Appeal from the Circuit Court of Cook County. Case Nos: 01 CH 5654, 01 CH 5656, 01 CH 5659, 01 CH 5660, 01 CH 5661, 01 CH 5662, 01 CH 5663, 01 CH 5664, 01 CH 5665, 01 CH 5667, 01 CH 5669, 01 CH 5671, 01 CH 5672, 01 CH 5673, 01CH 5674, 01 CH 5675, 01 CH 5684, 01 CH 5685, 01 CH 5686, 01 CH 5687, 01 CH 5688, 01 CH 5690, 01 CH 5691, and 01 CH 5692 (Consolidated) Consolidated with: Case Nos: 01 CH 5597, 01 CH 5598, 01 CH 5599, 01 CH 5600, 01 CH 5602, 01 CH 5605, 01 CH 5606, 01 CH 5613, 01 CH 5614, 01 CH 5615, 01 CH 5616, 01 CH 5617, 01 CH 5618, and 01 CH 5705 (Consolidated). Honorable Patrick E. McGann, Judge Presiding.
The opinion of the court was delivered by: Justice O'mara Frossard
Plaintiff-appellant, the Illinois Health Maintenance Organization Guaranty Association ("plaintiff" or "Association"), filed 24 complaints for administrative review in the trial court seeking review of decisions issued by Nathaniel Shapo, the Director of the Illinois Department of Insurance (Department). In those decisions Director Shapo (the Director) found plaintiff liable to health care providers for services rendered by them to enrollees of an insolvent health maintenance organization (HMO) known as MedCare HMO, Inc. (MedCare). MedCare was the largest HMO insolvency in Illinois state history. Over the course of approximately six years, the parties took more than 40 depositions, approximately 60 hearings were conducted, and a record of over 12,000 pages was generated. The record consists of 96 volumes.
The following 24 defendants-appellees are health care providers that provided services to MedCare enrollees: EHS Hospitals-Christ Hospital, EHS Hospitals-South Chicago Community Hospital, EHS Hospitals-Bethany Hospital, University of Chicago Hospitals, Loyola University Medical Center, South Suburban Hospital, Children's Memorial Hospital, St. James Hospital-Chicago Heights, Little Company of Mary Hospital, Oak Park Hospital, Grant Hospital, Loyola Medical Practice Plan, University of Chicago Physician's Group, Westlake Community Hospital, Westside Community Hospital, d/b/a Sacred Heart Hospital, Thorek Hospital and Medical Center, SSM Regional Health Services, d/b/a St. Francis Hospital and Health Center, Hartgrove Hospital, County of Cook on behalf of John H. Stroger, Jr. Hospital of Cook County, Paul T. Atkenson, St. Bernard Hospital, Rush-Presbyterian-St. Luke's Hospital, Ravenswood Hospital and Medical Center, and West Suburban Hospital.
The Director's decisions addressed three separate issues: plaintiff's liability to the providers for services rendered, plaintiff's liability for interest on principal amounts awarded, and the allocation of hearing costs. The Director found plaintiff liable to 20 of the 24 providers and awarded specific principal amounts but declined to assess interest on those principal amounts. Based upon the "contract" (or "contracted provider") defense relied upon by plaintiff in motions for summary disposition, the Director did not find plaintiff liable to the following four providers: St. Bernard Hospital, Hartgrove Hospital, St. James Hospital-Chicago Heights, and Thorek Hospital and Medical Center. The Director assessed hearing costs against plaintiff as well as these four providers. Plaintiff's complaints against these four providers seek review of the Director's decision only on the issue of hearing costs.
The trial court consolidated plaintiff's administrative complaints and subsequently dismissed them because plaintiff did not request a rehearing before the Director prior to filing them and thus failed to exhaust its administrative remedies. The trial court later entered judgments on the Director's awards; those judgments totaled more than $22 million and included prejudgment and post-judgment statutory interest.
Plaintiff appeals the dismissal of its 24 complaints, contending the trial court refused to consider its underlying claims by improperly applying the exhaustion doctrine. Plaintiff further contends it was not liable for the underlying monetary judgments and hearing costs. In addition, three of the care providers, EHS Hospitals-Bethany Hospital, EHS Hospitals-Christ Hospital, and EHS Hospitals-South Chicago Community Hospital, cross-appeal the amount of prejudgment interest awarded in their favor by the trial court.
