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Vine Street Clinic v. HealthLink

September 21, 2006

VINE STREET CLINIC ET AL., APPELLANTS AND CROSS-APPELLEES,
v.
HEALTHLINK, INC., APPELLEE AND CROSS-APPELLANT.



The opinion of the court was delivered by: Justice Karmeier

Chief Justice Thomas and Justices Freeman, Fitzgerald, and Kilbride concurred in the judgment and opinion.

Justices Garman and Burke took no part in the decision.

OPINION

On March 4, 2003, plaintiff Vine Street Clinic (Vine Street) filed a putative class action lawsuit in Sangamon County against defendant HealthLink, Inc. (HealthLink), seeking a declaration that the "percentage fee" provision of the parties' services contract violated section 22(A)(14) of the Medical Practice Act of 1987 (Act) (225 ILCS 60/22(A)(14) (West 2002)). Vine Street also sought a refund of all administrative fees paid to HealthLink under the contract. On May 27, 2003, plaintiff Ursula Thatch, M.D., was granted leave to intervene in this action, and Vine Street and Thatch (plaintiffs) were allowed to amend their complaint. Plaintiffs' amended complaint sought a declaration that: (1) the percentage fee violated the Act; (2) HealthLink's new "flat fee" also violated the Act; and (3) HealthLink was barred from collecting any administrative fees under the Illinois Insurance Code (Insurance Code) (215 ILCS 5/1 et seq. (West 2002)). The amended complaint also sought injunctive relief and recovery of all administrative fees previously paid to HealthLink.

On June 26, 2003, HealthLink filed a verified counterclaim for declaratory relief, seeking a declaration that the flat fee does not violate the Act, and asking the court to enter judgment against plaintiff Thatch for any administrative fees that she owed. On July 30, 2003, the circuit court entered judgment on the pleadings, holding that although HealthLink's former percentage fee violated the Act, its current flat fee did not. The circuit court further held that previously paid monies were not recoverable because any alleged illegal contract was unenforceable. Finally, the court granted defendant's motion to dismiss plaintiffs' counts alleging: (1) the Insurance Code bars HealthLink from collecting administrative fees; and (2) unjust enrichment. Plaintiffs appealed and HealthLink cross-appealed.

The appellate court affirmed the circuit court's ruling with respect to the repayment of fees previously paid, but the majority held that both the flat fee and the previously charged percentage fee were prohibited by the Act. 353 Ill. App. 3d 929. The appellate court did not address plaintiff's argument that HealthLink violated the Insurance Code. Justice Steigmann dissented, arguing that both the percentage and flat fee were permissible. Appeal lies in this court as a result of the appellate court thereafter granting an application for a certificate of importance pursuant to Supreme Court Rule 316 (155 Ill. 2d R. 316). This court has granted leave to file an amicus curiae brief in support of HealthLink to: (1) America's Health Insurance Plans; and (2) the American Federation of State, County and Municipal Employees, AFL-CIO, and Egyptian Area Schools Employee Benefit Trust. We have also granted the Illinois State Medical Society leave to file an amicus brief in support of plaintiffs. 155 Ill. 2d R. 345.

Plaintiff Vine Street is a partnership consisting of physicians who render psychiatric services, and plaintiff Thatch is an Illinois physician specializing in obstetrics and gynecology. Defendant HealthLink is an Illinois corporation that enters into participating physician agreements with physicians, and different agreements with those offering other health-care services, thereby creating a network of health-care providers. HealthLink makes these provider networks available to members of health plans that are offered by insurance carriers, self-funded employer groups, governmental entities and union trusts (collectively payors). Participating physicians agree to provide medical services to payor members at a discounted rate and to send their claims for reimbursement to HealthLink. HealthLink then processes the claims and sends them to the payor for benefit determination and payment. Vine Street was a provider in HealthLink's network from 1989 to 2001, and during that time paid HealthLink a 5% administrative fee that totaled at least $21,720.28. Thatch is a provider in HealthLink's network who, from 1993 until June 30, 2002, paid HealthLink a percentage-based fee totaling $25,079.06.

