                          State of New York
                   Supreme Court, Appellate Division
                      Third Judicial Department
Decided and Entered: November 5, 2015                   520621
________________________________

GOOD SHEPHERD VILLAGE AT
   ENDWELL, INC.,
                    Respondent,
      v                                     OPINION AND ORDER

PETER YEZZI et al.,
                    Appellants.
________________________________


Calendar Date:   September 10, 2015

Before:   Lahtinen, J.P., Garry, Lynch and Devine, JJ.

                             __________


      Woods Oviatt Gilman, LLP, Rochester (Rene H. Reixach of
counsel), for appellants.

      Hinman Straub, PC, Albany (David T. Luntz of counsel), for
respondent.

                             __________


Lynch, J.

      Appeal from an order of the Supreme Court (Lebous, J.),
entered December 22, 2014 in Broome County, which, among other
things, granted plaintiff's motion for partial summary judgment.

      Plaintiff is a not-for-profit corporation that owns and
operates Good Shepherd Village at Endwell (hereinafter GSV),
located in the Town of Union, Broome County, a Fee-For-Service
Continuing Care Retirement Community (hereinafter CCRC)
established pursuant to Public Health Law article 46-A, which was
enacted in 2004. GSV is the first approved and licensed CCRC in
the state. A CCRC is defined as a facility established "to
provide a comprehensive, cohesive living arrangement for the
elderly," with statutorily required residential options ranging
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from independent living units to nursing facility services, all
"pursuant to the terms of the fee-for-service continuing care
contract on a fee-for-service schedule" (Public Health Law § 4651
[8] [a]). A fee-for-service continuing care contract is defined
as "a single continuing care retirement contract that provides
long-term care and other services on a per diem, fee-for-service
or other agreed upon rate" (Public Health Law § 4651 [9]). The
statutory objective is "to encourage affordable care options for
middle income seniors" (Public Health Law § 4654). Essentially,
this model provides for lifetime care at the same upscale
facility, initially on a private pay basis and, as necessary,
with payment through Medicaid.

      In 2009, defendant Peter Yezzi and his spouse, Hazel Yezzi
(hereinafter collectively referred to as the Yezzis),1 applied
for and were granted admission to GSV. In August 2009, GSV and
the Yezzis entered into a fee-for-service continuing care
contract (hereinafter the contract), which required the Yezzis to
pay an entrance fee of $143,850, together with a basic monthly
fee totaling $2,550 to cover the cost of an independent living
unit. Notably, the contract specified that "nursing facility
services . . . are at an additional charge and are not included
in the Monthly Fee." In October 2012, Hazel Yezzi was admitted
into the skilled nursing facility pursuant to an admission
agreement executed on her behalf by Peter Yezzi. She resided
there until she passed away in January 2014. In the meantime,
Hazel Yezzi executed a comprehensive power of attorney to Peter
Yezzi and defendant Joseph P. Yezzi, which they utilized in
January 2013 to apply for Medicaid on her behalf. Around this
time, Hazel Yezzi notified GSV that some of the Yezzis' assets
had been transferred to Peter Yezzi for Medicaid planning
purposes. Moreover, in March 2013, Peter Yezzi completed an
updated financial information form disclosing that several
accounts, totaling $741,000, were now owned by Peter Yezzi and
Joseph Yezzi. Medicaid coverage was approved in July 2013.


