        SUPREME COURT OF THE STATE OF NEW YORK
           Appellate Division, Fourth Judicial Department

1302
CA 11-01204
PRESENT: CENTRA, J.P., PERADOTTO, CARNI, LINDLEY, AND SCONIERS, JJ.


IN THE MATTER OF PRESBYTERIAN HOME FOR
CENTRAL NEW YORK, INC., PETITIONER-APPELLANT,

                    V                             MEMORANDUM AND ORDER

COMMISSIONER OF HEALTH OF THE STATE OF NEW
YORK AND DIRECTOR OF BUDGET OF THE STATE OF
NEW YORK, RESPONDENTS-RESPONDENTS.


RUFFO, TABORA, MAINELLO & MCKAY, P.C., ALBANY (JOHN F. DARLING OF
COUNSEL), FOR PETITIONER-APPELLANT.

ERIC T. SCHNEIDERMAN, ATTORNEY GENERAL, ALBANY (VICTOR PALADINO OF
COUNSEL), FOR RESPONDENTS-RESPONDENTS.


     Appeal from a judgment (denominated order) of the Supreme Court,
Oneida County (Anthony F. Shaheen, J.), entered October 25, 2010 in a
proceeding pursuant to CPLR article 78. The judgment, among other
things, denied petitioner’s motion for partial summary judgment.

     It is hereby ORDERED that the judgment so appealed from is
unanimously affirmed without costs.

     Memorandum: Petitioner owns and operates a nursing home in
Oneida County that receives reimbursement of its capital and operating
costs from the State of New York through the Medicaid program. We
note at the outset that petitioner purported to commence a declaratory
judgment action when in fact the relief it sought was the adjustment
of its Medicaid reimbursement rates from the State of New York.
Moreover, petitioner does not challenge the constitutionality of any
statutes or regulations, and we thus conclude that the parties and
Supreme Court have acted properly in ultimately treating this as a
CPLR article 78 proceeding (see generally Matter of Custom Topsoil,
Inc. v City of Buffalo, 63 AD3d 1511).

     Petitioner alleged in its fifth cause of action that respondents
did not fully reimburse petitioner for the conversion of 80 health-
related facility (HRF) beds to skilled nursing facility (SNF) status
in 1990 when the distinction between HRF and SNF beds was eliminated
pursuant to the Omnibus Budget Reconciliation Act of 1987 ([OBRA] Pub
L 100–203, 101 US Stat 1330; see generally Matter of Grand Manor
Nursing Home Health Related Facility, Inc. v Novello, 39 AD3d 1062,
1063, lv denied 9 NY3d 812). As a result of OBRA, the New York State
Department of Health (DOH) changed its regulations with respect to
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                                                         CA 11-01204

Medicaid reimbursement rates. One of the newly adopted regulations
included subdivision (s) of 10 NYCRR 86-2.10, which provides that each
facility’s new reimbursement rate would be calculated based on a
weighted average of its SNF to HRF beds. That regulation also
included subdivision (t), which allows for an adjustment of a
facility’s base year costs if its proportion of SNF to HRF beds
changed since the beginning of the base year, i.e., January 1, 1983.

     In moving for partial summary judgment, petitioner contended that
it was entitled to a bed conversion adjustment pursuant to 10 NYCRR
86-2.10 (t) for 40 SNF beds that had been added in July 1983.
According to petitioner, in adjusting its base year costs due to the
40 SNF beds in question, respondents gave petitioner credit for having
added only 21 SNF beds, 19 short of what petitioner claimed should
have been added. As the court determined, however, that contention
was not raised in petitioner’s administrative appeals. We thus
conclude that the court properly denied the motion and granted in part
the cross motion on the ground that petitioner failed to exhaust its
administrative remedies with respect to the bed conversion adjustment
issue raised in the motion (see Watergate II Apts. v Buffalo Sewer
Auth., 46 NY2d 52, 57; Young Men’s Christian Assn. v Rochester Pure
Waters Dist., 37 NY2d 371, 375-376; Matter of Nelson v Coughlin, 188
AD2d 1071, appeal dismissed 81 NY2d 834). Without a final
administrative decision on an issue, in which the agency develops the
factual record, judicial review is not available (see Matter of Saint
Mary’s Hosp. of Troy, 108 AD2d 1068, 1069). Indeed, “ ‘[i]t is
hornbook law that one who objects to the act of an administrative
agency must exhaust available administrative remedies before being
permitted to litigate in a court of law’ ” (Watergate II Apts., 46
NY2d at 57).

     In its initial administrative appeal, petitioner in relevant part
raised only the issue of the “transition of 80 o[f] our existing beds
from HRF to SNF [beds] in the early 1990s.” No mention was made of
the 40 SNF beds added in July 1983, nor was there a reference to 10
NYCRR 86-2.10 (t). Nor did petitioner raise that particular issue in
its second-stage administrative appeal. The issue whether respondents
properly adjusted petitioner’s rates based on the mandatory conversion
of beds pursuant 10 NYCRR 86-2.10 (s) is separate and distinct from
the issue whether respondents properly adjusted petitioner’s rates
pursuant to 10 NYCRR 86-2.10 (t) based on the SNF beds added after
January 1, 1983. We thus conclude that petitioner’s “failure to
obtain prompt administrative review on the basis of the objection
which it now seeks to assert . . . precludes petitioner from seeking
judicial review” (Saint Mary’s Hosp. of Troy, 108 AD2d at 1069).
Moreover, the court had “no discretionary power to reach” the
unexhausted issue (Nelson, 188 AD2d at 1071), and it is therefore
irrelevant that respondents did not raise the defense of exhaustion of
administrative remedies in their answer. In any event, we note that
the amended “complaint” did not allege that petitioner was improperly
reimbursed for the 40 SNF beds added in July 1983; that issue was
raised for the first time in petitioner’s motion for partial summary
judgment, and thus there was no basis for respondents to have raised
the failure to exhaust administrative remedies as a defense with
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                                                         CA 11-01204

respect to that issue (see generally Held v Kaufman, 91 NY2d 425,
430).

     Because the court properly denied the motion based on
petitioner’s failure to exhaust its administrative remedies, we do not
address the merits of petitioner’s underlying contention.




Entered:   December 30, 2011                    Frances E. Cafarell
                                                Clerk of the Court
