Mihailescu v. Sheehan (Full Text)

SUPREME COURT OF THE STATE OF NEW YORK – NEW YORK COUNTY
PART %

4h/+ N l CclO(AS

PRESENT:

fiGU G b A
J u s d e s-C .

MOT ION DA T E

MOTION SEQ . N O .

MOTION CAL . NO .

The following papers , numb e r ed 1 t o

w e r e read on th is mo t ion to / fo r

Notice of Mo t ion / Order t o Show Cause – A f f idav i ts – Exhibits …
An sw e r ing A f f idav i ts – Exhibits

Rep ly ing A f f idav i ts
Cross-Mot ion: 0 Yes 94 NO
Upon t h e forego ing papers, it i s ordered t h a t this mo t ion

PAPERS NUMBERED
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UNFlLEP JUDGMENT
mls Judgment has not heen entered by the County Clerk
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obtafn enpy, counsel or authorized r@presentPthre must
appear In person at the Judgment Clerk’s Dimk (Room
d 41 0 ) .
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
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In the Matter of the Petition of

VIVIAN GINA GIOVANNA MIHAILESCU, M.D.,

In this Article 78 proceeding, a medical doctor seeks to set aside a determination by the

State Medicaid Inspector General (the Medicaid IG) denying her application to be reinstated as a

provider in the Medicaid program. The Director of the State Office of Professional Conduct

(OPMC) has also been joined as a respondent in this proceeding. Both respondents hold

positions as bureau heads within the State’s Department of Health. The TG’s denial of

petitioner’s application, however, effectively bars petitioner from a work venue specifically

contemplated as available to her under a prior settlement with the Director.

Petitioner, a 1990 emigrb from Rumania, is licensed to practice in New York and is

board-certified in psychiatry and neurology. Between 1990 and 2003, she was employed by

hospitals in the Greater New York area and at the end of that period was an attending physician

in an out-patient clinic at Metropolitan Hospital. At the beginning of 2004, however, one of her

patients filed a complaint against her with the State Department of Health. The Department

referred the complaint to OPMC, for investigation and possible disciplinary proceedings by the

Board of Professional Medical Conduct (the Board). Petitioner resigned from her position at

Metropolitan Hospital shortly after the complaint against her was filed. Two months later, she

joined the medical staff of St. Joseph’s Medical Center, a community hospital in Yonkers, where

she continued to work for the next two-and-a-half years. During that time, the OPMC

investigation of her case continued.

In late December 2006, petitioner, OPMC, and the Bureau of Professional Medical

Conduct (the Board’s legal department) executed a “Consent Agreement.” Under the

Agreement, petitioner, who was then represented by counsel, waived her right to contest

OPMC’s formal charges, which alleged that she had committed “boundary violations” involving

two patients, including “inappropriate sexual contact” with one of them. Further, the parties

agreed to a 12-months suspension of petitioner’s medical license, as a “penalty.” They also

agreed that, at the end of the 12 month-period, reactivation of her license would be subject to her

meeting specified “conditions,” including her completion of “a continuing education program in

the area of physician-patient boundaries” and her submission of “a current, independent, in-depth

psychiatric evaluation by a board-certified psychiatrist … pre-approved by the Director, showing

that she is fit and clinically competent to practice as a physician.” It was further agreed that

petitioner would be subject to, among other things, the following conditions for a period of 60

months after her license was reactivated:

Unless determined and pre-approved otherwise by the Director
of OPMC, [petitioner] shall work only in a supervised setting,
such as a facility licensed by New York State, where close
practice oversight is available on a daily basis and where quality
assurance and risk management protocols are in effect. [Petitioner]
shall not practice medicine until the supervised setting proposed
by [petitioner] is approved, in writing, by the Director of OPMC ….

The terms of the Agreement were adopted by the Board in a Consent Order dated January

8 ,2007 .

Following its standard practice, early in 2007 OPMC gave notice of the Agreement and

Order to various State and federal agencies, including the Medicaid IG. In view of the license

suspension, the IG automatically terminated petitioner from participation as a Medicaid provider
pursuant to Department of Health regulations ( 1 8 NYCRR 5 504.7[d][l]). The IG twice sent

petitioner notice of this action. The second such notice apparently was prompted by a letter sent

in early June 2007 by the U S . Department of Health & Human Services, advising the IG that

petitioner had been excluded from enrollment as a Medicare provider in view of the license

suspension and directing that the IG take parallel steps on behalf of the Medicaid program

pursuant to section 1320a-7 of title XIX.

