Senn Park Nursing Center v. Miller

• Decision Date: 19 October 1984
• Docket Number: Nos. 59286,59287,s. 59286
• Citation: 83 Ill.Dec. 609,104 Ill.2d 169,470 N.E.2d 1029
• Parties: , 83 Ill.Dec. 609, 7 Soc.Sec.Rep.Ser. 776, Medicare & Medicaid Guide P 34,184 SENN PARK NURSING CENTER et al., Appellees, v. Jeffrey C. MILLER, Director of Public Aid, Appellant.
• Court: Illinois Supreme Court

Page 1029

470 N.E.2d 1029

104 Ill.2d 169, 83 Ill.Dec. 609, 7

Soc.Sec.Rep.Ser. 776,

Medicare & Medicaid Guide P 34,184

SENN PARK NURSING CENTER et al., Appellees, v. Jeffrey C. MILLER, Director of Public Aid, Appellant.

Nos. 59286, 59287.

Supreme Court of Illinois.

Oct. 19, 1984.

Rehearing Denied Nov. 30, 1984.

Neil F. Hartigan, Atty. Gen., Springfield (James C. O'Connell, Barbara L. Greenspan and Karen Konieczny, Sp. Asst. Attys. Gen., Chicago, of counsel), for appellant.

Richard F. Zehnle, Vedder, Price, Kaufman & Kammholz, Chicago, for appellees.

J. Brian Heller and Maria E. Richter, Springfield, for amicus curiae the Joint Committee on Administrative Rules.

CLARK, Justice:

This appeal involves two consolidated cases. In the first case, which has been called "Senn Park I," the plaintiffs, three Illinois nursing-home facilities, sought a writ of mandamus in the circuit court of Cook County against the defendant, Jeffrey C. Miller, Director of the Illinois Department of Public Aid (the IDPA). The plaintiffs asked the circuit court to direct Miller to reimburse them for Medicaid services in accordance with the inflation-update procedure set forth in the Illinois State Medicaid plan which was in effect prior to January 1, 1980, rather than the procedure Miller adopted, which became effective January 1, 1980. The circuit court found that the new procedure was invalid and ordered the defendant to reimburse plaintiffs for their operating costs for services rendered after February 15, 1980 (the date the plaintiffs demanded repayment under the old procedure), using the prior method of computation. Both defendant and plaintiffs appealed to the appellate court. The plaintiffs contested only that portion of the order that required reimbursement for services rendered after February 15, 1980. The appellate court affirmed in part, modified in part, and remanded the cause. (118 Ill.App.3d 504, 74 Ill.Dec. 123, 455 N.E.2d 153.) The appellate court held that the amended procedure for calculating the inflation-update factor was a "rule" within the meaning of the Illinois Administrative Procedure Act and that since it was not published in accordance with the Act, or the Federal notice and comment regulations, it was invalid. The appellate court also agreed with plaintiffs that they were entitled to relief beginning with services rendered on January 1, 1980, not beginning with services rendered after February 15, 1980.

In "Senn Park II," the second case involved in this appeal, the plaintiffs filed a complaint for declaratory judgment in the circuit court of Cook County, asking the court to declare that Emergency Rule 4.14221, which was enacted by Miller after the judgment in Senn Park I, was void and of no effect because there was no emergency as that term is defined in the Illinois Administrative Procedure Act (Ill.Rev.Stat.1979, ch. 127, par. 1005.02) and because the rule was promulgated in violation of Federal notice requirements (42 C.F.R. sec. 447.205 (1979)). On December 30, 1980, the emergency rule in question was withdrawn. The parties filed cross-motions for summary judgment. The trial court, in its order granting defendant's motion for summary judgment, found that the emergency rule was valid, that the action was not moot because the rule was withdrawn, and that the plaintiffs had to bring their monetary claims in the Illinois Court of Claims. On appeal in the appellate court, the plaintiffs contended that the trial court erred in finding that the emergency rule was valid and that their monetary claims had to be brought in the Court of Claims. Defendant asserted that the matter was moot. The appellate court affirmed in part, reversed in part, and remanded the cause to the circuit court (118 Ill.App.3d 733, 74 Ill.Dec. 132, 455 N.E.2d 162). The appellate court held that the matter was not moot because, even though the emergency rule was withdrawn, the validity of the rule had to be decided in order to determine the amount of reimbursement the plaintiffs would be entitled to under the writ of mandamus to be issued in Senn Park I. The appellate court further held that the circuit court had erred in finding the emergency rule valid, because there was no emergency and because the defendant had failed to comply with the notice and comment requirements of the Federal regulations. Lastly, the appellate court held that the circuit court had erred in ordering that the plaintiffs' monetary claims must be brought in the Court of Claims.

