The following papers read on this motion:Notice of Petition and Affidavits XVerified Answer and Objections in Point of Law XReply Memorandum XRelief Requested The petitioners move for an order vacating and annulling the determination by respondents to withhold of Medicaid reimbursement funds. The respondents submit opposition. The petitioners submit a Reply Memorandum of Law.BackgroundPetitioners Checker Transportation Corp. (hereinafter referred to as “Checker”) and Checkmate Transportation Corp. (hereinafter referred to as “Checkmate”) each participated in New York State’s Medicaid Program (see 42 USCS §1396), providing taxi services and ambulette services, respectively. On June 21, 2017, respondent Office of the Medicaid Inspector General (hereinafter referred to as “OMIG”) referred petitioner Checker Transportation Corp. to the Attorney General’s Medicaid Fraud Control Unit (hereinafter referred to as “MFCU”) based on what it deemed a credible allegation of fraud. MFCU then informed OMIG that it had invoked the “law enforcement exception” and requested OMIG not suspend payment at that time, because such a payment suspension may compromise or jeopardize an investigation.On February 7, 2018, Special Assistant Attorney General Prabhjot Sekhon wrote a letter to petitioners requesting certain records in accordance with 18 NYCRR 504.3(a) and (g). After an exchange of documents, the parties disagreed as to whether the petitioners’ responses were adequate. On April 19, 2018, OMIG served subpoenas upon petitioners and their owner, Philip Fortuna, seeking unredacted, original records, as well as a deposition of Mr. Fortuna on May 30, 2018. Mr. Fortuna failed to appear for the deposition. Original, unredacted records were never provided.By letters dated July 5, 2018, Special Assistant Attorney General Sekhon advised OMIG that the MFCU was conducting an ongoing investigation into fraudulent Medicaid billings of the petitioners. This letter states that petitioners fraudulently billed and received payment from Medicaid for trips that could not possibly have occurred. The letter additionally details the repeated attempts of MFCU to obtain records. A withhold of 100 percent was requested in order to protect the State’s ability to recover overbillings and interest while the investigation was completed. Checker appealed the determination, and Checkmate did not appeal but ceased operations in February of 2018.By letter dated September 18, 2018, OMIG informed Checker that it had considered the appeal, noting that the scope of the alleged false billings has been hindered by its failure to produce the requested records. OMIG determined that the withhold would be modified and reduced from 100 percent to 15 percent .The petitioners now seek to annul and reverse the determination which imposed the 100 percent withhold as well as the subsequent determination on appeal which reduced the withhold to 15 percent .Applicable LawAn administrative determination will be overturned pursuant to CPLR article 78 only if it is arbitrary, capricious, or an abuse of discretion (Matter of Able Health Servs. Inc. v. New York State Off. of the Medicaid Inspector Gen., 59 Misc. 3d 171, citing Matter of Heintz v. Brown, 80 N.Y.2d 998). This standard is met where the decision is “without sound basis in reason and… without regard to the facts” (Matter of Able Health Servs. Inc., supra, citing Matter of Local 363, Intl. Bhd. of Elec. Workers v. New York State Dept. of Labor, 230 A.D.2d 440).By enrolling in the New York State Medicaid Program, the provider agrees:“a — To prepare and to maintain contemporaneous records demonstrating its right to receive payment under the medical assistance program and to keep for a period of six years from the date of the care, services or supplies were furnished, all records necessary to disclose the nature and extent of services furnished and all information regarding claims for payment submitted by, or on behalf of, the provider and to furnish such records and information, upon request, to the department, the Secretary of the United States Department of Health and Human Services, the Deputy Attorney General for Medicaid Fraud Control and the New York State Department of Health.g-To permit audits, by the persons and agencies denominated in subdivision (a) of this section, of all books and records or, in the discretion of the auditing agency, a sample thereof, relating to services furnished and payments received under the [program].”