Daleview Nursing Home v. Axelrod, 62 N.Y.2d 30 (1984)

The State can recover Medicaid overpayments to a facility resulting from the State’s own computer error, even if the facility could not have discovered the error and was not promptly notified.

Summary

Daleview Nursing Home was overpaid Medicaid reimbursements due to a state computer error. The State discovered the error in November 1980 but did not notify Daleview until June 1981, after Daleview had entered into a new union contract increasing employee salaries. Daleview argued the State should be estopped from recouping the overpayment. The Court of Appeals held that the State could recover the overpayment despite its delay in notifying Daleview, reaffirming the principle that estoppel is generally not available against governmental agencies acting in their governmental capacity to protect the public fisc. The court distinguished between errors in calculation and judgmental determinations, finding the former recoverable.

Facts

Daleview Nursing Home operated a nursing and health care facility, participating in the Medicaid program. Reimbursement rates were fixed approximately 60 days before each year. The State’s Office of Health Systems Management advised Daleview on June 22, 1981, that its 1980 and 1981 reimbursement rates were incorrectly computed due to electronic data processing problems, resulting in overpayments of $150,961. The State discovered this error in November 1980 but did not notify Daleview until June 1981. Daleview entered a new union contract on April 1, 1981, increasing employee salaries.

Procedural History

Daleview commenced an Article 78 proceeding to review and enjoin the retroactive reduction and reimbursement. Special Term dismissed the petition. The Appellate Division affirmed. The New York Court of Appeals affirmed the Appellate Division’s order.

Issue(s)

Whether the State can recoup Medicaid overpayments to a residential health care facility when the overpayment resulted from the State’s own computer error, the facility could not have discovered the error, and the State delayed notifying the facility of the error.

Holding

Yes, because estoppel is not available against a governmental agency in the exercise of its governmental functions, and the State’s common-law right to recover overpayment of governmental moneys is well-established. The delay in notification does not transform the error in calculation into a discretionary judgment barring recoupment.

Court’s Reasoning

The Court relied on the established principle that estoppel is generally not available against a governmental agency exercising its governmental functions. The Court noted that an exception exists in very limited circumstances with unusual facts, which this case did not meet. The court emphasized the importance of protecting the public fisc. Addressing Daleview’s argument that the seven-month delay constituted a judgmental error, the Court distinguished between errors in calculation and judgmental considerations involving expertise. It stated that recoupment is barred when payments are based on judgmental considerations, but the delay in informing Daleview of the computer error did not transform the initial error in calculation into such a judgmental determination. The court quoted Board of Supervisors v Ellis stating that “the recipient ‘should now and then suffer by such mistakes, than to introduce a rule against the abuse of which * * * it would be very difficult for the public to protect itself’”. The Court deferred to the Legislature to make any changes to the long-accepted rule against estopping the government in these circumstances.