Saint Anthony Hosp. v. Eagleson
| Decision Date | 09 July 2021 |
| Docket Number | Case No. 20-cv-2561 |
| Citation | 548 F.Supp.3d 721 |
| Parties | SAINT ANTHONY HOSPITAL, Plaintiff, v. Theresa EAGLESON, in her official capacity as Director of the Illinois Department of Health and Family Services, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Edward W. Feldman, Kay L. Dawson, Mary Eileen Cunniff Wells, William James Katt, Michael L. Shakman, Miller Shakman Levine & Feldman LLP, Chicago, IL, for Plaintiff.
Sunil Shashikant Bhave, Jason Aaron Kanter, Richard Scott Huszagh, Office of the Attorney General, Chicago, IL, for Defendant.
Plaintiff Saint Anthony Hospital is a charitable hospital located on the west side of Chicago. It cares for a disproportionately poor patient population, so it relies heavily on Medicaid for its funding. But the Hospital has encountered all sorts of problems receiving payments from managed care organizations ("MCOs"), which are private healthcare insurance companies that administer the bulk of the Medicaid program in Illinois. All too often, the payments arrive late, or not at all.
Saint Anthony filed suit and asserted a right to payment under the Medicaid Act. But it didn't sue the MCOs. Instead, the Hospital filed a complaint against Theresa Eagleson, the Director of the Illinois Department of Health and Family Services ("HFS"). HFS is the state agency that is responsible for overseeing Medicaid in Illinois.
The theory of the complaint is that the state is failing to oversee the MCOs as required by federal law. The Hospital claims that the state's Medicaid system involving the MCOs is plagued by "dysfunction." See Cplt., at ¶ 38. The lack of oversight has allowed the MCOs to run rampant and shirk their responsibility to pay providers like Saint Anthony in full and in a timely manner. Saint Anthony seeks an injunction to force the state to compel the MCOs to do better.
The state moved to dismiss on a number of grounds. For the reasons stated below, the motion to dismiss is granted.
Saint Anthony Hospital opened its doors in 1898. See Cplt., at ¶ 16 (Dckt. No. 1). For over a century, the Hospital has provided medical care and social services to the communities on the west side of Chicago. Id. at ¶¶ 1, 12, 16. The patient population at Saint Anthony is disproportionately poor. Id. at ¶¶ 10, 16.
The patients may not have the means to pay for what they need, but that does not stop the Hospital from caring for them. Saint Anthony is a "safety net" hospital, meaning that it cares for the needy without regard for their ability to pay. Id. at ¶¶ 2, 16; see also 305 ILCS 5/5-5e.1. Saint Anthony cares for everyone, and "turn[s] away no one." See Cplt., at ¶ 10 (Dckt. No. 1).
The Hospital relies heavily on Medicaid to carry out its mission. Id. at ¶¶ 1, 16. Medicaid is a program funded by the federal and state governments to pay for health care for low-income families. Id. at ¶ 22; see generally 42 U.S.C. § 1396 et seq. The federal government provides funds to the states, and the states then contribute funds and administer the program within their borders. See Cplt., at ¶ 22.
States can elect whether to participate in the Medicaid program. But if states elect to participate, the federal government requires them to comply with certain conditions as expressed in the Medicaid Act. For example, states must submit a plan to the federal government for approval, and the plan must describe how they intend to administer their Medicaid program. See 42 U.S.C. § 1396a.
There is an enforcement mechanism on the back end. States must comply with the conditions in the statute, or else risk the possibility of losing federal funding. See Planned Parenthood of Indiana, Inc. v. Comm'r of Indiana State Dep't of Health , 699 F.3d 962, 969 (7th Cir. 2012) ; Collins v. Hamilton , 349 F.3d 371, 374 (7th Cir. 2003) (); 42 U.S.C. § 1396c.
The Illinois Department of Healthcare and Family Services is the agency that administers this state's Medicaid program. Id. at ¶ 13. Defendant Theresa Eagleson is the Director, and is responsible for ensuring that the state program complies with federal law. Id. at ¶¶ 13, 24.
Medicaid patients in Illinois can enroll in one of two programs: the "fee for service" program, or the "managed care" program. Id. at ¶¶ 25–26; see also Aperion Care, Inc. v. Norwood , 2018 WL 10231154, at *1 (N.D. Ill. 2018), aff'd sub nom Bria Health Servs., LLC v. Eagleson , 950 F.3d 378 (7th Cir. 2020). When a patient is enrolled in the "fee for service" program, the state pays for the patient's medical care directly. See Midwest Emergency Assocs.-Elgin Ltd. v. Harmony Health Plan of Illinois, Inc. , 382 Ill. App. 3d 973, 975, 321 Ill. Dec. 175, 888 N.E.2d 694 (2008). So, when Saint Anthony treats a patient in the fee for service program, it sends the bill to the state.