The Illinois Attorney General is charged with enforcing state law, including the Act, and one duty of the Attorney General is to provide written opinions on legal questions to certain government officers and agencies. 15 ILCS 205/4 (West 2002). In an opinion letter dated March 5, 2002, Attorney General James E. Ryan responded to an inquiry made by Charles A. Hartke, assistant majority leader of the House of Representatives, and concluded that section 3.7 of the HealthLink agreement, requiring each participating physician to pay HealthLink an administrative fee equal to 5% of the amount allowed in HealthLink's rate schedule for services provided to members by the physician, violated section 22(A)(14) of the Act and was therefore void under Illinois law. 2002 Ill. Att'y Gen. Op. No. 02-005, slip op. at 4. On May 30, 2002, HealthLink notified its providers that to comply with the Attorney General's opinion, it would now charge a fixed flat fee instead of the percentage-based fee. HealthLink calculated the flat fee based on two factors: (1) physician specialty; and (2) volume of claims submitted by the physician during the preceding calendar year. HealthLink calculated Thatch's new fixed flat fee at $600 per month. Thatch refused to pay the flat fee. On May 27, 2003, as noted, plaintiffs filed their amended complaint seeking, inter alia, a declaration that both the percentage-based fee and the flat fee violated the Act, and the recovery of all fees previously paid.

In this court, HeathLink contends that: (1) neither its flat fee nor its former percentage fee for administrative services violates section 22(A)(14) of the Act; and (2) its administrative fees violate no public policy. Plaintiffs contend herein that: (1) the lower courts erred by allowing HealthLink to retain the administrative fees paid by plaintiffs; (2) if the fees are not returned to plaintiffs, HealthLink should be divested of these fees and the funds applied to benefit the public; and (3) HealthLink was acting as an administrator under the Illinois Insurance Code (215 ILCS 5/1 et seq. (West 2002)).

As it is the linchpin issue raised herein, we first address cross- appellant HealthLink's assertion that the appellate court erred in finding that both its percentage and flat fees violated section 22(A)(14) of the Act. Because this issue concerns the construction of a statute, it is a question of law, and our standard of review is de novo. Bowman v. American River Transportation Co., 217 Ill. 2d 75, 80 (2005); Progressive Universal Insurance Co. of Illinois v. Liberty Mutual Fire Insurance Co., 215 Ill. 2d 121, 128 (2005). The primary rule of statutory construction is to ascertain and give effect to the legislature's "true intent and meaning." Bowman, 217 Ill. 2d at 83; Progressive Universal Insurance, 215 Ill. 2d at 134. "We determine legislative intent by examining the language of the statute, which is `the most reliable indicator of the legislature's objectives in enacting a particular law.' " In re Detention of Lieberman, 201 Ill. 2d 300, 308 (2002), quoting Michigan Avenue National Bank v. County of Cook, 191 Ill. 2d 493, 504 (2000). "A court construing a statute should read it as a whole, give the statutory language its plain meaning, and import to the statute the fullest possible meaning to which it is susceptible." People v. Ferrell, 277 Ill. App. 3d 74, 77 (1995). Further, when undertaking the interpretation of a statute, we must presume that when the legislature enacted a law, it did not intend to produce absurd, inconvenient or unjust results. Progressive Universal Insurance, 215 Ill. 2d at 134.

Here, the relevant language of the Medical Practice Act of 1987 provides:

"§22. Disciplinary action.

(A) The Department [of Professional Regulation] may revoke, suspend, place on probationary status, or take any other disciplinary action as the Department may deem proper with regard to the license or visiting professor permit of any person issued under this Act to practice medicine, or to treat human ailments without the use of drugs and without operative surgery upon any of the following grounds:

(14) Dividing with anyone other than physicians with whom the licensee practices in a partnership, Professional Association, limited liability company, or Medical or Professional Corporation any fee, commission, rebate or other form of compensation for any professional services not actually and personally rendered." 225 ILCS 60/22(A)(14) (West 2002).

