Ill. Health Maintenance v. Dept. of Ins.

• Decision Date: 05 March 2007
• Docket Number: No. 1-05-2548.,No. 1-05-2422.,1-05-2422.,1-05-2548.
• Citation: 864 N.E.2d 798
• Parties: ILLINOIS HEALTH MAINTENANCE ORGANIZATION GUARANTY ASSOCIATION, Plaintiff-Appellee and Cross-Appellant, v. The DEPARTMENT OF INSURANCE, Deirdre K. Manna, Acting Director of the Department of Insurance, and Glenn R. Gasiorek, Defendants (University of Chicago Hospitals and University of Chicago Practice Plan, Defendants-Appellants and Cross-Appellees). University of Chicago Hospitals and University of Chicago Practice Plan, Plaintiffs-Appellants, v. Deirdre K. Manna, Acting Director of the Department of Insurance, Defendant (Illinois Health Maintenance Organization Guaranty Association, Defendant-Appellee).
• Court: United States Appellate Court of Illinois

864 N.E.2d 798

ILLINOIS HEALTH MAINTENANCE ORGANIZATION GUARANTY ASSOCIATION, Plaintiff-Appellee and Cross-Appellant, v. The DEPARTMENT OF INSURANCE, Deirdre K. Manna, Acting Director of the Department of Insurance, and Glenn R. Gasiorek, Defendants (University of Chicago Hospitals and University of Chicago Practice Plan, Defendants-Appellants and Cross-Appellees).

University of Chicago Hospitals and University of Chicago Practice Plan, Plaintiffs-Appellants, v. Deirdre K. Manna, Acting Director of the Department of Insurance, Defendant (Illinois Health Maintenance Organization Guaranty Association, Defendant-Appellee).

No. 1-05-2422.

No. 1-05-2548.

Appellate Court of Illinois, First District, First Division.

March 5, 2007.

Rehearing Denied March 30, 2007.

COPYRIGHT MATERIAL OMITTED

Varga Berger Ledsky Hayes & Carey, Chicago (Michael V. Casey, of counsel), for Appellants University of Chicago Hospitals and University of Chicago Practice Plan.

Foley & Lardner LLP, Chicago (Wm. Carlisle Herbert, Mary Kay M. Martire and Derek L. Wright, of counsel), for Appellee Illinois Health Maintenance Organization Guaranty Association.

Mayer, Brown, Rowe & Maw LLP, Chicago (Alan J. Martin, Marc E. Rosenthal and Robert M. Dow, Jr., of counsel), for the Illinois Department of Insurance.

Justice ROBERT E. GORDON delivered the opinion of the court:

The central issue in these appeals is whether the Illinois Health Maintenance Organization Guaranty Association (Association) is liable to the University of Chicago Hospitals (Hospitals) and the University of Chicago Practice Plan (Practice Plan) (collectively, Providers) for unpaid claims for services rendered to enrollees of a health maintenance organization (HMO) which was declared insolvent. The Association was created by section 6-6 of the Illinois Health Maintenance Organization Guaranty Association Law (Act) (215 ILCS 125/6-6 (West 2004)) for the express purpose of protecting HMO enrollees "and their beneficiaries, payees and assignees, subject to certain limitations" (215 ILCS 125/6-2 (West 2004)), against the insolvency of an HMO.

In August 2001, the Providers submitted unpaid claims totaling more than $6 million to the Association for services rendered to enrollees of American Health Care Providers, Inc. (AHCP), an HMO which had been declared insolvent. Early the next year (2002), the Association denied most of the Providers' claims. The bulk of the claims were denied on the ground that the Providers were not entitled to recover under the Act for services provided to Medicaid enrollees (Medicaid defense). Most of the Providers' claims were for services rendered to AHCP enrollees who were Medicaid patients. The Providers appealed the denial of their claims to the Illinois Director of Insurance (Director). 215 ILCS 125/6-11(3) (West 2004).¹ Subsequently, the parties filed motions for summary disposition. On December 5, 2003, the Director issued an order rejecting, among other things, the Association's Medicaid defense, and directing the Association to pay $5,084,922.19 to the Hospitals and $292,229.62 to the Practice Plan.

The Association and the Providers filed complaints for administrative review with the circuit court of cook county, chancery division. The Association sought the reversal of those portions of the Director's order that were adverse to the Association, particularly the rejection of the Medicaid defense, while the Providers challenged that part of the order declining to award prejudgment and postjudgment interest. In May 2005, the circuit court reversed the Director's rejection of the Association's Medicaid defense. In so doing, the court upheld the denial of most of the claims the Association had rejected. The circuit court also affirmed the Director's denial of prejudgment and postjudgment interest.

