Judge: Feds wrong to abruptly cut off funds for Chicago children's psychiatric hospital accused of abuse

By Dan Churney | Dec 31, 2018

A federal judge has ordered a children's psychiatric hospital in Chicago, where patients have allegedly been exposed to “rampant” abuse, should continue receiving Medicare and Medicaid funds while the facility gets the chance to argue the federal government did not give the hospital time to correct problems.

On Dec. 12, Aurora Chicago Lakeshore Hospital filed for a temporary injunction and restraining order against the U.S. Department of Health and Human Services and the Centers for Medicare and Medicaid Services, which is an agency within the department. U.S. District Judge Sharon Johnson Coleman granted Aurora’s requests Dec. 21.

The 160-bed hospital, which is at 4840 Marine Drive on Chicago’s North Side, provides psychiatric care for children, treating about 5,000 patients every year. Most of the children are covered by Medicare and Medicaid, according to court papers.

The Illinois Department of Public Health said it inspected the facility four times in the summer and fall, alleging Aurora failed to protect patients from sexual and physical abuse, didn’t report and track allegations patients were sexually abused and failed to hospitalize a patient after the patient complained of such abuse.


U.S. District Judge Sharon Johnson Coleman  

Further, Aurora allegedly gave psychotropic medications to patients without consent, failed to make sure patients could not hang themselves from door frames and didn’t ensure safety rounds were done, according to the health department.

The Centers for Medicare and Medicaid Services threatened after each inspection to cut Aurora’s Medicare and Medicaid funding, because of the violations. However, after the first and third inspections, CMS gave Aurora the opportunity to furnish a plan to rectify the shortcomings, which would keep funds flowing. Aurora submitted plans, but CMS spurned the final plan, instead saying it was terminating funds Dec. 15 and telling Aurora it could submit an administrative appeal.

Aurora appealed, but funding was to be shut off before the appeal would be resolved. To head off this eventuality, Aurora went to court, saying CMS breached Aurora’s constitutional right to due process and did not abide by the U.S. Administrative Procedures Act, when it refused to let Aurora remedy the alleged violations after the fourth inspection. To this end, Aurora asked for a court order to stop CMS from cutting funds, while Aurora’s legal claims are addressed.

Judge Coleman found Aurora’s arguments persuasive.

CMS argued it was premature for Aurora to have its day in court, because the hospital has not exhausted its administrative options. Aurora acknowledged this, but contended the issue of constitutional due process should not be handled in an administrative hearing. Coleman agreed.

A final decision from CMS would not “answer Aurora’s challenge to the deprivation of its procedural rights,” Coleman concluded.

Coleman further found Aurora would be harmed without a prompt injunction.

“It is undisputed that the vast majority of Aurora’s patients are part of the Medicare or Medicaid programs, and that those patients would be lost in the event of a termination. Aurora has represented that it would subsequently be rendered insolvent and forced to close, likely destroying any continuing relationship with Aurora’s remaining private patients. Aurora, 

moreover, has represented that even the act of termination will cause staff to begin seeking other employment,” Coleman said. 

CMS argued Aurora should have diversified its revenue stream by not accepting so many Medicare and Medicaid patients. Coleman found it “distasteful” CMS suggested Aurora should have turned away such patients in order to avoid financial risk.

Coleman cautioned Aurora was not asking for the right to disregard its patients’ well-being and her ruling did not “sanction perpetuation” of the alleged “rampant physical and sexual abuse.”

 “Aurora only claims that CMS was legally obligated to give it an opportunity to fix its shortcomings,” Coleman noted. 

At any rate, Coleman pointed out Aurora said it has put right the most serious failures.

At a court hearing Dec. 27, both sides reported the Medicare program continued to be funded during the partial governmental shutdown. The next hearing is Jan. 17.

Aurora Chicago Lakeshore Hospital has been represented by the Chicago firm of Polsinelli PC.

Defendants are represented by Assistant U.S. Attorney Valerie Raedy.

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Centers for Medicare & Medicaid Polsinelli PC U.S. Department of Justice U.S. District Court for the Northern District of Illinois

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