Plaintiff is a legal entity created by the Illinois Health Maintenance Organization Guaranty Association Law (Guaranty Law) (215 ILCS 125/6-1 et seq. (West 2000)). The purpose of the Guaranty Law is "to protect enrollees of health care plans who reside in [Illinois], and their beneficiaries, payees and assignees, *** against failure in the performance of contractual obligations due to the impairment or insolvency of the organization operating such health care plans." 215 ILCS 125/6-2 (West 2000). The Guaranty Law gives plaintiff specified powers and duties to carry out this purpose. Among other things, if a health maintenance organization (HMO) is insolvent, plaintiff "shall, subject to the approval of the Director *** assure payment of the contractual obligations of the insolvent organization to covered persons." 215 ILCS 125/6-8(2)(b) (West 2000).
The providers rendered health care services to several thousand people enrolled in MedCare pursuant to contracts they had with MedCare. In addition, MedCare contracted with the Illinois Department of Public Aid (IDPA) to provide or pay for health care services, including emergency services, to public aid recipients. The providers submitted bills to MedCare for the services rendered, but MedCare failed to pay them. MedCare was declared insolvent by the circuit court of Cook County on January 4, 1993. Following the declaration of MedCare's insolvency, the providers submitted payment claims to plaintiff for services rendered to MedCare's enrollees. Plaintiff denied the claims, and the providers in turn sought review by the Director under the Guaranty Law. In October 1994, hearing officers Michael B. Nash and Royal B. Martin were appointed to conduct hearings on the providers' claims.
Plaintiff asserted numerous defenses to the providers' claims. The hearing officers rejected most of plaintiff's alleged defenses and found plaintiff liable to 20 of the 24 providers for their principal claims and for prejudgment interest. Based upon the findings of the hearing officers that plaintiff was liable to 20 of the 24 providers for various principal amounts and interest on those amounts, plaintiff and the providers entered into stipulations specifying the total amount of principal and interest plaintiff would owe each provider if the hearing officers' conclusions were upheld. The hearing officers submitted their findings of fact, conclusions of law, and recommendations to the Director and recommended hearing costs totaling $499,526.49, of which $491,526.49 was allocated to plaintiff. The Director adopted and approved the hearing officers' findings of fact and conclusions of law on the principal claims in the stipulated amounts. The Director, however, declined to award interest on those principal amounts, concluding that he lacked statutory authority to do so. The Director accepted the hearing officers' recommendation that hearing costs be imposed, but reduced the $499,526.49 in hearing costs recommended by them based on a payment made by the Department in partial satisfaction of that amount. Specifically the Director imposed hearing costs pursuant to section 408(5) of the Illinois Insurance Code (Code) (215 ILCS 5/408(5) (West 2000)) totaling $295,023.94, of which $289,122.54 was assessed against plaintiff.
Plaintiff did not request a rehearing on any of the Director's orders. Rather, it filed 24 separate complaints for administrative review in the trial court. Twenty of the complaints were brought by plaintiff against the twenty providers to which the Director found plaintiff liable for principal amounts and hearing costs. The other four complaints were brought by plaintiff against the four providers to which the Director found plaintiff was not liable; these complaints sought review of the Director's decision only on the issue of hearing costs.
Fourteen providers filed separate administrative complaints in the trial court seeking judicial review only of the part of the Director's decisions which denied them interest. Plaintiff moved to consolidate its 24 cases with the providers' 14 cases. The motion to consolidate was granted. All the providers filed motions to dismiss plaintiff's complaints pursuant to section 2-619(a) of the Illinois Code of Civil Procedure (735 ILCS 5/2-619(a)(9) (West 2000) based on plaintiff's failure to exhaust its administrative remedies. In these motions, the providers relied upon section 2402.280(c) of the Illinois Administrative Code (50 Ill. Adm. Code § 2402.280 (2000)), which provides that rehearing motions "shall be filed within 10 days of the date of mailing of the Director's Order." In orders dated December 21, 2001, February 1, 2002, and April 3, 2002, the trial court dismissed all of plaintiff's complaints for administrative review, concluding that the supreme court's holding in Castaneda v. Illinois Human Rights Comm'n, 132 Ill. 2d 304 (1989), required plaintiff to request a rehearing with the Director before filing those complaints.
In addition to dismissing plaintiff's complaints, the trial court dismissed, pursuant to Castaneda, nine of the fourteen complaints filed by the providers seeking judicial review of the Director's decision denying an award of interest. Those nine dismissed complaints were filed by the following nine providers: Little Company of Mary Hospital, County of Cook on behalf of John H. Stroger, Jr. Hospital of Cook County, Oak Park Hospital, Grant Hospital, Loyola Medical Practice Plan, University of Chicago Physicians Group, Westlake Community Hospital, Rush-Presbyterian-St. Luke's Medical Center, and SSM Regional Health Services d/b/a St. Francis Hospital and Health Center. The trial court did not dismiss the remaining five complaints pursuant to Castaneda as the providers which filed those complaints sought rehearing before the Department prior to filing their complaints.
