Cook County Record

Monday, April 6, 2020

Appeals panel: Medical caregivers can't use their patients to sue the state to force Medicaid payments

Federal Court

By Scott Holland | Feb 13, 2020

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CHICAGO — A federal appeals panel has denied a bid by health care workers who are paid through Medicaid to sue Illinois' state government on behalf of their patients in order to collect their paychecks.

The ruling was issued Feb. 11 by a three-judge panel of the U.S. Seventh Circuit Court of Appeals. Circuit Judge David Hamilton wrote the opinion. Judges Diane Sykes and Michael Brennan concurred. 

According to the panel, Bria Health Services employees who worked as consultants for nursing homes and long-term care facilities sued the Illinois Department of Healthcare and Family Services on behalf of seriously ill nursing home residents covered by Medicaid.


U.S. Seventh Circuit Court of Appeals Judge David F. Hamilton | law.columbia.edu

The workers also named as defendants several Medicaid managed care organizations, alleging those entities didn’t process timely payment claims nursing homes submitted, which puts the residents at risk of discharge. Those defendants included such organizations as Humana, Cigna and Aetna, and the Cook County Health and Hospitals System, among others.

According to the panel, the nursing home residents completed forms designating the consultant plaintiffs as authorized representatives.

“The residents, however, are not parties to this suit, and it seems unlikely that they would benefit at all if plaintiffs win,” Hamilton wrote. “By all appearances, plaintiffs have brought this suit in an effort to push the state of Illinois and its Medicaid contractors to pay outstanding bills owed to the consultants’ clients.”

U.S. District Judge Charles Norgle had dismissed the complaint, finding the consultants aren’t allowed to file a civil lawsuit on behalf of Medicaid beneficiaries and therefore lack standing to sue. On appeal, the consultants cited federal regulations forcing state Medicaid agencies to allow participants to designate representatives and describing the scope of that representation, including a general provision letting representatives “cct on behalf of the applicant or beneficiary in all other matters with the agency.”

The panel, however, said the phrase “matters with the agency” does not include lawsuits. Rather, they said, it is limited to “communication and document processing in interactions with the agency.” Since the regulation lists specific areas that can involve a representative, such as “submitting applications, renewing eligibility and receiving agency communications,” the panel said, the general provision should be interpreted to follow in the same vein.

“The purpose provision for the relevant part of the Medicaid regulations and the broader regulatory context confirm that the scope of authorization is limited to agency‐applicant communications and does not reach civil lawsuits,” Hamilton wrote. “Plaintiffs do not suggest that authorized representatives have ever sued on behalf of Medicaid beneficiaries as plaintiffs seek to do here, and we have no reason to believe otherwise.”

All the residents in question have been approved as Medicaid benefit recipients, the panel noted, so even if the consultants were allowed to sue on behalf of the residents, their action would fail because it doesn’t involve Medicaid eligibility determinations.

The panel cautioned its opinion shouldn’t be construed as a decision on whether a written regulation can confer the right to bring a claim on behalf of another person.

“The general rule is that plaintiffs must allege their own injuries to establish standing,” Hamilton wrote. And although there are “well-established exceptions to this rule,” such as guardians suing on behalf of a minor, third parties suing on behalf of someone deemed legally incompetent or associations suing on behalf of members, the party bringing the suit in such cases “is normally required to identify one of these existing doctrines— most of which have deep common‐law roots and all of which are limited in scope” in order to establish representative standing.

The panel also said the underlying standing of the nursing home residents is disputed by a lack of allegations of actual or imminent legal damage. During oral arguments the consultants said the residents they sought to represent were receiving medical care and not facing a discharge.

“Discharging residents because of nonpayment to their care‐givers would, in fact, violate federal law,” Hamilton wrote. “Suing state officials on the theory that one’s clients may or will soon violate federal law is not a promising theory.”

The panel said there may be instances in which such residents could be represented in a Medicaid lawsuit, but the consultants’ allegations can’t be used to deploy such an approach.

Plaintiffs have been represented in the action by attorneys Kimberly M. Watt, of Sb2 Inc., of Harrisburg, Pa.; and Ray W. Welcher,of St. John, Ind.

The state has been represented by the Illinois Attorney General's office. 

Managed care organization defendants have been represented by attorneys from the firms of Falkenberg Ives LLP, of Chicago; McDermott Will & Emery LLP, of Chicago; and SmithAmundsen, of Chicago. The Cook County State's Attorney's Office represented the Cook County Health and Hospitals System.

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Organizations in this Story

Cook County Health and Hospitals SystemMcDermott, Will & Emery LLPHumanaU.S. District Court for the Northern District of IllinoisU.S. Court of Appeals for the Seventh CircuitSB2Falkenberg Fieweger & Ives LLPAetnaSmithAmundsenCigna Health