Petition for Writ of Certiorari — Doe v. United States

, | FILED

| CU , APR 20 1992

i-1 679

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

ILLINOIS COUNCIL ON LONG TERM CARE;

GILMAN NURSING CENTER, an Illinois limited

partnership; SPRING VALLEY NURSING CENTER,

an Illinois limited partnership; and

WOODSIDE MANOR, an Illinois corporation,

Petitioners,

V.

PHILLIP BRADLEY, in his official capacity as

Director of the Illinois Department of Public Aid;

DAWN CLARK NETSCH, in her official capacity as

Comptroller of the State of Illinois; and

PATRICK QUINN, in his official capacity as

Treasurer of the State of Illinois,

Respondents.

Petition for Writ of Certiorari to the United

States Court of Appeals for the Seventh Circuit

PETITION FOR WRIT OF CERTIORARI

RICHARD F. ZEHNLE

Counsel of Record

NEAL A. CROWLEY

ANN A. MCKENZIE

VEDDER, PRICE, KAUFMAN & KAMMHOLZ

222 North LaSalle Street

Chicago, Illinois 60601

(312) 609-7500

Attorneys for Petitioners

April, 1992

Midwest Law Printing Co., Chicago 60611, (312) 321-0220

i

QUESTIONS PRESENTED

1. Whether, in view of the consistent holdings of fed-

eral courts that States, in reimbursing providers for Medi-

caid services, may not freeze or diminish rates or delay

implementation of rate increases for budgetary reasons,

the Medicaid Act, and the Boren Amendment in particu-

lar, prohibit the State of Illinois, when it has failed to

appropriate adequate funds to make the payments, from

accomplishing the same result by delaying payments of

the rates it has determined to be adequate and reasonable

to the extent that annual payments to providers are re-

duced by one-sixth and providers are threatened with ir-

reparable injury.

2. Whether, in view of the decision of this Court in

Wilder v. Virginia Hospital Association, the fundamental

obligation of the States under the Boren Amendment is

to actually make payments for services that are reason-

able and adequate to meet the costs which must be in-

curred by efficiently and economically operated facilities

in rendering the services, and not just to determine rates

that would, if paid, satisfy the statutory standard.

3. Whether a State’s extraordinary delay in making

Medicaid payments beyond its practice over more than

ten years, to the extent that ten payments were made

in a calendar year in lieu of the usual twelve payments,

constitutes the kind of “change in payment methods and

procedures” for which the State is required to make find-

ings and assurances to the Secretary of the Department

of Health and Human Services.

il

LIST OF PARTIES

The parties to this action both in the Federal District

Court for the Northern District of Illinois and the Court

of Appeals for the Seventh Circuit are those stated in

the caption on the cover. Apparently by inadvertence, one

of the petitioners was omitted from the decision of the

Court of Appeals.

Pursuant to Supreme Court Rule 29.1, petitioners state

that petitioner, Illinois Council on Long Term Care, is a

not for profit corporation having no parent companies or

subsidiaries, and petitioner, Woodside Manor, is a for profit

corporation having no parent companies or subsidiaries.

ill

TABLE OF CONTENTS

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

Oo ge eee il

STATEMENT OF THE CASE ...............

REASONS FOR GRANTING CERTIORARI ..

I.

THE RULING OF THE COURT OF APPEALS

WILL PERMIT ALL STATES AND THEIR

MEDICAID AGENCIES TO CIRCUMVENT

THE CONSISTENT DECISIONS OF FEDERAL

COURTS THAT HAVE CONSTRUED THE

MEDICAID ACT TO ENJOIN REDUCTIONS

IN REIMBURSEMENT SOLELY FOR BUD-

RE CED Acc cw cccrecnensaccsecs 9

A. Federal Courts Have Consistently Held

That a State May Not Reduce Medicaid

Reimbursement Solely Because of Bud-

getary Concerns by Freezing, Diminishing

or Delaying Implementation of Increases

een Wk kta ehh anencee nas os 10

B. The Decision of the Court of Appeals Per-

mits a State Medicaid Agency to Diminish

Medicaid Reimbursement Solely Because

of Budgetary Concerns by Simply De-

laying Payments Without Reducing the

eae she aCe bCAd ae h See ss 12

iv

C. The Decision of the Court of Appeals

Conflicts with This Court’s Insistence on

Compliance with the Medicaid Act in

Practice and on the Prime Importance of

CUS -WacCaakethGaeeis ceeeriebees«

II.

THE RULING OF THE COURT OF APPEALS

IS CONTRARY TO SETTLED PRINCIPLES OF

STATUTORY INTERPRETATION .........

A. The Court of Appeals Ignored the Explicit

Language of the Medicaid Act and Other

Evidence of the Intent of Congress ....

1. Statutory Language ..............

2. Congressional Intent .............

De RO RD ask Sokwccicescce

B. The Court of Appeals Purported to Ascer-

tain Agency Intent Without Sufficient

Evidence and then Unjustifiably Attrib-

uted Such Intent to Congress ........

GE Gi cirauins ccbekecsanvakscsaxes

ETE San aNV hs uu mN andy cubs ak baekebexes

14

la

V

TABLE OF AUTHORITIES

Cases PAGE

Amisub (PSL), Inc. v. State of Colorado Depart-

ment of Social Services, 879 F.2d 789 (10th Cir.

1989), cert. denied, 110 S.Ct. 3212 (1990) .. 10, 11, 19

Bethesda Hospital Association v. Bowen, 485 U.S.

399, 108 S.Ct. 1255, 99 L.Ed. 2d 460 (1988) ... 16

California Association of Health Care Facilities v.

Department of Health Services, No. S-90-1086,

CCH Medicare and Medicaid Guide 439,053 (E.D.

Cs SEES Be EE Wace dcx cuonesmeteanees 10, 11, 22

Chicago Osteopathic Medical Centers v. Duffy, 88

C 1174, Medicare & Medicaid Guide (CCH),

ee a te OE $x eh vnscdencciveses 17

Commissioner of Internal Revenue v. Engle, 464

U.S. 206, 104 S.Ct. 597, 78 L.Ed. 2d 420 (1984) .. 16

Illinois Healthcare Association, Inc. v. Quern, No.

77-C-1109, Medicare and Medicaid Guide (CCH)

Pan eee CHD. Th. TOBE) once cecsccccsuae 10, 13, 14

Illinois Hospital Association v. Illinois Department

of Public Aid, 576 F. Supp. 360 (N.D. Ill. 1983) .. 10

Kansas Health Care Association, Inc. v. Kansas

Department of Social and Rehabilitation Ser-

vices, No. 90-4207-S, Medicare and Medicaid

Guide (CCH) 439,059 (D. Kan. Dec. 31, 1990) .. 10, 11

Nebraska Health Care Assoc. v. Dunning, 578 F.

Supp. 543 (D. Neb. 1983), affirmed in part, 778

F.2d 1291 (8th Cir. 1985) (as amended on denial

of rehearing 1986), cert. denied, 479 U.S. 1063

GUOUED Sebecedetcuveuds Gracesdeaiareeneees 11

vi

Temple University v. White, 729 F. Supp. 1327

(E.D. Pa. 1990), aff'd, 941 F.2d 201 (8d Cir.

1991), cert. denied, Snider v. Temple University,

oe 8 rere en 10

United Cerebral Palsy Assn. of New York State,

Inc. v. Cuomo, 1992 U.S. Dist. Lexis 1122

Ce EA at “SE (5b 5 0 be a0 dst <b kA 22

Washington State Hospital Association v. State of

Washington, No. C86-463D, Medicare and Medi-

caid Guide (CCH) 436,352 (W.D. Wash. May 18,

ry een er ae ay Lyre 10, 11

Wilder v. Virginia Hospital Assn., 496 U.S. 490, 110

S.Ct. 2510, 110 L.Ed.2d 455 (1990) .... 14, 15, 16, 19

Other Authorities

42 U.S.C. §1396a(aX13XA) (Boren Amendment) .. passim

Oe SA is TE oO a 0 oon ak une ans 8, 18, 19, 20

Oe Sod ee QOD kas sacs nadecace 7, 8, 9, 19, 20, 22

H. Conf. Rep. 1497, 96th Cong. 2d Sess. 154 (1980) .. 10

H. Rep. 100-391(I), 1987 U.S. Code Cong. & Ad.

SUNS 5aseanan sna nkaaesdOciianunee meets 17

H. Conf. Rep. 101-964, 1990 U.S. Code Cong. &

Pe OE *4 80400048 0400405 ee 17, 18

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

ILLINOIS COUNCIL ON LONG TERM CARE;

GILMAN NURSING CENTER, an Illinois limited

partnership; SPRING VALLEY NURSING CENTER,

an Illinois limited partnership; and

WOODSIDE MANOR, an Illinois corporation,

Petitioners,

Vv.

PHILLIP BRADLEY, in his official capacity as

Director of the Illinois Department of Public Aid;

DAWN CLARK NETSCH, in her official capacity as

Comptroller of the State of Illinois; and

PATRICK QUINN, in his official capacity as

Treasurer of the State of Illinois,

Respondents.

Petition for Writ of Certiorari to the United

States Court of Appeals for the Seventh Circuit

PETITION FOR WRIT OF CERTIORARI

Petitioners, Illinois Council on Long Term Care, Gilman

Nursing Center, Spring Valley Nursing Center, and Wood-

side Manor, respectfully pray that a writ of certiorari

issue to review the judgment and opinion of the United

States Court of Appeals for the Seventh Circuit, entered

in the above-entitled proceeding on February 18, 1992.

2

OPINIONS BELOW

The opinion of the Court of Appeals for the Seventh

Circuit is reported at 1992 U.S. App. LExis 2074, and is

reprinted in Appendix A, p. la, infra.

The opinion of the United States District Court for the

Northern District of Illinois (Holderman, J.V.) granting

the temporary restraining order has not been reported.

It is reprinted in Appendix B, p. 1la, infra.

The opinion of the United States District Court for the

Northern District of Illinois (Holderman, J.V.) denying the

preliminary injunction is reported at 759 F.Supp. 1309,

and is reprinted in Appendix C, p. 14a, infra.

JURISDICTION

Invoking federal jurisdiction under Title XIX of the

Social Security Act, 42 U.S.C. $1396 et seg., commonly

known as the Medicaid Act, and under 42 U.S.C. $1983,

petitioners brought this suit in the Northern District of

Illinois on March 19, 1991 for injunctive and other relief.

On March 29, 1991, the Northern District denied the peti-

tioners’ motion for preliminary injunction.