Plaintiff filed notices of appeal on separate dates seeking review of the trial court's dismissals of its complaints. After some of these notices of appeal were filed, the trial court entered monetary judgments against plaintiff. In support of these judgments, the trial court reasoned "it is logically inconsistent for me to find other than, by dismissing a complaint for administrative review, I have done anything other than affirm the decision of the administrative body." Regarding the principal amounts awarded by the Director, the trial court rejected plaintiff's contention that the trial court no longer had jurisdiction over the cases that were then before the appellate court on appeal, noting that entry of a monetary judgment was "merely a ministerial act in completing the order." In addition to awarding the providers the principal amounts specified in the Director's order, the trial court awarded statutory interest at a prejudgment rate of 5% and a post-judgment rate of 9%.
Plaintiff now appeals the dismissals of its complaints and the trial court's entry of monetary judgments.
We note that in addition to plaintiff, the above mentioned nine providers (those that filed the complaints challenging the Director's refusal to award interest which were dismissed by the trial court) filed notices of appeal seeking review of the dismissal of their complaints. The appellate court entered an order consolidating those appeals with the appeals filed by plaintiff under case number 1-02-0264 (which was the appeal number originally assigned to the appeal filed by provider County of Cook on behalf of John H. Stroger, Jr. Hospital of Cook County), and accordingly the captions included on the appellate briefs as well as many related documents designate "County of Cook on behalf of John H. Stroger, Jr. Hospital of Cook County " as "plaintiff-appellant." We note, however, that none of the nine providers which filed notices of appeal has filed appellate briefs requesting relief from this court with respect to their dismissed cases. In fact, pursuant to a motion filed by the above nine providers, this court entered an order dispensing with briefing requirements and holding their appeals in abeyance. Thus, these providers are designated not as "plaintiffs-appellants" but as "plaintiffs" in the second case listed in the instant case caption. Correspondingly, the Association is designated not as "defendant-appellee" but rather as "defendant" in that portion of the case caption. The appellate court numbers listed in the header above the case caption correspond with the notices of appeal filed by the above providers as well as notices of appeal filed by plaintiff with respect to the trial court's dismissals of its complaints and subsequent entry of monetary judgments on behalf of the providers.
DISMISSAL BASED ON EXHAUSTION OF REMEDIES DOCTRINE
Plaintiff challenges the dismissal of its claims, contending that the trial court "erroneously concluded that a party aggrieved by a decision of the Director must file a petition for rehearing with the Director before seeking judicial review." We apply de novo review to the question of whether the trial court properly dismissed all of plaintiff's complaints pursuant to section 2-619 of the Illinois Code of Civil Procedure (735 ILCS 5/2-619 (West 2000)). Consolidated Freightways Corp. of Delaware v. Human Rights Comm'n, 305 Ill. App. 3d 934, 938 (1999) (applying de novo review to a section 2-619 dismissal for failure to exhaust administrative remedies).
The exhaustion of administrative remedies doctrine "has long been a basic principle of administrative law - a party aggrieved by administrative action ordinarily cannot seek review in the courts without first pursuing all administrative remedies available to him." Illinois Bell Telephone Co. v. Allphin, 60 Ill. 2d 350, 357-58 (1975). "Requiring the exhaustion of remedies allows the administrative agency to fully develop and consider the facts of the cause before it *** [and] to utilize its expertise; and it allows the aggrieved party to ultimately succeed before the agency, making judicial review unnecessary. " Castaneda, 132 Ill. 2d at 308. "The doctrine also helps protect agency processes from impairment by avoidable interruptions, allows the agency to correct its own errors, and conserves valuable judicial time by avoiding piecemeal appeals." Castaneda, 132 Ill. 2d at 308.
While strict compliance with the doctrine is generally required, there are several exceptions to the doctrine:
"An aggrieved party may seek judicial review of an administrative decision without complying with the exhaustion of remedies doctrine where a statute, ordinance or rule is attacked as unconstitutional on its face [citations], where multiple administrative remedies exist and at least one is exhausted [citations], where the agency cannot provide an adequate remedy or where it is patently futile to seek relief before the agency [citations], where no issues of fact are presented or agency expertise is not involved [citations], where irreparable harm will result from further pursuit of administrative remedies [citations], or where the agency's jurisdiction is attacked because it is not authorized by statute [citation]." Castaneda, 132 Ill. 2d at 308-09.
