Petition for Writ of Certiorari — Theresa Eagleson, Director, Illinois Department of Healthcare and Family Services, Petitioner v. St. Anthony Hospital, et al.

Supreme Court briefDec 7, 2022

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No. 22-

In the Supreme Court of the United States

—————

THERESA EAGLESON, DIRECTOR OF THE ILLINOIS

DEPARTMENT OF HEALTHCARE AND FAMILY SERVICES,

Petitioner,

ST. ANTHONY HOSPITAL,

Respondent.

—————

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Seventh Circuit

—————

PETITION FOR A WRIT OF CERTIORARI

—————

* Counsel of Record

KWAME RAOUL

Attorney General

State of Illinois

JANE ELINOR NOTZ*

Solicitor General

RICHARD S. HUSZAGH

Assistant Attorney General

100 West Randolph St.

Chicago, Illinois 60601

(312) 814-5376

jane.notz@ilag.gov

QUESTIONS PRESENTED

In traditional Medicaid fee-for-service programs,

States pay healthcare providers directly and must

adopt claims payment procedures to ensure that they

pay defined percentages of providers’ claims within

specified time periods. 42 U.S.C. § 1396a(a)(37)(A).

Alternatively, States may establish managed care

programs, in which they contract with managed care

organizations (“MCOs”) that in turn enter into

contracts with healthcare providers and pay them

according to the terms of those contracts. For such

programs under a State’s Medicaid plan, Section u-2(f)

of the Medicaid Act provides that a State must include

in its contracts with MCOs a provision—the “Timely

Payment Clause”—pursuant to which each MCO

agrees to pay providers “on a timely basis consistent

with the claims payment procedures described in

section 1396a(a)(37)(A) . . . , unless the health care

provider and [MCO] agree to an alternate payment

schedule.” 42 U.S.C. § 1396u-2(f).

The questions presented are:

1. Whether Spending Clause legislation, including

Section u-2(f), can impliedly create private rights

enforceable under 42 U.S.C. § 1983.

2. Whether, if so, Section u-2(f)’s requirement that

States include the Timely Payment Clause in their

contracts with MCOs unambiguously gives States a

statutory duty, not just a contractual right, to ensure

that MCOs pay providers in accordance with that

contract provision, and also unambiguously gives

providers a private right to enforce that duty.

PARTIES TO THE PROCEEDING

Petitioner is the Director of the Illinois

Department of Healthcare and Family Services

(“Department”), the state agency that operates

Illinois’ Medicaid program. Respondent St. Anthony

Hospital operates a hospital in Illinois. Meridian

Health Plan of Illinois, Inc., IlliniCare Health Plan,

Inc., Blue Cross and Blue Shield of Illinois, a division

of Health Care Service Corporation, and Cook County

Health & Hospitals System are MCOs that intervened

in the action.

RELATED PROCEEDINGS

St. Anthony v. Eagleson, No. 21-2325 (7th Cir.)

(order denying rehearing and rehearing en banc, Sept.

8, 2022)

St. Anthony v. Eagleson, No. 21-2325 (7th Cir.)

(order reversing district court judgment, July 5, 2022)

St. Anthony v. Eagleson, No. 20-cv-2561 (D. Ct.

N.D. Ill.) (judgment against plaintiff, July 13, 2021)

St. Anthony v. Eagleson, No. 20-cv-2561 (D. Ct.

N.D. Ill.) (order dismissing action, July 9, 2021)

iii

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ........................................ i

PARTIES TO THE PROCEEDING ............................ ii

RELATED PROCEEDINGS ........................................ ii

TABLE OF AUTHORITIES ....................................... v

PETITION FOR A WRIT OF CERTIORARI ............. 1

OPINIONS BELOW ..................................................... 2

JURISDICTION ........................................................... 2

STATUTE INVOLVED ................................................ 2

STATEMENT ............................................................... 2

REASONS FOR GRANTING THE PETITION ...... 10

This Case Should Be Held for Talevski. ............. 11

II. If The Court Does Not Grant, Vacate, and

Remand After Talevski, It Should Grant

Plenary Review. ................................................... 12

A. The Seventh Circuit’s Decision Flatly

Contravenes this Court’s Precedent on

Interpreting Spending Clause Statutes. ....... 13

1. Interpretation of Spending Clause

statutes ..................................................... 14

2. The Seventh Circuit’s opinion disregards

the Court’s precedent on interpreting

Spending Clause legislation. .................... 16

B. The Interpretation of Section u-2(f) Is

a Question of Exceptional Importance. ....... 18

1. The interpretation of Section u-2(f)

has huge consequences for Medicaid

managed care programs nationwide. ...... 18

2. Correction of the Seventh Circuit’s

error is necessary to ensure consistency

in the interpretation of Spending

Clause statutes. ........................................ 21

CONCLUSION............................................................ 22

APPENDICES ............................................................ 1a

A. St. Anthony v. Eagleson,

48 F.4th 737 (7th Cir. 2022)

(denying rehearing and rehearing en banc)....... 1a

B. St. Anthony v. Eagleson,

40 F.4th 492 (7th Cir. 2022)

(reversing district court judgment) .................. 11a

C. St. Anthony v. Eagleson,

548 F. Supp. 3d 721 (N.D. Ill. 2021)

(dismissing action) ............................................. 78a

TABLE OF AUTHORITIES

Cases

Page(s)

Arlington Cent. Sch. Dist. Bd. of Educ. v.

Murphy, 548 U.S. 291 (2006) ........................ 14, 16

Armstrong v. Exceptional Child Ctr., Inc.,

575 U.S. 320 (2015).......................................... 7, 15

Blessing v. Freestone,

520 U.S. 329 (2004)........................................ 14, 15

Cannon v. Univ. of Chicago,

441 U.S. 677 (1979).............................................. 14

Cmty. Health Care Ass’n of N.Y. v. Shah,

770 F.3d 129 (2d Cir. 2014) ................................... 3

Cummings v. Premier Rehab Keller, P.L.L.C.,

142 S. Ct. 1562 (2022).....................................13–14

Fla. Dep’t of Revenue v. Piccadilly Cafeterias,

Inc., 554 U.S. 33 (2008) ............................. 8, 15, 17

Flowers v. Mississippi,

136 S. Ct. 2157 (2016).......................................... 11

Gonzaga University v. Doe,

536 U.S. 273 (2002)...................... 1, 5, 7, 14–15, 21

Graham Cnty. Soil & Water Conservation

Dist. v. U.S. ex rel. Wilson,

545 U.S. 409 (2005)........................................ 15, 16

Jackson Transit Auth. v. Loc. Div. 1285, Amalgamated Transit Union, AFL-CIO-CLC,

457 U.S. 15 (1982) ...........................................15–16

Lawrence v. Chater,

516 U.S. 163 (1996).............................................. 11

Nat’l Ass’n of Mfrs. v. Dep’t of Def.,

138 S. Ct. 617 (2018) ........................................... 15

Pennhurst State School & Hospital v.

Halderman, 451 U.S. 1 (1981) .... 1, 5, 7, 13, 16, 21

Return Mail, Inc. v. United States Postal Serv.,

139 S. Ct. 1853 (2019).................................... 15, 17

Rodriguez v. United States,

480 U.S. 522 (1987).............................................. 17

Wilson v. Garcia,

471 U.S. 261 (1985).............................................. 16

Statutes

28 U.S.C. § 1254(1) ....................................................... 2

28 U.S.C. § 1331 ............................................................ 4

42 U.S.C. §§ 1396 et seq. ............................................... 3

42 U.S.C. § 1396a(a)(37)(A) .......................... i, 2, 3, 4, 7

42 U.S.C. § 1396b(m)(4) ............................................... 3

42 U.S.C. § 1396u-2 ...................................................... 3

42 U.S.C. § 1396u-2(f) ......................................... passim

42 U.S.C. § 1983 ................................................... passim

Pub. L. No. 105-33, §§ 4701 et seq. .............................. 3

Other Authorities

Brief of Indiana, et al. as Amici Curiae in Support

of Petitioner, Health & Hospital Corp. of

Marion County v. Talevski (No. 21-806) ............ 21

Brief of 128 Members of Congress as Amici Curiae

in Support of Certiorari, Kerr v. Kerr v. Planned

Parenthood S. Atlantic (No. 21-1431) ................ 21

vii

Ctrs. For Medicare & Medicaid Servs., Medicaid

Managed Care Enrollment and Program

Characteristics, 2020, https://bit.ly/3OXHUwL

(last visited Dec. 6, 2022) .................................... 18

Ctrs. For Medicare & Medicaid Servs.,

Annual Medicaid & CHIP Expenditures,

https://bit.ly/3XPA5x7

(last visited Dec. 6, 2022) .................................... 18

Health & Hospital Corp. of Marion County v.

Talevski (No. 21-806), Nov. 8, 2022 Oral Arg.

Tr. at 48 ............................................................... 21

PETITION FOR A WRIT OF CERTIORARI

Theresa Eagleson, Director of the Illinois Department of Healthcare and Family Services, respectfully

petitions for a writ of certiorari to review the judgment

of the United States Court of Appeals for the Seventh

Circuit. That court, over a dissent by Judge Brennan,

held that Section u-2(f) does not just require States to

include the Timely Payment Clause in their contracts

with MCOs, thereby giving States a contractual right

to enforce that provision, but also imposes on States a

statutory duty to “ensure” that MCOs comply with the

Timely Payment Clause, and gives healthcare providers a private right, enforceable under Section 1983, to

force States to comply with that duty.

That interpretation implicates the issues raised in

Health & Hospital Corp. of Marion County v. Talevski

(No. 21-806), now pending before this Court—namely

whether, and under what standards, Spending Clause

legislation may impliedly create private rights enforceable under Section 1983. In addition, as the dissent

below observed, even under existing precedent—

including Pennhurst State School & Hospital v.

Halderman, 451 U.S. 1 (1981), and Gonzaga University v. Doe, 536 U.S. 273 (2002)—the Seventh Circuit’s

interpretation of Section u-2(f) violates the Court’s

strict standards for finding state duties and private

rights in Spending Clause statutes.

In these circumstances, the Court should hold this

petition pending its decision in Talevski, then grant

certiorari and either (i) vacate the Seventh Circuit’s

opinion and remand for further consideration, or (ii)

set the case for plenary review on the second question

presented.

OPINIONS BELOW

The opinion of the court of appeals on denial of

rehearing (App. 11a–77a) is reported at 48 F.4th 737.

That court’s opinion on the merits (App. 11a–77a) is

reported at 40 F.4th 492. The district court’s opinion

and order (App. 78a–113a) is reported at 548 F. Supp.

3d 721.

JURISDICTION

The court of appeals’ judgment on denial of

rehearing was entered on September 8, 2022. This

Court’s jurisdiction is invoked under 28 U.S.C.

§ 1254(1).

STATUTE INVOLVED

42 U.S.C. § 1396u-2(f) provides:

A [State’s] contract . . . with a medicaid

managed care organization shall provide that

the organization shall make payment to health

care providers for items and services which are

subject to the contract and that are furnished

to individuals eligible for medical assistance

under the State plan . . . who are enrolled with

the organization on a timely basis consistent

with the claims payment procedures described

in section 1396a(a)(37)(A) of this title, unless

the health care provider and the organization

agree to an alternate payment schedule[.]

STATEMENT

1. Medicaid is a Spending Clause program in

which participating States, with federal financial support, provide medical assistance to needy individuals.

It is authorized by Title XIX of the Social Security Act,

42 U.S.C. §§ 1396 et seq. (the “Medicaid Act”), which

Congress enacted in 1965 and has since amended from

time to time. States originally operated only fee-forservice programs, in which they process claims and pay

healthcare providers directly for covered services to

eligible individuals. For such programs, Section

a(a)(37)(A) requires States to adopt claims payment

procedures which ensure that they pay 90 percent of

practitioners’ “clean claims” (that is, claims for which

all necessary information to process the claim is

provided) within 30 days, and pay 99 percent of such

claims within 90 days. 42 U.S.C. § 1396a(a)(37)(A).

In 1997, Congress amended the Medicaid Act to

allow state Medicaid plans to offer medical assistance

through managed care programs. Pub. L. No. 105-33,

§§ 4701 et seq. Such programs, which are commonly

used in the private sector and for Medicare benefits,

rely on a two-tier system of contracts—between States

and MCOs, to whom States pay a fixed fee for each

enrolled individual, and then between MCOs and

healthcare providers, whose contracts govern how

much, and when, the providers are paid for covered

services. See Cmty. Health Care Ass’n of N.Y. v. Shah,

770 F.3d 129, 137 (2d Cir. 2014).

For such managed care programs, the Medicaid

Act directly regulates certain conduct by States and by

MCOs, mainly relating to the enrollment and provision

of medical care to eligible individuals. See, e.g., 42

U.S.C. §§ 1396u-2(a)(2)–(6), (b)(3)–(8), (c)(1), (d)(1),

(2), (4), (6), (e)(1)–(4); 1396b(m)(4). The Medicaid Act

also regulates various aspects of the contractual

relationship between States and MCOs. See, e.g., 42

U.S.C. §§ 1396u-2(b)(1)–(3), (c)(2), (d)(5), (f), (g), (h).

2. Section u-2(f), at issue here, provides that each

state contract with an MCO shall include the Timely

Payment Clause, pursuant to which the MCO makes

a contractual commitment to the State that it will

pay providers “on a timely basis consistent with the

claims payment procedures described in section

1396a(a)(37)(A) . . . , unless the health care provider

and [MCO] agree to an alternate payment schedule.”

42 U.S.C. § 1396u-2(f).

Proceedings Below

1. Respondent St. Anthony Hospital is a private

hospital located in Chicago with a large volume of

Medicaid patients. App. 16a, 78a. Invoking the

district court’s jurisdiction under 28 U.S.C. § 1331,

respondent brought this Section 1983 action against

petitioner, claiming that the Department was violating

Section u-2(f) by not ensuring that the MCOs with

which respondent has contracts were paying it on a

timely basis. App. 79a, 82a–83a, 86a–87a. In support

of this claim, respondent asserted that Section u-2(f)

does not just give States a contractual right to require

MCOs to pay providers on the same schedule that

States follow when they pay providers directly in a feefor-service program (unless an MCO and provider

agree to an alternate payment schedule), but also

imposes on States a statutory duty to “ensure” that

MCOs pay providers according to that schedule. App.

12a, 18a, 87a, 97a, 110a. And instead of seeking relief

against the MCOs under its contracts with them,

which contain arbitration clauses, respondent sought

a federal court order requiring the Department to force

the MCOs to promptly pay respondent what it claimed

the MCOs owed it. App. 17a–18a, 58a, 79a, 85a–87a.

2. The district court dismissed respondent’s action

and rejected its interpretation of Section u-2(f),

stating: “that’s not what the statute says at all.” App.

110a–111a. Relying on this Court’s holdings in

Pennhurst and Gonzaga that only “clear” and “unambiguous” language in Spending Clause statutes may

establish state obligations and private rights to enforce

those obligations, the district court held that that the

duty respondent attributed to Section u-2(f), under

which States must “ensure that MCOs pay providers

promptly, . . . simply isn’t there.” App. 96a–100a,

110a–111a.

3. On appeal, a divided panel of the Seventh

Circuit reversed. Over Judge Brennan’s dissent, the

majority held that Section u-2(f) imposes on States a

statutory duty, which providers have a private right to

enforce under Section 1983, to “ensure” that MCOs do

not “systematically” fail to pay providers on a timely

basis. App. 12a, 20a, 33a–43a, 46a, 48a.

At the threshold, both the majority and dissent

recognized the importance of the case. The majority

acknowledged the “potential magnitude” of its interpretation of Section u-2(f), “with high stakes for the

State.” App. 48a. And the dissent, noting that no

other federal court of appeals had “ever recognized a

state’s privately enforceable duty to guarantee timely

payment under § 1396u-2(f),” stated that the majority’s interpretation “threatens to put a tremendous

burden on states and the judiciary” and will make

“district courts the new Medicaid claims processors for

the states.” App. 63a, 71a–72a. Among the “few cases

recognizing a private right of action under Medicaid,”

the dissent explained, “none has imposed a duty on the

states as broad in scope, ongoing in nature, and

difficult to enforce as the duty the majority opinion

concludes exists here.” App. 72a (footnote omitted).

Nevertheless, in the majority’s view, its reading of

Section u-2(f) better fulfilled Congress’s goal of having

providers timely paid. App. 25a, 33a–39a, 46a–48a.

The majority recognized that the Medicaid Act establishes two contractual remedies for delayed MCO

payments to providers: “The State can . . . sue MCOs

for breach of contract if they fail to pay providers

according to the 30/90 pay schedule, and providers are

entitled to enforce their own contractual rights as they

see fit.” App. 34a.1 But it considered these remedies

inadequate, stating that “[t]here is good reason to

doubt that contractual remedies alone can vindicate

the provider’s right to prompt payment.” App. 47a.

The result, the majority held, is that respondent’s

interpretation of Section u-2(f) was “more coherent”

than a reading that would rely on contractual remedies

alone. App. 37a. The majority further held that

Section u-2(f) incorporates an additional element: a

State’s duty is limited to addressing “systemic

failures” by MCOs to make timely payments. App.

37a.

Judge Brennan dissented. He explained that the

majority’s reading violated this Court’s precedent

regarding the creation of state duties and private

rights in Spending Clause statutes. This precedent, he

The majority admitted that the Department had exercised its

contractual right to enforce the Timely Payment Clause in its

contract with an MCO operated by the government of Cook

County, Illinois, through a corrective action plan, when that MCO

delayed payments to providers by using Medicaid funds to pay

other obligations. App. 36a; see also App. 45a–46a.

observed, establishes that “‘[i]f Congress intends to

impose a condition on the grant of federal moneys, it

must do so unambiguously,’” and that “[b]ecause

Medicaid is legislation under the Constitution’s Spending Clause, Congress must ‘speak with a clear voice’

before imposing obligations on the states.” App. 60a

(quoting Pennhurst, 451 U.S. at 17). He added:

“[n]othing short of an unambiguously conferred right

. . . phrased in terms of the persons benefited can

support a section 1983 action.” App. 61a (citing, inter

alia, Gonzaga, 536 U.S. at 283–284, and Armstrong v.

