Koch v. Sheehan

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This appeal considered a decision of the Office of Medicaid Inspector General (“OMIG”) to exclude Petitioner from participating in New York’s Medicaid program. Petitioner Eric J. Koch, D.O., was investigated by the Office of Professional Medical Conduct (“OPMC”) for his treatment of two patients, both of whom died shortly after receiving treatment in 2006. The Board for Professional Medical Conduct (“BPMC”), the state agency responsible for adjudicating professional misconduct complaints against physicians, found that Petitioner had negligently practiced medicine with respect to these two patients, and it entered into a consent agreement with Petitioner and OPMC. Pursuant to the consent agreement, Petitioner pleaded “no contest” to these charges and accepted a sanction of 36 months probation. OMIG, an independent state agency responsible for, inter alia, assuring that Medicaid funds are expended on quality medical care, was notified of the BPMC finding and removed Petitioner from the Medicaid program pursuant to 18 N.Y.C.R.R. §§ 515.7(e), 515.3(a)(1), which permit OMIG to take immediate action against a person found guilty of professional misconduct.

Petitioner challenged the OMIG decision, and the Supreme Court, Erie County, vacated OMIG’s decision and reinstated Petitioner. OMIG appealed, and the Appellate Division, Fourth Department, affirmed, holding that it was arbitrary and capricious to remove Petitioner from the program when BPMC had permitted him to continue to practice. It held further that OMIG was required to conduct an independent investigation before excluding a physician from Medicaid on the basis of a BPMC consent order.

The Court of Appeals affirmed on different grounds. The Court rejected the idea that OMIG was required to conduct an independent investigation and that it was required to give any deference to BPMC’s findings. It held that there was no statutory or regulatory basis for such a requirement and noted that OMIG may adopt the findings of BPMC and may choose not to levy further sanctions. However, it is ultimately within OMIG’s discretion to determine what sanctions, if any, are to be imposed.

Thus, the Court reasoned that OMIG may remove a physician based solely on the findings of a BPMC consent order in an exercise of its inherent discretionary authority. But, such a discretionary action requires an explanation. The Court held that, in cases such as this, where OMIG seeks to impose sanctions more severe than those imposed by BPMC, it must explicitly explain why exclusion from the program is warranted. The record in this case did not provide any such explanation. Rather, the recommendation for exclusion merely reiterated that Petitioner had two charges of negligence and was placed on probation for 36 months. The Court held that this was insufficient and that OMIG’s decision was arbitrary and capricious and an abuse of discretion.

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2013 WL 5707874, 2013 N.Y. Slip Op. 06804

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