(18 N.Y.C.R.R 504.3)Providers under the Medicaid Program additionally agree to “keep any records necessary to disclose the extent of services the provider furnishes to beneficiaries” (42 CFR 431.107[b][1]).The department may withhold payments under the program, in whole or in part, where it has determined that a provider has abused the program or has committed an unacceptable practice, and where it has determined or has been notified that a provider is the subject of a pending investigation of a credible allegation of fraud unless the department finds good cause not to withhold payments in accordance with 42 CFR 455.23 (see 18 NYCRR 518.7[a]). An unacceptable practice is conduct which constitutes fraud or abuse and includes the use of false statements in determining the right to payment, as well as unacceptable record keeping (see 18 NYCRR 515.2). The state Medicaid agency may suspend payments without first notifying the provider of its intention to suspend such payments (42 CFR 455.23[a][2]).The Appellate Division, Third Department considered a similar challenge to a withhold and found that OMIG’s reliance upon MFCU’s withhold request was acceptable, even without consideration of factual information from MFCU or the petitioner (Matter of Consumer Directed Choices, Inc. v. New York State Off. of the Medicaid Inspector Gen., 90 A.D.3d 1271). Subsequently, the Supreme Court, Albany County, considered a similar challenge (see Matter of Able Health Servs. Inc., supra). The court in Able noted that in Consumer Directed Choices, the entire basis for the withhold was a letter from MFCU, and this was found sufficient to support the imposition of the withhold (Id). The court further noted that a 2011 change in the language of 42 CFR 455.23(a)(1) now requires OMIG to determine that there is a credible allegation of fraud for which an investigation is pending, such that OMIG’s actions in Consumer Directed Choices would now be found insufficient, as the language change indicates that some independent review of MFCU’s evidence of fraud is required (Id).DiscussionRespondents submit, inter alia, the affidavit of Jayne Marzello, who reviews requests to initiate withholds, and the affidavit of Michael D’Allaird, who reviews appeal requests. Ms. Marzello and Mr. D’Allaird describe the steps they took to independently review the evidence provided by MFCU and how they came to recommend withholds.The record here demonstrates that OMIG initially elected not to impose a withhold in 2017 so as to not compromise an investigation, and then determined that a 100 percent withhold was appropriate following MFCU’s unsuccessful attempts to gather additional documents and deposition testimony. On appeal, OMIG ultimately rejected Checker’s arguments, affirming it’s determination that a Checker is the subject of a pending investigation of a credible allegation of fraud. However, having considered Checker’s arguments and information submitted on appeal, OMIG determined that the withhold would be modified and reduced from 100 percent to 15 percent.In Able, MFCU investigated a Medicaid provider, and OMIG imposed a withhold, based on falsified evaluation forms. In support of it’s determination, OMIG submitted the affidavits of Ms. Marzello and Mr. D’Allaird, as in the instant action.However, the instant action is distinguishable from Able. In Able, the court did not determine that OMIG’s review process was insufficient as an independent review of MFCU’s recommendation. Rather, the court determined that OMIG failed to demonstrate that the evaluation forms at issue were required to be maintained pursuant to the Medicaid Program, and further, OMIG failed to articulate who may have been defrauded by the use of such evaluation forms, to what end, or how the use of such records may have deprived the State of funds (Matter of Able Health Servs. Inc., supra).Contrary to the facts in Able, in the instant matter, the respondents have made clear how petitioners’ billing for trips that never occurred would defraud the Medicaid Program and deprive the State of funds, as well as how petitioners are required to maintain, and provide on request, contemporaneous records regarding services provided (18 N.Y.C.R.R 504.3[a] & [g]).Accordingly, the respondents’ determinations to impose a 100 percent withhold, and to reduce to the 100 percent withhold to a 15 percent withhold, were not arbitrary and capricious (see Matter of Able Health Servs. Inc., supra). OMIG independently reviewed MFCU’s findings regarding its investigation and identified various credible allegations, including that Checker knowingly employed a driver with a forged driver’s license, and that petitioners submitted Medicaid billings and received payment for trips that were not actually provided. From February 7, 2018, documents were requested, including unredacted originals, which were never provided. Further, Mr. Fortuna failed to appear for a deposition pursuant to the subject subpoenas. The respondents have noted that, without the requested documents, they are unable to determine the extent of the alleged fraud.ConclusionIn light of the foregoing, it is herebyORDERED that the petition is denied in its entirety.Dated: May 6, 2019