Exceptional Child Ctr., Inc., 575 U.S. 320, 332 (2015)).

The majority’s reading of the statute, Judge

Brennan explained, violated those commands. As to

“the text of § 1396u-2(f),” he wrote:

Congress mandated that a state’s “contract”

with an MCO “shall provide” that the MCO

make payments to healthcare providers on a

timely basis consistent with § 1396a(a)(37)(A)’s

30-day/90-day payment schedule, unless

healthcare providers and MCOs agree to an

alternate payment schedule. But it is clear that

is all the text requires. Section 1396u-2(f) is

silent on any ongoing governmental duty to

monitor MCO payments or otherwise guarantee that MCOs consistently make prompt

payments. As other neighboring statutory provisions show, Congress knows how to impose

duties requiring state action. Section § 1396u2(f) contains no such language.

App. 61a–62a (footnote omitted).

Addressing the majority’s analysis of Section

u-2(f), Judge Brennan described it as “lacking a

textual basis in § 1396u-2(f)” and “pass[ing] over the

actual language of § 1396u‐2(f) in favor of factors

outside the statute.” App. 63a, 68a. He also criticized

the majority’s judgment that “Congress’s chosen tools

for ensuring prompt payment—private suits and

arbitration by healthcare providers against MCOs,

along with discretionary enforcement by states—are

inadequate.” App. 69a. That judgment, he said: overlooked that Congress demonstrated it “knows how to

impose duties requiring state action” (App. 61a);

incorrectly assumed that the court must “disfavor[]”

an interpretation that limits the extent to which

Section u-2(f) achieves Congress’s purpose to have

providers paid on a timely basis (App. 68a–69a); and

substituted the majority’s “‘view of . . . policy for the

legislation which has been enacted by Congress’” (App.

69a (quoting Fla. Dep’t of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33, 51–52 (2008))). The result,

Judge Brennan said, lets providers “bypass” Congress’s “chosen tools for ensuring prompt payment,”

based on contract rights, by bringing Section 1983

actions directly against States. App. 58a, 69a.

Judge Brennan further stated that the Medicaid

Act provisions regarding state oversight of MCOs, on

which the majority relied, are consistent with giving

States contractual rights, not statutory duties, to

require MCOs to pay providers on a timely basis. App.

66a. And, he concluded, the statutory duty the

majority found in Section u-2(f) not only defeats the

managed care program’s design “to alleviate the

burden on states of managing the ‘day‐to‐day’ functions previously performed by states under a fee‐for‐

service system,” but also “threatens to put a tremendous burden on states and the judiciary,” by opening

the door to “substantial litigation over the timeliness

of paying claims.” App. 62a–64a.

Judge Brennan also criticized the majority for

rewriting Section u-2(f) to include a condition for

invoking private rights under it—the “systemic”

failure by an MCO to make timely payments—that has

“no textual basis.” App. 64a; see also App. 64a (Section

u-2(f) “never mentions—let alone defines—‘systemic’

failures to make timely payments.”). Federal courts,

he explained, will not be able to determine whether an

MCO has systemically failed to make payments according to the 30-day/90-day schedule “without reaching

the requisite question of whether the disputed claims

are clean,” “examin[ing] claims for untimely payment

on the merits,” and “then determin[ing] whether the

‘systemic’ threshold has been reached.” App. 70a.

Noting, finally, that no “other federal circuit ever

recognized a state’s privately enforceable duty to

guarantee timely payment under § 1396u-2(f),” Judge

Brennan stated that “[t]o find such an expansive duty

under § 1396u-2(f), without any textual support—in

the context of Spending Clause legislation, where

Congress must speak ‘unambiguously’ with a ‘clear

voice’—is a watershed moment.” App. 72a–73a.

4. Petitioner sought rehearing on the question of

whether Section u-2(f) creates the statutory duty and

private right announced by the majority opinion. 7th

Cir. Doc. 68. Petitioner also requested that the court

hold the rehearing petition pending this Court’s

decision in Talevski. Id. at 3, 14–15. The Seventh

Circuit declined to hold the petition and denied

rehearing, with the panel members again issuing separate majority and dissenting opinions. App. 1a–10a.

For its part, the majority acknowledged both “the

potential complexity and challenge of this case for

the district court.” App. 3a. It also “recognize[d] that

the Supreme Court may reshape applicable law in

Talevski.” App. 3a. The majority asserted, however,

that its decision “imposes no new duties on . . . State

officials” and allows only “injunctive relief to push

State officials to comply with duties already imposed

by the Medicaid Act.” App. 3a.

Judge Brennan, again dissenting, stated that “the

proper interpretation of § 1396u-2(f) is a question of

extraordinary significance which we should rehear.”

App. 8a. Panel rehearing was justified, he explained,

“[b]ecause this decision will create tremendous burdens and complex practical problems,” including for

federal courts. App. 8a. He concluded, however, that

rehearing en banc was not warranted “[b]ecause of the

imminent possibility this area of law will change

markedly” as a result of Talevski. App. 8a–10a.

REASONS FOR GRANTING THE PETITION

The Court should hold this petition pending its

decision in Talevski and then either (i) enter an order

granting certiorari, vacating the majority’s opinion,

and remanding for further consideration in light of

Talevski, or (ii) grant plenary review on the merits of

the second question presented.

The Court’s upcoming decision in Talevski will

clarify, if not change, the standards relevant to the

proper interpretation of Section u-2(f). Whether

Section u-2(f) imposes on States a statutory duty to

ensure that MCOs pay providers on a timely basis, and

also gives providers a private right to enforce that

duty, presents an issue of extraordinary importance

affecting the administration of Medicaid managed care

programs in dozens of States involving hundreds of

billions of dollars in annual public expenditures. And

the decision below departs egregiously from this

Court’s existing precedent setting strict standards for

finding the creation of state duties and private rights

in Spending Clause statutes. Further review is thus

warranted.

This Case Should Be Held for Talevski.

“Where intervening developments . . . reveal a

reasonable probability that the decision below rests

upon a premise that the lower court would reject if

given the opportunity for further consideration, and

where it appears that such a redetermination may

determine the ultimate outcome of the litigation, a

GVR order is . . . potentially appropriate.” Lawrence

v. Chater, 516 U.S. 163, 167 (1996) (per curiam). The

Court “often ‘GVRs’ a case . . . when it believes that

the lower court should give further thought to its

decision in light of an opinion of this Court that

(1) came after the decision under review and (2)

changed or clarified the governing legal principles in a

way that could possibly alter the decision of the lower

court.” Flowers v. Mississippi, 136 S. Ct. 2157, 2157

(2016) (Alito, J., dissenting) (cleaned up); see Lawrence, 516 U.S. at 168–169. That standard is met here.

All members of the Seventh Circuit panel, as well

as respondent, recognized that this Court’s decision in

Talevski, including on the issue of whether Spending

Clause statutes can create private rights enforceable

under Section 1983 only expressly, not by implication,

may affect the outcome of this case. App. 3a, 8a–10a.

Section u-2(f) is part of a Spending Clause statute (the

Medicaid Act), and no one contends that it expressly

declares the private right the Seventh Circuit majority

found in it. A decision on the second question

presented in Talevski, addressing whether another

provision of the Medicaid Act creates private rights

enforceable under Section 1983, likewise could change

or clarify the applicable standards for finding that

Congress intends to create such rights in Spending

Clause statutes. Accordingly, the Court should hold

this petition pending its decision in Talevski and then

act on the petition as appropriate, including by

entering an order granting the petition, vacating the

Seventh Circuit’s opinion, and remanding the case for

further consideration.

II. If The Court Does Not Grant, Vacate, and

Remand After Talevski, It Should Grant

Plenary Review.

If the Court does not grant the petition and vacate

the decision below in light of Talevski, it should grant

plenary review for two related reasons. First, the

Seventh Circuit majority’s opinion does not just

obviously misinterpret Section u-2(f); it flatly

contravenes this Court’s precedent regarding the

interpretation of Spending Clause statutes. Second,

the interpretation of Section u-2(f) has tremendous

national importance. The majority’s judgment fundamentally transforms the basic structure and operation

of managed care programs throughout the country,

which involve hundreds of billions of dollars in public

spending each year. And review of that decision is

critical to ensure that federal courts faithfully follow

this Court’s precedent establishing strict standards for

finding that Spending Clause statutes create state

duties and private rights to enforce those duties.

A. The Seventh Circuit’s Decision Flatly

Contravenes this Court’s Precedent on

Interpreting Spending Clause Statutes.

Review on the merits of the second question

presented, involving the proper interpretation of

Section u-2(f), is justified by the Seventh Circuit’s

manifest failure to follow the Court’s well-established

precedent concerning the interpretation of Spending

Clause legislation. The majority opinion mentioned

this precedent but then effectively disregarded it,

despite the dissent’s repeated charge that the majority

was doing just that. This case thus presents an

excellent vehicle for the Court to clarify and reaffirm

the applicable principles for interpreting a Spending

Clause statute that does not unambiguously establish

the duty and right asserted by the plaintiff.

Interpretation of Spending Clause

statutes

Whether a Spending Clause statute establishes a

private right enforceable under Section 1983 involves

two related issues: whether the statute imposes on a

State the duty claimed by the plaintiff, and whether it

further gives the class of persons that includes the

plaintiff a private right to enforce that duty.

On the first issue, because Spending Clause legislation operates in the nature of a contract, and States

voluntarily choose whether to participate based on the

terms Congress specified, such legislation creates state

duties only when Congress “speak[s] with a clear

voice” and establishes such duties “unambiguously.”

Pennhurst, 451 U.S. at 17; see Cummings v. Premier

Rehab Keller, P.L.L.C., 142 S. Ct. 1562, 1570 (2022);

Gonzaga, 536 U.S. at 286 (“If Congress intends to alter

the usual constitutional balance between the States

and the Federal Government, it must make its intention to do so unmistakably clear in the language of the

statute.”) (cleaned up).

To determine whether

Congress has given such “clear notice,” courts “begin

with the text” of the statutory provision at issue.

Arlington Cent. Sch. Dist. Bd. of Educ. v. Murphy, 548

U.S. 291, 296 (2006).

If a Spending Clause statute satisfies this first

requirement, a court must then determine whether it

does not merely confer “benefits” on a specific category

of private persons, but “unambiguously” gives them a

“right” to enforce the relevant statutory duty, using

“explicit rights-creating terms.” Gonzaga, 536 U.S. at

280–284; see also id. at 283 (“Blessing [v. Freestone,

520 U.S. 329 (2004)),] emphasizes that it is only violations of rights, not laws, which give rise to § 1983

actions.”) (emphasis in original). This inquiry also

focuses on the text of the specific statutory provision

in question. Blessing, 520 U.S. at 342–343; Cannon v.

Univ. of Chicago, 441 U.S. 677, 689 (1979).

Blessing explained that this second question

involves an examination of three factors: whether

Congress intended the provision in question to benefit

the plaintiff; whether the claimed statutory right is not

so “vague and amorphous” that its enforcement would

strain judicial competence; and whether the statute

unambiguously imposes a binding obligation on the

States. 520 U.S. at 340–341. If a Spending Clause

statute satisfies all three of these elements, a presumption arises that Congress intended to create a private

right, but that presumption is rebutted if the statute

contains an enforcement scheme that is inconsistent

with that intent. Id. at 341; see also Gonzaga, 536 U.S.

at 280–284 & n.4.

In Gonzaga, the Court refined the Blessing analysis in several respects. It held that the relevant statute

must be “phrased in terms of the persons benefitted”

and establish an “individual entitlement,” rather than

describing duties with an “aggregate focus.” 536 U.S.

at 284, 288 (emphasis in original, cleaned up). It

clarified that only statutes that “unambiguously”

establish a “right” to enforce the relevant statutory

duty, using “explicit rights-creating terms,” create

private rights enforceable under Section 1983. Id. at

280–284. And it disavowed the suggestion that a less

rigorous standard can support finding such rights. Id.

at 281–283; see also Armstrong, 575 U.S. at 330–331

n.* (plurality opinion).

A statute is “unambiguous,” and hence can impose

on States a particular statutory duty and create a

private right to enforce that duty, only if no other

interpretation of the statute is “plausible.” Graham

Cnty. Soil & Water Conservation Dist. v. U.S. ex rel.

Wilson, 545 U.S. 409, 419 (2005). And, as with all

legislation, the interpretation of Spending Clause

statutes does not permit courts to read into them

terms or conditions that Congress did not enact, Nat’l

Ass’n of Mfrs. v. Dep’t of Def., 138 S. Ct. 617, 629

(2018); Return Mail, Inc. v. United States Postal Serv.,

139 S. Ct. 1853, 1867 n.11 (2019), or to substitute their

policy preferences for the text that Congress did enact,

Piccadilly Cafeterias, 554 U.S. at 51–52. Further,

when Congress regulates in an area by prescribing

contract terms, rights based on those terms normally

are contract rights, not rights “secured by the . . .

laws” of the United States that may be enforced under

Section 1983. 42 U.S.C. § 1983; Jackson Transit Auth.

v. Loc. Div. 1285, Amalgamated Transit Union, AFLCIO-CLC, 457 U.S. 15, 20–21, 29 & nn.12, 13 (1982);

see Wilson v. Garcia, 471 U.S. 261, 277 (1985).

The Seventh Circuit’s opinion

disregards the Court’s precedent

on interpreting Spending Clause

legislation.

The Seventh Circuit majority’s opinion repeatedly

disregarded this established precedent, and often did

so without disputing the dissent’s protests that it

failed to follow this precedent. In particular:

• the majority’s interpretation did not “begin

with the text” of Section u-2(f), see Arlington

Cent. Sch. Dist. Bd. of Educ., 548 U.S. at 296,

analyze that text to determine whether it is

“unambiguous[],”Pennhurst, 451 U.S. at 17, or

even identify the specific language in Section

u-2(f) that supposedly supports its interpretation;

• the majority did not state that the interpretation of Section u-2(f) adopted by the dissent

and the district court, under which the provision simply gives States a contractual right to

enforce the Timely Payment Clause in their

contracts with MCOs, is not even “plausible,”

see Graham Cnty. Soil & Water Conservation

Dist., 545 U.S. at 419, and instead stated only

that its interpretation was “more coherent”

(App. 37a);

• the majority substituted its own policy views for

what Congress enacted by grounding its conclusion on its views about the comparative effecttiveness of contractual and statutory rights and

remedies to achieve the goal of having providers

paid on a timely basis, and its assumption about

the extent to which Congress intended Section

u-2(f) to achieve that goal (App. 34a–38a, 47a–

48a), see Piccadilly Cafeterias, 554 U.S. at 51–

52; Rodriguez v. United States, 480 U.S. 522,

525–526 (1987) (per curiam); and

• the majority added an element to its interpretation of Section u-2(f)—that States have a

statutory duty only to prevent “systemic” failures by MCOs to pay providers on a timely

basis—that is not included in Section u-2(f)’s

text, see Return Mail, 139 S. Ct. at 1867 n.11.

Remarkably, the majority never responded to the

dissent’s objections that its opinion “passes over the

actual language of § 1396u‐2(f) in favor of factors

outside the statute” (App. 68a); that the other

provisions of the Medicaid Act on which the majority

relied are entirely consistent with the view that

Congress adopted them for other reasons, including to

facilitate a State’s exercise of its contractual right to

enforce the Timely Payment Clause (App. 65–66a); and

that the Medicaid Act, including Section u-2 itself,

repeatedly showed that Congress knew how to impose

affirmative statutory duties on States when it wanted

to (App. 61a–62a & n.3, 65a). Nor did the majority

respond to the dissent’s criticism that adding the

“systemic” element to the duty it found in Section u2(f)—apparently to minimize the obvious problems

that would follow from holding that States must

literally “ensure” that MCOs pay providers in

accordance with the Timely Payment Clause—has no

basis in Section u-2(f)’s text and violates the principle

that courts are not free to read into statutes conditions

that Congress itself did not enact. App. 63a–65a.

Individually and collectively, these many serious

departures by the Seventh Circuit majority from this

Court’s established precedent on the interpretation of

Spending Clause statutes warrant this Court’s review.

B. The Interpretation of Section u-2(f) Is a

Question of Exceptional Importance.

Plenary review of the Seventh Circuit’s decision is

also warranted due to its exceptional importance. The

decision has enormous significance for the administration of Medicaid managed care programs nationally.

And review is necessary to ensure consistency in lower

court jurisprudence concerning the rights and duties

created by Congress in Spending Clause statutes.

The interpretation of Section u-2(f)

has huge consequences for Medicaid

managed care programs nationwide.

The proper interpretation of Section u-2(f) has

immense practical importance for Medicaid managed

care programs throughout the country. Those programs serve more than 50 million individuals in

dozens of States and involve annual expenditures of

hundreds of billions of dollars in public funds.2 And

the practical differences between the competing interpretations of Section u-2(f) are enormous.

Ctrs. for Medicare & Medicaid Servs., Medicaid Managed Care

Enrollment and Program Characteristics, 2020 at 6,

https://bit.ly/3OXHUwL; Ctrs. for Medicare & Medicaid Servs.,

Annual Medicaid & CHIP Expenditures, https://bit.ly/3XPA5x7

(last visited Dec. 6, 2022).

The Seventh Circuit majority rightly recognized

the “potential magnitude” of this question, “with high

stakes for the State.” App. 48a. The dissent agreed,

emphasizing the resulting “tremendous burden” on

States and federal courts alike. App. 63a. The massive

nationwide consequences of the Seventh Circuit’s

decision thus justify review by this Court.

