The petitioner appeals from a judgment dismissing an article 78 proceeding brought to review the determination of the State Commissioner of Health approving and certifying the Medicaid reimbursement rates allowable to the petitioner for nursing home services rendered to patients during the period from July 1,1968, to December 31,1969.
The statute (Public Health Law, § 2807, subd. 3; L. 1965, ch. 795, § 1, as amd. by L. 1968, ch. 862, § 8, eff. Sept. 1, 1968) controlling the action of the Commissioner, provided that he should “determine and certify ” rate schedules for payments for hospital and health related service, including nursing home service, as ‘ ‘ are reasonably related to the costs of providing such service,” and “in making such certification, the commissioner shall specify the elements of cost taken into consideration.” Furthermore, rules promulgated by the Commissioner (repealed as of Jan. 13, 1970) under the authority of section 2803 of the Public Health Law provided that ‘ ‘ nursing home and health related facility rates shall be individually determined, be related to the reasonable cost of providing services to patients or residents, be established on an all-inclusive bases, be computed as an average monthly cost of providing inpatient or resident care, and be no greater than the rate established by a nursing home or health related facility for private patients or residents.” (10 NYCRR 770.2 [b]; emphasis added.) Said rule, in subdivisions (c) and (d), then specified the elements of cost and the items of expense to be taken into consideration by the Commissioner in the rate computation. However, the Commissioner concededly failed to follow this statutory directive and the then general regulatory guidelines prescribed for establishing the rates properly chargeable by petitioner. Instead, the Commissioner followed a further provision of his then rules which arbitrarily fixed nursing home rates through June 30, 1969, so as not to exceed “ 50 percent of the weighted average adjusted inpatient or resident day cost” charged by the proprietary hospitals in the State. (10 NYCRR 770.2[h].)
Where, as here, it appears that a nursing home’s reasonable costs in providing services substantially exceeded the arbitrary norm of 50% of the average daily rate charged by proprietary hospitals, we conclude that the Commissioner, to comply with the statutory directive and his promulgated general guidelines, was bound to take the appropriate steps to determine and certify *318a rate to cover such reasonable costs. The action of the respondent, in failing to comply with the statutory directive, amounted to the assumption of powers in excess of those conferred upon it by law. Consequently, the administrative action may not stand. (See Matter of Barry v. O’Connell, 303 N. Y. 46, 53.) The court, however, may not, on the basis of the record, assume the power to determine the proper rates and the matter should be remanded for this purpose.
The petitioner’s right to the establishment of proper rates for the period from July 1 to December 31,1969 may not be defeated by the application of the 1969 amendment to subdivision 2 of section 2807 of the Public Health Law providing that rates of payment in effect on 'March 31, 1969, or approved after such date, shall continue in effect for the remainder of the year. Such amendment is properly limited in its application to such rates as have been lawfully determined and certified in the first instance and may not be lawfully applied to validate or “ freeze ” rates which have not been so established. (Catholic Med. Center of Brooklyn & Queens v. Rockefeller, 305 F. Supp. 1256; 305 F. Supp. 1268.)
Finally, we see no merit in respondents’ claim that petitioner’s right to the relief sought, or to a part thereof, has been barred by the four-month Statute of Limitations. That defense was not pleaded in respondents’ answer and, furthermore, the matter of determining the rates for the entire period remained fully subject to continuous administrative consideration until final action within four months of the commencement of this proceeding.
The judgment dismissing the article 78 proceeding should be reversed on the law with costs and disbursements to petitioner-appellant and the matter remanded to the State Commissioner of Health to re-establish in light of this opinion the nursing home rates chargeable by petitioner from July 1, 1968, to December 31,1969.