Judge: Health department was correct in yanking away nursing home’s Medicaid dollars after years of overpayment

A New Jersey nursing facility that was overpaid for a decade isn’t entitled to that rate of payment, an appeals court ruled last week.

Hudson Manor Health Care Center, a former county-owned facility, had been misclassified for years, even though it was sold to a for-profit entity in 2002. That error funneled thousands of extra Medicaid dollars to the SNF, before the health department caught the error in 2012 and cut off the funds, Bloomberg Law reported last week.

Officials at the facility — which today operates as Alaris Health at Secaucus — argued that New Jersey’s Appropriations Act barred such a reclassification, because it’s meant to minimize rate fluctuations from year to year.

However, the Superior Court of New Jersey, Appellate Division, disagreed Feb. 7, siding with the state.

“Because [Hudson Manor’s] interpretation would lead to the absurd result of continuing reimbursement at an improper rate to which it was never entitled, we reject its contention on this point,” the court wrote.

In New Jersey, county-owned SNFs are reimbursed at the higher Class II rate, while those that are privately owned earn the lower Class 1 designation, Bloomberg reported. The Appropriations Act only pertains to rates that have been correctly established, the court ruled. County officials had promised to make “best efforts” to ensure that Hudson Manor stayed at the more favorable Class II rate, but the court said local officials had no authority to make such a promise. The health department will reportedly not try to recover the overpayments.