Donovan v. Eagleson
| Citation | 484 F.Supp.3d 552 |
| Decision Date | 03 September 2020 |
| Docket Number | No. 19-cv-06020,19-cv-06020 |
| Parties | Charles DONOVAN et al., Plaintiffs, v. Theresa EAGLESON, Director of the Illinois Department of Healthcare and Family Services, and Grace Hou, Secretary of the Illinois Department of Human Services, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Kimberly M. Watt, SB2, Inc., Harrisburg, PA, for Plaintiffs.
Michael D. Arnold, Illinois Attorney General's Office, Chicago, IL, for Defendants.
The Plaintiffs are a group of Illinois nursing-home residents who are entitled to receive long-term care benefits under the Federal Medicaid Act, 42 U.S.C. § 1396 et seq.1 R. 1, Compl.2 According to the residents, the Illinois Department of Healthcare and Family Services (widely known in Medicaid circles as "HFS") and the Illinois Department of Human Services (known by the acronym "DHS") have ostensibly processed and approved their eligibility applications. But the problem is that, as a practical matter, HFS and DHS are not actually reimbursing the nursing homes for providing those long-term care benefits to the Plaintiffs. Thus, the Plaintiffs allege that HFS and DHS are violating their due process rights as well as certain provisions of the Medicaid Act. Specifically, the Plaintiffs have named as defendants Theresa Eagleson, in her official capacity as Director of HFS, and Grace Hou, in her official capacity as Secretary of DHS. The Defendants have now moved to dismiss the complaint for lack of standing under Federal Rule of Civil Procedure 12(b)(1), or alternatively, for failure to state a claim under Rule 12(b)(6). R. 11. For the reasons discussed below, the motion to dismiss is granted.
For purposes of this motion, the Court accepts as true the allegations in the Complaint. Erickson v. Pardus , 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007). The Court may also look to facts outside the Complaint in considering the Rule 12(b)(1) motion to dismiss for lack of subject-matter jurisdiction, or, in this case, standing. Ezekiel v. Michel , 66 F.3d 894, 897 (7th Cir. 1995).
To make sense of the facts in this case, it is necessary to first outline the general application process for long-term care benefits—which, for our purposes, just means residency in a nursing home—under the Medicaid Act. To start, HFS and DHS are the state agencies responsible for administering the federal Medicaid program in Illinois. Compl. ¶¶ 10-11. In order to receive long-term care benefits, an Illinois resident must complete a two-part application process. First, the resident must submit a general application to receive Medicaid benefits. Id. ¶ 12. This application is processed by HFS, which issues an eligibility determination. Id. ¶ 13. Then, separate from the general-eligibility application, a resident must also specifically request long-term care benefits. Id. ¶ 15. The long-term care request can be made either simultaneously with the eligibility application or after the eligibility application is already approved. Id. ¶ 28. In this case, the Complaint is not entirely clear about which specific procedure each Plaintiff followed or the exact timing of all of the applications. But it is undisputed that all 13 Plaintiffs have gone through one of the application routes, and all of them appear to have been approved for Medicaid benefits in general. Compl. ¶¶ 1-2. It is also undisputed that at least some of them have been specifically approved for long-term care benefits: June Douglas, Dolores Lampe, Grace Irene Palmer, James Daly, and Barbara Dickman. Id. ¶¶ 1, 80, 88. And finally, it is undisputed that all of them are currently residing in nursing homes and receiving long-term care services.3 Id. ¶¶ 74, 86, 102, 114, 127, 143, 155, 169, 181, 196, 211, 228, 243.
In addition to that application process, there is a separate application pathway for nursing homes —which are responsible for providing long-term care services—to receive financial reimbursements from HFS and DHS. The parties refer to this separate application process as the MEDI (which stands for "Medical Electronic Data Interchange") system. Specifically, nursing homes must submit what is called a MEDI "admission packet" to HFS for every resident who receives long-term care benefits. This is required regardless of whether a resident was approved for Medicaid long-term care services before or after entering the nursing home; either way, when the resident enters a nursing home and begins to receive long-term care, a MEDI admission packet must be submitted for each resident. Compl. ¶¶ 28-29. If the MEDI admission is approved, then the nursing home presumably receives reimbursements for any long-term care services provided by the nursing home beginning on the date that the beneficiary was "admitted" into the facility.