Under the interpretation adopted by Judge

Brennan in dissent and by the district court, providers

have a contractual right to enforce the payment terms

in their own contracts with MCOs, and States have a

separate contractual right to enforce the Timely

Payment Clause in their contracts with MCOs (as the

Department has done, see supra at 6 n.1), but States

do not also have a statutory duty to “ensure” that

MCOs pay providers on time, or that MCOs are not

guilty of “systemic” payment delays. By contrast,

under the majority’s interpretation, States must

effectively duplicate the MCOs’ processing of millions

of provider claims and, as the dissent noted, undertake

“the same ‘day‐to‐day’ administration that a managed

care system was supposed to avoid.” App. 63a. Under

the majority’s interpretation, therefore, state Medicaid directors have to decide whether to establish an

administrative infrastructure to perform the same

claims-processing functions handled by MCOs or risk

federal court litigation and liability if they do not.

Further, unless an MCO admits that it is systematically failing to pay providers on a timely basis, a

State cannot determine whether an MCO is doing

so without itself evaluating, for individual claims,

whether the claim was timely paid, which in turn

requires evaluating whether the claim was “clean,”

whether the services were covered by the MCO’s plan,

whether the provider obtained any prior authorization

required by the plan, when the claim was paid or

denied, and, if paid, whether the MCO paid the amount

due under its contract with the provider. Performing

that analysis for many millions of claims each year

represents a monumental task that should not be

imposed on States without a thorough analysis of

Section u-2(f)’s text in accordance with this Court’s

governing precedent.

The majority’s interpretation of Section u-2(f) also

imposes a significant burden on federal courts. As the

dissent observed, “a district court can hardly decide if

an MCO has systemically underperformed if it does not

examine claims for untimely payment on the merits,”

including “the requisite question of whether the

disputed claims are clean,” and “then determine

whether the ‘systemic’ threshold has been reached.”

App. 70a. That determination will just “add to” the

“burden on district courts,” the dissent explained,

“because ‘systemic’ remains undefined both as a

metric (for example, total number of unpaid claims, or

a percentage of such claims) and the point at which

that numeric threshold is crossed.” App. 69a. And this

“arduous task” will necessarily “involve some level of

adjudicating the nature, timeliness, and merits of

payment claims, rendering district courts the new

Medicaid claims processors for the states.” App. 71a.

Thus, the result of the majority’s decision is a

wholesale transformation of the regime of contractual

rights and remedies governing MCO payments to

Medicaid providers into a regime of statutory rights

and remedies enforceable in federal court through

Section 1983 litigation. Such a massive restructuring

of Medicaid managed care programs, with its atten-

dant burdens on both States and federal courts,

justifies this Court’s review.

Correction of the Seventh Circuit’s

error is necessary to ensure

consistency in the interpretation

of Spending Clause statutes.

Review by this Court of the second question

presented, concerning Section u-2(f)’s meaning, is also

warranted to ensure lower courts’ faithful adherence

to the Court’s precedent regarding the interpretation

of Spending Clause legislation. As advocates in other

litigation before the Court have noted, lower court

decisions in this area are characterized by inconsistency and confusion, with conflicting rulings about

the meaning of numerous Medicaid Act provisions.3

That uncertainty undermines the principle that States

are entitled to know, based on “unambiguous” statutory text, what duties they have under Spending

Clause statutes, and whether those statutes create

private rights to enforce those duties. Gonzaga, 536

U.S. at 280–286; Pennhurst, 451 U.S. at 17.4 And, as

this case illustrates, that uncertainty also leaves room

for courts to read into such statutes their own public

policy preferences.

See Brief of Indiana, et al. as Amici Curiae in Support of

Petitioner at 5–6, 8- 9, 14–17 & nn.3–5, Talevski (No. 21-806);

Brief of 128 Members of Congress as Amici Curiae in Support of

Certiorari at 2-3, 19-21, Kerr v. Kerr v. Planned Parenthood S.

Atlantic (No. 21-1431).

See Talevski (No. 21-806), Nov. 8, 2022 Oral Arg. Tr. at 46

(Sotomayor, J.) (“So why don’t you bring us a case where the right

is more ambiguous? This case doesn’t seem to present that

confusion that you seem to be referring to.”).

Against this background, the Seventh Circuit’s

decision, if left uncorrected, will not just establish a

statutory regime subject to federal court enforcement,

rather than a contractual regime, to govern MCO

payments to Medicaid providers. The decision’s many

serious departures from the Court’s established

precedent, conspicuously noted by the dissent, will also

send a signal to other courts that this precedent need

not be scrupulously observed in cases involving other

Spending Clause statutes.

That prospect is unacceptable. Whether Spending

Clause statutes unambiguously establish specific state

duties and private rights to enforce them is subject to

strict standards under this Court’s clear precedent. To

avoid the Seventh Circuit’s approach being followed by

other lower courts, and for other Spending Clause

statutes, the Court should grant plenary review and

clarify the interpretive principles applicable in cases of

this kind.

CONCLUSION

The petition for a writ of certiorari should be held

pending this Court’s decision in Talevski (No. 21-806)

and then disposed of as appropriate in light of that

decision, either by granting, vacating, and remanding

for further consideration in light of Talevski, or by

granting review on the second question presented.

Respectfully submitted,

* Counsel of Record

DECEMBER 2022

KWAME RAOUL

Attorney General

State of Illinois

JANE ELINOR NOTZ*

Solicitor General

RICHARD S. HUSZAGH

Assistant Attorney General

100 West Randolph St.

Chicago, Illinois 60601

(312) 814-5376

jane.notz@ilag.gov

APPENDIX A

In the

United States Court of Appeals

For the Seventh Circuit

____________________

No. 21‐2325

SAINT ANTHONY HOSPITAL,

Plaintiff‐Appellant,

THERESA A. EAGLESON, in her official capacity

as Director of the Illinois Department of

Healthcare and Family Services,

Defendant‐Appellee,

and

MERIDIAN HEALTH PLAN OF ILLINOIS, INC.,

et al.,

Intervening Defendants‐Appellees.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 1:20‐cv‐02561 — Steven Charles Seeger, Judge.

____________________

On Petitions for Rehearing and Rehearing En Banc

____________________

DECIDED SEPTEMBER 8, 2022

____________________

Before Wood, Hamilton, and Brennan, Circuit

Judges.

On consideration of the petitions for rehearing en

banc filed August 2, 2022 by Defendant-Appellee and

Intervening Defendants-Appellees, no judge in active

service has requested a vote on the petitions for

rehearing en banc.* Judges Wood and Hamilton voted

to deny panel rehearing; Judge Brennan voted to grant

panel rehearing.

Accordingly, the petitions for rehearing en banc

filed August 2, 2022 by Defendant-Appellee and

Intervening Defendants-Appellees are DENIED.

Judge St. Eve did not participate in the consideration of these

petitions for rehearing en banc.

Hamilton, Circuit Judge, joined by Wood, Circuit

Judge.

In view of the petitions’ exaggerated accounts of

the panel’s decision, a few comments are in order.

First, the panel opinion imposes no new duties on

either State officials or managed care organizations.

Nor does the panel opinion offer any path toward

monetary liability for the State of Illinois or its

officials. Only injunctive relief is at stake here: possible

injunctive relief to push State officials to comply with

duties already imposed by the Medicaid Act.

The panel recognizes the potential complexity and

challenge of this case for the district court, but also its

importance for plaintiff and other providers of health

care to Medicaid patients, as well as for the patients

themselves. The panel concluded that the case should

not be dismissed on the pleadings but should proceed

toward substantial discovery. That course will allow

the district court to consider actual facts rather than

just allegations in weighing whether injunctive relief

is appropriate and what forms it might take.

Finally, the parties and all members of the panel

recognize that the Supreme Court may reshape

applicable law in Talevski v. Health and Hospital

Corp., 6 F.4th 713 (7th Cir. 2021), cert. granted, –––

U.S. –––, 142 S. Ct. 2673 (2022). While that case

proceeds in the Supreme Court, however, the stakes of

this case and the delay plaintiff has already

experienced in the courts weigh in favor of allowing the

case to proceed in the district court in parallel with the

Supreme Court’s consideration of Talevski. Hence we

are not holding these petitions but issue the mandate

with this order denying them.

Brennan, Circuit Judge, dissenting from the

denial of rehearing.

I would grant panel rehearing of this case for the

reasons stated in my concurrence in part and dissent

in part, as well as those argued in the petitions for

panel rehearing filed by the State of Illinois and the

intervening managed care organizations (MCOs).

The full context of this dispute shows how far the

majority opinion goes.

Saint Anthony has provider contracts with the

MCOs in the Illinois managed care program. Those

contracts require the Hospital to submit any dispute

arising under them to arbitration. So, arbitration is

the path for the Hospital to secure relief on its

payment terms. Saint Anthony asked to stay the

arbitration of its contract and brought this lawsuit,

asking that 42 U.S.C. § 1396u-2(f) be interpreted to

recognize a new statutory duty. Only then did a route

appear outside of the provider contract and the

bargained-for dispute resolution of arbitration.

As seen in literature about private enforcement of

the Medicaid Act under 42 U.S.C. § 1983,1 circuit court

enforcement of Medicaid provisions since Gonzaga

University v. Doe, 536 U.S. 273 (2002), has never

involved § 1396u-2(f). Now, not only has a private right

of action been recognized for the first time as to

Jane Perkins, NAT’L HEALTH L. PROGRAM, PRIVATE ENFORCE-

MENT OF THE MEDICAID ACT UNDER 42 U.S.C. § 1983 (2021),

https://health-law.org/wp-content/uploads/2021/07/Fact-Sheet1983-Enforcement.pdf.

§ 1396u-2(f)—a conclusion I agree is compelled under

the Blessing factors—but the State is obliged under

that Medicaid statute to proactively guarantee timely

managed care payments to healthcare providers. That

obligation is meant to be enforced under the

arbitration clause pursuant to the MCO provider

contracts.

I will not repeat the reasons why an administrative prerequisite that a managed care contract includes

deadlines is so different from a privately enforceable

statutory duty to proactively guarantee timely

managed care payments. To me, the text of § 1396u2(f), the silence of its neighboring statutes as to a duty

requiring state action, and the statutory incongruence

created by the majority opinion’s interpretation are

revealing. They show that the text-based interpretation of § 1396u-2(f), in which the district court

and I engage, is at least plausible.

A statute with more than one plausible interpretation of its text is ambiguous. Graham Cnty. Soil &

Water Conservation Dist. v. United States ex rel.

Wilson, 545 U.S. 409, 419 (2005). And the Supreme

Court requires that before Spending Clause statutes

impose duties on states, they must do so

“unambiguously,” “speak[ing] with a clear voice,”

Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S.

1, 17 (1981), and in statutory language that is “unmistakably clear.” Gonzaga, 536 U.S. at 283 (quoting Will

v. Mich. Dep’t of State Police, 491 U.S. 58, 65 (1989)).

Adhering to these Supreme Court pronouncements, I

would not conclude that § 1396u-2(f) imposes an

enforceable duty.

These two petitions for rehearing articulate well

the burdens, practical problems, and changes in

decisionmakers resulting from the majority opinion’s

interpretation of § 1396u-2(f).

The State points out the heavy burdens this

decision will place on various players in the complex

world of Medicaid. The interpretation of § 1396u-2(f)

presents “a question of first impression ... with

immense practical importance for Medicaid managed

care programs nationwide, involving dozens of States

and hundreds of billions of dollars in spending each

year.” The State fears the majority opinion will

“impose on States a huge and unprecedented obligation to duplicate the administrative functions that

Congress intended to be fulfilled by MCOs.” The State

also notes the impact this decision will have on federal

courts to resolve the merits of “payment disputes

between MCOs and providers as a predicate to

determining whether States are liable for failing to

ensure the MCOs are making payments on a timely

basis.” Medicaid managed care programs “serve more

than 50 million individuals and involve annual

expenditures of hundreds of billions of dollars.” The

State is concerned that “state Medicaid directors will

have to decide whether to establish an administrative

infrastructure to duplicate the claims-processing

functions performed by MCOs or risk liability” under

§ 1396u-2(f).

The MCOs are worried that this decision

“funnel[s] a subset of MCO-provider payment disputes

into litigation, instead of arbitration, [which] will

severely burden all interested parties (including

federal courts).” Under this decision, “federal judges

will become the arbiters of any MCO-provider disputes

that providers can frame as involving ‘systemic

failure.’” The foundational question of whether

providers should address disputes with MCOs through

§ 1983 claims or arbitration will arise. The MCOs

lament the lack of guidance as to “whether and when

there is a ‘systemic failure’ sufficient to justify” a

§ 1983 claim. Rather than “costly litigation over the

nature and scope of claims,” the MCOs believe these

disputes “could and should have been submitted to

cost-effective arbitration.”

The MCOs also point out the practical problems

with the majority opinion’s reading of § 1396u-2(f). For

courts to determine if the predicate for State

intervention—“systemic failures by MCOs to comply

with the 30/90 payment schedule”—is satisfied, they

have to determine “which claims (how many? what

proportion?) are unpaid, paid late or paid with less

transparency.” These “determinations fall squarely

within the broad arbitration provision in each provider

contract,” including Saint Anthony’s.

To say the majority opinion only provides a new

way under § 1983 to enforce existing obligations does

not mitigate the substantial changes and alterations to

the Medicaid landscape this decision creates. The “new

world” of an enforceable duty under § 1396u-2(f) will

require a huge amount of adaptation, new systems,

and working through unseen problems, as the

obligations on various players change and decisionmaking is shifted away from arbitrators to federal

courts.

Because this decision will create tremendous

burdens and complex practical problems, and federal

courts will now have to consider and decide payment

disputes between MCOs and providers that can be

framed as involving “systemic failure,” the proper

interpretation of § 1396u-2(f) is a question of extraordinary significance which we should rehear.

So why not hear this case en banc? Because of the

imminent possibility this area of law will change

markedly.

This case may well merit rehearing en banc. Given

the burdens and change in decisionmakers, it poses “a

question of exceptional importance” under Federal

Rule of Appellate Procedure 35(a)(2). And under the

requirements before Spending Clause legislation

imposes a duty on a state, “the panel decision conflicts

with a decision of the United States Supreme Court”

under Federal Rule of Appellate Procedure

35(b)(1)(A).

But since this case was argued in February, and

before it was decided in July, the Supreme Court

granted certiorari in another case from our court,

Talevski v. Health & Hosp. Corp. of Marion Cnty., 6

F.4th 713 (7th Cir. 2021), cert. granted, ––– U.S. ––––,

142 S. Ct. 2673 (2022), argument scheduled for

November 8, 2022. Talevski held that nursing home

residents have privately enforceable rights under 42

U.S.C. §§ 1396r(c)(1)(A)(ii) and (c)(2)(A) to not be

chemically restrained for disciplinary or convenience

purposes, and to not be transferred or discharged from

a facility unless certain criteria are met. 6 F.4th at 720.

Talevski concerned different Medicaid statutes.

But one of the two questions presented on which the

Supreme Court granted certiorari is broad:

“[w]hether, in light of compelling historical evidence

to the contrary, the Court should reexamine its

holding that Spending Clause legislation gives rise to

privately enforceable rights under Section 1983.”

Petition for a Writ of Certiorari at i, Health & Hosp.

Corp. of Marion Cnty. v. Talevski, ––– U.S. ––––, 142 S.

Ct. 2673 (2022). The Court can answer this question in

ways that will greatly impact the decision in this case.

Even Saint Anthony admits in its response to the

petitions for rehearing en banc that “[i]f the Supreme

Court significantly changes its precedent on Medicaid

private rights of action, those changes could affect the

majority’s opinion in this case.”

If our court heard this case en banc, we would

proceed parallel with the Supreme Court’s consideration of Talevski and expend valuable court time and

resources. Given the question presented quoted above,

we would need to predict how the Supreme Court

thinks that issue should come out, a task broader than

the arguments before us in this case. So, en banc

rehearing here likely would not be an efficient course

given the grant of certiorari in Talevski.

In the alternative, as the State suggests, I would

hold these petitions for rehearing pending the decision

in Talevski. The non-prevailing parties here may

petition the Supreme Court for a writ of certiorari, and

even ask that Court for a stay. The Supreme Court

may hold such a petition pending the resolution of

Talevski. Given the broad and deep impact of the

majority opinion, it would be best to resolve these

10a

petitions for rehearing with the counsel of Talevski,

which could significantly change the legal landscape

governing the interpretation of § 1396u-2(f).

For these reasons, I respectfully dissent from the

denial of panel rehearing. I would grant the petitions

for panel rehearing and reconsider this decision, or in

the alternative I would hold these petitions for

rehearing subject to the outcome of Talevski.

11a

APPENDIX B

In the

United States Court of Appeals

For the Seventh Circuit

____________________

No. 21‐2325

SAINT ANTHONY HOSPITAL,

Plaintiff‐Appellant,

THERESA A. EAGLESON, in her official capacity

as Director of the Illinois Department of

Healthcare and Family Services,

Defendant‐Appellee,

and

MERIDIAN HEALTH PLAN OF ILLINOIS, INC.,

et al.,

Intervening Defendants‐Appellees.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 1:20‐cv‐02561 — Steven Charles Seeger, Judge.

____________________

ARGUED FEBRUARY 15, 2022 — DECIDED JULY 5, 2022

____________________

Before Wood, Hamilton, and Brennan, Circuit

Judges.

12a

Hamilton, Circuit Judge.

In recent years, Illinois has moved its Medicaid

program from a fee-for-service model, where a state

agency pays providers’ medical bills, to one dominated

by managed care, where private insurers pay medical

bills. Most patients of plaintiff Saint Anthony Hospital

are covered by Medicaid, so Saint Anthony depends on

Medicaid payments to provide care to patients. Saint

Anthony says it is now in a dire financial state. Over

the last four years, it has lost roughly 98% of its cash

reserves, allegedly because managed-care organizations (MCOs) have repeatedly and systematically

delayed and reduced Medicaid payments to it.