In August 2005, the Association and the Providers filed notices of appeal. The Providers argue on appeal that the circuit court erred in (1) reversing the Director's rejection of the Association's Medicaid defense, and (2) failing to award prejudgment and postjudgment interest. In its cross-appeal, the Association contends, among other things, that the circuit court erred in upholding the Director's rejection of certain additional defenses asserted by the Association. By order dated October 18, 2005, the parties' appeals were consolidated. For the reasons set forth below, we affirm in part and reverse in part the judgment of the circuit court.

BACKGROUND

On May 11, 2000, the circuit court entered an order of liquidation with a finding of insolvency against AHCP. Prior to this liquidation, the (University of Chicago) Hospitals and the Practice Plan, a group of physicians who were employees and faculty members of the University of Chicago, had provided various medical services to AHCP enrollees for which the Providers had not been paid. Most of these services were rendered on an emergency basis.² For the period at issue, the Providers had no agreement with AHCP to supply medical services to its enrollees.

On August 3, 2001, subsequent to AHCP's liquidation, the Providers submitted unpaid claims totaling more than $6 million to the Association. This total included $5,609,609.72 for the Hospitals and $415,620.93 for the Practice Plan. The majority of the Providers' claims were for services provided to AHCP enrollees who were Medicaid recipients.

In early 2002, the Association notified the Providers that it was denying most of their claims. Some $5.2 million ($5,013,329.53 for the Hospitals and $209,192.35 for the Practice Plan) of the Providers' $6.025 million in claims were denied on the ground that the Providers were not entitled to recover under the Act for services provided to Medicaid enrollees. The Association also denied any claims that it concluded were (1) the responsibility of other medical groups under contract with AHCP (referral defense), (2) for services provided to enrollees who did not reside in Illinois or Wisconsin on the date of the liquidation (residency defense), and (3) for charges incurred either before the effective date of coverage or after the termination date of coverage for a particular AHCP enrollee (nonenrollment defense). In a letter dated February 21, 2002 (and a supplemental letter dated March 12, 2002), the Providers appealed the Association's denial of their claims to the Director. 215 ILCS 125/6-11(3) (West 2004). In May 2002, the Director designated an employee of the Department of Insurance as hearing officer in the case.

In August 2002 (prior to the hearing), the Association filed a motion for leave to take discovery. About a month later (September 23, 2002), the hearing officer issued an order granting some of the Association's discovery requests but denying most of them. The hearing officer declined to allow any discovery regarding possible additional defenses, explaining that the hearing would be limited to those defenses originally cited by the Association in denying the Providers' claims.

The parties filed motions for summary disposition. In its motions, the Association sought, among other things, a decision affirming its Medicaid, referral, residency and nonenrollment defenses. The Association also filed an alternative motion for summary disposition arguing that, if the Association's denial of the Hospitals' claims were reversed, these claims should be paid at a rate lower than the Hospitals' usual and customary rate. According to the Association, the Hospitals' claims should be paid "at the rates payable by the Illinois Department of Public Aid [(IDPA)] for those same services" (rate-of-payment defense). The Providers' motion for summary disposition requested a decision in Providers' favor and an order directing the Association to pay the full amount of the claims. In their memorandum in support of their motion for summary disposition, the Providers argued, among other things, that the Association was barred by collateral estoppel from asserting its Medicaid, referral, and rate-of-payment defenses. According to the Providers, these same defenses were rejected by the Director in an earlier proceeding to which the Association was a party. The Providers stated: "[T]he Director is bound by his prior Order on these identical issues and the Association is collaterally estopped from challenging it." (In the prior proceeding (Shapo), the Director found the Association liable to a number of health care providers, including the Hospitals, "for services rendered by them to enrollees of an insolvent health maintenance organization (HMO) known as MedCare HMO, Inc. (MedCare)." Illinois Health Maintenance Organization Guaranty Ass'n v. Shapo, 357 Ill.App.3d 122, 126, 292 Ill.Dec. 699, 826 N.E.2d 1135 (2005).) In the case at bar, the Providers and the Association agreed that the hearing would consist of their summary disposition submissions.

In August 2003, the hearing officer issued his findings of fact, conclusions of law and recommendations. The hearing officer rejected the Association's Medicaid, referral, and rate-of-payment defenses and denied the Association's motions for summary disposition on these issues. In rejecting the Medicaid defense, the hearing officer noted that the Providers "at no time * * * purposefully submit[ted] their claims to the Medicaid agency (IDPA) seeking reimbursement for those services [provided to Medicaid patients who were AHCP enrollees]." The hearing officer concluded that, with regard to the Medicaid claims at issue, the Providers "were not participating in the Medicaid program" and the Medicaid defense therefore did not apply to the Providers. The hearing officer came to a different conclusion regarding the Association's residency and nonenrollee defenses. The hearing officer granted the Association's motions for summary disposition on these latter two defenses, finding that the Association's denials of claims on those grounds were proper. On December 5, 2003, the Director...