    1
        Hazel Yezzi, named as a defendant, passed away during the
pendency of this action and Supreme Court substituted defendant
Joseph P. Yezzi, who was already a named defendant, individually,
as executor of her estate.
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      At issue on this appeal is the payment due GSV for services
that Hazel Yezzi received while in the skilled nursing facility,
amounting to over $106,000. After the parties reached an impasse
as to whether the Yezzis were obligated to pay these charges
through their personal resources, as GSV asserts, or whether GSV
was obligated to accept a reduced Medicaid payment, as defendants
contend, plaintiff commenced this action in September 2013.
Plaintiff maintains that the Yezzis disclosed assets valued at $1
million, with annual income of $25,000, in their admission
application.2   Based on this disclosure, Michael Keenan,
plaintiff's president and chief executive officer, averred that
GSV calculated that it would not need to start subsidizing the
cost of the Yezzis' room and board for 15.2 years and, thus,
accepted the application. Contending that the Yezzis were
obligated to first utilize the funds initially disclosed during
the application process to pay for the services provided,
plaintiff claims that the transfer of Hazel Yezzi's funds
constitutes a breach of contract and a fraudulent conveyance in
violation of the Debtor and Creditor Law. Plaintiff also seeks a
declaration that the contract complies with Medicaid law.
Defendants answered and counterclaimed, asserting that GSV
violated state and federal laws for failing to accept Medicaid as
payment in full for the services at issue, engaged in deceptive
business practices in violation of General Business Law § 349 and
breached the contract.

      Finding that the Yezzis were contractually obligated to
expend the assets disclosed upon admission to privately pay for
the costs of their care until such time that Medicaid was
necessary, Supreme Court granted plaintiff's motion for summary
judgment on both the breach of contract and fraudulent conveyance
claims. In addition, the court concluded that the contract and
admission agreement complied with both federal and state law and
dismissed defendants' counterclaims. Defendants appeal and we
affirm.


    2
        Although defendants denied this contention in their
answer, and the record does not include the underlying
application, Peter Yezzi's March 2013 financial information
statement reports assets valued at $751,000,
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      Generally, with respect to admission practices, stand-alone
nursing homes are prohibited from requiring that residents waive
or delay their eligibility or application for Medicaid benefits
(see 42 USC § 1396r [c] [5] [A] [1] [I], [II]; 10 NYCRR 415.3 [b]
[3], [4]). Further, Public Health Law § 4655 (3) specifies that
"[n]othing in this article [46-A] shall be construed to enlarge,
diminish or modify . . . medical assistance eligibility under
title eleven of article five of the social services law." It is
also established that an institutionalized spouse may transfer
all of his or her assets to a community spouse for Medicaid
eligibility purposes (see Matter of Shah [Helen Hayes Hosp.], 95
NY2d 148, 161 [2000]). Notwithstanding the foregoing, section
6015 (a) (2) of the federal Deficit Reduction Act of 2005 amended
the Social Security Act by adding a provision for the
"[t]reatment of continuing care retirement communities admission
contracts" (Pub L 109-171, § 6015 [a] [2], 120 Stat 4, 65 [Feb.
8, 2006]). That provision states that contracts for admission to
a "[s]tate licensed, registered, certified, or equivalent [CCRC]
. . . , including services in a nursing facility that is part of
such community, may require residents to spend on their care
resources declared for the purposes of admission before applying
for medical assistance" or Medicaid (42 USC § 1396r [c] [5] [B]
[v]).

      To operate as a CCRC, GSV was required to obtain a
certificate of authority from the state, including a review of
"the proposed forms of contracts to be entered into with
residents of the community" (Public Health Law § 4655 [2] [c]).
In a 2006 administrative directive, the Department of Health
(hereinafter DOH) stated that, consistent with federal law,
residents with contracts with a state-certified and licensed CCRC
"may be required to spend on their care resources declared for
purposes of admission before applying for Medicaid" and that,
under certain circumstances, an individual's paid entrance fee to
a CCRC "will be considered a resource when determining Medicaid
eligibility." Summarizing federal law (see 42 USC § 1396r [c]
[5] [B] [v]), DOH further explained that "CCRCs are paid
primarily with private funds" and that, following the Deficit
Reduction Act of 2005, certified CCRCs "may require in their
admission contracts that residents spend their resources declared
for the purposes of admission on their care, before they apply
                              -5-                520621

for Medicaid." Based on the foregoing, we agree with plaintiff
that the contract could require a resident to first spend the
resources identified upon admission before applying for Medicaid,
in compliance with both state and federal law. As Supreme Court
recognized, the essence of the CCRC financial model requires a
tradeoff between the resident and the facility, in which the
resident must disclose and spend his or her assets for the
services provided, while the facility must continue to provide
those services for the duration of the resident's lifetime even
after private funds are exhausted and Medicaid becomes the only
source of payment. With this long-term commitment, the facility
necessarily must evaluate the financial feasibility of accepting
a resident in the first instance.