Saint Anthony contends in this lawsuit that

Illinois officials owe it a duty under the federal

Medicaid Act to remedy the late and short payments.

In a thoughtful opinion, the district court dismissed

the suit for failure to state a claim for relief. Saint

Anthony Hospital v. Eagleson, 548 F. Supp. 3d 721

(N.D. Ill. 2021). We see the case differently, however,

especially at the pleadings stage. We conclude that

Saint Anthony has alleged a viable claim for relief

under 42 U.S.C. § 1396u-2(f) and may seek injunctive

relief under 42 U.S.C. § 1983 against the state official

who administers the Medicaid program in Illinois. We

appreciate the potential magnitude of the case and the

challenges it may present. Like the district judge and

Judge Brennan, we can imagine forms of judicial relief

that would be hard to justify. We can also imagine

some poor ways to handle this case going forward in

the district court. But we need not and should not

decide this case by assuming that the worst-case

scenarios are inevitable.

13a

The State has tools available to remedy systemic

slow payment problems—problems alleged to be so

serious that they threaten the viability of a major

hospital and even of the managed-care Medicaid

program as administered in Illinois. If Saint Anthony

can prove its claims, the chief state official could be

ordered to use some of those tools to remedy systemic

problems that threaten this literally vital health care

program. We therefore reverse in part the dismissal of

the case and remand for further proceedings.

Factual and Procedural Background

In reviewing the grant of a motion to dismiss

under Federal Rule of Civil Procedure 12(b)(6) for

failure to state a claim, we accept all well-pleaded

allegations as true and draw all reasonable inferences

in Saint Anthony’s favor. Ashcroft v. Iqbal, 556 U.S.

662, 678 (2009). We are not vouching for the truth of

Saint Anthony’s account of the facts at this point.

Rather, because the defense chose to move to dismiss

on the pleadings, it chose to accept for now the truth

of Saint Anthony’s factual allegations.

The Illinois Medicaid Program

The federal Medicaid Act established a cooperative

arrangement between the federal government and

states to provide medical services to poor residents. 42

U.S.C. § 1396 et seq.; Bria Health Services, LLC v.

Eagleson, 950 F.3d 378, 380 (7th Cir. 2020); see also

National Federation of Independent Business v.

Sebelius, 567 U.S. 519, 541–42 (2012). By agreeing to

participate in Medicaid, a state receives financial

assistance to help administer the program in exchange

for complying with detailed statutory and regulatory

14a

requirements. Bria Health Services, 950 F.3d at 380.

Those requirements are found in the Medicaid Act

itself (Title XIX of the Social Security Act) and in

regulations promulgated by the Secretary of the

Department of Health and Human Services (HHS).

See id. at 382; Rock River Health Care, LLC v.

Eagleson, 14 F.4th 768, 771 (7th Cir. 2021).

Before discussing the relevant statutory requirements at issue here, it is important to understand how

Illinois, specifically the Department of Healthcare and

Family Services (HFS), administers its Medicaid

program. There are two major ways for states to pay

providers for services provided to patients covered by

Medicaid: fee for service or managed care. In a fee-forservice program, the state pays providers directly

based on a set fee for a particular service. See

§ 1396a(a)(30)(A); Medicaid Program; Medicaid

Managed Care: New Provisions, 67 Fed. Reg. 40,989

(June 14, 2002). Under a managed-care program, by

contrast, HFS contracts with MCOs (which are private

health insurance companies) to deliver Medicaid

health benefits to beneficiaries. See 42 U.S.C. § 1396u2; see also § 1396b(m); 42 C.F.R. § 438 (2020). The

state pays the MCO a flat fee per patient per month.

The MCO then pays providers for services actually

provided to covered Medicaid patients. Bria Health

Services, 950 F.3d at 381, citing 305 ILCS 5/5-30.1; see

also 42 U.S.C. §§ 1396u-2, 1396b(m). Like insurance

companies, MCOs are generally entitled to keep the

difference between the money they receive from the

state and the amounts they pay providers for care of

covered patients.

15a

In recent years, Illinois has changed from a fee-forservice system to a system dominated by managed

care. Illinois introduced managed care in its Medicaid

program in 2006. In 2010, the State spent just $251

million on managed care. By 2019, that number had

grown to $12.73 billion. In the meantime, the number

of MCOs in Illinois has fallen from twelve to seven.

Federal law establishes requirements for timely

Medicaid payments for health care providers. When a

state pays claims directly, it must pay 90% of so-called

“clean claims” within 30 days and 99% within 90 days.

See 42 U.S.C. § 1396a(a)(37)(A). (A “clean claim” is

one where the provider has given the payor all

information needed to determine the proper payments.

Id.) When a state relies on MCOs to pay providers,

federal law requires that the state’s contract with an

MCO contain a provision that requires the same 30/90

pay schedule for MCO reimbursements to providers.

§ 1396u-2(f). (MCOs and providers can opt for a

different pay schedule, but Saint Anthony has not

agreed to a different schedule with any MCOs.)

The focus of this case is the payment schedule

provision, § 1396u-2(f). Saint Anthony contends it is

also entitled to relief under a separate Medicaid

statute requiring a participating state to “provide that

all individuals wishing to make application for medical

assistance under the plan shall have opportunity to do

so, and that such assistance shall be furnished with

reasonable promptness to all eligible individuals.”

§ 1396a(a)(8). As we explain below, however, Saint

Anthony is not entitled to relief under that clause.

16a

Plaintiff Saint Anthony Hospital

Saint Anthony is a so-called “safety-net hospital”

on the southwest side of Chicago. It provides health

care regardless of patients’ financial means. See 305

ILCS 5/5-5e.1. Most Saint Anthony patients are on

Medicaid. As the Illinois Medicaid system has shifted

from fee for service to managed care, the hospital has

become ever more dependent on timely payments from

MCOs. In recent years, according to Saint Anthony,

those payments have repeatedly arrived late, if they

arrived at all. As of February 2020, payments of at

least $20 million were past due. The impact of late

payments can be dramatic. In 2015, Saint Anthony had

more than $20 million in cash on hand, which was

enough to fund 72 days of operation. As the State

increased its reliance on managed care, Saint Anthony

saw its cash reserves dwindle. By 2019, Saint Anthony

had less than $500,000 cash on hand, enough to cover

just two days of operation. Saint Anthony’s net

revenue per patient also dropped more than 20%.

The MCO payments that eventually arrive are

often for less than is owed. Making matters even worse

from Saint Anthony’s perspective, the payment forms

it receives from the MCOs lack the details needed to

determine just what is being paid and what is not. The

delays and lack of clarity benefit the MCOs: since the

State pays the MCOs flat fees per patient and permits

them to keep the funds they do not pay out to

providers, MCOs have a powerful profit incentive to

delay and underpay hospitals like Saint Anthony.

Saint Anthony may not be alone in its experience.

Mercyhealth is a regional health-care system and the

largest Medicaid provider in Illinois outside of Cook

17a

County. Illustrating the potential gravity of the MCO

payment problems, in April 2020, Mercyhealth

announced it would stop accepting Medicaid patients

covered by four of the seven MCOs in Illinois. Decl. of

Kim Scaccia ¶ 6, Dkt. 50-1, Ex. 12. That was a drastic

step showing the potential threat to the viability of the

managed-care model for Medicaid. Mercyhealth said it

took this step because those MCOs were delaying and

underpaying it to the point that it was losing $30

million per year on Medicaid patients. See also David

Jackson & Kira Leadholm, Insurance Firms Reap

Billions in Profits While Doctors Get Stiffed for

Serving the Poor, Better Government Ass’n (Nov. 8,

2021, 12:00 PM), https://www.bettergov.org/news/

insurance-firms-reap-billions-in-profits-while-doctorsget-stiffed-for-serving-the-poor/.1

Faced with this dire financial situation, Saint

Anthony had two paths to seek legal relief from what

it sees as systemic defects in the Illinois Medicaid

program. One path would be to sue MCOs individually

for violating Saint Anthony’s contractual right to

timely payment. Arbitration provisions in those

contracts would likely require arbitration for each

individual claim in dispute, which could easily involve

many thousands of individual claims each year. This

We may consider the Mercyhealth information in evaluating a

Rule 12(b)(6) motion, without converting the motion into one for

summary judgment, because the information elaborates on and

illustrates factual allegations in the complaint. E.g., Geinosky v.

City of Chicago, 675 F.3d 743, 745 n.1 (7th Cir. 2012). Mercyhealth also reportedly worked out a compromise with one MCO,

Molina, under which it continued to care for Molina-covered

Medicaid patients. Decl. of Kim Scaccia ¶ 9, Dkt. 50-1, Ex. 12.

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suit represents the second path, seeking a court order

to require Illinois to enforce the MCOs’ contractual

obligations to make timely and transparent payments.

Procedural History

Saint Anthony filed a two-count complaint under

42 U.S.C. § 1983 against Theresa A. Eagleson, the

Director of HFS, in her official capacity. (We refer to

Director Eagleson here as HFS or the State.) As

relevant here, Count I alleges that HFS is violating the

Medicaid Act, including section 1396u-2(f), by failing

to ensure that MCOs meet the timely payment

requirements. Count II alleges that HFS is violating

section 1396a(a)(8) by failing to ensure that the MCOs

furnished medical assistance with reasonable

promptness. Saint Anthony seeks injunctive relief

directing HFS to require the MCOs to comply with the

30/90 payment rule, to use transparent remittance

forms, and if necessary, to require the State to cancel

a contract with an MCO that continues to fail to

comply with the timely payment requirements.2

HFS moved to dismiss Saint Anthony’s complaint

under Federal Rule of Civil Procedure 12(b)(6) for

failure to state a claim. Its chief argument was that

none of the statutory provisions grant Saint Anthony

any rights enforceable under section 1983, and that

even if they did, the factual allegations failed to state a

plausible claim for relief. The district court agreed and

Saint Anthony also moved for a preliminary injunction. The

district court granted limited discovery before suspending in part

actions related to the preliminary injunction motion while it

resolved a discovery dispute. The court then granted the motion

to dismiss and denied the preliminary injunction motion as moot.

19a

dismissed the case. 548 F. Supp. 3d 721 (N.D. Ill. 2021).

While the motion to dismiss was pending, Saint

Anthony moved to supplement its complaint by adding

a due process claim. HFS responded to Saint

Anthony’s request, arguing that the new claim would

fail on the merits. The district court denied Saint

Anthony the opportunity to file a reply to defend its

proposed claim on the merits. Then, four days after

granting the motion to dismiss, the district court

denied the motion to supplement as futile, and also

because the judge thought the entire case should be

concluded by the grant of the motion to dismiss.

In the district court, four MCOs also sought and

were granted leave to intervene in the suit. The MCOs

asked the court to stay the lawsuit and compel

arbitration. One MCO (Meridian) demanded arbitration with Saint Anthony, but that proceeding was

stayed because Meridian had not followed the proper

procedures to invoke arbitration. The district court

later denied the MCOs’ motions as moot after granting

the motion to dismiss.

Saint Anthony has appealed the court’s dismissal

of its section 1396u-2(f) and 1396a(a)(8) claims, as well

as the denial of the motion to supplement. We first

address Saint Anthony’s asserted right to timely

payment under section 1396u-2(f). To evaluate Saint

Anthony’s claim, we walk through each of the so-called

Blessing factors. Each factor supports Saint Anthony

here. We then analyze three remaining issues: Saint

Anthony’s claim under section 1396a(a)(8), the district

court’s denial of the motion to supplement, and the

intervening MCOs’ motion to stay the proceedings in

favor of arbitration.

20a

II. A Right to Timely Payment

The central issue here is whether section 1396u2(f) grants a right to providers like Saint Anthony that

is privately enforceable through section 1983. We

conclude that the State’s duty is to try to ensure that

the MCOs actually pay providers in accord with the

30/90 pay schedule—not merely that the contracts

between the MCOs and HFS include clauses that say

as much on paper. Providers like Saint Anthony have

a right under section 1396u-2(f) that is enforceable

under section 1983, at least to address systemic

failures to provide timely and transparent payments.

Legal Standard

We again emphasize that we are reviewing the

grant of a motion to dismiss under Federal Rule of

Civil Procedure 12(b)(6) for failure to state a claim, so

we begin by accepting all well-pleaded allegations as

true and drawing all reasonable inferences in Saint

Anthony’s favor. Iqbal, 556 U.S. at 678.

The analysis for possible enforcement of federal

statutory rights under section 1983 is familiar.

“Section 1983 creates a federal remedy against anyone

who, under color of state law, deprives ‘any citizen of

the United States ... of any rights, privileges, or

immunities secured by the Constitution and laws.’”

Planned Parenthood of Indiana, Inc. v. Commissioner

of Indiana State Dep’t of Health, 699 F.3d 962, 972 (7th

Cir. 2012) (omission in original), quoting 42 U.S.C.

§ 1983. This language “means what it says,” Maine v.

Thiboutot, 448 U.S. 1, 4 (1980), and “authorizes suits

to enforce individual rights under federal statutes as

well as the Constitution.” City of Rancho Palos Verdes

21a

v. Abrams, 544 U.S. 113, 119 (2005).

Yet not all statutory benefits, requirements, or

interests are enforceable under section 1983. A

plaintiff seeking redress for an alleged violation of a

federal statute through a section 1983 action “must

assert the violation of a federal right, not merely a

violation of federal law.” Blessing v. Freestone, 520

U.S. 329, 340 (1997) (remanding for further consideration whether federal statute on child-support

obligations created rights enforceable under section

1983); see also Gonzaga University v. Doe, 536 U.S.

273, 286 (2002) (“[W]here the text and structure of a

statute provide no indication that Congress intends to

create new individual rights, there is no basis for a

private suit.”). Congress must have “intended to create

a federal right,” Gonzaga, 536 U.S. at 283, and “the

statute ‘must be phrased in terms of the persons

benefited’ with ‘an unmistakable focus on the

benefited class.’” Planned Parenthood of Indiana, 699

F.3d at 973, quoting Gonzaga, 536 U.S. at 284. It is

thus not enough to fall “within the general zone of

interest that the statute is intended to protect” to

assert a right under section 1983. Gonzaga, 536 U.S.

at 283.

To aid in this analysis, courts apply the three

“Blessing factors” to the statutory text and structure:

First, Congress must have intended that the

provision in question benefit the plaintiff.

Second, the plaintiff must demonstrate that the

right assertedly protected by the statute is not

so “vague and amorphous” that its enforcement

would strain judicial competence. Third, the

statute must unambiguously impose a binding

22a

obligation on the States. In other words, the

provision giving rise to the asserted right must

be couched in mandatory, rather than precatory, terms.

Talevski v. Health & Hospital Corp. of Marion County,

6 F.4th 713, 717 (7th Cir. 2021) (Federal Nursing

Home Reform Act granted individual rights

enforceable under section 1983, quoting Blessing, 520

U.S. at 340–41), cert. granted, No. 21-806, ––– U.S. ––

––, 142 S. Ct. 2673 (U.S. May 2, 2022).

If these three factors are satisfied, “the right is

presumptively enforceable under section 1983.” Id. at

720. The defendant may overcome this presumption by

demonstrating that “Congress shut the door to private

enforcement.” Gonzaga, 536 U.S. at 284 n.4. Congress

may foreclose a remedy under section 1983 “either

expressly, through specific evidence from the statute

itself, or impliedly, by creating a comprehensive

enforcement scheme that is incompatible with

individual enforcement under § 1983.” Id. (internal

quotation marks and citations omitted); see also

Talevski, 6 F.4th at 721 (collecting just three cases

where the Supreme Court determined that a statutory

scheme implicitly foreclosed section 1983 liability).

One final background note: The Medicaid Act is an

exercise of Congress’s power under the Spending

Clause. The Supreme Court has found that section

1983 can be used to enforce rights created in the

exercise of the spending power. Wilder v. Virginia

Hospital Ass’n, 496 U.S. 498, 508–12 (1990) (finding a

now-defunct amendment to the Medicaid Act granted

plaintiff a private right enforceable under section

1983). Since Wilder, the Court has cautioned against

23a

finding rights in that context. See Armstrong v.

Exceptional Child Center, Inc., 575 U.S. 320, 330 n*

(2015) (“[Plaintiffs] do not assert a § 1983 action, since

our later opinions plainly repudiate the ready

implication of a § 1983 action that Wilder exemplified.”); see also Gonzaga, 536 U.S. at 283. We made

this observation in Nasello v. Eagleson: “In the three

decades since Wilder [the Court] has repeatedly

declined to create private rights of action under

statutes that set conditions on federal funding of state

programs.” 977 F.3d 599, 601 (7th Cir. 2020).

But as we clarified most recently in Talevski, this

trend does not mean that Spending Clause legislation

never creates rights enforceable under section 1983. 6

F.4th at 723–26. On the contrary, the Court has not

overruled Wilder. The later Spending Clause cases in

which it has declined to find private rights simply did

not satisfy the standards we have discussed. Id. at 724.

As we said in Talevski, “[t]he Court could have saved

itself a great deal of time [in Armstrong] if it had

wanted to establish an unbending rule that Spending

Clause legislation never supports a private action.” Id.

at 725. Spending Clause legislation or not, the relevant

question is the same: “do we have the necessary rightscreating language to support a private right of action?”

Id. To answer that question, apply the Blessing

factors.3

While this case involves a right under section 1983, not an

implied private right of action, Gonzaga clarified that “the

inquiries overlap in one meaningful respect—in either case we

must first determine whether Congress intended to create a

federal right.” 536 U.S. at 283.

24a

Rights Analysis

With this background in mind, here is the text of

section 1396u-2(f), the provision central to this appeal:

A contract under section 1396b(m) of this title

with a medicaid managed care organization

shall provide that the organization shall make

payment to health care providers for items and

services which are subject to the contract and

that are furnished to individuals eligible for

medical assistance under the State plan under

this subchapter who are enrolled with the

organization on a timely basis consistent with

the claims payment procedures described in

section 1396a(a)(37)(A) of this title, unless the

health care provider and the organization agree

to an alternate payment schedule....