On petitioners’ appeal, the Seventh Circuit on February

18, 1992, entered a judgment and an opinion affirming the

Northern District’s judgment and remanding with instruc-

tions to dismiss the case on the merits. No petition for

rehearing was sought.

The jurisdiction of this Court to review the judgment of

the Seventh Circuit is invoked under 28 U.S.C. §1254(1).

=

STATUTES AND REGULATIONS

42 U.S.C. §1396a(a)(13)(A)

A State plan for medical assistance must

(13) provide—

(A) for payment .. . of the hospital, skilled nursing

facility, and intermediate care facility services provided

under the plan through the use of rates (determined in

accordance with methods and standards developed by the

State . . .) which the State finds, and makes assurances

satisfactory to the Secretary, are reasonable and adequate

to meet the costs which must be incurred by efficiently

and economically operated facilities in order to provide

care and services in conformity with applicable State and

Federal laws, regulations and quality and safety standards

and to assure that individuals eligible for medical assistance

have reasonable access (taking into account geographic lo-

cation and reasonable travel time) to inpatient hospital

services of adequate quality... .

42 CFR §447.45(d)

(d) Timely processing of claims. (1) The Medicaid agen-

cy must require providers to submit all claims no later

than 12 months from the date of service.

(2) The agency must pay 90 percent of all clean claims

from practitioners, who are in individual or group prac-

tice or who practice in shared health facilities, within 30

days of the date of receipt.

(3) The agency must pay 99 percent of all clean claims

from practitioners, who are in individual or group prac-

tice or who practice in shared health facilities within 90

days of the date of receipt.

(4) The agency must pay all other claims within 12

months of the date of receipt... .

ieeeien

42 CFR 3447.253(a)(b)

Other requirements:

(a) State assurances. In order to receive HCFA ap-

proval of a State plan change in payment methods and

standards, the Medicaid agency must make assurances sat-

isfactory to HCFA that the requirements set forth in par-

agraphs (b) through (g) of this section are being met, must

submit the related information required by § 447.255 of

this subpart, and must comply with all other requirements

of this subpart.

(b) Findings. Whenever the Medicaid agency makes a

change in its methods and standards, but not less often

than annually, the agency must make the following find-

ings. ...

STATEMENT OF THE CASE

I. THE MEDICAID ACT AND THE IDPA PAYMENTS

Illinois takes part in the federal-state Medicaid program

and receives matching funds from the federal government

in order to provide medical services for those people who

qualify under 42 U.S.C. §1396 (the “Medicaid Act’’). Pur-

suant to 42 U.S.C. §1396 and Ill. Rev. Stat. ch. 23, 441-1

et seq., the Illinois Department of Public Aid (“IDPA’’)

has developed a State Plan by which it administers the

program. The Medicaid Act requires the State to submit

its plan to the Secretary of the Department of Health and

Human Services (“Secretary”) and provide assurances that

the plan provides for payment for Medicaid services by

rates that are reasonable and adequate to meet the costs

incurred by an efficiently and economically operated facil-

ity which provides care that conforms with applicable stan-

dards and laws.

=

Regulations issued by the Secretary require that a Medi-

caid agency must provide assurances and make findings

that any change in its “payment methods and standards”

conforms with the requirements of the Medicaid Act.

Member nursing homes of petitioner Illinois Council in-

cluding the three named petitioners receive large percent-

ages of their income from the IDPA. Since 1975, these

homes have received monthly payments from the State

between 30 and 45 days after the last date of services

with only a few exceptional delays of not more than ten

or fifteen days occurring near the end of the State’s fiscal

year.

During the State’s fiscal year 1991 (July 1, 1990 to June

30, 1991), the time between the last day of services and

payment of claims increased substantially. Facilities re-

ceived payment for November, 1990 services between

March 4 and March 14, 1991, 94 and 104 days after the

last day of services, respectively. As of March 28, 1991,

the date of the preliminary injunction hearing, the IDPA

had not even sent requests for payment for December,

1990 services to the Comptroller.

Respondent Bradley admitted that the delay in pay-

ments was due to shortage of funds. The unrefuted evi-

dence was that the delay in making payments would be

increased by an additional ten days by the end of the

fiscal year.

II. EFFECT ON PETITIONER NURSING HOMES

The evidence presented showed that because of the fail-

ure of the IDPA to make Medicaid payments, facilities

were seriously behind in paying suppliers, utilities, mort-

gagees or lessors, and even the Internal Revenue Service.

Owners and administrators were forced to spend consid-

-

erable time searching for financing, which detracted from

the time they were able to devote to supervising quality

of care. About half of the members of the Illinois Coun-

cil had completely used up available credit. Most owners

were financing their facilities by personal funds and bor-

rowing. Owners were threatened with imminent failwre

to meet payroll and/or utility bills. Failure to meet payroll

will result in the loss of professional staff.

At least one facility was no longer able to provide re-

habilitative services for residents. Another was being

threatened with removal of respirators. Nursing home

residents were suffering a decline in quality of life: Spe-

cific examples include use of less satisfactory diapers and

curtailment of food amenities. Residents were also suf-

fering anxiety as to the continued viability of the places

they had called home for many years. In short, the evi-

dence demonstrated that the delay in making payments

was putting in jeopardy the ability of the nursing homes

to provide services conformable to the applicable stan-

dards and laws.

As of March 28, 1991, the IDPA had not assured nurs-

ing home operators that any further payments would be

forthcoming in the near future. The Illinois Director of

the Budget informed long term care providers in early

March, 1991 that there would be a further delay of ten

days in fiscal 1991.

Ill. DISTRICT COURT PROCEEDINGS

Petitioners filed their complaint for injunctive relief

against respondent Bradley on March 19, 1991, and moved

for a temporary restraining order the following day. Peti-

tioners claimed that the delay in making payments consti-

tuted a violation of the Boren Amendment, and, addition-

=

ally, that the change in the timeliness of making payments

constituted a change in the “payment methods and stan-

dards” for which the IDPA was required to receive the

Secretary’s approval.

On March 20, 1991, the district court, after reviewing

petitioners’ complaint, motion, and memorandum in sup-

port thereof, and hearing arguments presented by al! par-

ties, temporarily restrained respondent Bradley from de-

laying the processing of claims for provision of long-term

care to Medicaid beneficiaries, and required him to pay

all future claims not later than 30 days from the date of

a claim’s submission (Appendix B). The court specifically

found that there was a reasonable likelihood that the delay

of payment was equivalent to decreasing the payment rate

and that it violated the Boren Amendment to the Medi-

eaid Act (42 U.S.C. §1396a(aX13XA)). A hearing on peti-

tioners’ motion for preliminary injunction was set for

March 29, 1991, and later moved up to March 28, 1991.

On March 25, 1991, petitioners filed an amended com-

plaint, adding respondents Netsch and Quinn, and on March

27, 1991 petitioners filed a petition fer rule to show cause

why respondent Bradley should not be held in contempt

of court for failure to take any action in response to the

March 20, 1991 order of the district court.

On March 28, 1991, an evidentiary hearing was held in

which petitioners presented evidence demonstrating the

singular delay in the payment of rates and the irreparable

injury it was causing to nursing homes in Illinois. Re-

spondents presented no evidence.

On March 29, 1991, Judge Holderman entered a Memo-

randum Opinion and Order denying petitioners’ motions

for a rule to show cause and for preliminary injunction

(Appendix C). Judge Holderman found that the approval

silos,

of the Illinois State Plan by the Secretary constituted a

“finding that a delay in payments of up to twelve months”

did not contravene the Medicaid Act. Moreover, Judge

Holderman held that the Secretary consented to the risk

sharing arrangement between IDPA and the Medicaid

providers, whereby the Medicaid providers were “respon-

sible for financing the first twelve months.”

Judge Holderman further found that the reference to

“payment methods and standards” in the regulations re-

ferred only to the establishment of rates, not to the time-

liness of making payments. Since the IDPA had not changed

the rates, he found that there was no change in the State

Plan that needed the Secretary’s approval.

IV. APPELLATE COURT PROCEEDINGS

On March 29, 1991, petitioners filed their notice of ap-

peal with the district court, and on April 1, 1991 a mo-

tion for expedited appeal with the Court of Appeals for

the Seventh Circuit. By order dated April 9, 1991, the

motion was denied, a briefing schedule was set, and oral

argument was scheduled for the week of June 10, 1991,

and was heard on June 14, 1991.

On February 18, 1992, the appellate panel affirmed the

decision of the district court and remanded with instruc-

tions to dismiss the case on the merits (Appendix A). The

appellate panel based its decision not on the Secretary’s

alleged approval of the Illinois State Plan but on the lan-

guage of the statute itself. It found that the Boren Amend-

ment did not impose time limits on states for paying Medi-

caid claims (Jd. at 5). However, on the question of whether

the delay in payments constituted a change for which the

Secretary’s approval would be needed, the panel agreed

with the district court that a change in “payment methods

ww

and standards” referred only to changes in rates (Id. at 8-9).

Hence, the panel decided that petitioners had no chance

of success on the merits and ordered the district court

to dismiss the case on the merits.

On March 6, 1992, petitioners filed a motion to stay the

mandate pending the filing of this petition for certiorari,

which motion was granted.

REASONS FOR GRANTING CERTIORARI

I.

THE RULING OF THE COURT OF APPEALS WILL PER-

MIT ALL STATES AND THEIR MEDICAID AGENCIES TO

CIRCUMVENT THE CONSISTENT DECISIONS OF FED-

ERAL COURTS THAT HAVE CONSTRUED THE MEDI-

CAID ACT TO ENJOIN REDUCTIONS IN REIMBURSE-

MENT SOLELY FOR BUDGETARY REASONS.

The appellate panel held that, under the Medicaid Act,

Illinois could, solely for budgetary reasons, delay for up

to twelve months making the payments it found would

reasonably reimburse providers of Medicaid services, even

though such delay threatened nursing homes (and, of ne-

cessity, their aged and infirm residents) with irreparable

injury. By holding that the Boren Amendment requires

only the establishment of reasonable rates but not time-

ly payments in accordance therewith, the appellate panel

placed itself in conflict with decisions of federal courts

generally that have refused to permit States to reduce

Medicaid reimbursement solely for budgetary reasons.

= =

A. Federal Courts Have Consistently Held That a State

May Not Reduce Medicaid Reimbursement Solely Be-

cause of Budgetary Concerns by Freezing, Diminishing

or Delaying Implementation of Increases in Rates.

