By Dan Churney | Jan 4, 2017

A Chicago appellate panel has affirmed a lower court finding that a suit lodged by scores of nursing homes, alleging Illinois state government excessively cut its Medicaid reimbursements to the nursing facilities, should be pursued in the Illinois Court of Claims rather than Cook County Circuit Court, because the state did not overstep its authority as to how it calculated the reductions. 

The ruling was delivered Dec. 28 by Justice Aurelia Pucinski of Illinois First District Appellate Court, with concurrence from Justices Cynthia Cobbs and James Fitzgerald Smith. The justices filed the unpublished order under Supreme Court Rule 23, which means it may not be cited as precedent, except in the limited circumstances permitted by Rule 23. 

The appellate ruling favored the Illinois Department of Healthcare and Family Services and its director, Felicia Norwood, in an action brought against them by more than 150 nursing homes from throughout Illinois. 

The Department of Healthcare and Family Services administers federal Medicaid payments in Illinois, reimbursing health care providers for costs associated with Medicaid patients. The reimbursements come from the Illinois General Revenue Fund, the Long-Term Care Provider Fund and the Health Care Provider Relief Fund. 

In March 2015, the Illinois General Assembly passed a law reducing reimbursements for the rest of the 2015 fiscal year, by an amount “equivalent to a 2.25 percent reduction in appropriations from the General Revenue Fund for the medical assistance program for the full fiscal year.” The law also ordered reimbursements be decreased “uniformly” among all health care facilities. 

The nursing homes filed suit in July 2015 in Cook County Circuit Court, alleging Norwood calculated the reductions based on all three reimbursement funds, rather than solely on the reimbursements from the General Revenue Fund, as they said was spelled out by the General Assembly. This method of calculation led to greater cuts than called for, plaintiffs said. Further, plaintiffs alleged Norwood exempted skilled nursing facilities run by local units of government that provided the non-federal share of Medicaid services from the cuts. 

The nursing homes alleged Norwood exceeded her authority and asked the court to order Norwood to comply with the law. Norwood responded with a motion to dismiss the suit, invoking sovereign immunity and asserting the Illinois Court of Claims had jurisdiction, not circuit court. The Court of Claims handles personal injury and money claims by citizens against a state agency or employee.

Judge LeRoy Martin dismissed the suit, because he determined Norwood had authority to calculate the reductions, but the nursing homes were alleging she incorrectly exercised that authority. As a consequence, Martin concluded the matter belonged in the Court of Claims. 

The nursing homes appealed, maintaining the case should remain in circuit court, because Norwood went beyond the scope of her office, so her actions were not the legitimate actions of a state official and thus not under the Court of Claims’ jurisdiction. 

Norwood countered the law capped the reductions, but authorized her to implement the reductions. Justice Pucinski agreed, upholding the lower court’s decision the case should be routed to the Court of Claims. 

“The defendants were authorized to make the reductions as they saw fit – to any reimbursement funds they saw fit – so long as the amount of the total reductions did not exceed 2.25 percent of that year’s GRF Medicare appropriations,” Pucinski said. 

In addition, Pucinski said the General Assembly stated cuts should be made by an “amount equivalent to 2.25 percent of General Revenue Fund Medicaid appropriations.” By employing the the word “equivalent,” the General Assembly indicated it was using 2.25 percent of the General Revenue Fund Medicaid appropriations as a “general benchmark” for figuring total reductions. 

Pucinski further noted legislators did not restrict reductions to those reimbursements made from the General Revenue Fund, but included the two other funds as well. 

As far as plaintiffs’ contention certain skilled nursing homes were given special treatment, Pucinski pointed out legislators directed that reductions be made uniformly to the “extent practical,” leaving it to Norwood to ascertain what was practical. 

The nursing homes are represented by the Philadelphia-based global firm of Duane Morris, which has an office in Chicago. Norwood and the Department of Healthcare and Family Services are represented by the Illinois Attorney General’s Office. 

On Nov. 15 in Chicago federal court, a number of other Illinois nursing homes affiliated with Heritage Operations Group LLC, based in downstate Bloomington, filed suit alleging Norwood and her department have not paid them for services they rendered nursing home residents who receive Medicaid. Plaintiffs also alleged defendants have not promptly processed Medicaid applications from residents. The nursing homes said the state is obligated by federal law to perform these functions.

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Duane Morris LLP Illinois Department of Healthcare and Family Services Illinois First District Appellate Court Illinois General Assembly

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