42 U.S.C. § 1396u-2(f). The statutory language crossreferences sections 1396b(m) and 1396a(a)(37)(A).

Section 1396b(m) describes the State’s contract with

an MCO. Section 1396a(a)(37)(A) declares that a

“State plan for medical assistance must”

(37) provide for claims payment procedures which

(A) ensure that 90 per centum of claims for

payment (for which no further written

information or substantiation is required in

order to make payment) made for services

covered under the plan and furnished by

health care practitioners through individual

or group practices or through shared health

facilities are paid within 30 days of the date

of receipt of such claims and that 99 per

centum of such claims are paid within 90

25a

days of the date of receipt of such claims.

§ 1396a(a)(37)(A).

We agree with Saint Anthony that section 1396u2(f) grants providers a right to timely payment from

the MCOs that the State must safeguard because the

right satisfies all three Blessing factors. Also, there is

no alternative remedy that would be incompatible with

individual enforcement under section 1983. As we

explain next in applying the Blessing factors, providers

are the intended beneficiaries of section 1396u-2(f),

enforcing the 30/90 pay schedule would not strain

judicial competence, and the statute unambiguously

imposes a binding obligation on the State. In addition,

while private contract remedies may offer an

alternative path to enforcement for individual claims,

that path does not foreclose enforcement under section

1983. It is also far from clear that contract remedies,

including arbitration, could provide systemic relief

that may be sought more sensibly from state officials

under section 1983. We address each point in turn.

1. Factor One: Intended Beneficiaries

The first Blessing factor asks whether Congress

intended section 1396u-2(f) to benefit providers like

Saint Anthony and whether it intended that benefit to

be a right, as distinct from a generalized entitlement.

We conclude that both answers are yes.

First, providers are the intended beneficiaries of

section 1396u-2(f). The text requires MCOs to contract

that they “shall make payment to health care

providers ... on a timely basis.” § 1396u-2(f) (emphasis

added). No one benefits more directly from a

requirement for timely payments to providers than the

26a

providers themselves. Cf. BT Bourbonnais Care, LLC

v. Norwood, 866 F.3d 815, 821 (7th Cir. 2017) (“Who

else would have a greater interest than the [nursing

facility operators] in the process ‘for determination of

rates of payment under the [State] plan for ... nursing

facility services’”? (second alteration and omission in

original)).

To resist this conclusion, HFS asserts that the

term “health care providers” includes practitioners but

not hospitals. The district judge did not adopt this

argument, nor do we. Section 1396u-2(f) crossreferences section 1396a(a)(37)(A), which requires

that states pay “practitioners” on the 30/90 pay

schedule. See Illinois Council on Long Term Care v.

Bradley, 957 F.2d 305, 306, 308 (7th Cir. 1992).

“Practitioners” in that context means individual

providers as opposed to institutional ones like Saint

Anthony. HFS thus argues that since section 1396u2(f) requires states to ensure MCOs pay providers

“consistent with the claims payment procedures

described in section 1396a(a)(37)(A),” section 1396u2(f) adopts the 30/90 pay schedule requirement only as

to “practitioners.” In the State’s view, holding that

section 1396u-2(f) applies to hospitals as well would

exceed rather than be consistent with what section

1396a(a)(37)(A) requires.

The argument is not persuasive. HFS reasons that

Congress implicitly and indirectly defined “providers”

narrowly—just for purposes of section 1396u-2(f)—

through a cross-reference to section 1396a(a)(37)(A)

that describes a state’s payment obligations to

practitioners in a fee-for-service program. That is an

improbably subtle reading. A more persuasive reading

27a

of the statutory text is that Congress invoked only the

payment procedures in section 1396a(a)(37)(A), not

the beneficiaries of that provision. The statutory text

explains that payment must be made “on a timely basis

consistent with the claims payment procedures

described in section 1396a(a)(37)(A) of this title.”

§ 1396u-2(f) (emphasis added). Those procedures

include the 30/90 pay schedule.

Congress knows how to use cross-references for a

definitional purpose in the Medicaid Act. See, e.g.,

§ 1396u-2(a)(1)(B)(i) (“[A] medicaid managed care

organization, as defined in section 1396b(m)(1)(A) of

this title....”); § 1396u-2(b)(2)(A)(i) (“[T]o provide

coverage for emergency services (as defined in subparagraph (B))....”). That is not what occurred here.

The language is sufficiently plain here, United States

v. Melvin, 948 F.3d 848, 851–52 (7th Cir. 2020), and

the plain meaning of “health care provider” includes

hospitals. Cf. 42 U.S.C. § 1395w–25(d)(5) (enacted as

part of the Balanced Budget Act of 1997).

HFS’s position is also inconsistent with the

provision’s purpose as shown in additional statutory

language. Section 1396u-2(f) was part of the same

Balanced Budget Act of 1997. See Pub. L. No. 105-33,

111 Stat. 251 § 4708(c) (1997). Section 4708(c) is

entitled: “Assuring Timeliness of Provider Payments.”

This language signals that Congress intended section

1396u-2(f) to assure, i.e., to guarantee, timely payment

to providers. That understanding is consistent with

later congressional action. In 2009 Congress enacted

42 U.S.C. § 1396u-2(h) as part of the American

Recovery and Reinvestment Act of 2009. See Pub. L.

No. 111-5, 123 Stat. 115, § 5006(d) (2009). That

28a

subsection established special rules for “Indian

enrollees, Indian health care providers, and Indian

managed care entities.” § 1396u-2(h). Relevant to our

purposes, section 1396u-2(h)(2)(B) cross-references

section 1396u-2(f) and describes it as the “rule for

prompt payment of providers”:

(2) Assurance of payment to Indian health care

providers for provision of covered services

Each contract with a managed care entity

under section 1396b(m) of this title or

under section 1396d(t)(3) of this title shall

require any such entity, as a condition of

receiving payment under such contract, to

satisfy the following requirements:

...

(B) Prompt payment

To agree to make prompt payment

(consistent with rule for prompt payment

of providers under section 1396u–2(f) of

this title) to Indian health care providers

that are participating providers with

respect to such entity....

§ 1396u-2(h)(2)(B) (emphasis added).

Given this evidence, it would seem odd to construe

a provision Congress intended to assure timeliness of

provider payment as not applying to many providers,

as HFS advocates. That would appear to defeat the

statute’s evident purpose in most cases. We decline to

read the text in such a manner. Quarles v. United

States, ––– U.S. ––––, 139 S. Ct. 1872, 1879 (2019) (“We

should not lightly conclude that Congress enacted a

29a

self-defeating statute.”). If the text required such a

result, that would be one thing, but we should not

adopt such an improbable reading of the text to reach

such an odd result.

In applying the first Blessing factor, we next

conclude that section 1396u-2(f) grants providers a

right, not merely a generalized benefit. It is here that

we disagree with the district court. In granting the

motion to dismiss, the court determined that section

1396u-2(f) failed the first Blessing factor. The court

invoked Gonzaga, asserting that providers received

only “a generalized ‘benefit’” from section 1396u-2(f),

which “isn’t good enough” to constitute a right

enforceable under section 1983. Saint Anthony

Hospital, 548 F. Supp. 3d at 734, quoting Gonzaga, 536

U.S. at 283. The district court concluded that section

1396u-2(f) “itself does not entitle providers to much of

anything, and does not contain any ‘explicit rightscreating terms.’” Id., quoting Gonzaga, 536 U.S. at

284.

We read the statute differently. Gonzaga provides

a useful contrast regarding rights-creating language.

In Gonzaga, a former student sued Gonzaga

University and an employee under section 1983 for

allegedly violating his rights under the Family

Educational Rights and Privacy Act (FERPA). Part of

the statutory language at issue directed the Secretary

of Education that “[n]o funds shall be made available’

to any ‘educational agency or institution’ which has a

prohibited ‘policy or practice’” of permitting the

release of education records without parents’ written

consent. Gonzaga, 536 U.S. at 287 (alteration in

original), quoting 20 U.S.C. § 1232g(b)(1); see also

30a

§ 1232g(b)(2). That prohibited activity is allegedly

what occurred in the case.

The Supreme Court concluded that Congress did

not grant an individual whose interests were violated

under FERPA a right enforceable through section

1983. Because the statutory provisions did not have an

individualized focus, they failed Blessing factor one:

“[The] provisions further speak only in terms of

institutional policy and practice, not individual

instances of disclosure. Therefore, as in Blessing, they

have an ‘aggregate’ focus, they are not concerned with

‘whether the needs of any particular person have been

satisfied,’ and they cannot ‘give rise to individual

rights.’” Gonzaga, 536 U.S. at 287–88 (internal

citation omitted), quoting Blessing, 520 U.S. at 343–

44. The Court also highlighted that the Secretary of

Education could take away funds only if the university

did not substantially comply with the statutory

requirements. This fact contributed to the understanding that the focus was on systemwide performance rather than individual instances of improper

disclosure. Finally, since FERPA’s provisions spoke

only to the Secretary and directed him to withdraw

funding from schools that had a “prohibited ‘policy or

practice,’” the Court determined that their focus was

“two steps removed from the interests of individual

students and parents.” Id. at 287 (citation omitted).

The provisions therefore failed to confer an individual

right enforceable under section 1983.

The opposite is true here. Section 1396u-2(f) is

concerned with whether the needs of particular

persons and entities—providers like Saint Anthony—

have been satisfied. The statutory text specifies that

31a

the State “shall provide” that MCOs “shall make

payment to health care providers ... on a timely basis.”

42 U.S.C. § 1396u-2(f). The focus of section 1396u-2(f)

is not “two steps removed” from the interest of

providers. Its focus is directly on the interest Saint

Anthony asserts here: ensuring that providers receive

timely payment from MCOs. And the provision is not

concerned only with whether MCOs in the aggregate

pay providers on the 30/90 pay schedule, but whether

individual providers are receiving the payments in the

timeframe promised.

We see this in the provision’s close attention to

provider-specific exemptions from the 30/90 pay

schedule. Section 1396u-2(f) says that its mandate

applies “unless the health care provider and the

organization agree to an alternate payment schedule.”

It establishes a personal right to timely payment,

which all providers are entitled to insist upon. Cf.

Planned Parenthood of Indiana, 699 F.3d at 974

(Medicaid state plan requirement permitting all

eligible recipients to receive medical assistance from

the provider of their choice established a personal right

“to which all Medicaid patients are entitled” but,

implicitly, need not accept (emphasis added)). Either

way, the focus is on the individual provider. The focus

is not on whether MCOs in the aggregate substantially

comply with the timely payment requirement. Section

1396u-2(f) is thus not just a benchmark for aggregate

performance.

That conclusion finds support in our precedents

under the Medicaid statutes. Section 1396a(a)(10)(A)

provides that “[a] State plan for medical assistance

must ... provide ... for making medical assistance

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available ... to all [eligible] individuals.” We have held

that the provision confers private rights to individuals

enforceable under section 1983. See Miller v.

Whitburn, 10 F.3d 1315, 1319–20 (7th Cir. 1993);

accord, Bontrager v. Indiana Family & Social Services

Admin., 697 F.3d 604, 607 (7th Cir. 2012) (reaffirming

Miller’s rights analysis after Blessing and Gonzaga).

In Miller, we found it significant that the State was

required to provide medical assistance to all eligible

individuals. The same is true here, but with respect to

timely payments to providers that do not opt out of the

30/90 pay schedule. And in Wilder, the statute, like the

statute here, required states to provide for payment to

health care providers: “a state plan” must ensure

“‘payment ... of the hospital services, nursing facility

services, and services in an intermediate care facility

for the [recipients] under the plan.’” 496 U.S. at 510

(omission

original),

quoting

U.S.C.

1396a(a)(13)(A) (1982 ed., Supp. V). The Supreme

Court concluded that this statutory language granted

rights to health care providers enforceable under

section 1983. See id. at 524. Wilder may lie close to the

outer edge of the line for section 1983 cases under

Spending Clause legislation, but recognizing the

rights-creating language in section 1396u-2(f) does not

push that logic any further.

At bottom, section 1396u-2(f) defines the

minimum terms of the provider’s right to timely

payment and is provider-specific. It uses “individually

focused terminology,” Gonzaga, 536 U.S. at 287,

unmistakably “phrased in terms of the persons

benefited,” id. at 284, quoting Cannon v. University of

Chicago, 441 U.S. 677, 692 n.13 (1979), and satisfies

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Blessing factor one.

2. Factor Two: Administration

Blessing factor two requires a plaintiff to show

that “the right assertedly protected by the statute is

not so vague and amorphous that its enforcement

would strain judicial competence.” Talevski, 6 F.4th at

719. HFS does not appear to contest whether section

1396u-2(f) satisfies this standard, nor could it. Saint

Anthony argues that the State violated its right to

timely payment by failing to abide by section 1396u2(f)’s statutory mandate of trying to ensure that the

MCOs are paying providers in line with the 30/90 pay

schedule. Determining whether payments met the

30/90 pay schedule is “administrable,” “fully capable

of judicial resolution,” and “falls comfortably within

the judiciary’s core interpretative competence.”

Planned Parenthood of Indiana, 699 F.3d at 974.

3. Factor Three: Obligation

The third Blessing factor asks whether section

1396u-2(f) unambiguously imposes a binding

obligation on HFS. This requires answering two

questions: (1) what is HFS’s duty under the statute,

and (2) is that duty mandatory?

In a typical private right dispute, the emphasis is

on the second question. See, e.g., BT Bourbonnais

Care, 866 F.3d at 822. Section 1396u-2(f) contains

mandatory language, however: “A [State contract] ...

with a medicaid managed care organization shall

provide that the organization shall make payment to

health care providers ... on a timely basis....” 42 U.S.C.

§ 1396u-2(f) (emphasis added). The double use of

“shall” rebuts the notion that the State’s obligation is

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anything less than mandatory. But what exactly is the

State’s obligation here?

Section 1396u-2(f) requires the State’s contracts

with the MCOs to require that the MCOs pay providers

on the 30/90 pay schedule. HFS asserts, and the partial

dissent agrees, that section 1396u-2(f) does not impose

a duty on the State even to try to ensure that MCOs

actually do what their contracts say. HFS’s theory is

that the statute requires only that a provision in the

paper contract specify the timely payment obligation.

The State can then sue MCOs for breach of contract if

they fail to pay providers according to the 30/90 pay

schedule, and providers are entitled to enforce their

own contractual rights as they see fit. In HFS’s view,

nothing in section 1396u-2(f) requires the State itself

do anything more to ensure prompt payment. Put

differently, if the contract between an MCO and the

State contains a clause ensuring timely payment for

providers on the 30/90 pay schedule, the State

contends it has met its duty under section 1396u-2(f),

regardless of actual performance.

We do not read section 1396u-2(f) as permitting

such a hands-off approach. Nor would a reasonable

state official deciding whether to accept federal

Medicaid money have expected she could take that

hands-off approach to MCO payments to providers.

When interpreting statutes, often the “meaning—or

ambiguity—of certain words or phrases may only

become evident when placed in context.” King v.

Burwell, 576 U.S. 473, 486 (2015), quoting FDA v.

Brown & Williamson Tobacco Corp., 529 U.S. 120, 132

(2000). We must read texts “in their context and with

a view to their place in the overall statutory scheme.”

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Id., quoting Brown & Williamson, 529 U.S. at 133; see

also Davis v. Michigan Dep’t of Treasury, 489 U.S. 803,

809 (1989) (“[S]tatutory language cannot be construed

in a vacuum. It is a fundamental canon of statutory

construction that the words of a statute must be read

in their context and with a view to their place in the

overall statutory scheme.”). And to the extent possible,

we must “ensure that the statutory scheme is coherent

and consistent.” Ali v. Federal Bureau of Prisons, 552

U.S. 214, 222 (2008).

Interpreting section 1396u-2(f) as only a “paper”

requirement conflicts with these principles of

statutory interpretation. HFS is correct that Congress

intended MCOs to “assume day-to-day functions

previously performed by States under a traditional feefor-service model.” Appellee’s Br. at 30. But Congress

did not intend for MCOs to go unsupervised. It has

long been obvious to all that under the managed-care

system of Medicaid, MCOs have a powerful incentive

to delay payment to providers for as long as possible

and ultimately to underpay to maximize their own

profits. It’s a classic agency problem: MCOs are

expected to act in the providers’ interests, but their

interests are not the same. Regarding timely

payments, they are in direct conflict. The Medicaid Act

contains several provisions to counteract that problem

in addition to section 1396u-2(f). They help inform our

understanding of the particular provision in dispute

here.

The statute also imposes reporting and oversight

responsibilities on states. For example, section

1396b(m)(2)(A)(iv) requires a state’s contract with an

MCO to permit the state “to audit and inspect any

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books and records” of an MCO related to “services

performed or determinations of amounts payable

under the contract.” Section 1396u-2(c)(2)(A)(i)

further specifies that a state’s contract with an MCO

must provide for an “annual (as appropriate) external

independent review” of the “timeliness” of MCO

“services for which the organization is responsible,”

including payments. The Medicaid Act thus requires

HFS to take steps to monitor MCO payment activities

to gather performance data and to understand how the

system is functioning.

The Medicaid Act further specifies actions a state

can take when an MCO underperforms. See § 1396u2(e). The State can put an MCO on a performance plan,

for example. As discovery in this case revealed, HFS

took this step recently with CountyCare, an MCO,

after CountyCare paid only 40% of claims within 30

days and only 62% of claims within 90 days. The

CountyCare case turned up evidence of the agency

problem in action. The State found that CountyCare’s

Medicaid money was improperly diverted from the

Medicaid program to pay other county government

bills rather than health care providers.4

In such a case, if an MCO has “repeatedly failed to

meet the requirements” of its contract with the State

and the requirements in section 1396u-2, “the State

As with the information mentioned above about Mercyhealth,

we may also consider the CountyCare information in evaluating

the Rule 12(b)(6) motion without converting the motion into one

for summary judgment. The information elaborates on (and

illustrates) factual allegations in the complaint. E.g., Geinosky,

675 F.3d at 745 n.1.

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shall (regardless of what other sanctions are provided)

impose the sanctions described in subparagraphs (B)

and (C) of paragraph (2).” § 1396u-2(e)(3). Subparagraph (B) details the appointment of temporary

management to oversee the MCO, and subparagraph

terminate enrollment without cause. § 1396u2(e)(2)(B)–(C).

