

The audit was seeking to determine if the state overpaid The Plastic Surgery Group for a number of claims between 2011 and 2015. 

Those claims were submitted to UnitedHealthcare, which contracts with the state to process and pay medical claims for employees, retirees and others on the Empire Plan, the primary health insurance plan for government workers in New York.

It was unclear, according to the record, whether the state—through UnitedHealthcare—had overpaid the company. The Plastic Surgery Group is an out-of-network provider under the Empire Plan, meaning its rates aren't negotiated beforehand.

When the company didn't respond to an initial request from DiNapoli's office for information on the claims, the state issued a subpoena for records relevant to its audit. 

The Plastic Surgery Group did not comply with that subpoena, and chose instead to challenge it in court. The Appellate Division, Third Department upheld the probe in a decision two years ago, writing that patient permission was only needed if the subpoena was part of a lawsuit.

Fahey, in the court's decision Tuesday, said they'd come to the same conclusion about the relevant statute.

"We conclude that the requirement set out in CPLR 3122 (a) (2) applies only to subpoenas served pursuant to CPLR 3120, after the commencement of an action," Fahey wrote.

The section of law at issue, CPLR 3122(a), requires that certain subpoenas issued to medical providers in New York also include written permission from patients whose records are sought in the probe.

The crux of the case partly rested on a small section of that law that says it should be enforced "pursuant to this rule," but there was disagreement on what that meant.

Attorneys for The Plastic Surgery Group had argued before the Court of Appeals last month that the rule referred to itself, meaning that it would apply to all subpoenas issued to medical providers in New York.

The Plastic Surgery Group was represented by Matthew Didora, a partner at Abrams, Fensterman, Fensterman, Eisman, Formato, Ferrara, Wolf & Carone in Nassau County. Didora wasn't immediately available for comment.

Fahey wrote that Didora had misinterpreted the law, and said his conclusion would have produced an "absurd result." The section of law at issue, Fahey said, referred to a preceding statute concerning pretrial discovery. That's not part of an initial investigation, he wrote.

"If it were the intent of the legislature to set forth a rule, governing the operation of all subpoenas duces tecum served on medical providers, it would not have placed such a statute in the article of the CPLR that governs 'disclosure' and immediately after a paragraph concerning the service of notices and subpoenas during discovery," Fahey wrote.

That interpretation was supported by a report from the state's Advisory Committee on Civil Practice, which wrote to then-Chief Administrative Judge Jonathan Lippman that CPLR 3122 (a) was meant to apply "during the course of discovery."

"Were there any doubt about the meaning of CPLR 3122 (a), the legislative history would put it to rest," Fahey wrote.

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