The intent of Congress in passing the Boren Amend-

ment to the Medicaid Act, as confirmed consistently by

the federal courts, is that reimbursement for services

rendered under the Medicaid Act may not be diminished

solely because of budgetary concerns. Congress clearly ex-

pressed this intention, stating: “The conferees would fur-

ther note their intent that a state not develop rates...

solely on the basis of budgetary appropriations.” H. Conf.

Rep. 1497, 96th Cong. 2d Sess. 154 (1980).

In accordance with this Congressional mandate, federal

decisions have consistently held that a state may not freeze

reimbursement rates, diminish rates or delay implementa-

tion of rate increases simply because of budgetary concerns.

See, Illinois Hospital Association v. Illinois Department

of Public Aid, 576 F. Supp. 360 (N.D. Ill. 1983); Illinois

Healthcare Association, Inc. v. Quern, No. 77-C-1109, Medi-

care and Medicaid Guide (CCH) 482,396 (N.D. Ill. 1983);

Amisub (PSL), Inc. v. State of Colorado Department of

Social Services, 879 F.2d 789 (10th Cir. 1989), cert. denied,

110 S.Ct. 3212 (1990); California Association of Health

Care Facilities v. Department of Health Services, No.

S-90-1086, CCH Medicare and Medicaid Guide {39,053

(E.D. Cal. Oct. 1, 1990); Kansas Health Care Association,

Inc. v. Kansas Department of Social and Rehabilitation

Services, No. 90-4207-S, Medicare and Medicaid Guide

(CCH) 489,059 (D. Kan. Dec. 31, 1990); Tempie Univer-

sity v. White, 729 F. Supp. 1327 (E.D. Pa. 1990), aff'd,

941 F.2d 201 (3d Cir. 1991), cert. denied, Snider v. Tem-

ple University, 112 S.Ct. 873 (1992); Washington State

Hospital Association v. State of Washington, No. C86-

a; on

463D, Medicare and Medicaid Guide (CCH) 436,352 (W.D.

Wash. May 18, 1987); and Nebraska Health Care Assoc. v.

Dunning, 578 F. Supp. 543 (D. Neb. 1983), affirmed in

part, 778 F.2d 1291 (8th Cir. 1985) (as amended on denial

of rehearing 1986), cert. denied, 479 U.S. 1063 (1987).

When the States of Colorado, Kansas and Nebraska at-

tempted to cut, cap or freeze rates of reimbursement in

order to reduce payments to meet budget constraints, the

federal courts were quick to disallow such tactics as vio-

lative of the Medicaid Act’s Boren Amendment, whether

or not the Secretary of HHS had approved the rates. See,

Amisub (PSL), Inc. v. State of Colorado Department of

Social Services, supra; Kansas Health Care Association,

Inc. v. Kansas Department of Social and Rehabilitation

Services, supra; Nebraska Health Care Association v.

Dunning, supra.

In the California Association case, supra, the court ad-

dressed a State’s decision to implement rate increases on

December 1, 1990 rather than on October 1, 1990, which

would be the usual date of annual increases. The court

found that “failing to pay legally mandated rates solely

and exclusively because of budgetary concerns” (emphasis

added) was illegal under the Medicaid Act, and ordered

the State to refrain from “withholding and cause to be

promptly disbursed” the payments established pursuant

to the state plan. Hence the court held that delaying pay-

ment, not of the entire payment amount, but only of the

increase, for two months would violate the Medicaid Act,

if done solely for budgetary reasons.

= a

B. The Decision of the Court of Appeals Permits a State

Medicaid Agency to Diminish Medicaid Reimbursement

Solely Because of Budgetary Concerns by Simply Delay-

ing Payments Without Reducing the Rates.

Respondent Bradley denied that the IDPA establishes

rates. He stated that the IDPA determines a methodology

according to which “ultimate rates’ and the consequent

reimbursement payments are calculated.

Reimbursement to nursing homes for Medicaid recipi-

ents is made for monthly services. After the last day of

each month of services, the IDPA, pursuant to the meth-

odology, calculates a per diem rate and the total amount

due the nursing home, and sends a Turnaround Invoice.

The nursing home reviews and returns the Turnaround

Invoice to the IDPA. The date on which such verified

Turnaround Invoice is received by the IDPA constitutes

the date of reception of the bill for services.

For purposes of the budget, the IDPA determines a pro-

jected average per diem rate for the fiscal year. This rate

is then multiplied by the estimated number of Medicaid

long term care patient days, and estimated third party

payments are subtracted. The resu: ing number is sub-

mitted as part of the Illinois State budget for the fiscal

year. Accordingly, in fiscal 1991, funding of the Medicaid

payments to be made for long term care by the IDPA

was based on 365 days, with payments to be made each

month, that is twelve times during fiscal 1991, as in the

past.

It is uncontroverted that historically these monthly pay-

ments had been made 30 to 45 days after the last date

of service, but that by the date of the preliminary injunc-

tion hearing payments were being made 94 to 104 days

after the last date of service, with a further delay of an

x_ =

additional ten days expected before the end of the fiscal

year. Hence, Illinois would make only ten payments in

fiscal 1991, instead of the twelve on which the method-

ology was set and the Illinois budget was established.

The evidence shows that this delay made it impossi-

ble for many nursing homes to meet the costs incurred

in providing services to Medicaid recipients. There was

no showing that these homes, whose operators have op-

erated nursing homes successfully for years, were any-

thing other than economically and efficiently operated fa-

cilities. Moreover, in an attempt to meet costs, half of the

Illinois Council members had completely exhausted avail-

able credit.

Respondent Bradley admitted that the delay in pay-

ments to nursing homes for services rendered to Medicaid

recipients was due to a shortage of money on the part

of the State. Therefore, solely for budgetary reasons, in

fiscal 1991 Illinois reduced its Medicaid reimbursement

below what it had determined was reasonable and ade-

quate for nursing homes to meet the costs incurred in

rendering services.

The delay in payment by IDPA caused a greater reduc-

tion in payments made to long term care providers than

the rate changes and freezes invariably condemned and

enjoined by the federal courts. Paying for only ten months

in fiscal 1991 means that Illinois has reduced Medicaid

reimbursement by one-sixth because of financial considera-

tions. Illinois did not lower the rates; it simply did not

make the monthly reimbursement payments. It is incon-

ceivable that a state should be allowed to do directly what

is clearly illegal when done indirectly. A state agency can-

not hide the true nature of a rate decrease by “creative

accounting,” “sleight of hand,” or placing “form over sub-

=

stance.” Illinois Healthcare Association, Inc. v. Quern,

No. 77-C-1109, Medicare and Medicaid Guide (CCH) 32,396

(N.D. Ill. 1988).

C. The Decision of the Court of Appeals Conflicts with This

Court’s Insistence on Compliance with the Medicaid Act

in Practice and on the Prime Importance of Payment.

In Wilder v. Virginia Hospital Assn., 496 U.S. 490, 110

S.Ct. 2510, 110 L.Ed.2d 455 (1990), this Court evidenced

a concern lest the Boren Amendment be interpreted in

such manner as to “render it a dead letter.” 110 S.Ct.

at 2520. Although the issue presented in Wilder was not

that posed by petitioners in the inrtant matter, the rea-

soning of this Court appears to demand more than the

mere setting of rates with an indefinite promise to pay

that appears to satisfy the appellate panel.

In Wilder, this Court held that, under the Medicaid Act,

a state plan must establish “a scheme for reimbursing”

services, and styled as a state’s “fundamental obligation”’

the payment of reasonable rates. Id. at 2513, 2520. As

this Court held, ‘“‘a State must reimburse providers ac-

cording to rates” it has established, not merely set the

rates. Id. at 2516. In passing the Boren Amendment,

“Congress retained the ultimate requirement that the

rates reimburse the ‘reasonable cost’ of the services pro-

vided.” Id. at 2515. Moreover, this Court noted that the

true issue is “noncompliance in practice,” and cited 42

CFR §430.35 to indicate that “noncompliance in practice”

may exist “regardless of whether the plan itself complies

with” federal requirements. Jd. at 2519.

Further, in refusing to hold that compliance with “bare

procedural requirements” was the only right enforceable

under §1983, this Court stated that such an interpreta-

tion would render “the entire reimbursement provision

=

essentially meaningless.” Jd. at 2519-2520. Citing legisla-

tive history, the Court pointed out that the flexibility

given to the States by the Boren Amendment was “not

intended to encourage arbitrary reductions in payment

that would adversely affect the quality of care.” Jd. at

2520, citing S.Rep. No. 96-471, at 29 (emphasis added).

Finally, this Court noted the intention of Congress that

health care providers be able to sue in federal court for

injunctive relief “to ensure that they were reimbursed ac-

cording to reasonable rates.” Id. at 2521 (emphasis added).

This Court, therefore, has held that the Medicaid Act

requires the making of payments that reasonably and ade-

quately reimburse providers for services, not simply the

setting of reasonable and adequate rates of reimburse-

ment, which the States are then free to pay or not to

pay regardless of the consequences for reimbursement in

practice. Because the delay by the IDPA resulted in un-

reasonable and inadequate reimbursement, the decision of

the appellate panel should be reversed.

II.

THE RULING OF THE COURT OF APPEALS IS CON-

TRARY TO SETTLED PRINCIPLES OF STATUTORY IN-

TERPRETATION.

No one denies that the purpose of Congress in passing

the Medicaid Act was to provide the needy aged and in-

firm with financial assistance that would insure appro-

priate medical care. Moreover, the Boren Amendment, as

noted above, explicitly states that a state plan must pro-

vide for payment.

In devising legislation, Congress cannot foresee all prob-

lems that may later arise. When certain States reduced

reimbursement by lowering or freezing rates, the federal

aaa ieee ieee

«th

courts looked to the Congressional purpose and enjoined

such reduction. When Illinois reduced reimbursement by

delaying payments, however, the appellate panel deduced

a contrary Congressional intent from an alleged failure

of Congress to supplement the Secretary’s regulations.

Such statutory misinterpretation should not be allowed

to stand.

A. The Court of Appeals Ignored the Explicit Language of

the Medicaid Act and Other Evidence of the Intent of

Congress.

1. Statutory Language: As this Court has frequently

held, the first rule of statutory construction is to give ef-

fect to the “language and design of the statute as a whole.”’