Federal Medicaid regulations add to the State’s responsibilities here. For instance, 42 C.F.R. § 438.66(a)

(2016) provides: “The State agency must have in effect

a monitoring system for all managed care programs.”

Section 438.66(b)(3) specifies that the State’s

monitoring system “must address all aspects of the

managed care program, including the performance of

each MCO ... in ... [c]laims management.” It’s hard to

imagine a more central aspect of claims management

than timely payments. Saint Anthony alleges here that

HFS is simply failing to collect the required data on

the timeliness of MCO payments.

These responsibilities support the conclusion that

Congress intended for states to try to ensure that the

right to timely payment in section 1396u-2(f) is

honored in real life. The timely payment rule is more

than a paper requirement. The more coherent reading

of the statute as a whole is that Congress intended the

State to engage in these reporting and oversight

responsibilities, and if it becomes evident that MCOs

are systematically not paying providers on a timely

basis, then the State would have an obligation to act

under section 1396u-2(f) to secure providers’ rights.

These mandatory oversight responsibilities would

make little sense if that were not the case. The

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provision’s mandatory language, coupled with the

additional oversight and reporting responsibilities,

supports the reading that section 1396u-2(f) must be

doing more than imposing merely the formality of

contract language. Providers’ right to timely payment

must exist in practice.

HFS counters, and the partial dissenting opinion

agrees, that the duty imposed by section 1396u-2(f) is

at the very least ambiguous. HFS points to Pennhurst

State School & Hospital v. Halderman, 451 U.S. 1, 17

(1981), which taught that Congress can impose

conditions on grants of federal money only if it does so

“unambiguously” and “with a clear voice.” In HFS’s

view, if Congress wanted to impose the significant duty

on states that Saint Anthony advocates, it should have

done so more explicitly. Section 1396u-2(f) is not a

clear statement, it’s ambiguous, and therefore cannot

carry the weight Saint Anthony gives it. So says HFS.

We appreciate the point, but we think Congress

spoke sufficiently clearly here. The clear-statement

rule explains that “States cannot knowingly accept

conditions of which they are ‘unaware’ or which they

are ‘unable to ascertain.’” Arlington Central School

District Board of Education v. Murphy, 548 U.S. 291,

296 (2006), quoting Pennhurst, 451 U.S. at 17. To

determine whether Congress spoke clearly in this case,

we “must view [section 1396u-2(f) and the Medicaid

Act] from the perspective of a state official who is

engaged in the process of deciding whether the State

should accept [Medicaid] funds and the obligations

that go with those funds.” Id. Any state official

planning to launch a managed-care program would

have understood that the state would have to try to

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ensure that providers receive prompt payment from

MCOs. Such an official would not reasonably have

concluded that Congress intended that the “rule for

prompt payment of providers” would be only a

proverbial paper tiger. See § 1396u-2(h)(2)(B)

(describing section 1396u-2(f) as the “rule for prompt

payment of providers”). That position conflicts with

the State’s oversight and reporting obligations and its

enforcement duties under the Medicaid Act.

HFS also argues that section 1396u-2(f) cannot

impose this duty on the State because it “would

negate[] section 1396u-2(e)’s express grant to States of

discretion to seek termination of an MCO’s contract

for violating section 1396u-2[f] or its contract with the

State.” Appellee’s Br. at 27. The argument highlights

a key issue in this appeal and one that helps explain

our disagreement with the district court and the

partial dissent.

Saint Anthony requested several forms of relief in

its complaint. One of those was canceling a contract

with an MCO that fails to pay on time after State

intervention. HFS argues that forcing it to cancel a

contract with an MCO because it did not meet the

30/90 pay schedule would infringe on the State’s

discretion to decide when it will terminate such a

contract, which is expressly preserved by the statute.

See § 1396u-2(e)(4)(A) (“In the case of a managed care

entity which has failed to meet the requirements of

this part or a contract under section 1396b(m) or

1396d(t)(3) of this title, the State shall have the

authority to terminate such contract....”). In HFS’s

view, that means section 1396u-2(f) cannot impose a

duty on the State to ensure providers receive timely

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payment because it might require the State to take

action that is expressly reserved to its discretion.

We are inclined to agree with HFS that a district

court could not force the State to cancel a contract with

an MCO. Canceling a contract with any one of the

seven MCOs in Illinois might well cause a “massive

disruption” to the State’s Medicaid program.

Appellee’s Br. at 28. HFS and only HFS has the

discretion to decide when and why it will invite that

type of disruption. Section 1396u-2(e)(4)(A) is clear on

that point. See also 42 C.F.R. §§ 438.708 (when states

can terminate an MCO contract), 438.730 (CMS can

sanction an MCO by denying payment). To the extent

that Saint Anthony requests such relief, we doubt the

district court has authority to impose it, though we

need not answer that question definitively at this

stage, on the pleadings. Perhaps sufficiently egregious

facts might convince us otherwise, but that question

about a worst-case scenario can be addressed if and

when it actually arises and matters.

Continuing with the theme of assuming the worst,

HFS and the partial dissent also argue that reading

this duty into section 1396u-2(f) would lead to the

district court acting effectively as the Medicaid claims

processor for the State. In a parade of horribles, that’s

the prize-winning float. Given the practical difficulties

in judicial enforcement that would come with

recognizing a duty here, HFS contends, such a duty

could not be what Congress intended. We agree that

any form of retail-level relief, i.e., requiring the district

court to adjudicate issues at the claim-by-claim level,

would strain judicial resources and seem to conflict

with the arbitration clauses in the contracts between

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the MCOs and Saint Anthony. A process that required

a district judge to micro-manage claims would be

inappropriate here.

These two limits on remedies in a section 1983

action do not persuade us, however, that we should

affirm dismissal on the theory that the State has no

duty at all to ensure timely payment under section

1396u-2(f). HFS can take other steps at the system

level to address chronic late and/or short payments by

MCOs. Those actions would neither force the State to

cancel an MCO contract nor turn the district court into

a claims processor. If Saint Anthony can prove its

claims of systemic delay and/or underpayment, we are

confident that the district court could craft injunctive

relief to require HFS to do something to take effective

action.

We draw helpful guidance on these issues of

potential equitable relief from O.B. v. Norwood, 838

F.3d 837 (7th Cir. 2016). There, we affirmed a

preliminary injunction against Illinois officials in a

suit brought by Medicaid beneficiaries who sought to

enforce different sections of the Medicaid Act

requiring the State to find nurses to provide home

nursing for children enrolled in Medicaid. HFS argued

in O.B. that it had no obligation to find nurses (or to

act at all). We rejected that argument:

Certainly the defenses thus far advanced by

HFS are weak. The primary defense is that

nothing in the Medicaid statute “required

[HFS] to ensure that Plaintiffs would receive

medical care from nurses in their homes.” But

it was HFS that decided that home nursing was

the proper treatment for O.B., the other named

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plaintiffs, and the other members of the class.

Id. at 840 (alteration in original).

We recognized in O.B. the difficulties state officials

faced in providing the needed nurses. There was no

guarantee that compliance with the injunction would

solve the plaintiffs’ problems. In affirming the

preliminary injunction, though, we explained that the

injunction “should be understood simply as a first cut:

as insisting that the State do something rather than

nothing to provide in-home nursing care for these

children.” Id. at 842; see also id. at 844 (Easterbrook,

J., concurring) (“All a district court can do in a

situation such as this is require [the State] to start

trying.”). If Saint Anthony can prove its claims of

systemic delay and/or underpayment, the same is true

here. The State decided to switch to a Medicaid

program dominated by managed care. The State

cannot now claim it has no obligation to ensure that

Medicaid providers serving patients under that

program receive timely payment. O.B. instructs that

where HFS has a duty, a district court may order it to

do something when that duty is not being met, at the

first cut. The court may then need to supervise the

effects of the injunction and the State’s response and

adjust the court’s orders as circumstance and equity

may require. The district court should not let the

perfect become the enemy of the good, nor should the

possibility that a first cut at an injunction might not

work sufficiently justify a denial of any relief at all.

To be clear, we are not suggesting that an

injunction ordering the State officials literally to do

only “something” would be sufficient. Federal Rule of

Civil Procedure 65(d)(1) requires an injunction to

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“describe in reasonable detail ... the act or acts

restrained or required.” At the same time, we have

often recognized that district courts have substantial

equitable discretion in crafting injunctions so that they

are both understandable by those enjoined and

effective to accomplish their purposes. Eli Lilly & Co.

v. Arla Foods, Inc., 893 F.3d 375, 384–85 (7th Cir.

2018); H-D Michigan, LLC v. Hellenic Duty Free Shops

S.A., 694 F.3d 827, 843 (7th Cir. 2012), citing Russian

Media Group, LLC v. Cable America, Inc., 598 F.3d

302, 307 (7th Cir. 2010). If Saint Anthony can prove

systemic failures by MCOs to comply with the 30/90

payment schedule with reasonably transparent

payment information, we would expect the district

court to explore with the parties what steps the State

officials could reasonably be expected to take to correct

those systemic failures before framing an appropriate

and effective injunction. And if such an injunction

later needed to be modified based on experience, the

district court would have ample power to do so at the

request of a party or on its own motion.

O.B. also makes clear that a district court can craft

injunctive relief within its equitable powers and

discretion even in circumstances where some more

drastic remedial measures may be off the table. See

O.B., 838 F.3d at 844 (Easterbrook, J., concurring)

(identifying certain forms of relief that were off limits

while also instructing the district judge to try different

things and to “keep tabs on what is happening and

adjust the injunction as appropriate” to secure relief

for plaintiffs); accord, Rizzo v. Goode, 423 U.S. 362,

376–77 (1976) (“Once a right and a violation have been

shown, the scope of a district court’s equitable powers

44a

to remedy past wrongs is broad, for breadth and

flexibility are inherent in equitable remedies.”

(internal quotations and citation omitted)). Federal

Rule of Civil Procedure 54(c) offers relevant guidance

here, providing that any final judgment other than a

default judgment “should grant the relief to which

each party is entitled, even if the party has not

demanded that relief in its pleadings.” The converse is

also true, of course. If a party demands relief in its

pleadings that is not available, such a demand does not

poison the well to defeat relief to which the party is

otherwise entitled. If Saint Anthony succeeds on the

merits of its claims, we believe the district court here

will be able to craft a remedy to push the State toward

complying with its duty to provide for timely and

transparent payments to Saint Anthony.

We recognize that part of the rationale for

adopting the managed-care model was to ease the

State’s administrative burden. Measures that would

force HFS to take a more aggressive oversight role

could reduce some of the administrative benefits the

State hoped to gain by the switch to managed care. As

we have explained, however, the Medicaid Act permits

states to shift major Medicaid duties to MCOs but does

not allow States to wash their hands of effective

oversight. On the contrary, the Medicaid Act shows

that Congress recognized the troubling financial

incentives inherent in a managed-care system and the

need for effective oversight. Recall that the Medicaid

Act requires the State to audit and inspect MCO books

and records, to perform annual external reviews of

payment timeliness, and to implement sanctions if an

MCO is underperforming.

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Saint Anthony alleges here that HFS is falling far

short on those oversight and monitoring duties. HFS

cannot avoid those duties altogether on the theory that

Saint Anthony also asked for certain remedies that

might not be available in this section 1983 action. If

the State cannot manage to carry out those oversight

and monitoring duties, an effective remedy to enforce

the requirements would honor the bargain struck

when Illinois accepted funding for Medicaid in the first

place.

The partial dissent also criticizes our focus on

systemic failures and judicial relief to address such

failures, arguing that there is no textual basis for that

focus. The partial dissent portrays the choice as an

either-or: either the district court must prepare to take

over day-to-day claims management, or no judicial

relief is available at all. The case is difficult, but the

judicial options are not so limited. First, the Medicaid

statute and the relevant contracts recognize that

perfection is not required. That much is clear from the

30/90 pay schedule itself: pay 90% of clean claims

within 30 days and 99% within 90 days. Second, HFS

itself seems to be able to tell the difference between

minor problems and systemic ones, and there is reason

to think it can identify systemic measures that can be

effective without having HFS (let alone the district

court) take over day-to-day claims management. As

noted above, for example, HFS took action against

CountyCare based on data showing that CountyCare

“was not regularly meeting” the 30/90 pay schedule.

Decl. of Robert Mendonsa ¶ 16, Dkt. 86-10. HFS

investigated, demanded that CountyCare adopt a

“Corrective Action Plan,” and reported that a few

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months after adopting such a plan, CountyCare

“significantly reduced the number of outstanding

claims that [were] older than 90 days.” Id. ¶¶ 17–21.

We need not and should not adopt a mathematical

definition of “systemic” failures at the pleadings stage.

That problem can await further factual development.

(To use a metaphor often used in the law, a person can

usually tell the difference between being in mountains,

in foothills, or on a plain even if there are no sharp

boundaries between mountains, foothills, and plains.)

For these reasons, we conclude that section 1396u2(f) satisfies the third Blessing factor because the

State has a binding obligation to try to ensure prompt

payment for providers from MCOs.

4. Alternative Remedial Scheme

Since section 1396u-2(f) satisfies the three

Blessing factors, the right to prompt payment is presumptively enforceable under section 1983. Talevski, 6

F.4th at 720. HFS can rebut this presumption by

“showing that Congress specifically foreclosed a

remedy under § 1983 ... expressly, through specific

evidence from the statute itself, or impliedly, by

creating a comprehensive enforcement scheme that is

incompatible with individual enforcement under

§ 1983[.]” Id. (alteration and omission in original),

quoting Gonzaga, 536 U.S. at 284 n.4. HFS has not

identified any express language in the Medicaid Act

foreclosing private rights enforcement. HFS relies

instead on the implicit approach, which is a “difficult

showing.” Blessing, 520 U.S. at 346.

If the MCOs are failing to abide by the contractual

terms, says HFS, Saint Anthony should just enforce its

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own contracts with them. And providers like Saint

Anthony are “in the best position” to “enforce their

right to timely payment directly under their contracts

with MCOs.” Appellee’s Br. at 29. As HFS sees the

matter, there is no need to permit section 1983 actions

to “achieve Congress’s goal of enabling Medicaid

providers to receive timely payment.” Id.

A contractual remedy may offer some prospect of

relief to a provider like Saint Anthony. But HFS has

not convinced us that “allowing [section 1983] actions

to go forward in these circumstances ‘would be

inconsistent with’” a “carefully tailored [Congressional] scheme.’” Blessing, 520 U.S. at 346, quoting

Golden State Transit Corp. v. City of Los Angeles, 493

U.S. 103, 107 (1989). Rather, Congress intended the

State’s Medicaid plan to ensure timely payment to

providers. If, as Saint Anthony alleges, the plan has

been failing to meet this requirement, repeatedly and

systematically, we would not be surprised if providerMCO arbitrations would do little to correct that

problem on a systemic basis.

There is good reason to doubt that contractual

remedies alone can vindicate the provider’s right to

prompt payment. Saint Anthony files many thousands

of Medicaid claims each year. If most claims are not

paid on time, Saint Anthony’s option under the

contract is to sue the MCO and/or to submit each claim

for arbitration. Many other Medicaid providers across

Illinois might need to do the same with each of the

seven MCOs. That avenue represents a claim-by-claim

adjudication on the individual provider-MCO level,

across many thousands of claims, all in their own

arbitrations. It’s not immediately obvious that this

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dispute-resolution system would even be manageable,

let alone superior to a systemic solution implemented

by HFS. At the very least, we are not persuaded that

Congress, implicitly through the contractual model,

created “a comprehensive enforcement scheme that is

incompatible with individual enforcement under

[section 1983].” Gonzaga, 536 U.S. at 285 n.4.

For these reasons, we conclude that section 1396u2(f) satisfies Blessing and contains a right to timely

payment that is enforceable under section 1983. Saint

Anthony has plausibly alleged a violation of such a

right that would support a claim for relief. We

therefore reverse the district court’s dismissal of this

claim.

We emphasize that this decision is based on the

pleadings. This is a hard case with high stakes for the

State, Medicaid providers, and Medicaid beneficiaries.

We also recognize the potential magnitude of the case

and the challenges it may present to the district court.

If it turns out that resolving this dispute would

actually require the district court to analyze each late

claim, effectively taking on the role of the State’s

Medicaid claims processors, or that effective relief

could come only by canceling a contract with an MCO,

then we may face a different situation. But we do not

know at this point what direction the course of this

litigation will take. HFS has not convinced us that we

must decide whether Saint Anthony has alleged a

viable claim today by assuming only the worst-case

scenarios will emerge down the line. If Saint Anthony

can support its factual allegations about systematically

late and inadequate payments, we believe the district

court could exercise its equitable discretion to fashion

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effective relief. The corrective action plan that HFS

demanded from CountyCare may provide a starting

point, adaptable to the circumstances of different

MCOs.

III. Additional Issues

We have three issues left to discuss: Saint

Anthony’s claim in Count Two under section

1396a(a)(8), the district court’s denial of Saint

Anthony’s motion to supplement the complaint, and a

possible stay in favor of arbitration. We address each

in turn.

A. Count Two

Unlike Saint Anthony’s claim under section

1396u-2(f), its claim under section 1396a(a)(8) is not

viable. Section 1396a(a)(8) does not provide Saint

Anthony any enforceable rights under section 1983

because it does not contain any rights-creating

language for providers. In the jargon of this niche in

the law, it fails to satisfy Blessing factor one.