Just before the end of the 12-month license-suspension period, the report of an

independent psychiatrist was sent to OPMC, as required under the Agreement. The psychiatrist

based his evaluation of petitioner on seven interviews as well as his review of the details of her

case. The report ended by noting, “Considering that [petitioner] had functioned as a psychiatrist

for over two years after the ‘incident’ without any problems and she has had for the last year

some beneficial psychotherapy, and after evaluating her good grasp of the psychodynamic of her

past emotional difficulties related to the ‘incident,’ I believe that she is ready and able to function

now as a licensed physician.” This report substantially confirmed the substance of another from

a rnental-health professional retained by petitioner.

When her license was reactivated, petitioner made arrangements

to return to St. Joseph’s

staff as a physician in an in-patient unit under supervision and protocols

consistent with the

strictures of the Agreement. The proposed terms of her employment were approved by OPMC.

At the same time, petitioner applied for reinstatement in the Medicare program, and her

application was granted. By a separate application, she also sought reinstatement in the

Medicaid program.

By letter dated June 12, 2008, however, the Medicaid IG denied her application for

reinstatement. The letter advised petitioner that, “Although,[sic] your license is active, the

causes that lead [sic] to your license[’s] being suspended is [sic] sufficient reason for this

Agency’s decision to deny your application . . . .” The letter further advised that petitioner could

not submit a new application for at least two years from the letter’s date, but that she could,

within 45 days of such date, seek reconsideration. Petitioner applied for reconsideration, but a

responsive letter dated September 12 ,2008 , notified her that the IG affirmed h s original decision

and that such action constituted his “final determination.” Petitioner commenced the instant

proceeding on December 30,2008.

It appears undisputed that the denial of petitioner’s application to be reinstated in the

Medicaid program was responsible for the loss of her job at St. Joseph’s. Indeed, respondents do

not deny petitioner’s assertion that, under Medicaid regulations, her continuing exclusion from

the roster of Medicaid providers effectively bars any governmentally licensed or operated facility

from hiring her. Petitioner has remained unemployed and claims that the challenged

determination a s a practical matter prevents her from working as a physician. To be sure,

respondents contend that she could possibly find work in some private practice that might be able

to accommodate the close supervision and protocols required under the Agreement. Petitioner

disputes that contention as unrealistic, if not disingenuous. In any event, there is no dispute that

a prime avenue of employment contemplated in the Agreement – “a facility licensed by New

York State” – has been effectively closed to petitioner by the Medicaid IG’s action.

As will be seen below, the foregoing facts implicate legal issues of first impression.

The threshold legal question concerns respondents’ argument that this proceeding is time-

barred under section 217[1]), requiring that an Article 7 8 proceeding be brought within four

months of the petitioner’s receipt of the agency’s final determination (90-92 Wadsworth Avenue

Tenants Association v City of New York Department of Housing Preservation and Development,

227 AD2d 331). In this connection, respondents base their calculation of untimeliness upon the

IG’s 2007 notices to petitioner that she was being excluded from participating in the Medicaid

program in view of her license’s suspension. Petitioner does not, however, purport to be

challenging that initial exclusion. Her challenge is, instead, to the final determination denying

her reinstatement in Medicaid, as announced by the Medicaid IG in his September 12 ,2008 ,

letter. Her filing of the instant petition on December 30,2008, was therefore timely.

We thus arrive at the substantive issues. At least one governing principle is well

established: where, as here, an Article 78 petitioner asks the court to set aside an agency’s

discretionary action, the court may do so only if the challenged action is arbitrary and capricious

or lacks a rational basis (E Pel1 v Board of Education, 34 NY2d 222’23 1). This does not

happen often. To establish whether this matter is one of the infrequent cases in which the

demanding standard for relief is satisfied, it is necessary to trace the history and content of

statutes and regulations that bear upon respondents’ respective administrative functions and upon

their relationship to the Department within which they operate.

In the mid-l970’s, the State legislature transferred from the Department of Education to

the Department of Health responsibility for overseeing the professional conduct of medical

doctors (L. 1975, ch. 109). The Board, with a majority of its members required to be physicians,

was created at the same time specifically ‘“to improve procedures for the professional discipline

of physicians’,” (Roberts v Gross, 100 AD2d 540, quoting 79 Opns Atty Gen 51) (Public Health
Law, 5 230[ 13).

Since then, OPMC and the Board have served, respectively, as the

Department of Health’s investigatory and adjudicatory a n n s concerning allegations of
professional misconduct by physicians (Education Law 5 6509; Public Health Law 5 230[ 11).