The other program is the "managed care" program, and that's the program at issue in this case. Under that program, the state pays a private insurance company a flat monthly fee, on a per member basis. Id. at 975–76, 321 Ill. Dec. 175, 888 N.E.2d 694. And in exchange, the private insurance company agrees to pay for each patient's medical care. Id. The private insurance companies that participate in the Medicaid program are known as managed care organizations (again, "MCOs"). Id. When Saint Anthony treats a patient insured through the managed care program, it sends the bill to an MCO.
Illinois introduced the managed care program in 2006. See Cplt., at ¶ 31 (Dckt. No. 1). At first, the program was a small part of the state's Medicaid spending, representing less than 3% of the state's total expenditures. Id. But the program has expanded significantly in recent years. Id. Illinois spent $251 million on MCOs in 2010, and by 2019, the expenditures shot up to $12.73 billion. Id. As of January 2020, over 2.1 million people are enrolled in the state's managed care program. Id. at ¶ 35. That's roughly 80% of the state's Medicaid enrollees. Id.1
Meanwhile, the state reduced the number of MCOs from twelve to seven in 2017. Id. at ¶¶ 32–35. So fewer MCOs are providing an ever-growing amount of services. The total value of the state's contracts with the seven MCOs is $63 billion, the largest single procurement in Illinois history. Id. at ¶ 34.
As Saint Anthony tells it, the radical expansion came with significant growing pains. According to the complaint, the state presided over a "hasty roll-out" of the managed care program that was "haphazardly-planned and poorly-executed." Id. at ¶¶ 36–37. The Hospital claims that the state fails to provide sufficient oversight of the MCOs, who take advantage of the fact that the state is asleep at the wheel.
The complaint recounts the many problems that Saint Anthony has experienced when it attempts to receive payment from the MCOs. In the Hospital's view, the MCOs have an incentive to pay nothing, or pay as little as possible, or pay as late as possible. Id. at ¶¶ 26, 65. And that's exactly what the MCOs are doing. According to the complaint, the MCOs are dragging their feet, and the state isn't doing anything about it. Id. at ¶ 65.
Saint Anthony points to four bad practices in particular. Id. at ¶ 43. In a nutshell, the MCOs deny many of the claims, or don't pay in full, or put up roadblocks, or don't make it clear what they are paying and what they're denying. "The MCOs have systematically delayed and denied claims without justification, failed to pay undisputed claims, and when payments are made, they refuse to provide the detail necessary for Saint Anthony to determine if it is receiving proper payment or, if not, why not." Id. at ¶ 6.
First, the MCOs deny Saint Anthony's claims much more often than in the past. Specifically, claims are denied at a rate that is "four times greater" than "under the previous system." Id. at ¶ 46. As a result, the Hospital "is not paid for a substantial amount of services it provides." Id. at ¶ 48. A denial means that Saint Anthony must foot the bill. Id.
Many of the denials involve ticky-tack issues and "technical ‘gotchas.’ " Id. at ¶ 47. For example, "Illinicare MCO denied $92,000 in charges submitted by Saint Anthony because the patient label was placed on a State-mandated consent form for the procedure instead of the patient's name being handwritten on the form." Id.
Second, when the MCOs do approve claims, they make Saint Anthony wait a long time for the funds. Today, Saint Anthony "has to wait anywhere from 90 days to 2 years to be paid by the MCOs." Id. at ¶ 51; see also id. at ¶¶ 72–73. But in the meantime, Saint Anthony has bills of its own to pay. Without receiving payment from the MCOs, Saint Anthony has trouble paying its vendors. Id. at ¶ 51.
Third, the process for requesting payment from the MCOs is unduly cumbersome. Id. at ¶¶ 52–54. Each MCO has its own policies and procedures for how to request payment, creating a "labyrinth" that is difficult to navigate. Id. at ¶ 52.
Fourth, when the MCOs do tender payment, it's difficult to tell what they're paying for. That is, the "MCOs do not provide itemized claims data showing a breakdown of how it calculated the total amount of payment for a claim, leaving Saint Anthony to guess whether it received the full amount due to it." Id. at ¶ 57.
Overall, Saint Anthony is facing "unjustified denials, unwarranted delays ... and increased costs to try to navigate this broken system." Id. at ¶ 54. The Hospital has to devote resources to try to get paid, and any money spent on reimbursement efforts is money that it can't spend on patient care. Id. The lack of payment creates a risk of cutting services, and may put the Hospital itself in jeopardy. Id.
All of those bad practices, but especially the delays in payment, have had disastrous financial consequences for Saint Anthony. Id. at ¶¶ 10, 70. For one,...
To continue reading
Request your trial