In Castaneda, the plaintiff filed an employment discrimination charge with the Illinois Department of Human Rights. Castaneda, 132 Ill. 2d at 307. Thereafter, the Department of Human Rights filed a complaint against the defendant employer, alleging violations of the plaintiff's civil rights. Castaneda, 132 Ill. 2d at 307. Following a full hearing, an administrative law judge (ALJ) found no discrimination against the plaintiff and recommended dismissal of the complaint. Castaneda, 132 Ill. 2d at 307. A three-member panel of the Illinois Human Rights Commission adopted the recommendations of the ALJ and dismissed the complaint. Castaneda, 132 Ill. 2d at 307. Although the Illinois Human Rights Act (Ill. Rev. Stat. 1987, ch. 68, par. 1-101 et seq.) included a provision that gave the plaintiff the right to request a rehearing before the full Commission, the plaintiff did not request such a rehearing. Castaneda, 132 Ill. 2d at 310-11. Rather, the plaintiff appealed the dismissal to the appellate court, which in turn sua sponte dismissed the appeal, finding "that petitioner failed to exhaust his administrative remedies by not requesting a rehearing of the panel decision by the entire Illinois Human Rights Commission." Castaneda v. Human Rights Comm'n, 175 Ill. App. 3d 1085, 1088 (1988). The rehearing provision in the Human Rights Act specifically provided:
" `Rehearing. (1) Within 30 days after service of the Commission's order, a party may file an application for rehearing before the full Commission. ***
(2) Applications for rehearing shall be viewed with disfavor, and may be granted, by vote of 6 Commission members, only upon a clear demonstration that a matter raises legal issues of significant impact or that three-member panel decisions are in conflict.' " (Emphasis added.) Castaneda, 132 Ill. 2d at 310-11, quoting Ill. Rev. Stat. 1987, ch. 68, pars. 8-107(F)(1),(F)(2).
The plaintiff and Commission (the appellants) in Castaneda appealed the appellate court's dismissal to the supreme court, contending that "the mere availability of a rehearing procedure does not necessarily mean a party must use such a procedure." Castaneda, 132 Ill. 2d at 313. To support this characterization of the exhaustion doctrine, the appellants relied on section 3-101 of the Administrative Review Law (Review Law), which states in relevant part:
" `In all cases in which a statute or a rule of the administrative agency requires or permits an application for a rehearing or other method of administrative review to be filed within a specified time (as distinguished from a statute which permits the application for rehearing or administrative review to be filed at any time before judgment by the administrative agency against the applicant or within a specified time after entry of such judgment), and an application for such rehearing or review is made, no administrative decision of such agency shall be final as to the party applying therefor until such hearing or review is had or denied.' " (Emphasis omitted.) Castaneda, 132 Ill. 2d at 313, quoting Ill. Rev. Stat. 1987, ch. 110, par. 3-101.
The appellants in Castaneda argued that the language in section 3-101 distinguishing between agencies which require applications for rehearing and those which merely permit them supported their view that a party need not request a rehearing when the regulation or statute in question merely permits but does not require such a request. Castaneda, 132 Ill. 2d at 313. The appellants argued that because the rehearing provision in the Human Rights Act was discretionary, the appellate court improperly concluded that the plaintiff had failed to exhaust his administrative remedies. Castaneda, 132 Ill. 2d at 313.
The supreme court in Castaneda rejected the appellants' argument and concluded that "[t]he principles underlying the exhaustion of remedies doctrine require a party to seek an administrative remedy where one is still available and where seeking such a remedy will not lead to damage or unfairness to that party." Castaneda, 132 Ill. 2d at 323. In support of this conclusion, the supreme court cited section 3-102 of the Review Law, which states that if " `an administrative decision has become final because of the failure to file any document in the nature of objections, protests, petition for hearing or application for administrative review within the time allowed *** such decision shall not be subject to judicial review.' " Castaneda, 132 Ill.2d at 320, quoting Ill. Rev. Stat. 1987, ch. 110, par. 3-102. The supreme court found that section 3-102 clarified ambiguity in section 3-101, that sections 3-101 and 3-102 of the ARL reflected a legislative intent to codify the exhaustion of remedies doctrine, and that the "underlying principle" of section 3-102 was that "aggrieved parties who fail to exercise all procedural remedies available to them in the allotted time relinquish any opportunity for judicial review." Castaneda, 132 Ill. 2d at 320.