In 1996, some thirty years after Medicaid’s inception, the legislature reposed in the

Department of Health the responsibility for administering Medicaid, in place of the Department

of Social Services (L.1996, c. 4741. As amended, section 363-a(1) of the Social Services Law

directed that, “The department shall … act as the single [Sltate agency to supervise the

administration of [Medicaid] in t h s [ Sltate.. . .” and further directed that all of the statute’s
references to “the department” should be understood to mean the Department of Health (id., 5

233). As an incident of such responsibility, the Department of Health became subject to

Medicaid regulations previously promulgated by the Department of Social Services, including

provisions governing enrollment of providers (1 8 NYCRR, part 504) and sanctions and

reinstatement (1 8 NYCRR, part 5 15).

The position of Medicaid IG as it now exists was not established until 2006. In August

2005, in the wake of a series of newspaper articles reporting that widespread fraud and waste had

cost the State billions of dollars annually, the Governor issued Executive Order (No. 140), which

announced the creation of a Medicaid IG within the State’s Executive Department (Lytle, Meet

the State’s Brand New Medicaid Fraud Legislation, NYLJ, July 10, 2006, at 9, col 1). The

mandate of this new State officer was to review the structure and operations of the State’s

program and to recommend ways to “improve efforts to control fraud, waste and abuse” (9
NYCRR 0 5.14). Six months later, a superseding Executive Order (No. 140.1) removed the

Medicaid IG from the Executive Department and defined his office as “an independent fraud-

fighting entity within the Department of Health” whose central mission was to “prevent []

Medicaid fraud, waste and abuse.” Only a few months after that, the legislature enacted title TII

of the Public Health Law (effective as of July 26,2006).

The new statute borrowed heavily from the later Executive Order’s terms. Among other

things, it expressed the legislature’s intent to “establish[] an independent office of Medicaid

inspector general within the department [of health] ” who would streamline “the [Sltate’s process

of detecting and combating Medicaid fraud and abuse and maximize the recoupment of improper
Medicaid payments” (Public Health Law 5 30). It reaffirmed that “the department [of health] is

the single [Sltate agency for the administration of [Medicaid] in New York [Sltate, provided that

the office [of the Medicaid IG] shall undertake and be responsible for the department’s duties as

[such] single [Sltate agency with respect to

(a) prevention, detection and investigation of fraud and
abuse within [Medicaid]; (b) referral of appropriate cases
for criminal prosecution; and (c) recovery of improperly
expended [Medicaid] funds. Such responsibility shall
include, but not be limited to, [Medicaid] audit functions, …
and the function of [Medicaid] fraud and abuse prevention ….

(Public Health Law 3 1 [ 11).

The statute provided that the Medicaid 1G was to be appointed by and serve at the
pleasure of the Governor (Public Health Law 5 3 1 [2]) and specified as the prerequisite to such

appointment at least ten years’ experience in fraud investigation or auditing or in the profession

of law involving some prosecution or “consideration” of fraud; or some comparable experience

in the area of health care or senior management, with the proviso that such comparable

experience involve “some consideration of fraud” (id.). The statute further provided for “the

transfer of the [Medicaid] audit and fraud and abuse prevention functions from the department
[of health]” to the IG’s office (Public Health Law 5 34). The statute authorized the IG, among

other things, to “solicit, receive and investigate complaints related to fraud and abuse within
[Medicaid]” (Public Health Law 5 32[4]; “to pursue civil and administrative enforcement

actions against any individual or entity that engages in fraud, abuse [and, as recently amended,

illegal or improper acts or unacceptable practices]”(Public Health Law tj 32[6]); and to

“exclu[de] … providers … from participation in the program”(id., [d]). Moreover, the statute

directed that, for the sake of “prevent[hg], detect[ing] and investigat[ing] Medicaid fkaud and

abuse,” the IG work toward “coordinat[ion] among the department [of health] and [other
appropriate entities]” (Public Health Law 4 32[3],[ 181).

The parties’ arguments in our Article 78 proceeding rely on their respective views of the

scope of the Medicaid IG’s power to determine whether a provider may participate in the

Medicaid program where the basis for exclusion is professional misconduct.

The Medicaid IG points out that the applicable statutes and regulations authorize him to

refuse to reinstate a Medicaid provider, and he contends that the terms of the Agreement do not

constrain him to do otherwise in petitioner’s case. His argument is, in effect, that his authority

to exclude physicians from enrollment as Medicaid providers includes the power to determine

independently which providers would pose a threat to the health and safety of Medicaid patients.

