Affirmation of Statistical Sampling Authority in Medicaid Overpayment Determinations

Introduction

This commentary examines the Supreme Court of New York, Fourth Department’s decision in the case of In the Matter of Harry's Nurses Registry, Inc. v. New York State Office of Medicaid Inspector General et al. (2025 N.Y. Slip Op. 1459). In this case, Harry’s Nurses Registry, Inc. (the petitioner) challenged a determination finding the organization liable for Medicaid overpayments. The disputed determination arose after an audit by the New York State Office of Medicaid Inspector General (OMIG), which employed an extrapolation method to calculate the total Medicaid overpayments allegedly made to petitioner. Prompted by a CPLR article 78 proceeding, this case raises key issues related to evidentiary submissions in administrative hearings, preservation of contentions for judicial review, and, critically, the statutory authority supporting OMIG’s use of statistical sampling techniques.

Summary of the Judgment

The Court unanimously confirmed the administrative determination that Harry’s Nurses Registry, Inc. was liable for Medicaid overpayments. The decision dismissed the petition on multiple grounds. The Court held that:

The petitioner failed to preserve certain issues for review by not raising them sufficiently at the administrative hearing.
OMIG’s use of an extrapolation method to estimate overpayments fell within the authority granted by both case law and relevant regulatory frameworks, particularly under 18 NYCRR 519.18(g) and supported by the precedent established in cases such as Matter of Mercy Hosp. of Watertown and West Midtown Mgt. Group, Inc. v. State of N.Y., Dept. of Health.
The arguments regarding evidentiary irregularities, the alleged arbitrary application of the extrapolation method, and the claim of deficient administrative notice were not persuasive, as petitioner’s objections were untimely or unsubstantiated.

Ultimately, the Court affirmed the determination without costs and rejected all key contentions advanced by the petitioner.

Analysis

Precedents Cited

The judgment relied on several important precedents which have collectively contributed to the authority granted to OMIG in utilizing statistical sampling and extrapolation methods:

Matter of Mercy Hosp. of Watertown v. New York State Dept. of Social Servs. – This case emphasized that the authority to conduct Medicaid audits via statistical sampling is implicit in the broader supervisory powers over the Medicaid program. The Court noted the reasonableness of using statistical or sampling techniques, provided the provider is given an adequate chance to challenge the methodology.
West Midtown Mgt. Group, Inc. v. State of N.Y., Dept. of Health, Off. of the Medicaid Inspector Gen. – Here, the Court explicitly acknowledged the legitimacy of adopting statistical methods in Medicaid audits, reinforcing OMIG’s methodology as consistent with established legal standards.
MATTER OF KHAN v. NEW YORK STATE DEPT. OF HEALTH and Matter of Lisowski v. New York State Dept. of Motor Vehs. – These cases underscored the necessity for petitioners to preserve contentions by timely raising objections during administrative proceedings.
MATTER OF MARZEC v. DeBUONO – This decision was instrumental in affirming that a provider must adhere to strict timelines for submitting objections, and failure to do so can result in the exclusion of claims or documentation not submitted within the designated period.

Collectively, these precedents shaped the Court’s approach in dismissing the petitioner’s contentions, thereby reinforcing the principle that administrative agencies may adopt statistical extrapolation methods in determining overpayments when a provider has a fair opportunity to contest the methodology.

Legal Reasoning

At the heart of the Court’s legal reasoning was the acceptance of the extrapolation method used by OMIG as legally valid and administratively sound. The Court acknowledged:

The statutory and regulatory framework — particularly 18 NYCRR 519.18(g) — permits the use of statistical sampling techniques, as corroborated by the referenced precedents. The method’s application was not seen as arbitrary or capricious provided the provider had the opportunity to challenge the methodology.
The petitioner’s failure to raise key evidentiary and methodological objections during the administrative hearing meant that these issues were effectively waived for judicial review. This principle, reinforced by previous decisions, limited the Court’s ability to reconsider points not properly preserved.
The Court further clarified that any contention regarding the method’s scientific adequacy must be raised during the appropriate administrative phase, rather than being introduced for the first time in the judicial review.
Finally, distinctions were drawn between the remedial context of recouping overpayments and the imposition of monetary penalties. The Court reiterated that reimbursement for overpayments is not deemed a penalty but a remedial action, thus aligning with the interpretation of pertinent regulations.

Impact on Future Cases and Relevant Area of Law

This decision is likely to have significant implications for future Medicaid overpayment audits and recoupment proceedings:

It firmly establishes that agencies like OMIG are endowed with the authority to employ statistical sampling and extrapolation techniques when calculating alleged overpayments, as long as affected parties have had the opportunity to contest the methods used.
The judgment reinforces the need for timely and precise objection procedures under relevant regulations, thereby warning providers against raising new matters at judicial review that were not timely preserved.
It may also lead to greater administrative deference towards the methodologies and audits conducted by Medicaid supervisory bodies, thus strengthening their position in future recoupment and penalty-related proceedings.

Complex Concepts Simplified

Several complex legal concepts surface in this judgment. For clarity:

Statistical Sampling and Extrapolation: This refers to the method by which a sample of Medicaid claims is analyzed to estimate the total amount of overpayments. Rather than reviewing every claim, a representative sample is used to infer the overall overpayment amount.
Preservation of Contentions: In administrative law, a party must timely raise all relevant issues during the initial hearing or administrative process. Failure to do so typically prevents those issues from being re-litigated in subsequent judicial reviews.
Recoupment vs. Penalty: The judgment distinguishes between recoupment (recovering funds that were improperly paid) and the imposition of a penalty. The former is seen as a remedy to correct an overpayment, whereas the latter is a punitive measure.
Judicial Economy: This principle emphasizes efficiency in legal proceedings, such that all substantive issues are resolved in a single judicial review rather than allowing piecemeal litigation.

Conclusion

The Supreme Court of New York’s decision affirms that administrative agencies have the authority to use statistical sampling and extrapolation methods in determining Medicaid overpayments. By dismissing the petitioner’s contentions on the grounds of untimely objections and unsupported methodological challenges, the Court not only reinforces established legal precedents but also clarifies the boundaries of administrative review in Medicaid audits.

This judgment carries a significant implication for future Medicaid overpayment cases, emphasizing that providers must strictly adhere to procedural timelines and object to audit methodologies during the initial administrative process. The decision underscores judicial deference to agency expertise as long as procedural fairness is maintained, thereby shaping the landscape of Medicaid audit and recoupment law.