      Pertinent here, the contract provided that the Yezzis could
"not transfer assets represented as available in [their]
application to be a [r]esident of [GSV] for less than fair market
value, unless the transfer [would] not impair [their] ability to
pay [their] financial obligations to [GSV]." The contract
further required the Yezzis to "make every reasonable effort to
meet [their] financial obligations" to GSV and prohibited them
from making "any transfers or gifts after actual occupancy, which
would substantially impair [their] ability or the ability of
[their] estate to satisfy [their] financial obligations to
[GSV]." Further, the contract specifies that the financial
information disclosed with their application was "a material part
of this [contract], . . . [that was] incorporated as a part of
this [contract]." Although, as defendants correctly contend, the
contract does not affirmatively state that the Yezzis must expend
the private resources identified with their application, it does
expressly preclude the transfer of such resources without fair
consideration.

      Given the long-term nature of the contract, which expressly
embraced the prospect of nursing facility care, we agree with
Supreme Court that the admission agreement is supplemental to,
and does not supercede, the contract. We recognize that, under
the admission agreement, the Yezzis were required to "pay for, or
arrange to have paid for by Medicaid, . . . all services provided
by [GSV]" (emphasis added). We are not, however, persuaded by
defendants' interpretation that this disjunctive provision
                              -6-                520621

required plaintiff to accept Medicaid as an alternative payment
source. Construed together, the contract and admission agreement
are actually compatible in that the CCRC financial model
anticipates that, upon depletion of a resident's personal
resources, Medicaid will be the ultimate source of payment – and
plaintiff is contractually obligated to accept Medicaid while
continuing to provide the same services. Consistently, addendum
X to the admission agreement specifies that, "[i]t is the
responsibility of residents, and those who assist them, to use
the residents' assets and income to pay the costs associated with
their residency and health care."

      Nor are we persuaded by defendants' contention that Public
Health Law article 46-A only provides for a limited exception to
the general Medicaid rules that permits a CCRC to utilize the
entrance fee, but not more, before a resident can become Medicaid
eligible. An "entrance fee" is defined as "an initial or
deferred transfer to an operator of a sum of money, made or
promised to be made by a person or persons entering into a fee-
for-service continuing care contract, for the purpose of ensuring
services pursuant to such contract" (Public Health Law § 4651
[6]; see Public Health Law § 4659 [1], [2]). Once a resident
takes occupancy, the entrance fee is partially refundable,
subject to the operator's right to retain two percent per month
of the occupancy and no more than four percent for processing
(see Public Health Law § 4660 [2]). By comparison, the exception
authorized under the Deficit Reduction Act of 2005 speaks to the
"resources declared for the purposes of admission" (42 USC
§ 1396r [c] [5] [B] [V]), and not just the entrance fee. As
indicated above, GSV evaluated the Yezzis' total resources in
determining whether to grant their admission application.

      In view of the foregoing, Supreme Court properly determined
that the undisputed transfer of Hazel Yezzi's assets for less
than fair market value constitutes a breach of contract.
Correspondingly, since the transfer preceded her approval for
Medicaid coverage, which, in any event, would ultimately only
cover payment at a reduced rate, we further agree that the
transfer constitutes a fraudulent conveyance under Debtor and
Creditor Law § 273. Finally, defendants' contention that
plaintiff engaged in a deceptive practice in violation of General
                              -7-                  520621

Business Law § 349 (a) is without merit and was properly
dismissed.

     Lahtinen, J.P., Garry and Devine, JJ., concur.



     ORDERED that the order is affirmed, with costs.




                             ENTER:




                             Robert D. Mayberger
                             Clerk of the Court