Bethesda Hospital Association v. Bowen, 485 U.S. 399,

405, 108 S.Ct. 1255, 1259, 99 L.Ed. 2d 460 (1988). How-

ever, to arrive at the design of the statute as a whole,

it is necessary to consider the general purposes of Con-

gress in devising the legislation. Commissioner of Inter-

nal Revenue v. Engle, 464 U.S. 206, 217, 104 S.Ct. 597,

604, 78 L.Ed. 2d 420, 429-30 (1984).

As this Court has made abundantly clear in its Wilder

decision, the general purpose of Congress in devising the

Medicaid Act was to provide the financial assistance neces-

sary to furnish medical care to needy individuals. The

Boren Amendment explicitly directs that a state plan pro-

vide for payment. To adopt an interpretation of the Medi-

caid Act that allows a state to avoid making payments

reasonable and adequate for the provision of services to

the needy is to subvert fhe purposes for which the statute

was passed in the first place.

2. Congressional Intent: Congress explicitly directed

that states were not to develop unreasonable and inade-

quate rates solely on the basis of budgetary appropriations.

=

It is a bizarre interpretation of Congressional intent tc

conclude that it is permissible to refrain from making

reasonable and adequate payments solely on the basis of

budgetary appropriations. Rates serve no purpose other

than to enable the calculation of appropriate payments.

In passing the Omnibus Budget Reconciliation Act of

1987 (“OBRA 87’), Congress mandated a higher standard

of care for nursing home residents. Mindful that “quality

care is not free,” the House Committee required an up-

ward adjustment in rates, stating:

It is the intent of the Committee that the States’

Medicaid programs provide for an adjustment (in

their Medicaid plan) and make payments commen-

surate to the cost incurred by the providers in im-

plementing the new requirements and that such pay-

ment be made as those costs are incurred.

H. Rep. 100-391(I), 1987 U.S. Code Cong. & Ad. News,

p. 2313-284; emphasis added. In stating that additional

amounts be paid as costs are incurred, Congress evidently

assumed that pre-OBRA 87 payments were being made

as the costs were incurred.

3. The COMC Case: Respondents below relied on Chi-

cago Osteopathic Medical Centers v. Duffy, 88 C 1174,

Medicare & Medicaid Guide (CCH), 938,395 (N.D. Ill. 1989)

(““COMC’’), in which the IDPA’s right to delay payments

for Medicaid services for up to twelve months was recog-

nized. As Petitioners pointed out, and the district court

agreed, COMC is distinguishable from the instant case

in that the services at issue in COMC were provided un-

der a waiver of the provisions of the Boren Amendment.

More important, Congressional action since the decision

in COMC unmistakably demonstrates that Congress in-

tended the Boren Amendment to require prompt payment

of claims. House Conference Report No. 101-964 (1990

= =

U.S. Code Cong. & Ad. News, p. 2587) states that the

House Bill would change the “Timely Payment” provision

to extend the prompt payment requirements of 42 C.F.R.

447.45(d) to ‘any type of provider participating under a

selective contracting waiver” (Jd. at 2593). This provision

of the House Bill was accepted by the conference agree-

ment (Jd. at 2598), and has been enacted into law, 42

U.S.C. §1896n(b)\4).

Thus, since COMC, Congress has enacted into law a

provision that would grant a waiver of the Boren Amend-

ment only if 90% of claims are paid within 30 days and

99% within 90 days. There can be no clearer proof that

Congress intended the Boren Amendment to provide for

timeliness of payments than its concern to subject to ex-

plicit prompt payment provisions any program for which

a waiver of the Boren Amendment is to be granted.

In COMC, the Boren Amendment, requiring reimburse-

ment by rates “reasonable and adequate” to meet the

costs of an efficiently and economically operated facility,

had been waived, and the court concluded that in its ab-

sence the only requirement was that payment be made

within twelve months. Congress reacted by insisting that

the 30/90 day rule be followed whenever the Boren Amend-

ment is waived.

In the instant case, because the Boren Amendment has

not been waived, it is clearly the Congressional intent that

reasonable and adequate reimbursement be paid to enable

efficiently and economically operated facilities to meet the

costs incurred in providing quality care.

=~ =

B. The Court of Appeals Purported to Ascertain Agency In-

tent Without Sufficient Evidence and then Unjustifiably

Attributed Such Intent to Congress.

For the district court the decisive fact in denying the

preliminary injunction was that the Secretary had ap-

proved the Illinois State Plan, which, for the payment of

nursing home services, only sets an outside limit for pay-

ment of twelve months after the date of the receipt of

the claim. From the simple fact of the Secretary’s 1979

approval, the court concluded that the Secretary permits

Illinois to take up to twelve months to pay nursing home

invoices and approves the allocation of the first twelve

months’ of risk of nonpayment to the providers.

This conclusion will not withstand analysis. The Secre-

tary’s approval of the Illinois State Plan antedated the

Boren Amendment. Thereafter, the Secretary’s approval

would be required only if there was a significant change

in the “payment methods and standards” of reimburse-

ment. It is undisputed that, with regard to the timeliness

of payments, there was no significant change in the IDPA

practice after the passage of the Boren Amendment until

fiscal year 1991, as indicated above.

Moreover, as various federal courts have noted, the re-

view of state plans by HCFA is cursory. See, e.g., Ami-

sub, 879 F.2d, at 794. Indeed, as this Court has noted,

one of the effects of the Boren Amendment was to cur-

tail the review required of the Secretary. Wilder, 110

S.Ct. at 2516.

Finally, because the district court granted a Temporary

Restraining Order fully aware of the provisions of the

State Plan, the Secretary’s regulations and the Boren

Amendment, neither petitioners nor respondents presented

any evidence of the position the Secretary had taken re-

garding the delay in payments by the IDPA. The district

—20—

court should not have based its ruling on a factual posi-

tion not addressed by the parties without at least advis-

ing the parties that evidence was required on that issue.

This matter reached the appellate panel as an interlocu-

tory appeal of the denial of a preliminary injunction. Peti-

tioners pointed out*the lack of evidence concerning the

alleged intention of the Secretary, and requested at least

the opportunity to present evidence on the issue should

it be determinative of the outcome of the case.

The appellate panel converted an interlocutory ruling

to a final decision on the merits by a slight but deter-

minative shift of emphasis. It first noted that the Boren

Amendment did not “impose time limits’ on the States

for paying Medicaid claims (Appendix A at 5). By gram-

matical analysis it concluded that under the Medicaid Act

only rates, not payments, had to be reasonable and ade-

quate to reimburse for services (Jd. at 6).

The panel then noted that the Medicaid Act (1977) and

Secretary’s regulations (1979) contained some timely pay-

ment provisions, but none that set any time limit for

nursing home reimbursement other than the twelve-month

outside limit of the regulations (Jd. at 6-7). Observing that

Congress had taken no action in light of this absence, the

panel concluded that the Medicaid Act permits a delay in

reimbursement payments, regardless of the consequences,

as long as the delay does not exceed twelve months (Jd.

at 7-8). Additionally, the panel decided that a change from

the longstanding practice of making timely monthly pay-

ments did not constitute a change in “payment methods

and standards,”’ because that phrase is used in the regula-

tions only to refer to the rates, not the payment of rates

(Id. at 8-9).

This entire exercise in “statutory interpretation” is

founded upon a dichotomy between “rates” and “pay-

— =

ments,’ namely that the Medicaid Act and the Boren

Amendment require only that rates be reasonable and

adequate to reimburse for Medicaid services and not that

reasonable and adequate reimbursement be actually made.

The appellate panel obviously subscribes to such a di-

chotomy, but there is no evidence that either the Sec-

retary or Congress share the panel’s belief, which appears

to contradict the analysis of the Medicaid Act of this

Court in its Wilder decision.!

With regard to the Secretary, it is undisputed that the

delay in payments was unprecedented and that timely

monthly payments had been made in Illinois (with minor

exceptions) since before the Boren Amendment. There is

no record evidence of the Secretary’s opinion as to whether

the Boren Amendment requires payments more promptly

than the outside limits set by his regulations.? Yet, with-

out the benefit of any evidence, both the district court and

the appellate panel concluded that the Secretary would

have no objection to the delay in payments.

Worse, the appellate panel then deduced Congressional

intent from the alleged failure of Congress to supplement

the Medicaid Act by imposing the timely payment provi-

sions that were not contained in the regulations. In fact,

Congress did take action after the 1977 and 1979 timely

+ As noted above, according to respondent Bradley, the IDPA

des not determine “rates” but a methodology, pursuant to which

the “ultimate rates” for the monthly payments are calculated.

Thus, the “rates” are determined only as a function of the pay-

ments that are actually made.

2 As noted above, — were unfairly precluded from present-

ing such evidence. Attached hereto as Appendix D is correspondence

between HHS and IDPA that evidences HHS’s disapproval of IDPA’s

delay in making payments, and also an admission by the IDPA

that the delay was due to budgetary reasons.

—22—

payment provisions cited by the appellate panel, namely

by adopting the Boren Amendment itself in 1980. The

panel not only ignored the language and history of the

Boren Amendment itself, as analyzed by this Court in

Wilder, and the subsequent actions taken by Congress to

insure prompt payment for Medicaid services, but imposed

upon Congress the duty to foresee the delay in payment

undertaken for budgetary reasons by Illinois and the di-

chotomy between “rates” and “payments” devised by the

district court and the appellate panel.®

By unsubstantiated conjecture as to the intention of the

Secretary and unwarranted attribution of this alleged in-

tention to the Congress, the panel was able to reach a

conclusion, the effect of which is to permit the reduction

in Medicaid payments solely for budgetary reasons that

all other federal courts have enjoined. At the very least,

the appellate panel should have remanded the matter to

the district court for the presentation of evidence as to the

Secretary’s understanding of the requirement for prompt

payment under the Boren Amendment.‘

3 Respondents have not cited and petitioners have no knowledge

of any federal decision prior to the instant lawsuit addressing the

specific issue of a reduction in Medicaid reimbursement through

delay in making payments rather than through a change in pay-

ment rates, although the California Association court (p. 11 above)

held that a delay in paying increases violated the Medicaid Act.

Subsequently, the United States District Court for the Northern

District of New York, in United Cerebral Palsy Assn. of New

York State, Inc. v. Cuomo, 1992 U.S. Dist. Lexis 1122 (N.D.N.Y.

1992), in ey C.F.R. §447.253, has explicitly followed the

reasoning of the district court in the instant case, holding that

delay in making ayments did not constitute a change in “methods

and standards” for which assurances had to be made to the Sec-

retary.