The Plaintiffs allege, however, that HFS and DHS reject MEDI admissions for all sorts of reasons. For example, applicants are required to complete a needs-screening (referred to by yet another Medicaid acronym, "OBRA") for long-term care, but the agencies will reject a MEDI admission if the OBRA paperwork is not attached to the packet, even if the actual screening was completed on time. Compl. ¶ 32. In addition, the Defendants will reject a MEDI admission if the packet is missing any financial information. Id. ¶ 38. The agencies have also rejected MEDI admissions when the resident's name is misspelled or where there is a "transposition of digits in the ICD code." Id. ¶¶ 48-49. When these denials happen, the individual applicants are not given notice or an opportunity to appeal their MEDI admission denial. Id. ¶ 54. As of 2018, however, nursing home facilities do allegedly receive notice of MEDI denials; the State apparently sends out a rejection letter saying that "this is not a decision on an individual's Medicaid eligibility and, therefore, is not appealable through the Department of Human Services Bureau of Hearings." Id. ¶¶ 53-55, 91. In any event, after a rejection, a new MEDI admission packet with the correct information must be submitted for the resident, and if the later application is approved, the reimbursements begin on the later date. Id. ¶¶ 27, 47.
The Plaintiffs allege that these MEDI rejections, coupled with the lack of notice and opportunity to be heard, functionally allow Defendants "to avoid paying for care for Medicaid approved beneficiaries." Compl. at 2. From the perspective of the Plaintiffs, a rejection of a MEDI admission constitutes either a denial of an application for long-term care benefits (or a withdrawal of those benefits if the resident had previously been approved for them). Id. ¶¶ 97, 110, 139, 151, 165. The result, Plaintiffs allege, is that they are "unable to pay for their room, board, care and services at their facilities during their period of Medicaid ineligibility," and they are thus "at risk of being discharged from their facilities." Id. ¶¶ 71-72.
Seeking injunctive and declaratory relief, the Plaintiffs assert three claims based on the Defendants’ rejections of MEDI admission packets. First, the Plaintiffs (invoking 42 U.S.C. § 1983 ) allege that the agencies have violated their due-process rights by rejecting the MEDI admission packets without providing the Plaintiffs notice or an opportunity to be heard. Compl. ¶ 278. The Plaintiffs also allege that the agencies have violated the medical-assistance and nursing-facility provision of the Medicaid Act, 42 U.S.C. §§ 1396a(a)(10)(A) and 1396d(a)(4)(A), as well as the reasonable-promptness provision of the same statute, 42 U.S.C. § 1396a(a)(8). Compl. ¶¶ 287, 292. The agencies have moved to dismiss all claims for lack of standing and failure to state a claim. Defs.’ Mot. Dismiss.
Rule 12(b)(1) of the Federal Rules of Civil Procedure allows a defendant to move for dismissal of a claim where there is a lack of subject matter jurisdiction. A motion under 12(b)(1) can also seek to dismiss a claim for lack of standing. See Retired Chicago Police Ass'n v. City of Chicago , 76 F.3d 856, 862 (7th Cir. 1996). In ruling on a motion to dismiss for lack of standing, the Court must accept as true all material allegations of the complaint, drawing reasonable inferences in the plaintiffs’ favor. Lee v. City of Chicago , 330 F.3d 456, 468 (7th Cir. 2003) (cleaned up). The plaintiffs bear the burden of establishing the required elements of standing. Id. (cleaned up).
The question of Article III standing is one of jurisdiction, and addresses "whether the litigant is entitled to have the court decide the merits of the dispute or particular issues." Apex Digital, Inc. v. Sears, Roebuck & Co. , 572 F.3d 440, 444 (7th Cir. 2009) (cleaned up). Under Article III of the Constitution, federal jurisdiction is limited to claims presenting a case or controversy between the plaintiff and the defendant. Id. In order to establish constitutional standing, the party invoking federal jurisdiction must demonstrate "a personal injury fairly traceable to the defendant's allegedly unlawful conduct and likely to be redressed by the requested relief." Allen v. Wright , 468 U.S. 737, 751, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984).
"A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to state a claim upon which relief may be granted." Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7 , 570 F.3d 811, 820 (7th Cir. 2009). Under Federal Rule of Civil Procedure 8(a)(2), a complaint generally need only include "a short and plain statement of the claim showing that the pleader is entitled to relief." This short and plain statement must "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (cleaned up).4 The Seventh Circuit has explained that this rule "reflects a liberal notice pleading regime,...
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