New York Law Review

Matter of Brown v. New York State Dept. of Health, 48 N.Y.2d 805 (1979): Agency’s Inherent Power to Regulate Medicaid Providers Despite Unfiled Rules

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Matter of Brown v. New York State Dept. of Health, 48 N.Y.2d 805 (1979)

An administrative agency possesses inherent power to regulate the quality of services provided under a government program, even if the specific regulations it relies upon have not been properly filed.

Summary

A podiatrist, Brown, challenged his suspension from the Medicaid program, arguing that the regulations used against him weren’t properly filed. The Court of Appeals held that even if the regulations weren’t properly filed, the Department of Health had the inherent power to police the quality of Medicaid services and take action against inadequate service providers. The court modified the lower court’s ruling that the case was moot, finding that the suspension could have collateral effects on Brown’s reputation, and affirmed the substantive findings against Brown.

Facts

Brown, a licensed podiatrist, participated in the Medicaid program. The Department of Health suspended him for two years, alleging questionable medical judgment, improper billing, and inadequate documentation. Brown challenged the suspension, claiming the proceedings were invalid because Item 35 of the New York State Medical Handbook, which contained relevant regulations, was not properly filed with the Secretary of State.

Procedural History

The Appellate Division initially declared the proceeding moot because Brown’s suspension period had ended. Brown appealed to the New York Court of Appeals.

Issue(s)

1. Whether the failure to properly file Item 35 of the New York State Medical Handbook with the Secretary of State divested the Department of Health of its power to regulate Brown’s participation in the Medicaid program.

Holding

1. No, because the Department of Health has an inherent power to police the quality and value of services rendered by physicians participating in the Medicaid program and to take remedial measures against those whose services are found to be inadequate, regardless of whether specific regulations have been properly filed.

Court’s Reasoning

The Court of Appeals reasoned that the Department of Health’s authority to oversee the Medicaid program and ensure the quality of services is inherent and not solely dependent on properly filed regulations. The court stated that even assuming the proceedings were instituted pursuant to Item 35, “the failure to file did not divest respondents of their inherent power to police the quality and value of services rendered by physicians participating in the Medicaid program and to take remedial measures against those whose services are found to be inadequate.” The court cited Lang v. Berger, 427 F. Supp. 204, 213-214, n. 37 to support the existence of this inherent power. The court emphasized the importance of safeguarding against “the possibility of unwarranted collateral effects that would redound to the detriment of petitioner as a result of those findings,” thus finding the case was not moot even though the suspension period was over.

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