4 Inresponding to petitioners’ “cynical argument” that the twelve-

month delay can be further extended by IDPA’s delaying the send-

(Footnote continued on following page)

—~23—

More correctly, the panel should have refrained from

foisting its own rates/payments dichotomy on Congress,

and should have given effect to the plain language of the

Boren Amendment when seen in light of the fundamen-

tal purpose of the Medicaid Act.

CONCLUSION

For all of the foregoing reasons, petitioners respectfully

request this Court to grant this petition for certiorari,

and to review and reverse the decision of the United

States Court of Appeals of the Seventh Circuit in this

matter.

Respectfully submitted,

RICHARD F. ZEHNLE

Counsel of Record

NEAL A. CROWLEY

ANN A. MCKENZIE

VEDDER, PRICE, KAUFMAN & KAMMHOLZ

222 North LaSalle Street

Chicago, Illinois 60601

(312) 609-7500

Attorneys for Petitioners

4 continued

ing of the Turnaround Invoice in the first place, the appellate panel

noted that there was “‘no evidence” that such delay had ever taken

place (Appendix A at 7). There was, of course, only a preliminary

injunction hearing held nine days after the original complaint was

filed. By ordering the district court to dismiss the case on the

merits, the appellate panel assured that such evidence would never

be forthcoming.

APPENDICES

ee

INDEX TO APPENDICES

APP.

PAGE

A-—Slip Opinion of the United States Court of

Appeals for the Seventh Circuit, dated February

i EE nh N 5 ha ke Oe eee la

B—Order of the United States District Court for

the Northern District of Illinois, Eastern Divi-

sion, dated March 20, 1991 ................ lla

C—Memorandum Opinion and Order of the United

States District Court for the Northern District

of Illinois, Eastern Division, dated March 29,

ee Ee Se Pere errr rer ys Sry l4a

D—Various Correspondence between HHS and

og PEPE eT er ey eT er er ee et res 24a

—_

APPENDIX A

IN THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

No. 91-1701

ILLINOIS COUNCIL ON LONG TERM CARE,

GILMAN NURSING CENTER, an Illinois

limited partnership, SPRING VALLEY NURSING

CENTER, an Illinois limited partnership, et al.,

Plaintiffs-Appellants,

v.

PHILLIP BRADLEY, in his official capacity as

Director of the Illinois Department of Public

Aid, Dawn C. NETSCH, in her official capacity

as Comptroller of the State of Illinois and

PATRICK J. QUINN, in his official capacity

as Treasurer of the State of Illinois,

Defendants-Appellees.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 91 C 1666—James F. Holderman, Judge.

ARGUED JUNE 14, 1991—DEcIDED FEBRUARY 18, 1992

Before POSNER, MANION, and KANNE, Circuit Judges.

MANION, Circuit Judge. The Illinois Council on Long

Term Health Care, an organization representing the inter-

ests of nursing homes in Illinois, and two of its member

nursing homes sued various Illinois state officials for alleged-

ly violating the Medicaid Act, 79 Stat. 343, as amended,

|

— PG a

42 U.S.C. § 1896 et seg., by delaying payments to nurs-

ing homes for services provided to r residents. The

plaintiffs moved in the district court for a preliminary in-

junction that would have ordered the defendants to reim-

burse the nursing homes more quickly. The district court

denied the injunction. Because we find that the plaintiffs

have no chance of success on the merits, we affirm and

eran to the district court with instructions to dismiss

the case.

I.

Congress enacted the Medicaid program to allow the

federal government to provide financial assistance to states

so that the states may provide medical assistance to poor

people. State participation in the Medicaid program is vol-

untary. If a state does choose to participate and qualify

for financial assistance it must, among other things, sub-

mit a “plan for medical assistance,” describing the state

Medicaid program’s nature and scope, for the Secretary

of Health and Human Services’ approval. Among other

things, the plan must establish a scheme to reimburse

health care providers for the cost of medical services they

provide to poor people. See generally Wilder v. Virginia

Hosp. Ass’n, 110 S. Ct. 2510, 2513-14 (1990) (citing rele-

vant statutory and regulatory provisions).

Illinois participates in the Medicaid program under a

plan approved by the Secretary of HHS. In 1979, Illinois

submitted, and the Secretary approved, a plan amendment

stating that Illinois would meet “all requirements of 42

C.F.R. § 447.45 for timely payment of claims.” Section

447.45(d) sets explicit time limits for paying claims to

providers:

(d) Timely processing of claims. (1) The Medicaid

agency must require providers to submit all claims

no later than 12 months from the date of service.

(2) The agency must pay 90 percent of all clean claims

from practitioners . . . within 30 days of the date

of receipt.

«

—3a—

(3) The agency must pay 99 percent of all clean claims

from practitioners . . . within 90 days of the date

of receipt.

(4) The agency must pay all other claims [including

those of nursing home operators] within 12 months

of the date of receipt.

42 C.F.R. § 447.45(d) (emphasis added). Subsections (dX2)

and (3) implement 42 U.S.C. § 1396a(aX37XA). That provi-

sion, enacted in 1977, sets forth in the statute the 30-day/

90-day payment requirement for practitioners.

Billing for nursing home services under the Illinois Medi-

caid plan is accomplished by means of documents known

as “Turnaround Invoices.”’ Generally, after the last day

of each month of services Illinois calculates the amount

due a nursing home based on a per diem rate established

for the fiscal year. Illinois then sends the nursing home

a Turnaround Invoice reflecting this amount. The nursing

home then makes what it considers to be appropriate ad-

justments on the Turnaround Invoice and returns it to

the state. Illinois considers the nursing home’s bili for ser-

vices to be received when the nursing home returns the

Turnaround Invoice.

Historically, Illinois has paid claims for nursing home

services within 30 to 45 days after the last date of ser-

vices, with a few slightly longer delays toward the end

of several fiscal years. But because of budgetary problems

in fiscal year 1991 (July 1, 1990 to June 30, 1991), the

state consistently be to delay payments. For example,

the state did not make payments for November 1990 ser-

vices until between 94 and 104 days after the last day

of services.

Nursing home operators say they were able to live with

payments 30 to 45 days from the last day of services.

However, they insist that the recent delays in payments

from Illinois have caused them to fall behind in paying

their own bills. Faced with a situation that they allege

jeopardizes their very existence (an allegation the defen-

dants dispute), the plaintiffs in this case (two nursing homes

— 49.

and an umbrella organization representing nursing homes)

sought an injunction from the district court that would

require Illinois’ officials to pay claims for nursing home

services within 45 days of the last date of services in-

cluded in the claim. The district court denied the plain-

tiffs’ request for a preliminary injunction, holding that the

plaintiffs’ likelihood of success on the merits was negligi-

ble. The plaintiffs filed a timely interlocutory appeal under

28 U.S.C. § 1292(b) from the district court’s decision.

Il.

To be entitled to a preliminary injunction, a plaintiff

must demonstrate some likelihood of success on the merits.

If a plaintiff seeking a preliminary injunction cannot show

that his chance of _gptimery | on the merits is “better than

negligible,” a court must deny the injunction regardless

of how heavily any other equities may weigh in the plain-

tiff’s favor. Centurion Reinsurance Co., Ltd. v. Singer,

810 F.2d 140, 145 (7th Cir..1987); see also Curtis v. Thomp-

son, 840 F.2d 1291, 1296 (7th Cir. 1988). The district court

properly decided to deny the plaintiffs’ request for a pre-

liminary injunction because the plaintiffs have failed to

demonstrate a chance of success on the merits.

The plaintiffs argue that the recent delay in payments

by Illinois violates both the Medicaid Act and the Sec-

retary’s regulations. The plaintiffs first argue that the

delayed payments violate the Boren Amendment to the

Medicaid Act, Pub. L. 96-499, § 962(a), 94 Stat. 2650, codi-

fied as amended at 42 U.S.C. § 1396a(aX13XA). The Boren

Amendment provides that

a State plan for medical assistance must

provide .. . for payment . . . of [health care services]

provided under the plan through the use of rates (de-

termined in accordance with methods and standards

developed by the State . . .) which the State finds,

and makes assurances satisfactory to the Secretary,

are reasonable and adequate to meet the costs which

—pa—

must be incurred by efficiently and economically op-

erated facilities in order to provide health care ser-

vices in conformity with applicable State and Federal

ea

(Emphasis added.) The Boren Amendment does not on its

face impose any time limits on states for paying claims

but the plaintiffs insist that it requires states to make

timely payments. Stripped of embellishments, their argu-

ment proceeds like this: The Boren Amendment requires

that payments be adequate to enable providers to meet

the costs required to render sufficient health care ser-

vices. Untimely payments can be inadequate payments

since providers need the money in time to meet their own

expenses, such as payroll, mortgages, and utilities. If the

financial pressure caused by the late payments becomes

severe (as sources of credit dry up and creditors insist

on payment), care to residents may suffer to the point

that it becomes inadequate (or, in the worst case, less ac-

cessible as providers go out of business). The plaintiffs

insist that since late payment can be inadequate payment,

resulting in inadequate care, untimely payment of claims

can violate the Boren Amendment and a court must order

state officials to speed up their payments to cure the

violation.

As a practical matter, it does make sense to consider the

timeliness of payments as an element of their adequacy.

A dollar one or two months from today is not the same

as a dollar today. Money has a time value, and businesses

need money to pay their bills when due, not one or two

months later. But the question is not what reimbursement

scheme might make sense but whether the Boren Amend-

ment requires timely payment—in other words, whether

the Boren Amendment imposes time limits on the states

for paying Medicaid claims. Based on the amendment’s

language and the context of the statutory and regulatory

scheme in which it appears, we conclude it does not.

Although timeliness of payments could logically be an

element of their adequacy, the Boren Amendment’s lan-

~~

guage and context demonstrates that is not the approach

Congress took. As we have noted, the Boren Amendment

does not on its face impose any time limits or refer direct-

ly to timeliness in any way. Moreover, the Boren Amend-

ment’s | age requires rates, not actual payments, to

be reasonable and adequate. The words “reasonable and

adequate’’. modify the noun “rates,” not “payment.” See

42 U.S.C. § 1396a(aX13XA) (state plan must provide “for

payment . . . through the use of rates . . . which the state

finds . . . are reasonable and adequate . . .”). It may be

true that the reason for requiring adequate rates is to

assure adequate payment for services. But “rate” means

an amount, not the time at which that amount must be

paid. The logical conclusion from this is that the Boren

Amendment focuses on the amount of a state’s payments,

not the time in which the state makes those payments.

The statutory and regulatory context in which the Boren

Amendment appears reinforces this conclusion. “[A] stat-

ute is to be read as a whole, since the meaning of statu-

tory language, plain or not, depends on context.” King v.