Recall that the first Blessing factor requires

Congress to have intended the plaintiff to be the

beneficiary of the provision in question. Blessing, 520

U.S. at 340. Section 1396a(a)(8) requires a state to

“provide that all individuals wishing to make

application for medical assistance under [the state’s

Medicaid system] shall have opportunity to do so, and

that such assistance shall be furnished with reasonable

promptness to all eligible individuals.” 42 U.S.C.

§ 1396a(a)(8). The key language in this provision is

“individuals,” used in two places. At the beginning, the

text specifies that “all individuals wishing to make

application for medical assistance” must have the

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opportunity to do so. At the end, it says that “all

eligible individuals” must receive that assistance

promptly. We agree with other circuits that have

concluded that individuals are the intended beneficiaries of this provision. See, e.g., Romano v.

Greenstein, 721 F.3d 373, 378–79 (5th Cir. 2013)

(concluding that individuals were the “clearly”

intended beneficiaries of section 1396a(a)(8) and that

the provision gave individuals a private right of

action); Doe v. Kidd, 501 F.3d 348, 356–57 (4th Cir.

2007) (same); see also Nasello, 977 F.3d at 602

(collecting cases).5

Saint Anthony asserts that “individuals” could

also include providers. It argues that dictionary

definitions of “individual” include a “single ... thing, as

opposed to a group,” which includes a single provider.

Appellant’s Br. at 39, quoting Individual, Black’s Law

Dictionary (11th ed. 2019). Medical assistance is also

defined in the statute to include “payment.” 42 U.S.C.

§ 1396d(a). Saint Anthony puts these pieces together

to argue that section 1396a(a)(8) includes requiring

MCOs to furnish “medical assistance” (defined as

including “payment” for medical services) to

“individuals” (defined as including “hospitals”) with

“reasonable promptness.”

The argument is not convincing. For one,

interpreting “individual” to include a “hospital” is a

long stretch of the language. Saint Anthony’s argument is also inconsistent with other parts of section

We declined to decide this issue in Nasello but accepted the

premise for the sake of argument. 977 F.3d at 602.

51a

1396a(a)(8) and surrounding statutory provisions.

Section 1396a(a)(8) says that states must “provide that

all individuals wishing to make application for medical

assistance” can do so. (Emphasis added.) Providers do

not make application for medical assistance; individuals do. See 42 C.F.R. § 435.4 (2015) (“Applicant

means an individual who is seeking an eligibility

determination for himself or herself through an

application submission or a transfer from another

agency or insurance affordability program.”). As the

district court correctly identified, the texts

surrounding section 1396a(a)(8) use “individuals”

repeatedly to refer to natural persons. See Saint

Anthony Hospital, 548 F. Supp. 3d at 738 (collecting

provisions).

Given this statutory evidence, Congress did not

speak “with a clear voice” and manifest an “unambiguous[]” intent to confer rights to providers like

Saint Anthony under section 1396a(a)(8) through the

word “individuals.” See Pennhurst, 451 U.S. at 17.

Section 1396a(a)(8) thus fails the first Blessing factor

and does not confer a private right to providers that

can be enforced under section 1983.

B. Saint Anthony’s Motion to Supplement the

Complaint

While the motion to dismiss was pending, Saint

Anthony moved to supplement its complaint with a

claim for deprivation of property without due process

of law. Saint Anthony alleged HFS violated its due

process rights in two ways, both related to payment

transparency: (1) by failing to notify Saint Anthony of

the amounts being paid for services provided to

Medicaid beneficiaries in the fee-for-service program;

52a

and (2) by failing to require MCOs to provide such

notice in the managed-care program. Four days after

the district court dismissed the existing complaint, the

court denied Saint Anthony’s motion to supplement.

As a preliminary matter, there is an academic

question whether this request should be construed as

a motion to supplement under Federal Rule of Civil

Procedure 15(d) or a motion to amend under Rule

15(a). Saint Anthony’s motion sought to add

allegations concerning both post-complaint events

(most appropriate as a 15(d) supplement) and some

pre-complaint events that came to light in discovery

(most appropriate under 15(a)). The distinction

between 15(a) amendments and 15(d) supplements is

not important here. District courts have essentially the

same responsibilities and discretion to grant or deny

motions under either subsection. See Glatt v. Chicago

Park District, 87 F.3d 190, 194 (7th Cir. 1996) (“[T]he

standard is the same.”); see also 6A Wright & Miller,

Federal Practice and Procedure § 1504 (3d ed.)

(explaining that a lack of formal distinction between

the two is “of no consequence,” and that leave should

be freely granted when doing so will promote economic

and speedy disposition of entire controversy and will

not cause undue delay or unfair prejudice to other

parties).

Ordinarily, “a plaintiff whose original complaint

has been dismissed under Rule 12(b)(6) should be

given at least one opportunity to try to amend her

complaint before the entire action is dismissed. We

have said this repeatedly.” Runnion ex rel. Runnion v.

Girl Scouts of Greater Chicago & Northwest Indiana,

786 F.3d 510, 519 (7th Cir. 2015) (collecting cases).

53a

The decision to deny the plaintiff such an opportunity

“will be reviewed rigorously on appeal.” Id. “Unless it

is certain from the face of the complaint that any

amendment would be futile or otherwise unwarranted,

the district court should grant leave to amend after

granting a motion to dismiss.” Id. at 519–20, quoting

Barry Aviation Inc. v. Land O’Lakes Municipal Airport

Commission, 377 F.3d 682, 687 (7th Cir. 2004).

Reasons for denying leave to amend include “futility,

undue delay, prejudice, or bad faith.” Kreg

Therapeutics, Inc. v. VitalGo, Inc., 919 F.3d 405, 417

(7th Cir. 2019).

The district court used a procedure here that ran

a high risk of error. Saint Anthony requested leave to

add the due process claim after minimal discovery and

before the court ruled on the pending motion to

dismiss. The court entered a minute order recognizing

that “Rule 15(a)(2) provides that the ‘court should

freely give leave when justice so requires.’” It then

ordered HFS to respond, even permitting an oversized

brief. HFS responded by arguing the merits of the due

process claim, saying in essence that the proposed

amendment or supplement would be futile. Futility

could be a good reason to deny the amendment or

supplement, but then the district court took a wrong

turn. It denied Saint Anthony an opportunity to file a

reply defending the merits of its proposed due process

claim. The court then denied Saint Anthony’s motion

on futility grounds. This unusual procedure thus

denied Saint Anthony a fair opportunity to defend the

merits of its supplemental claim—only to lose on the

supposed lack of merit. That procedure amounted to

an abuse of discretion.

54a

Other aspects of the district court’s decision on

that motion also point toward reversal. For instance,

Saint Anthony’s request to supplement the complaint

occurred early in the lawsuit. See Abu-Shawish v.

United States, 898 F.3d 726, 738 (7th Cir. 2018) (“The

usual standard in civil cases is to allow defective

pleadings to be corrected, especially in early stages, at

least where amendment would not be futile.”

(emphasis added)). The district court did not find bad

faith by Saint Anthony or prejudice to HFS.

The district court denied the motion in part

because it concluded the new claim would expand the

scope and nature of the case, which the court thought

was “otherwise over.” We do not find this rationale

persuasive, especially after we have concluded that the

case is not otherwise over. The due process claim

against the State pertains to the lack of transparency

in the Medicaid remittances, based at least in part on

new information produced in the limited discovery.

Saint Anthony alleged problems with the remittances

in its original complaint, as HFS acknowledges. The

new claim added issues related to the fee-for-service

aspects of Illinois Medicaid, but that fact alone was not

reason enough to deny leave so early in the life of a

case and before discovery was in full swing. Courts

should not be surprised, and should not respond

rigidly, when discovery in a complex case turns up

evidence to support a new theory for relief or defense.

In addition, by denying the motion to amend or

supplement, the district court put Saint Anthony at

risk of serious and unfair prejudice. To the extent the

district court might have thought that the due process

claim should be presented in a separate lawsuit, Saint

55a

Anthony could face serious problems with claim

preclusion. See Arrigo v. Link, 836 F.3d 787, 798–800

(7th Cir. 2016).6

At this stage of the proceedings, the only arguable

ground for denying Saint Anthony’s request to

supplement its complaint would have been futility on

the merits. The district court did say that it “ha[d]

doubts about the legal sufficiency of Saint Anthony’s

proposed new claim.” As noted above, the denial of a

In Arrigo, the first district court denied plaintiff’s motion to

amend the complaint to add a related claim, and we affirmed.

Then, when the plaintiff tried to bring the claim in a new action,

the second district court dismissed it. We upheld that decision,

asserting that “allowing Arrigo to proceed here would result in

the very prejudice and inefficiency that the denial of the untimely

amendment, which we upheld, was intended to avoid.” 836 F.3d

at 800. We also stressed that “[t]o rule otherwise would

undermine the principles animating the doctrines of res judicata

and claim splitting, as well as our decision upholding on appeal

the denial of the motion for leave to amend.” Id. In that sense, by

prohibiting the supplemental claim here, the district court might

have also prevented Saint Anthony from bringing that claim in a

future case, all without the opportunity for Saint Anthony to

defend the merits of the claim. HFS argues that Saint Anthony’s

concerns are misplaced because the district court implied that

Saint Anthony could bring its due process claim in a future action.

It is true that a district court can expressly reserve a claim for

future adjudication, see, e.g., Sklyarsky v. Means-Knaus Partners,

L.P., 777 F.3d 892, 896 (7th Cir. 2015); 18 Wright & Miller § 4413,

but such an exception requires the second court to conclude the

first court adequately preserved the claim. One could understand

why such assurances from HFS, including its post-argument

letter promising to forgo a claim preclusion defense in a separate

lawsuit, might provide Saint Anthony limited comfort, especially

since the district court’s stated rationale was based at least in part

on a supposed lack of merit.

56a

plaintiff’s first attempt at leave to amend or

supplement “will be reviewed rigorously on appeal.”

Runnion, 786 F.3d at 519. Doubts on the merits do not

show futility. See, e.g., id. at 519–20; Bausch v. Stryker

Corp., 630 F.3d 546, 562 (7th Cir. 2010) (“Generally, if

a district court dismisses for failure to state a claim,

the court should give the party one opportunity to try

to cure the problem, even if the court is skeptical about

the prospects for success.”). We thus reverse the denial

of Saint Anthony’s motion to supplement its

complaint.

C. Arbitration?

The remaining issue is whether we should stay the

case in favor of arbitration, as the intervening MCOs

request. A necessary aspect of Saint Anthony’s claim

against HFS is showing that the MCOs systematically

miss the 30/90 pay schedule. The MCOs dispute that

allegation, however. They argue that under the

contracts, each allegedly late claim presents a factual

dispute that must be resolved in arbitration before

Saint Anthony’s case against HFS can proceed on the

merits.

The district court did not address this issue, and

we decline to do so here as well. Both HFS and the

MCOs have their distinct obligations to ensure timely

payment for providers. While factual issues related to

the MCOs appear intertwined with Saint Anthony’s

claim against HFS, they do not foreclose Saint

Anthony’s section 1983 action. Faced with chronic late

payments, Saint Anthony is entitled to seek relief

against HFS as well as against the MCOs.

57a

To sum up, Saint Anthony has alleged a viable

right under 42 U.S.C. § 1396u-2(f) to have HFS act to

try to ensure timely payments from MCOs, and that

right is enforceable in this section 1983 action against

HFS Director Eagleson in her official capacity. We

REVERSE the district court’s dismissal of Count One.

Saint Anthony does not have any rights under section

1396a(a)(8). We AFFIRM the district court’s dismissal

of Count Two. We REVERSE the district court’s denial

of Saint Anthony’s motion to supplement, decline to

stay the proceedings in favor of arbitration, and

REMAND for proceedings consistent with this

opinion.

58a

Brennan, Circuit Judge, concurring in part and

dissenting in part.

I join my colleagues in concluding that 42 U.S.C.

§ 1396a(a)(8) does not support a private right of action

for healthcare providers. And while I agree that under

the Blessing factors, 42 U.S.C. § 1396u-2(f) creates a

private right of action, I part ways with them on the

breadth and substance of the State’s duty under that

statute. An administrative prerequisite that a managed care contract includes deadlines is fundamentally

different from a privately enforceable statutory duty to

proactively guarantee timely managed care payments

to healthcare providers. I also conclude that the

district court did not abuse its discretion in denying

Saint Anthony’s Federal Rule of Civil Procedure 15(d)

motion to supplement its complaint.

Saint Anthony is a hospital in Chicago serving

impoverished patients that relies heavily on Medicaid

for its funding. Saint Anthony maintains that it has

not received timely Medicaid payments from multiple

managed care organizations (“MCOs”). Rather than

pursue any claims against the MCOs directly through

arbitration or litigation as provided for in the

Hospital’s contracts,1 Saint Anthony has attempted to

bypass the MCOs altogether by suing Illinois under 42

U.S.C. § 1396u-2(f).

Saint Anthony has contracts with all seven MCOs in the Illinois

managed care program. Each of the four MCOs that intervened

in this case has a contract with the Hospital that contain

arbitration provisions, three of which are binding.

59a

Section 1396u-2(f) governs contracts between

states and managed care organizations under a

managed care system. The provision states in relevant

part:

A contract under section 1396b(m) of this title

with a medicaid managed care organization

shall provide that the organization shall make

payment to health care providers ... on a timely

basis consistent with the claims payment

procedures described in section 1396a(a)(37)(A)

of this title, unless the health care provider and

the organization agree to an alternate payment

schedule.

42 U.S.C. § 1396u-2(f). The provision that § 1396u-2(f)

incorporates—42 U.S.C. § 1396a(a)(37)(A)—lists the

payment procedures which apply to a state’s fee-forservice system, requiring payment for 90% of clean

claims within 30 days and 99% of clean claims within

90 days.

The parties substantially disagree about § 1396u2(f)’s requirements. They agree that states have a duty

to include contractual provisions with MCOs, and

there is no dispute that such provisions exist in the

underlying contracts here.2 They also agree that states

have a right to enforce that provision. But the parties

diverge as to whether states have a privately

enforceable duty to guarantee that all MCO payments

Saint Anthony might have had an actionable claim under

§ 1396u-2(f) if it had pleaded that the State’s MCO contracts

failed to include the required 30-day/90-day payment schedule.

But the Hospital admits that the State’s contracts do include the

necessary payment provisions.

60a

are timely paid to healthcare providers. According to

the State, § 1396u-2(f) mandates only that MCO

contracts with healthcare providers include payment

schedules that conform to § 1396a(a)(37)(A)’s 30day/90-day payment requirement. Saint Anthony

believes the statute requires more: states must

proactively enforce MCO payments to ensure they are

issued on a timely basis.

Before determining the extent of a state’s duty

under § 1396u-2(f), it is crucial to remember, “if

Congress intends to impose a condition on the grant of

federal moneys, it must do so unambiguously.”

Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S.

1, 17 (1981). Because Medicaid is legislation under the

Constitution’s Spending Clause, Congress must

“speak with a clear voice” before imposing obligations

on the states. Id. This ensures states exercise their

choice to participate in Medicaid knowingly, “cognizant of the consequences of their participation.” Id. “A

state cannot knowingly accept the conditions of the

federal funding if that state is unaware in advance of

the conditions or unable to ascertain what is expected

of it, and therefore we insist that Congress must speak

with a clear voice.” City of Chi. v. Barr, 961 F.3d 882,

907 (7th Cir. 2020). We have described this requirement, which is rooted in federalism concerns, as

“rigorous.” Planned Parenthood of Ind., Inc. v.

Comm’r of Ind. State Dep’t Health, 699 F.3d 962, 973

(7th Cir. 2012). Indeed, the Court has shown great

reluctance to recognize private rights of action under

42 U.S.C. § 1983 for beneficiaries of federally funded

state programs. Since Wilder v. Virginia Hospital

Ass’n, 496 U.S. 498 (1990), decided over three decades

61a

ago, the Court “has repeatedly declined to create

private rights of action under statutes that set

conditions on federal funding of state programs.”

Nasello v. Eagleson, 977 F.3d 599, 601 (7th Cir. 2020);

see Talevski v. Health & Hosp. Corp. of Marion Cnty.,

6 F.4th 713, 718 (7th Cir. 2021), cert. granted sub nom.

Health & Hosp. Corp. v. Talevski, No. 21-806, ––– U.S.

––––, 142 S. Ct. 2673 (U.S. May 2, 2022) (“[N]othing

‘short of an unambiguously conferred right ... phrased

in terms of the persons benefited’ can support a section

1983 action.” (quoting Gonzaga Univ. v. Doe, 536 U.S.

273, 283–84 (2002))); see, e.g., Armstrong v.

Exceptional Child Ctr., Inc., 575 U.S. 320, 332 (2015).

With this legal backdrop, consider the text of

§ 1396u-2(f). Congress mandated that a state’s

“contract” with an MCO “shall provide” that the MCO

make payments to healthcare providers on a timely

basis consistent with § 1396a(a)(37)(A)’s 30-day/90day payment schedule, unless healthcare providers

and MCOs agree to an alternate payment schedule.

But it is clear that is all the text requires. Section

1396u-2(f) is silent on any ongoing governmental duty

to monitor MCO payments or otherwise guarantee

that MCOs consistently make prompt payments. As

other neighboring statutory provisions show, Congress

knows how to impose duties requiring state action.3

See, e.g., 42 U.S.C. § 1396u-2(a)(3)(A) (“A State must permit an

individual to choose a managed care entity from not less than two

such entities....”); 1396u-2(a)(4)(B) (“The State shall provide for

notice to each such individual of the opportunity to terminate (or

change) enrollment under such conditions.”); § 1396u-2(a)(4)(C)

(“[T]he State shall establish a method for establishing enrollment

priorities in the case of a managed care entity that does not have

sufficient capacity to enroll all such individuals seeking

62a

Section § 1396u-2(f) contains no such language.