Well-reasoned opinions of the Attorney General interpreting or construing an Illinois statute are persuasive authority and are entitled to considerable weight in resolving a question of first impression, although they do not have the force and effect of law. See Bonaguro v. County Officers Electoral Board, 158 Ill. 2d 391, 399 (1994); see also City of Springfield v. Allphin, 74 Ill. 2d 117, 130-31 (1978); Sparks & Wiewel Construction Co. v. Martin, 250 Ill. App. 3d 955, 965 (1993). While our appellate court has reviewed the meaning of section 22(A)(14) in somewhat similar contexts to the one presented here, this court has never examined the parameters of section 22(A)(14)'s prohibition of percentage fee arrangements involving Illinois licensed physicians, or, more specifically, whether entering into participating physician agreements with a corporation such as HealthLink, which required as an administrative fee a percentage of the amount the physicians received for medical services performed, is violative of section 22(A)(14). We therefore find the reasoning set forth in the Attorney General's March 2002 opinion letter to be useful here in determining the propriety of the lower courts' holdings that the percentage fee set forth in section 3.7 of HealthLink's standard agreement with its participating physicians violated the fee sharing prohibition of section 22(A)(14) of the Act.

Prior to May 30, 2002, section 3.7 of HealthLink's participating physician agreement stated, in pertinent part: "In consideration of the services provided hereunder by HealthLink, each PHO Participating Provider shall pay HealthLink an administrative fee equal to five percent (5%) of the amounts allowed to the PHO Participating Provider under the Rate Schedule for the provision of Medical Services to Members by the Participating Provider." As earlier stated, the Attorney General's opinion letter concluded that section 3.7 of HealthLink's participating provider agreement was in violation of section 22(A)(14) of the Act. The Attorney General's finding was essentially based upon several Illinois Appellate Court opinions which the Attorney General found had "construed subsection 22(A)(14) to prohibit payments by physicians for management or other services based upon a percentage of professional income." 2002 Ill. Att'y Gen. Op. No. 02-005, slip op. at 3.

In the earliest of these cases, E&B Marketing Enterprises, Inc. v. Ryan, 209 Ill. App. 3d 626 (1991), a marketing firm agreed to promote the name and practice of a physician engaged in private practice, primarily to insurance carriers, in return for a consulting fee of 10% on all billings collected by the physician in connection with such referrals. The appellate court held that the agreement was a fee splitting contract, in violation of section 16(14) of the Medical Practice Act (Ill. Rev. Stat. 1985, ch. 111, par. 4433(14)), and was therefore void as against public policy. E&B Marketing, 209 Ill. App. 3d at 628-30. The fact that the contracting physician collected the fees from insurance companies, rather than from individual patients, had no effect upon the illegality of the underlying fee splitting contract. E&B Marketing, 209 Ill. App. 3d at 629-30.

Although not noted by the Attorney General, E&B Marketing was clearly based on section 16(14) of the Medical Practice Act, which is not identical to section 22(A)(14) of the Medical Practice Act of 1987. Rather section 16(14) stated that anyone licensed or certified under the Medical Practice Act was subject to disciplinary action for: "Directly or indirectly giving to or receiving from any physician, person, firm or corporation any fee, commission, rebate or other form of compensation for any professional services not actually and personally rendered." Ill. Rev. Stat. 1985, ch. 111, par. 4433(14). Section 16(14) further stated that nothing therein prohibited those licensed under the Act from practicing medicine in a partnership, corporation or as an association and "pooling, sharing, dividing or apportioning the fees and monies received." Ill. Rev. Stat. 1985, ch. 111, par. 4433(14). The Medical Practice Act was repealed effective December 31, 1997. See E&B Marketing, 209 Ill. App. 3d at 629 n.1.

Thus, it was based on this earlier statutory language that the court in E&B Marketing found: "The Act, in its plain terms, prohibits the receipt of any fee or commission, direct or indirect, for professional services not actually rendered. E&B's receipt of money `indirectly' through insurance companies was in direct violation of the Act." E&B Marketing, 209 Ill. App. 3d at 629-30. We must therefore ask whether the differences between the language of the now-repealed section 16(14) and the language of section 22(A)(14) affect the Attorney General's finding that HealthLink's percentage-based fee violates the current Act. A comparison of the two sections reveals that, of the portion at issue here, only the language in the first phrase of the first sentence has been changed. Section 16(14) begins: "Directly or indirectly giving to or receiving from any physician, person, firm or corporation any fee ***," ...


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