St. Vincent's Hospital, 112 S. Ct. 570, 574 (1991). At the

time Congress passed the Boren Amendment, both the

Medicaid Act and its implementing regulations expressly

addressed the time in which states must pay claims. The

Act, in 42 U.S.C. § 1896a(aX37XA), enacted in 1977 (see

Pub. L. 95-142, § 2(bX1XC), 91 Stat. 1176 (1977), requires

that a state plan provide claim payment procedures to

ensure that “90 per centum of claims [from health care

practitioners] . . . are paid within 30 days of the date of

receipt . . . and that 99 per centum of such claims are

paid within 90 days of the date of receipt . . . .”’ The

regulation, 42 C.F.R. § 447.45(d), promulgated in 1979,

ursuant to the express authority granted by 42 U.S.C.

1302 to promulgate regulations to administer the Medi-

caid Act (see 44 Fed. Reg. 30344 (May 25, 1979)), adopts

the 30-day/90-day rule for practitioners’ claims and re-

quires that states “pay all other claims within 12 months

of b> date of receipt ... .” 42 C.F.R. § 447.45(dX2),(8),

and (4).

—

—19—

Section 1396a(aX37XA) shows that when Congress wanted

to impose time limits for the payment of certain Medicaid

claims, it did so explicitly. Moreover, given the express

time limits previously imposed by § 1396a(aX37XA) and 42

C.F.R. § 447.45(d), it is all the more unlikely that Con-

gress intended to impose further time limits through the

Boren Amendment, which does not mention time at all

and speaks only about payment rates. We conclude from

the Boren Amendment’s language and context that the

Boren Amendment does not address the timeliness of claim

payment. Cf. King, 112 S. Ct. at 573-74. A state complies

with federal law so long as it pays providers’ claims with-

in the express time limits established by the statute and

regulations (in this case, the 12-month limit for “all other

claims” set forth in 42 C.F.R. § 447.45(d\4)).

The plaintiffs insist that if the only time limit placed

on Illinois is § 447.45(d\4)’s 12-month limit, the state can

avoid paying its Medicaid bills forever. This is so, say the

plaintiffs, because the 12-month period begins when the

state receives the provider’s claim. However, the provider

cannot submit its claim until it receives a Turnaround In-

voice, a document the state generates; as we have noted,

Illinois deems receipt of the Turnaround Invoice to be

receipt of the claim. The plaintiffs assert that Illinois may

avoid paying claims simply by not sending the Turnaround

Invoice. Illinois will never receive a claim, so the 12-month

time limit for payment will never begin. According to the

plaintiffs, Congress could not have intended this result.

There are at least three responses to this cynical argu-

ment. First, there is no evidence that Illinois has ever

delayed or will ever delay sending Turnaround Invoices

to avoid paying claims. Indeed, there is no evidence that

Illinois is not paying claims; it is just taking longer to

pay them than it has in the past. Second, the plaintiffs’

argument ignores 42 C.F.R. § 447.45(dX1), which requires

the state “to require providers to submit all claims no

later than 12 months from the date of service.” If Illinois

did delay sending Turnaround Invoices so that the nursing

nla

homes could not submit their bills within 12 months from

the date of service, it would violate § 447.45(dX1). Third,

the plaintiffs’ scenario does not change the Boren Amend-

ment’s language and context, both of which indicate that

the Boren Amendment does not address timeliness. If the

plaintiffs want absolute assurance in the Medicaid Act that

the scenario they posit never comes to pass, they should

look to Congress to amend the Medicaid Act to prevent it.

Besides arguing that Illinois has violated the Boren

Amendment by delaying payments, the plaintiffs also ar-

gue that Illinois has violated 42 C.F.R. §§ 447.253(a) and

(b). Section 447.253(a) provides that whenever a state seeks

to change the “payment methods and standards” in its

plan, it must make the findings and assurances set forth

in §§ 447.255(b) through (g). Section 447.253(b) requires

that whenever a state makes a change in its “methods

and standards,” it must make certain findings. The plain-

tiffs argue that by making payments later than it histori-

cally had made them, Illinois changed its “methods and

standards”; since Illinois did not make the necessary find-

ings and assurances before slowing down its payments,

it violated §§ 447.253(a) and (b).

Sections 447.253(a) and (b) do not apply to Illinois’ deci-

sion to delay payments to nursing homes. Section 447.253,

read as a whole and in the context of accompanying reg-

ulations, addresses methods and standards for rate set-

ting and not the time in which payments must be made.

Section 447.253 appears in a part of Subpart C of Chap-

ter IV of 42 C.F.R. entitled “Payment Rates.” Section

447.252(b) states that a plan must “specify comprehensive-

ly the methods and standards used by the agency to set

payment rates.” The findings mandated by § 447.253(b)

(the section relevant to nursing homes), and the assur-

ances mandated by §§ 447.253(c), (f), and (g), all relate to

methods and standards for determining payment rates.

None of the findings or assurances that §§ 447.253(b) through

(g) require mentions anything about assuring that states

will make timely payments. Since a specific regulation,

—9a—

42 C.F.R. § 447.45(d), imposes express time limits for pay-

ments to Medicaid providers, it is unlikely that the Sec-

retary would implicitly address timeliness in a separate

regulation that does not mention timeliness.

Moreover, Subpart C of Chapter IV of 42 C.F.R., the

subpart containing § 447.252 and § 447.253, implements the

Boren Amendment. See 42 C.F.R. § 447.250(a). As we

have seen, the Boren Amendment does not address the

timeliness of payments. It follows that the regulations

implementing the Boren Amendment would not address

timeliness either. The language of the regulations, which

expressly addresses rate-setting but not timeliness, is con-

sistent with this conclusion. Since a delay in making pay-

ments is not the kind of “change in payment methods and

procedures” that 42 C.F.R. §§ 447.252 and 447.253 ad-

dress, Illinois did not have to make the findings and as-

surances those sections require when it increased the time

in which it paid the plaintiffs for their services.

The district court correctly determined that the plain-

tiffs were not entitled to a preliminary injunction because

they could not show a better than negligible chance of

Succeeding on the merits of their claims. In fact, the plain-

tiffs have not demonstrated any chance of success on the

merits. The plaintiffs’ claims depend on alleged violations

of the Boren Amendment and its regulations. But Illinois

has not violated either the Boren Amendment or its imple-

menting regulations because neither the Boren Amendment

nor the regulations address Illinois’ conduct—delaying pay-

ments to Medicaid providers. The only limit on the time

in which Illinois must pay the plaintiffs’ Medicaid claims

is the 12-month rule set out in 42 C.F.R. § 447.45(d4).

The plaintiffs may wish to be paid more quickly, and per-

haps the law should require more timely payments. But

that decision is for Congress, not the federal courts, to

make.

The plaintiffs have not ever suggested that Illinois has

violated § 447.45(dX4) or that any real possibility exists

that it will do so in the future. Since plaintiffs cannot win

—10a—

on the merits, there is no point in remanding the case

for further proceedings. Therefore, we affirm the district

court’s judgment and remand with instructions to dismiss

the case on the merits. See Pratte v. N.L.R.B., 683 F.2d

1038, 1044 (7th Cir. 1982); Hurwitz v. Directors Guild of

America, 364 F.2d 67, 70 (2d Cir. 1966).

AFFIRMED AND REMANDED WITH

INSTRUCTIONS TO DISMISS.

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Circuit

—lla—

APPENDIX B

[Dated March 20, 1991]

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

; EASTERN DIVISION

ILLINOIS COUNCIL ON LONG )

TERM CARE; GILMAN NURSING _)

CENTER, an Illinois limited )

partnership; SPRING VALLEY )

NURSING CENTER, an Illinois )

limited partnership; and )

WOODSIDE MANOR, an Illinois )

corporation, )

Plaintiffs, )

V. ) NO. 91 C 1666

)

PHILLIP BRADLEY, in his )

official capacity as Director )

of the Illinois Department of )

Public Aid, )

Defendant. )

ORDER

JAMES F. HOLDERMAN, District Judge:

Illinois Council On Long Term Care, Gilman Nursing

Center, Spring Valley Nursing Center and Woodside

Manor, having moved for a Temporary Restraining Order

pursuant to Rule 65 of the Federal Rules of Civil Pro-

cedure, notice thereof having been provided to counsel for

the Defendant Phillip C. Bradley, Director of the Illinois

Department of Public Aid, and the court having consid-

ered this motion, the Complaint in this action, Piaintiffs’

—12a—

Memorandum of Law in Support of Plaintiffs’ Motion for

Issuance of a Temporary Restraining Order and the ex-

hibits attached to all of these documents and having heard

the arguments of counsel, and based on the court’s find-

ings that:

(a)

(b)

(c)

(d)

(e)

The standard to be applied, as has been set forth

by the United State Court of Appeals for the Seventh

Circuit, is whether plaintiffs have demonstrated a

better than negligible likelihood of prevailing on the

merits of this action; whether plaintiffs will suffer

irreparable harm from which there is no adequate

remedy at law; whether issuance of the temporary

restraining order will not disserve the public in-

terest; whether the threatened injury to plaintiffs

outweigh any threatened harm the temporary re-

straining order may provide to defendants;

The State admittedly has delayed and unless en-

joined will continue to delay the payment of funds,

contrary to the procedures and the timeliness that

has been heretofore used in conjunction with these

payments;

There is a reasonable likelihood that the delay of

payment is equivalent to decreasing the payment

rate;

There is a reasonable likelihood that the delay of

payment is in violation of 42 U.S.C. §1396a (aX13)A;

The recent case of Chicago Osteopathic Medical

Center vs. Duffy, 1989 U.S. Dist. LEXIS 12824, is

distinguishable from this matter in that the situa-

tion there was not one where there was a possibil-

ity of harm resulting such as the harm that has

been shown by the affidavits to potentially occur

—13a—

here, and there is no waiver of the Boren Amend-

ment or negotiated rates in this matter;

(f) There has been a showing by plaintiffs of substan-

tial harm if this temporary restraining order is not

entered and no indication with regard to harm to be

suffered by the State if plaintiffs’ request for this

temporary restraining order were to be granted;

(g) The temporary restraining order will not disserve

the public interest.

IT IS HEREBY ORDERED that the Defendant is tempo-

rarily restrained pending a hearing on plaintiffs’ request

for preliminary injunction from delaying the processing

of claims for provision of long-term care to Medicaid bene-

ficiaries, and shall be required to pay all such claims

within the same time frame that has been utilized here-

tofore but in any event not to be later than 30 days from

the date of submission of such claims.