Rather, its text describes the contract provision that

must be included—for timely payments consistent

with deadlines set out in a different statute—not the

State’s ongoing enforcement duty. This is not

surprising given that § 1396u-2(f) pertains to managed

care systems, rather than traditional fee-for-service

arrangements. As the majority opinion notes, the

managed care structure was designed to alleviate the

burden on states of managing the “day-to-day”

functions previously performed by states under a feefor-service system.

Review of the Medicaid Act as a whole confirms

this reading of § 1396u-2(f). See ANTONIN SCALIA &

BRYAN A. GARNER, READING LAW 167 (2012) (“The text

must be construed as a whole.”); id. at 180 (“The

provisions of a text should be interpreted in a way that

renders them compatible, not contradictory.”). In 42

U.S.C. § 1396u-2(e)(4)(A), the statute sets forth

“[s]anctions for noncompliance” that states can

impose against MCOs who commit enumerated

offenses. Among the tools at a state’s disposal is the

enrollment....”); § 1396u-2(a)(4)(D) (“[T]he State shall establish

a default enrollment process....”); § 1396u-2(a)(5)(C) (“A State

that requires individuals to enroll with managed care entities

under paragraph (1)(A) shall annually (and upon request) provide

... to such individuals a list identifying the managed care

entities....”); § 1396u-2(c)(1)(A) (“[T]he State shall develop and

implement a quality assessment and improvement strategy....”);

§ 1396u-2(d)(1)(B)(i) (“[T]he State ... shall notify the Secretary of

such noncompliance.”); § 1396u-2(d)(6)(A) (“[A] State shall

require that ... the provider is enrolled consistent with section

1396a(kk) of this title with the State agency administering the

State plan under this subchapter.”).

63a

power to terminate a contract with a noncompliant

MCO. As the majority opinion admits, the text of

§ 1396u-2(e)(4)(A) reserves this punitive measure to

the discretion of the states. Yet under Saint Anthony’s

reading of the statute, if an MCO fails to make timely

payments to healthcare providers, a state could be

required to terminate the MCO’s contract as a last

resort if, as the majority opinion rules, the state has a

duty to ensure compliance with the contractual

payment schedule. Saint Anthony’s only response is

that states can “choose the tools to generate

compliance” with the payment schedule. But even the

Hospital admits—as it must—that terminating an

MCO’s contract may become “necessary” as a “final

draconian remedy” if other remedial measures prove

ineffective.4

In addition to lacking a textual basis in § 1396u2(f), and creating statutory incongruences within

the Medicaid Act, Saint Anthony’s interpretation

threatens to put a tremendous burden on states and

the judiciary. Unsuspecting states will be surprised to

learn that now they must manage MCOs to guarantee

that all payments to healthcare providers are made on

a timely basis—the same “day-to-day” administration

that a managed care system was supposed to avoid.

The duty the Hospital would read into § 1396u-2(f)

would obligate trial courts to become de facto Medicaid

claims processors for states. Courts will be charged

with resolving disputes about which claims are clean

and which are not, as well as substantial litigation over

Oral Arg. at 43:51–44:22.

64a

the timeliness of paying claims.

Aware of these problems, the majority opinion

endorses a third reading of § 1396u-2(f), distinct from

either of the interpretations for which the parties

advocate. Healthcare providers “have a right under

section 1396u-2(f) that is enforceable under section

1983, at least to address systemic failures to provide

timely and transparent payments,” per the majority

opinion. My colleagues hope that qualifying the state’s

duty to ensure timely payment only when MCO’s are

systemically late in paying healthcare providers will

lessen the burden on the states and district courts.

But the majority opinion’s interpretation is even

further removed from the text of § 1396u-2(f). That

provision never mentions—let alone defines—

“systemic” failures to make timely payments. While

Saint Anthony’s position that states must always

ensure timely payment is incorrect, its reading at least

acknowledges that the statutory text contains no

limiting principle—that is, states either have a privately enforceable duty to ensure prompt payment, or they

do not. By contrast, the majority opinion introduces a

new standard under which victims of the worst MCO

offenders may pursue federal claims, but disputes not

deemed “systemic”—presumably about a comparatively small number of untimely payments—are not

actionable. There is no textual basis for such a

conditional duty under § 1396u-2(f), let alone text that

is “unambiguous[]” and spoken with a “clear voice.”

Pennhurst, 451 U.S. at 17.

Instead of grounding its interpretation in the text

of § 1396u-2(f), the majority opinion looks elsewhere.

For example, it states that “Congress did not intend

65a

for MCOs to go unsupervised.” But that is a false

dilemma. By requiring contractual provisions that

MCOs make timely payments, § 1396u-2(f) enables a

healthcare provider like Saint Anthony to privately

enforce their contractual rights against MCOs directly

through arbitration or litigation. Recall that Saint

Anthony is not without a vehicle to press its arguments

about nonpayment of claims. The Hospital has

contracts with MCOs, each of which contains a

bargained-for arbitration clause. The arbitration with

one of the MCOs, Meridian, is currently stayed at the

Hospital’s request. Further, it is undisputed that

states have the authority to intervene and to penalize

noncompliant MCOs. The question is not whether

Congress intended that MCOs go unsupervised, but

whether Congress intended in § 1396u-2(f) that MCOs

be supervised via a privately enforceable legal duty,

found in that statute, and now recognized in the

majority opinion.

As evidenced throughout § 1396u-2, Congress

knows how to impose duties requiring state action

when it wants to. But language imposing a duty is

absent from § 1396u-2(f). “We do not lightly assume

that Congress has omitted from its adopted text

requirements that it nonetheless intends to apply, and

our reluctance is even greater when Congress has

shown elsewhere in the same statute that it knows

how to make such a requirement manifest.” Jama v.

Immigr. & Customs Enf’t, 543 U.S. 335, 341 (2005).

And as referenced above, unspoken Congressional

intent should be an oxymoron when examining

whether Spending Clause legislation contains a private

right of action.

66a

When the majority opinion does turn to the actual

language of the statute, tellingly, it looks only to

unrelated provisions in the Medicaid Act, rather than

“start[ing] with the specific statutory language in

dispute”—here, the text of § 1396u-2(f). Murphy v.

Smith, ––– U.S. ––––, 138 S. Ct. 784, 787 (2018); see

King v. Burwell, 576 U.S. 473, 500–01 (2015) (Scalia,

J., dissenting) (“[S]ound interpretation requires

paying attention to the whole law” as “a tool for

understanding the terms of the law, not an excuse for

rewriting them”). My colleagues note that elsewhere

in the Act, Congress authorized states to audit MCOs

and to conduct annual reviews, some of which relate to

MCO payment activities. The Medicaid Act also

specifies remedial measures a state can take against

noncompliant MCOs, such as putting them on

performance plans and imposing sanctions. These

“reporting and oversight responsibilities” are proof

positive, according to the majority opinion, that states

are legislatively required to enforce prompt payment

provisions.

This rationale proves too little. State oversight of

MCOs serves a wide array of purposes, any one of

which could plausibly explain Congress’s imposition of

managerial responsibilities. For example, as the

majority opinion highlights, these oversight measures

recently served to unearth an MCO’s misallocation of

funds. But the imposition of reporting and oversight

responsibilities does not show that Congress imposed

a privately enforceable duty on states to guarantee

healthcare providers are timely paid. The majority

opinion’s rationale also proves too much. If Congress’s

only purpose in authorizing state audits and oversight

67a

was to require states to guarantee timely payments by

MCOs to healthcare providers, why is that purpose

limited to systemic MCO noncompliance? No reason is

offered for limiting the state’s mandatory enforcement

duties to only the widest or worst offenders.

As a final measure, the majority opinion notes that

elsewhere in the Medicaid Act, § 1396u-2(f) is referenced as the “rule for prompt payment of providers.”

42 U.S.C. § 1396u-2(h)(2)(B). My colleagues suppose

that such a title implies a binding obligation on states

to enforce MCO payment schedules. “But headings

and titles are not meant to take the place of the

detailed provisions of the text. Nor are they necessarily

designed to be a reference guide or a synopsis.”

Brotherhood of R. R. Trainmen v. Balt. & O. R. Co.,

331 U.S. 519, 528 (1947). This title is especially

unhelpful because it does not clarify whether § 1396u2(f) is an administrative requirement that a managed

contract include deadlines, or a rule that imposes a

privately enforceable, managerial duty on states to

guarantee all MCO payments are timely (or at least

when there is “systemic” untimeliness). A passing

reference in § 1396u-2(h)(2)(B) to the provision in

dispute fails to alter the plain meaning of § 1396u2(f)’s text.

The broader structure of Medicaid also shows how

the majority opinion’s approach conflicts with § 1396u2(e)(4)(A). If a state is unable to resolve an MCO’s

“systemic” failure to timely pay healthcare providers

using lesser measures, the state must terminate its

contract with the MCO because the majority opinion

holds that states “have an obligation to act under

section 1396u-2(f) to secure providers’ rights.” My

68a

colleagues state that “a district court could not force

the State to cancel a contract with an MCO.” But that

attempts to have it both ways, as that is the

unavoidable consequence of this holding. If states have

a privately enforceable duty to ensure prompt payment

—at least when MCOs have systemically failed to

comply with the provided payment schedule—states

would be obligated to terminate MCO contracts as a

measure of last resort.5 My colleagues acknowledge as

much by suggesting that “sufficiently egregious facts”

could warrant such extreme measures. In other words,

the majority opinion nods to the statutory tension that

its broad rule creates, but then moves on without

resolving it, content with the knowledge that the

statutory conflict is not realized here because Saint

Anthony has not yet sought termination of MCO

contracts. That is not a tenable solution for the

statutory conflict created. Even if the “worst-case

scenario” existed only in the abstract, the fact that §

1396u-2(e)(4)(A) cannot be reconciled with my

colleagues’ construction of § 1396u-2(f) shows this is

not a sound approach to statutory interpretation.

Overall, the majority opinion passes over the

actual language of § 1396u-2(f) in favor of factors

outside the statute and references to Congress’s

overall intent. But “[i]t is not a proper use of the

[whole act] canon to say that since the overall purpose

of the statute is to achieve x, any interpretation of the

text that limits the achieving of x must be disfavored.”

SCALIA & GARNER, supra, at 168. “[N]o legislation

Again, as the Hospital’s counsel conceded repeatedly at oral

argument. Oral Arg. at 43:51–44:22.

69a

pursues its purposes at all costs.” Rodriguez v. United

States, 480 U.S. 522, 525–26 (1987) (per curiam). The

majority opinion suggests Congress’s chosen tools for

ensuring prompt payment—private suits and

arbitration by healthcare providers against MCOs,

along with discretionary enforcement by states—are

inadequate. See e.g., Majority Op. at 509, 511

(referencing § 1396u-2(f)’s mandate that state

contracts include prompt payment schedules with

MCOs as a “‘paper’ requirement” and “a proverbial

paper tiger”). But “it is not for us to substitute our

view of ... policy for the legislation which has been

passed by Congress.” Fla. Dep’t of Revenue v.

Piccadilly Cafeterias, Inc., 554 U.S. 33, 52 (2008)

(quoting In re Hechinger Inv. Co. of Del., Inc., 335 F.3d

243, 256 (3d Cir. 2003)).

Paradoxically, the attempt to limit this holding to

systemic MCO noncompliance, designed to alleviate

the burden on district courts, will add to it. Now courts

will have to make preliminary determinations on

whether healthcare providers have pleaded “systemic”

failures by MCOs to determine if claims are actionable.

That determination must be made without statutory

or judicial guidance, because “systemic” remains

undefined both as a metric (for example, total number

of unpaid claims, or a percentage of such claims) and

the point at which that numeric threshold is crossed.

The majority opinion suggests this determination

is intuitive, as evidenced by a solitary instance of the

State acting against one noncompliant MCO,

CountyCare. This example, my colleagues posit, shows

that the State “seems to be able to tell the difference

between minor problems and systemic ones.” As an

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initial matter, if Saint Anthony’s allegations of State

inaction in the face of rampant untimeliness by MCOs

are true, this case proves the State cannot intuit the

difference between “systemic” and “minor” failures.

Even more, before the majority opinion, labels like

“systemic” and “minor” were without legal significance. So, an example of the State acting against an

MCO does not show that the State—much less district

courts—can determine which MCOs are systemically

underperforming, and which are not. Tens of

thousands of untimely payments might signal a

“systemic” problem while a handful of unpaid claims

might not, but between these extremes lies a vast

expanse of undefined terrain.

District courts are also promised that they will not

need to “adjudicate issues at the claim-by-claim

level”—a task my colleagues concede “would strain

judicial resources and seem to conflict with the

arbitration clauses in the contracts between the MCOs

and Saint Anthony.” But a district court can hardly

decide if an MCO has systemically underperformed if

it does not examine claims for untimely payment on

the merits, and then determine whether the

“systemic” threshold has been reached. And a district

court cannot decide whether the payment schedule

even applies to a group of payment claims without

reaching the requisite question of whether the

disputed claims are clean. Moreover, without

inspecting whether individual claims are being paid on

time, a district court has no metric by which to gauge

the effectiveness of, or a State’s compliance with,

injunctions designed to ensure timely payment.

Pointing to O.B. v. Norwood, 838 F.3d 837 (7th Cir.

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2016), the majority opinion insists that all the district

court must do is require the State to do “something.”

But my colleagues recognize that such a remedy is

appropriate only “[i]f Saint Anthony can prove its

claims of systemic delay and/or underpayment,” which

necessarily involves adjudicating the underlying

claims on the merits.6

In sum, the majority opinion’s interpretation of

§ 1396u-2(f) finds no support in that statute’s text and

contravenes other provisions of the Medicaid Act. The

attempt to limit a privately enforceable duty to

“systemic” untimeliness by MCOs appears nowhere in

that statute. This interpretation requires district

courts to perform the arduous task of deciphering

whether a healthcare provider has proved systemic

abuse. That evaluation will involve some level of

adjudicating the nature, timeliness, and merits of

payment claims, rendering district courts the new

Medicaid claims processors for the states. And as a

consequence, “day-to-day” functions and enforcement

are returned to the states—the precise type of fee-forservice management that MCOs were designed to

O.B. is also distinguishable. There, the statutory text of 42

U.S.C. § 1396a(a)(10)(A) imposed a duty on the State to make

“medical assistance” available, which this court determined

included providing nurses for children. 838 F.3d at 842–43. Here,

there is no textual mooring for this holding that states have a

privately enforceable duty to ensure healthcare providers are

timely paid in instances where MCOs are systemically delaying

payments. See also id. at 843–44 (Easterbrook, J., concurring)

(noting the district court’s injunctive order requiring the states

to do something to find nurses “does not supply any detail,” and

“[t]he Supreme Court has reversed injunctions that read like this

one”).

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avoid. This court has not previously read an implied

right of action against the states under Medicaid so

expansively. Of this court’s few cases recognizing a

private right of action under Medicaid, none has

imposed a duty on the states as broad in scope, ongoing

in nature, and difficult to enforce as the duty the

majority opinion concludes exists here.7 Nor has any

other federal circuit ever recognized a state’s privately

enforceable duty to guarantee timely payment under

§ 1396u-2(f). Jane Perkins, Private Enforcement of the

Medicaid Act Under Section 1983, NAT’L. HEALTH L.

PROGRAM 5–7 (July 30, 2021), https://bit.ly/2XaCtDY.

To find such an expansive duty under § 1396u-2(f),

See, e.g., Talevski, 6 F.4th at 720 (holding that nursing home

residents have privately enforceable rights under 42 U.S.C.

§§ 1396r(c)(1)(A)(ii) and (c)(2) to not be chemically restrained for

disciplinary or convenience purposes, and to not be transferred or

discharged from a facility unless certain criteria are met); BT

Bourbonnais Care, LLC v. Norwood, 866 F.3d 815, 824 (7th Cir.

2017) (holding that 42 U.S.C. § 1396a(a)(13)(A) creates a

privately enforceable duty on states to provide a public process

with notice and opportunity to comment as outlined in

§ 1396a(a)(13)(A)); O.B., 838 F.3d at 842–43 (holding that

provisions in the Medicaid Act impose a privately enforceable

duty on states to take affirmative steps to locate and provide home

nurses for children that the Illinois Department of Healthcare

and Family Services have approved for home nursing); Planned

Parenthood of Ind., Inc., 699 F.3d at 974 (holding that 42 U.S.C.

§ 1396a(a)(23) creates a privately enforceable “right to receive

reimbursable medical services from any qualified provider”);

Bontrager v. Ind. Fam. & Soc. Servs. Admin., 697 F.3d 604, 607–

08 (7th Cir. 2012) (reaffirming Miller v. Whitburn, 10 F.3d 1315,

1318 (7th Cir. 1993), which held that Medicaid recipients have a

right of action to “challenge the reasonableness of a state’s

decision regarding the medical necessity of a life saving

procedure” under 42 U.S.C. § 1396a(a)(10)(A)).

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without any textual support—in the context of

Spending Clause legislation, where Congress must

speak “unambiguously” with a “clear voice”—is a

watershed moment.

I also part ways with my colleagues on whether the

district court abused its discretion in denying Saint

Anthony’s motion to supplement its complaint.

Federal Rule of Civil Procedure 15(d), which

governs motions to supplement pleadings, provides in

relevant part that “[o]n motion and reasonable notice,

the court may, on just terms, permit a party to serve a

supplemental pleading setting out any transaction,

occurrence, or event that happened after the date of

the pleading to be supplemented.” FED. R. CIV. P.

15(d). This court has emphasized “that there is no

absolute right to expand the case in this way,” and that

“the district court has substantial discretion either to

permit or to deny such a motion.” Chi. Reg’l Council

of Carpenters v. Vill. of Schaumburg, 644 F.3d 353, 356

(7th Cir. 2011); see In re Wade, 969 F.2d 241, 250 (7th

Cir. 1992) (noting that a Rule 15(d) motion is reviewed

for abuse of discretion); Otis Clapp & Son, Inc. v.

Filmore Vitamin Co., 754 F.2d 738, 743 (7th Cir.

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