The expansiveness of the Medicaid IG’s view of his authority is best appreciated by

contrasting the determination now at issue with the Agreement upon which he avowedly based

that action. As indicated above, the Agreement’s reference to a State-licensed facility clearly

was intended to illustrate the type of work venue in which petitioner could work once her license

was reactivated, a proposition that would have been meaningless if petitioner would not at that

point be allowed to participate in the Medicaid program. Moreover, implicit in such reference

was the Department of Health’s conclusion that, with the specified conditions in place,

petitioner’s return to work in such a facility would not present a reasonably foreseeable danger to

the health and safety of patients. Accordingly, the IG’s decision to deny petitioner

reinstatement tacitly reflects his assumption that he is authorized to assess whether a physician

would be an asset or detriment to patients in the Medicaid program based upon the physician’s

past and anticipated future professional conduct even where his conclusion is inconsistent with a

prior assessment by OPMC and the Board.

Petitioner for her part argues that the legislature intended the Medicaid IG to investigate

and be the arbiter of only such matters as directly relate to the Medicaid fisc, such as cases

involving auditing, accountancy, pursuit of fraud in its t e c h c a l sense, unnecessary prescriptions

for medical services, testing, or drugs, and the like. In other words, she maintains that the IG’s

function does not include independently assessing a provider as a professional per se.

The applicable statutory and regulatory provisions do not establish which of these

competing views of the Medicaid IG’s role is correct. Indeed, the regulations were written and

last amended well before the IG’s office was created, and they are therefore not natural sources

of light by which to locate the jurisdictional boundaries in question here. Thus, although an

application for reinstatement as a Medicaid provider is unquestionably subject to consideration of

factors “having a direct bearing on the applicant’s ability to provide high-quality medical care …”

( 1 8 NYCRR 504.5[a][ 13]), the regulations do not indicate whether the IG is to consider such

factors himself or instead is to depend upon others in the Department of Health to do so, i . e . , the

units whose long-time function and expertise are in the areas of professional conduct and patient

protection.

As for the Public Health Law provisions that created the office of Medicaid IG, they may

be read as arguable support for either of the parties’ competing views of the IG’s role in a case

such as this. Nor does the legislative history provide a definitive answer to this question.

Moreover, there is no prior judicial decision addressing, much less resolving, such issue.

However, certain practical considerations suggest that the IG’s authority necessarily falls short of

what he proposes.

The instant proceeding illustrates the point. Here, the Department of Health, through

OPMC and BPCM, was indisputably responsible for protecting non-Medicaid and Medicaid

patients alike by determining whether their health and safety could be entrusted to petitioner’s

care, and, if so, on what terms. Given the obvious importance of avoiding duplicative

Departmental work and potentially inconsistent intra-Departmental results, the legislature did not

likely intend that the Medicaid IG in such a case might second-guess the Department by also

investigating or evaluating whether the physician in question would present a potential danger to

a sub-set of the patient population, ie., Medicaid recipients. The IG was likelier meant instead

to defer to the conclusions of his sister Departmental units in such regard.

It is noted, however, that in this case the Medicaid IG did not purport to investigate or

independently evaluate petitioner. Indeed, respondents do not claim that the IG’s determination

was anything other than an automatic denial based on the content of the Agreement. To be sure,

the Agreement contained petitioner’s concession that she would not contest the two charges

against her. But it also in effect contained, as noted above, the Department’s conclusion that,

after the 12-month penalty, she could safely be returned to hospital employment under the

stipulated conditions. In the face of such acknowledgment by Departmental staff who had

directly and at length been involved in the review of petitioner’s case, the IG’s perfunctory

refusal to reinstate petitioner – thus hampering her return to such employment -wa s baseless. In

other words, it was arbitrary and capricious.

The same adjectives might be applied to the IG’s

apparent belief that petitioner could be passed from one bureau “within” the Department to

another for serial dispositions reflecting inconsistent resolutions of the same core question of

patient health and safety. Indeed, such a notion runs counter to the agency “coordination” that
the legislature set as an operative theme for the IG (see Public Health Law 9 32([18],[30]).

In view of the foregoing, which moots petitioner’s alternative request for relief against

OPMC, there is no need to decide whether such request is, as respondents argue, premature.

Instead, it is

ADJUDGED that, for the reasons discussed above, Article 78 relief is warranted in this

case, and the petition therefore is granted to the extent that it seeks relief against the IG. The

challenged determination is hereby annulled, and the IG is directed to reinstate petitioner

forthwith to the roster of Medicaid providers.

This constitutes the decision and judgment of the c o u i t

Dated: June 2 4 , 2 0 0 9

ENTER:

J.S.C.