IT IS FURTHER ORDERED this case shall be set for

a hearing on entry of a preliminary injunction on March

29, 1991 at 10:30 a.m. and the parties shall proceed with

expedited discovery to prepare for said hearing.

IT IS FURTHER ORDERED THAT no bond shall be re-

quired with respect to this Order.

Issued this 20th day of March, 1991 at 1:45 p.m.

ENTER:

JAMES F. HOLDERMAN

United States District Judge

—l4a—

APPENDIX C

[Dated March 29, 1991]

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ILLINOIS COUNCIL ON LONG

TERM CARE; GILMAN NURSING

CENTER, an Illinois limited

partnership; SPRING VALLEY

NURSING CENTER, an Illinois

limited partnership; and

WOODSIDE MANOR, an Illinois

corporation,

Plaintiffs,

v. NO. 91 C 1666

PHILLIP BRADLEY, in his

official capacity as Director

of the Illinois Department of

Public Aid}; DAWN CLARK NETSCH,

in her official capacity as

Comptroller of the State of

Illinois; and PATRICK QUINN, in

his official capacity as

Treasurer of the State of

Illinois,

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

Defendants.

MEMORANDUM OPINION AND ORDER

JAMES F. HOLDERMAN, District Judge:

Plaintiffs, Illinois Council on Long Term Care (a not-

for-profit health care association representing over 150

proprietary Illinois nursing homes) and three nursing

homes with at least 70% Medicaid recipients as residents,

bring this action for declaratory and injunctive relief

against the director of the Illinois Department of Public

Aid (IDPA), the state agency which administers the IIli-

nois Medicaid program, and the Comptroller and Treasurer

of the State of Illinois.

Plaintiffs seeks preliminary injunctive relief claiming

that the slowdown in IDPA’s Medicaid reimbursements to

nursing homes for care provided to Medicaid beneficiaries

violates the federal Medicaid Act (the ‘“‘Act”), Title 42,

United States Code, Sections 1396a(aX2), 1396a(aX13)\A),

and 1396a(aX30XA), and implementing regulations at 42

C.F.R. § 447.250-.257.

—1l5a—

BACKGROUND FACTS

Illinois participates in the Medicaid program, a cooper-

ative federal-state program established by the Act under

which federal matching funds are provided to states to

furnish medical assistance to persons ‘“‘whose income and

resources are insufficient to meet the costs of necessary

medical services.”’ 42 U.S.C. § 1396. IDPA administers

and supervises the Illinois Medicaid program pursuant to

§ 1396a(aX5) and Ill. Rev. Stat. ch. 23, § 1-1 et seg. Plain-

tiff Illinois Council on Long Term Care has a member-

ship comprised of 150 proprietary Illinois nursing homes.

Most of the Council’s members, including the three plain-

tiff nursing homes, participate in the Illinois Medicaid

program.

Under 42 U.S.C. § 1396a, a state becomes eligible to

participate in the Medicaid program, and to receive federal

matching funds, by submitting to the Secretary of Health

and Human Services (HHS) (the “‘Secretary’’) a State Medi-

caid Plan that meets the federal standards prescribed in

ite.

the Act and its implementing regulations, and by having

the plan approved by the Secretary. A state plan for med-

ical assistance must provide for financial participation by

the state on a basis “which will assure that the lack of

adequate funds from local sources will not result in lower-

ing the amount, duration, scope, or quality of care and

services available under the plan.” 42 U.S.C. § 1396a(aX2).

As of October 1, 1981, the Act requires a state plan

to provide for payment at rates “which the State finds,

and makes assurances satisfactory to the Secretary, are

reasonable and adequate to meet the costs which must be

incurred by efficiently and economically operated facilities

in order to provide care and services in conformity with

applicable State and Federal laws, regulations, and quality

and safety standards. . . .” 42 U.S.C. § 1396a(aX13)XA).

Section 1396a(aX30) requires that state plans “provide

such methods and procedures relating to the utilization

of, and the payment for, care and services available under

the plan . . . as may be necessary ... to assure that

payments are consistent with efficiency, economy, and

quality of care.”

A Medicaid agency must pay for long term care ser-

vices using rates determined in accordance with methods

and standards specified in an approved state plan. 42 CFR

§447.253(g).

When a Medicaid agency makes a change in its “pay-

ment methods and standards,” but not less often than an-

nually, the agency must provide assurance and make find-

ings that “the agency pays for. . . long-term care facil-

ity services through the use of rates that are reasonable

and adequate to meet the costs that must be incurred by

efficiently and economically operated providers to provide

services in conformity with applicable State and Federal

—17a—

laws, regulations, and quality and safety standards.” 42

C.F.R. § 447.253(a), (b).

The IDPA has established monthly billing cycles. His-

torically, IDPA has had a median delay of approximately

30 days from the time services are rendered to the com-

mencement of the processing of claims, and another 30

days delay before reimbursement is made to the providers.

Plaintiffs claim that this 60 day delay in reimbursement

from the date services are provided reflects the intention

of the state plan and the expectations of the nursing

homes. In fiscal years 1989 and 1990, however, the delay

after presentation of claims to IDPA increased from 30

days to approximately 40 days. The delays expanded again

in fiscal 1991: Payment for November, 1990 services were

made between 80 and 90 days after presentation of the

invoice, and, on March 21, 1991, payment was received

for certain services rendered through December 6, 1990.

As of the date of this opinion, March 29, 1991, no pay-

ments had been received by any nursing homes for any

services rendered after December 6, 1990.

DISCUSSION

To support the issuance of a preliminary injunction, a

plaintiff must demonstrate: (1) a reasonable likelihood of

success on the merits; (2) the inadequacy of a remedy at

law; (3) the existence of irreparable harm without the in-

junction; (4) that the threat of harm to the plaintiff

outweighs any harm to the defendant if the injunction

were issued; (5) that the public interest would not be

disserved if the injunction were granted. Kellas v. Lane,

No. 89 C 4290. slip op. at 3 (7th Cir. Jan. 22, 1991).

Though the plaintiff must satisfy each of these elements

to prevail, his threshold burden is to show the first three

~_

factors. Jd. Only when this burden is met does the in-

quiry become a “sliding scale” analysis of the harm to

the parties and the public from the grant or denial of the

injunction and the actual likelihood of success on the

merits. Id.

In order to establish a reasonable likelihood of success

on the merits, the plaintiff need only show that his

chances are better than negligible. Jd. The court, having

considered the evidence presented at the evidentiary hear-

ing held on March 28, 1991, finds that plaintiffs have not

met this standard.

Plaintiffs allege that the delay of Medicaid reimburse-

ment payments violate various provisions of 42 U.S.C.

§ 1396a(a)—namely §§ 1396a(aX13XA), 1396a(aX30XA), and

1396a(aX2). The provisions of § 1396a(a) set forth the re-

quirements of state plans for medical assistance. The Sec-

retary will approve state plans which fulfill the conditions

specified in § 1396a(a). 42 U.S.C. § 1396a(b). It is un-

disputed that the Illinois State Medicaid Plan (the “State

Plan”) has been approved by the Secretary. The only pro-

vision in the State Plan concerning timeliness of payments

for services rendered by providers is § 4.1%e). It states

that “(t]he Medicaid agency [IDPA] meets all require-

ments of 42 CFR 447.45 for timely payment of claims.”’

(Exhibit E, Illinois State Medicaid Plan, p. 61.) That fed-

eral regulation requires IDPA to pay all claims within

twelve months of the date of receipt of the claim. 42

C.F.R. § 447.45(d\4).

In evaluating the State Plan pursuant to 42 U.S.C.

§ 13896a(b), the Secretary was required to evaluate the

State Plan in light of the requirements of 42 U.S.C.

§ 1396a(a). The subsequent approval of the State Plan

signifies the Secretary’s finding that the sole timeliness

—19a—

provision in § 4.19(e) adequately addresses any timeliness

concerns raised by § 1396a(a). For example, the Secre-

tary’s approval of the State Plan demonstrates that the

directive of 42 U.S.C. § 1396a(aX13XA)—that the plan pro-

vide for payments through the use of rates which are rea-

sonable and adequate to meet the costs which must be in-

curred by efficiently and economically operated facilities—

is satisfied by the State Plan. Also, approval indicates that

the Secretary found that the State Plan, including the

§ 4.1% e) timeliness provision, adequately “‘provide[s] such

methods and procedures relating to the utilization of, and

the payment for, care and services available under the

.plan . . . as may be necessary . . . to assure that pay-

ments are consistent with efficiency, economy, and quali-

ty of care,” as required by § 1396a(aX80XA). Finally, the

Secretary’s approval demonstrates that the State Plan

provides for financial participation by the state on a basis

“which will assure that the lack of adequate funds from

local sources will not result in lowering the amount, dura-

tion, scope, or quality of care and services available under

the plan,” as required by 42 U.S.C. § 1396(aX2).1 Thus,

by giving its imprimatur to the State Plan, the Secretary

has made a finding that a delay in payments of up to

twelve months, as permitted by the State Plan, does not

contravene the provisions of § 1396a(a). See Wisconsin

Hospital Ass’n v. Reivitz, 733 F.2d 1226, 1287 (7th Cir.

1984) (determination by Secretary of the reasonableness

and adequacy of rates provides major guidance to the dis-

1 Defendants claims that § 1396a(aX2) does not apply to Illinois

since the Illinois Medicaid pro is administered on a state

basis, and not a county basis. Thus, “the lack of adequate funds

from local sources” is not relevant to the Illinois Plan. The court

need not address this issue since the court finds that, in any event,

defendants have not violated § 1396a(aX2).

—20a—

trict court). By approving the State Plan, the Secretary

consented to the manner in which the State of Illinois and

the Medicaid providers in Illinois are to share the risk

of nontimely payment, with the Illinois providers respon-

sible for financing the first twelve months and the State

of Illinois responsible for any delays thereafter.

As stated above, it is the State Plan which must comply

with 42 U.S.C. § 1396a(a), and not the “practices,” “in-

tentions,” or “expectations” of the agency and the pro-

viders.? Plaintiffs’ allegations of a slowdown simply consti-

tute a change in practice by IDPA. A new practice, even

one that imposes great hardships on Medicaid providers,

that does not violate the provisions of the State Plan

cannot, by itself, cause the Plan to contravene the fed-

eral requirements with which the Plan has been found to

comply.