The supreme court additionally noted that applying the exhaustion of remedies doctrine to the case before it was consistent with the purposes underlying the exhaustion of remedies doctrine and the Human Rights Act. Castaneda, 132 Ill. 2d at 323. Specifically, the supreme court stated:
"The principles underlying creation of the Human Rights Commission require that the Commission, in its expertise, should be allowed every opportunity to dispose of complaints involving civil rights violations fairly and efficiently. Requiring the application for rehearing gives the Commission a second opportunity to fulfill that purpose. Allowing panel decisions to be appealable, however, skips over an available remedy and offends the legislative purposes in empowering the Commission." Castaneda, 132 Ill. 2d at 323.
Following Castaneda, we find that the exhaustion of remedies doctrine required plaintiff to file motions for rehearing with the Department before filing complaints for administrative review in the circuit court. Here, the Code provided a procedural remedy which plaintiff failed to pursue. Specifically, section 2402.280(c) of the Illinois Administrative Code provides : "A motion for a rehearing or a motion for the reopening of a hearing shall be filed within 10 days of the date of mailing of the Director's Order." 50 Ill. Adm. Code § 2402.280(c) (2000). Regarding the requisite 10-day filing period, we note that the mandatory language "shall be filed" included in this regulation is even stronger than the permissive language "may file" included in the regulation at issue in Castaneda. Our ruling in the instant case is limited to application of Castaneda in the context of the "shall be filed" language as reflected in section 2402.280(c) of the Administrative Code, the operative provision in the instant case.
Requiring plaintiff to file a petition for rehearing in order to preserve its right to seek administrative review in the circuit court was consistent with the purposes underlying the exhaustion of remedies doctrine. A rehearing request would have given the Department the opportunity to review its decision and to correct any errors that it may have possibly made. As noted earlier, the administrative proceedings in the instant case were very extensive. The hearing officers, not the Director, conducted proceedings which lasted six years and generated several thousand pages of record. The Department was familiar with this record, had applied its expertise during the course of the proceedings, and was in an able position to efficiently review any errors alleged by plaintiff. A rehearing would have enabled the Department to review alleged errors and to correct or reverse them at the administrative stage of the proceedings, which, according to Castaneda, is when such errors should be first addressed. Castaneda, 132 Ill. 2d at 320-21.
As previously noted, "[r]equiring the exhaustion of remedies allows the administrative agency to fully develop and consider the facts of the cause before it *** [and] to utilize its expertise; and it allows the aggrieved party to ultimately succeed before the agency, making judicial review unnecessary." Castaneda, 132 Ill. 2d at 308. "The doctrine also helps protect agency processes from impairment by avoidable interruptions, allows the agency to correct its own errors, and conserves valuable judicial time by avoiding piecemeal appeals." Castaneda, 132 Ill. 2d at 308. The dismissal of plaintiff's complaints for administrative review by the circuit court was consistent with the above purposes, with section 2402.280 of the Illinois Administrative Code (50 Ill. Adm. Code §2402.280 (2000)), and with sections 3-101 and 3-102 of the Review Law (735 ILCS 5/3-101,102 (West 2000)).
Plaintiff contends that Castaneda should be narrowly limited "to decisions of three-member panels of the Human Rights Commission." We recognize the supreme court in Castaneda stated the "sole issue" before it was "whether petitioners seeking judicial review of decisions by three-member panels of the Human Rights Commission must seek an en bloc rehearing before the Commission in order to exhaust their administrative remedies and to render such decisions final and reviewable." Castaneda, 132 Ill. 2d at 308. In order to resolve that issue, the supreme court clarified and applied the exhaustion of remedies doctrine to the case before it. The supreme court did not, however, state the exhaustion of remedies doctrine was applicable only to the Human Rights Commission. Indeed, if the supreme court had intended to fashion a rule of exhaustion with such limited application, it would not have overruled appellate court decisions involving other agencies. See Castaneda, 132 Ill. 2d at 330 (noting that previously cited appellate court cases were overruled to the extent they conflicted with the supreme court's decision).
In a related argument, plaintiff contends that a petition for rehearing is unnecessary where an administrative decision is rendered at the highest level of the agency and cites three non-First District appellate cases to support that proposition: Grigoleit Co. v. Pollution Control Board, 245 Ill. App. 3d 337 (1993) (Fourth District), Strube v. Pollution Control Board, 242 Ill. App. 3d 822 (1993) (Third District), and Seelhoefer v. Regional Board of School Trustees of Clinton & Washington Counties, 266 Ill. App. 3d 516 (1994) (Fifth District). ...