The New York Appellate Division recently ruled that the Nesconset Center for Nursing and Rehabilitation does not have the legal standing to challenge a Medicaid audit report. This decision affects the facility's former owner and could set a precedent for similar disputes involving nursing homes across the state.

The court's ruling is significant as it clarifies who has the right to contest Medicaid audit findings, particularly in cases where ownership of the facility has changed. The decision could impact how nursing homes approach audits and the appeals process in the future.

Background

The case, Nesconset Center for Nursing Rehabilitation v. Commissioner of Health of the State of N.Y., was filed under docket number 2021-05097. The Nesconset Center, a nursing facility located in Nesconset, New York, was licensed by the New York State Department of Health (DOH) and was enrolled as a Medicaid provider. The facility was previously owned and operated by the plaintiff, who sold it to Nesconset Operating, LLC in February 2019.

In 2018, while still under the plaintiff's ownership, the facility filed appeals regarding Medicaid reimbursement rates. Following the sale, the Office of the Medicaid Inspector General (OMIG) conducted an audit of the facility's Medicaid reimbursements from February 2008 to December 2014. In April 2019, OMIG issued a final audit report indicating that the facility had received Medicaid overpayments.

After the audit report was released, the plaintiff initiated legal action seeking a judgment to declare the audit report null and void. The plaintiff argued that the report violated Social Services Law § 368-c(3) and a universal settlement agreement made in 2016 between New York State and various nursing facilities.

The Ruling

The Appellate Division ruled on July 15, 2026, affirming the lower court's decision to dismiss the plaintiff's complaint for lack of standing. The judges involved in the ruling were Betsy Barros, Lara J. Genovesi, Lourdes M. Ventura, and Elena Goldberg Velazquez.

The court stated, "The injury asserted by the plaintiff, as a former owner and operator of the facility, does not fall within the zone of interests sought to be protected..." This indicates that the plaintiff's claims were not valid because they no longer had a stake in the facility's operations after the sale.

Furthermore, the court found that the current operator, Nesconset Operating, is responsible for any Medicaid overpayments made to the facility. The judges emphasized that the statute and regulations regarding Medicaid payments are intended to protect the current provider of medical services, not former owners.

Impact

This ruling has important implications for nursing facilities and their owners in New York. It clarifies that only current operators of Medicaid providers can challenge audit findings related to overpayments. This could discourage former owners from attempting to contest audit results, as they may not have the legal standing to do so.

Additionally, the decision reinforces the responsibilities of current operators regarding Medicaid compliance. Facilities may need to be more diligent in their operations and financial practices to avoid potential overpayments that could lead to audits and disputes.

What's Next

Details were not available in the court filing regarding whether the plaintiff plans to appeal the decision. However, since the ruling was made by the Appellate Division, further appeals may be limited unless new legal grounds are presented.