Plaintiffs contend that, by paying in a slower manner

than was previously the practice of IDPA, the agency has

violated 42 C.F.R. § 447.253(bX1Xi).

An agency does not encounter the requirements of 42

C.F.R. § 447.253(a) and (b) unless a change has been made

to the state plan’s “methods and standards.” Throughout

this subpart of the federal regulations, the term “methods

and standards” relates to payment rates. See 42 C.F.R.

§ 447.252(b) (“the methods and standards used by the

agency to set payment rates”); § 447.253(f) (“significant

? Plaintiffs argue that “{mJoathly payment of Medicaid reimburse-

ment rates . . . has been the consistent practice of the IDPA under

its state plan,” and “it is clear that the intention of the State

and the expectation of the nursing homes is that the monthly bills

will be paid on a regular basis, not to exceed sixty days from

median date services are provided. . . .” (Mem. in Support, p. 3.,

emphasis added)

iain emaa ial i iin A

—2la—

changes to its methods or standards for setting payment

rates”); § 447.253(g) (“using rates determined in accord-

ance with methods and standards specified in an approved

State plan’). The provision of the Medicaid Act imple-

mented by this subpart, 42 U.S.C. § 1396a(aX13XA), re-

quires “‘the use of rates (determined in accordance with

methods and standards developed by the State).” Thus,

unless the IDPA slowdown amounts to a change in the

“methods and standards” of payment rates, IDPA is not

required to make the assurances and findings specified

in 42 C.F.R. § 447.253(a) and (b).

Plaintiffs equate delayed payments with reduced pay-

ments, which would constitute a change of rates under

the State Plan. However, plaintiffs cite no authority for

this position. Most of the cases cited by plaintiff pertain

to actual rate changes. The remainder involve rate freezes.

None of the cases concern delays in reimbursement with-

out alleging that the actual payment rates used by the

state agency are different from those set out in the state

plan. Plaintiffs make two arguments to equate the slow-

down to a rate reduction. First, plaintiffs claim that the

slowdown is tantamount to a decision by the IDPA to

make no payments for November and half of December,

1990. Second, plaintiffs try to equate the slowdown to a

rate reduction of 12.5 percent for 1990. Both of these posi-

tions would be correct if IDPA had taken the posture that

no reimbursement for services rendered during that one

and one half month period would be forthcoming. How-

ever, the circumstances are to the contrary. IDPA has

not denied liability for that period, and has stated that

it plans to reimburse plaintiffs for that period at the rates

and in the time frame set forth by the State Plan. At

this point, plaintiffs are unable to, and have no reason

to, disprove this assertion. Thus, plaintiffs attempts to

a

—~229—

equate delayed payment with reduced payment are unper-

suasive.

The court finds that the payment slowdown is not in-

consistent with the terms of the State Plan. Consequently,

the slowdown does not constitute an amendment to the

Plan and IDPA is not required to obtain an approval from

the Secretary through the submission of assurances and

findings.®

For these reasons, the court finds that plaintiffs do not

have a better than negligible likelihood of success on the

merits of their claim. Where the plaintiff is unable to show

likelihood of success on the merits, the harm to the plain-

tiff will never override this failure. Curtis v. Thompson,

840 F.2d 1291, 1296 (7th Cir. 1988). Denial of an injunction

for failure to establish such likelihood of success is appro-

priate and proper. Jd. at 1297.

Although the court need not and therefore will not ad-

dress the other requirements for the issuance of a pre-

liminary injunction, the court is not unmindful of the

necessity of adequate health care for those who qualify

for Medicaid benefits and would once again er:courage the

parties to attempt to settle this dispute.

8 The methods and standards for establishing i rates as

set forth in the State Plan include a two month working capital

component. (Exhibit E, Illinois State Medicaid Plan, Attachment

4.19-D, p. 12E.) Plaintiffs contend that the working capital com-

ponent infers that reimbursements by IDPA must be made within

sixty days of the date services are rendered in order for Medicaid

— to maintain proper working capital. The court disagrees.

working capital pe pel mean in this section of the State Plan

is for the purposes of calculating the capital cost component in

establishing payment rates. A plain reading of this section in con-

text does not persuade the court that the working capital compo-

nent constitutes an indirect requirement that IDPA pay Medicaid

claims within sixty days.

—23a—

CONCLUSION

Defendants’ motion to dissolve the temporary restrain-

ing order dated March 20, 1991 is GRANTED. Plaintiffs’

motion for a rule to show cause and motion for prelimi-

nary injunction are DENIED. The parties are encouraged

to discuss settlement and report on the status thereof on

May 3, 1991 at 10:00 a.m.

ENTER:

JAMES F. HOLDERMAN

United States District Judge

DATED: March 29, 1991

—24a—

APPENDIX D

SD oeneeEEEEEEEEEEEEeeeeeeel

[DEPARTMENT OF HEALTH & HUMAN

SERVICES LETTERHEAD]

Region V

105 West Adams

Chicago, Ill 60603

Philip C. Bradley, Director

Illinois Department of Public Aid

Jesse B. Harris Building

100 South Grand Avenue East

Springfield, Illinois 62762-0001

Dear Mr. Bradley:

This letter is to express my serious concern about the

length of time the Illinois Department of Public Aid (IDPA)

is taking to pay providers under the Illinois Medicaid pro-

gram. My office has been receiving inquiries and concerns

from Medicaid providers, the press and the Congress. It

appears that the concerns are now intensifying despite

previous State optimism that backlogs would be reduced

during the State’s current fiscal year.

The State’s figures on the average number of days to pay

claims from Medicaid providers has consistently exceeded

30 days for calendar years 1989 and 1990 and approached

or exceeded 50 days in July of each of those years. Aver-

age number of days to pay most claims exceeded 50 days

= December of 1990 and have risen fairly steadily since

then.

I had hoped that the increased appropriations for the cur-

rent State fiscal year would be used to reduce the backlog

ee Dh a AEN Soins

—25a—

of claims. The average number of days from claim receipt

to payment for August and September, 1991, however,

are the highest overall since early 1989. The most recent

figures we have indicate that average payment days for

non-institutional provider, pharmacist, ambulatory hospital,

and physician claims are well in excess of 100 days, long

term care claims are in excess of 90 days and inpatient

hospital claims are in excess of 80 days.

I am especially concerned about providers who serve a

large percentage of Medicaid and uninsured patients that

are highly dependent on Medicaid reimbursement for a

significant portion of their revenues. I understand that

IDPA has been prioritizing payments on the basis of the

percentage of Medicaid recipients a provider serves. This,

however, is not solving the basic underfunding problem.

As we discussed when I spoke with you recently, I would

like to meet with you to discuss your plan of action for

addressing this serious issue. In addition, I would like to

discuss my concerns related to the recently submitted re-

quest to revise Illinois’ alternative disposition plan for the

mentally ill and mentally retarded residents of nursing

facilities. I am requesting that you invite representatives

of the Illinois Department of Mental Health and Develop-

mental Disabilities as well as a representative of the Gov-

ernor’s office to this meeting.

My office will be in contact with you to arrange a con-

venient time for this meeting.

Sincerely,

Chester C. Stroyny

Regional Administrator

ec: [Various]

file code—R-4, Illinois disc 10—LATEPAYM.LT2

—26a—

Mr. Phil Bradley

Director

Department of Public Aid

Jesse B. Harris Building II

3rd Floor

100 S. Grand Avenue, East

Springfield, Illinois 62762

Dear Mr. Bradley:

During fiscal year (FY) 1991, staff from the Chicago Re-

gional Office (RO) of the Health Care Financing Admin-

istration (HCFA) conducted an operational review of your

Medicaid Management Information System (MMIS). The

purpose of the review was to evaluate your State’s sys-

tem against performance standards and review criteria

established under the authority of section 1903(r) of the

Social Security Act. A copy of the System Performance

Review (SPR) package used for the MMIS evaluation was

furnished to you prior to the last quarter of FY 1990 to

permit you to prepare for the review.

The SPR results of FY 1991 indicate that your State’s

MMIS meets all current conditions for reapproval. Conse-

quently, the 75-percent Federal financial participation cur-

rently available to your State for MMIS operations will

be continued. This rate will remain in effect until the

results of your next scheduled SPR are evaluated. The

Chicago RO will notify you before undertaking that re-

view.

I am pleased that your State’s MMIS met the conditions

for reapproval. However, I want to call to your atten-

tion those facts for which Illinois received a less than

minimally satisfactory score of 70 percent. They are:

Factor 18—Timeliness of Processing Clean Practi-

toner Claims—Part 1—The SPR revealed that IIli-

nois did not pay 90 percent of clean practitioner

claims within 30 days of receipt. Sixty-eight out of

A ea RAN ta Leb AOk ith

—27a—

eighty clean practitioner claims were not paid within

that time period. Actwal Score: 0

Factor 15—Timeliness of Processing Claims Other

Than Clean Practitioner Claims—The SPR also re-

vealed that Illinois did not satisfactorily pay other

than clean practitioner claims within 30 days of re-

ceipt. Only one of the twelve claims in the sample

were paid within that time period. Actual Score: 8

These problems are similar to those we identified in each

of the past 4 consecutive years (FYs 1987 through 1990).

Your State’s passing the FYs 1990 and 1991 SPRs can

be contributed largely to changes in our scoring method-

ology, rather than to corrective actions taken by your

State in these areas.

I encourage you to take prompt action to resolve these

timely claims processing problems. HCFA staff are ready

to assist you. Please contact the Chicago RO for any as-

sistance you need or if you have any questions.

Sincerely yours,

Christine Nye

Director

Medicaid Bureau

ce:

Regional Administrator

Chicago

State Medicaid Director

—28a—

(ILLINOIS DEPARTMENT

OF PUBLIC AID LETTERHEAD]

November 27, 1991

Mr. Chester C. Stroyny, Regional Administrator

Department of Health and Human Services

Health Care Financing Administration

Region V, 105 West Adams, 15th Floor

Chicago, Illinois 60603-6201

Dear Mr. Stroyny:

This letter is in response to your letter of November 1,

1991. I am responding for Phil Bradley, Director.

You requested our corrective action plan to the “1991

Medicaid Management Information System, System Per-

formance Review.” We concur with your finding, however,

we want to reiterate that failing the Timeliness Factors

13 and 15 was not due to MMIS Systems deficiencies but

ome was caused by an extreme shortfall of appropriated

funds.

If you have any questions please contact me at (217)

782-1136.

Sincerely,

James R. Donkin, CIA

Chief Internal Auditor

JRD:nw

ec: Charles W. Hazlett