The defendant filed a petition for leave to appeal in both of these cases, and they have been consolidated on appeal in this court.

Nursing-home care for needy residents of the State of Illinois is provided through Medicaid. The Medicaid program is a cooperative State and Federal program in which the State is partially reimbursed by the Federal government. The program is authorized under the Social Security Act (42 U.S.C. sec. 1396 et seq.) and implemented in accordance with Federal regulations. Each State, in order to participate in the program, must have a State plan which is subject to the approval of the Department of Health and Human Services (HHS). The IDPA must set reasonable rates of reimbursement for the participating nursing-home facilities, taking into account inflationary trends. The IDPA requires nursing-home facilities to submit annual cost reports which set forth the expenses of the facility for the fiscal year preceding the calendar rate year. The IDPA determines the reimbursable costs from these reports. Prior to January 1, 1980, the IDPA had calculated the inflation-update factor by comparing the two most recent cost reports of all the nursing homes with the Consumer Price Index over the same period, and multiplying that factor by the projected price changes for the upcoming year.

On December 14, 1979, the IDPA sent the plaintiffs and the other participating nursing-home facilities copies of changes to the Medicaid plan which included an amended procedure for calculating the inflation-update factor whereby all available cost reports were compared. The IDPA published notice of the amended inflation-update procedure in the newspaper of widest circulation in each Illinois city with a population of 50,000 or more, from December 17, 1979, through December 24, 1979. The notice was not published in the Illinois Register, because it was refused by that publication. The record does not indicate why the Illinois Register refused the notice. The notice also did not provide an address where comments could be sent. On May 14, 1980, HHS approved the amended procedure, making it retroactive to January 1, 1980.

On February 14, 1980, plaintiffs received their first payments, which were computed according to the new inflation-update procedure. On February 15, 1980, plaintiffs demanded that the IDPA pay them in accordance with the previous procedure. Plaintiffs filed their complaint for a writ of mandamus in response to the IDPA's refusal to reimburse the nursing homes using the previous update procedure.

On appeal before this court in Senn Park I, defendant raises the same issues he raised in Senn Park I in the appellate court.

The first issue we will address is whether the amendment to the State's Medicaid plan is a rule within the meaning of the Illinois Administrative Procedure Act (Ill.Rev.Stat.1979, ch. 127, par. 1001 et seq.). We agree with the circuit and appellate courts that the amendment which changed the inflation-update procedure is a rule.

Under the Act, a rule is defined as follows:

" 'Rule' means each agency statement of general applicability that implements, applies, interprets, or prescribes law or policy, but does not include (a) statements concerning only the internal management of an agency and not affecting private rights or procedures available to persons or entities outside the agency, (b) informal advisory rulings issued pursuant to Section 9, (c) intra-agency memoranda or (d) the prescription of standardized forms." Ill.Rev.Stat.1979, ch. 127, par. 1003.09.

There is no doubt that the amended inflation-update procedure is an agency statement of general applicability. It does implement a policy of the agency and is not a statement dealing only with the internal management of the agency. The rule does affect the rights and procedures available to people and entities outside the agency.

The defendant asserts that the relationship between the State and the Federal government in creating a workable Medicaid plan somehow causes the amendment in this case to be something other than a rule. In his brief the defendant states:

"Thus, the Appellate Court's decision that a State Plan amendment is a rule is contrary to the structure of the Medicaid program and should be reversed. A state participating in the Medicaid program must at all times have in place a state plan. IDPA amended the state plan to update the inflation update in accordance with federal law. IDPA is required to provide payment for services only to the extent that FFP [Federal Financial Participation] is available, and it is clear that FFP is available only for those expenditures made in accordance with an approved state plan."

We agree with the appellate court that the State plan is not what is at issue, but rather a rule changing the State plan. The defendant has not shown in what way he changed the plan to comply with Federal law. He changed the procedure before receiving any kind of approval or directive from HHS. The defendant's argument is circular and incorrectly analogizes the overall State plan with the rule which changed the plan without proper notice and opportunity for comment. Just because HHS approves the overall State plan, and reimbursement procedures are part of the State plan, does not mean that the IDPA does not have to follow the proper procedures under the Illinois Administrative Procedure Act for adopting a rule. We agree with the appellate court that none of the...