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CC Care, LLC v. Norwood

United States District Court, N.D. Illinois, Eastern Division

September 19, 2016

CC CARE, LLC, et al., Plaintiffs,
v.
FELICIA F. NORWOOD, not individually, but solely in her capacity as Director of the ILLINOIS DEPARTMENT OF HEALTHCARE AND FAMILY SERVICES, Defendant.

          MEMORANDUM OPINION AND ORDER

          MILTON I. SHADUR, SENIOR UNITED STATES DISTRICT JUDGE

         Ten operators of long-term care facilities ("nursing homes" in every-day parlance) in Illinois (collectively "Operators") brought this action against Felicia F. Norwood ("Norwood") in her capacity as Director of the Illinois Department of Healthcare and Family Services ("Department"), seeking injunctive and declaratory relief pursuant to 42 U.S.C. § 1983 ("Section 1983"). Operators contend that Norwood and Department failed to comply with various state and federal statutes, including 42 U.S.C. § 1396a(a)(13)(A), [1] applicable to those nursing homes when Operators acquired their ownership.

         Norwood responded to Operators' Complaint with a Fed.R.Civ.P. ("Rule") 12(b)(6) motion to dismiss, which has now been fully briefed. For the reasons stated in this opinion, this Court denies Norwood's motion (Dkt. No. 16).

         Standard of Review

         Under Rule 12(b)(6) a party may move for dismissal for the "failure to state a claim upon which relief can be granted." Familiar Rule 12(b)(6) principles require the District Court to accept as true all of Operators' well-pleaded factual allegations and to view those allegations in the light most reasonably favorable to them as the nonmovants (Lavalais v. Vill. of Melrose Park, 734 F.3d 629, 632 (7th Cir. 2013)). But "legal conclusions or conclusory allegations that merely recite a claim's elements" are not entitled to any presumption of truth (Munson v. Gaetz, 673 F.3d 630, 632 (7th Cir. 2012)).

         In the past decade the Supreme Court made an important change in the evaluation of Rule 12(b)(6) motions with what this Court regularly refers to as the "Twombly-Iqbal canon, " a usage drawn from Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) as more finely tuned in Erickson v. Pardus, 551 U.S. 89 (2007) (per curiam) and Ashcroft v. Iqbal, 556 U.S. 662 (2009). That canon has introduced the concept of "plausibility" into the analysis, and in that respect our Court of Appeals has "interpreted Twombly and Iqbal to require the plaintiff to provide some specific facts to support the legal claims asserted in the complaint" (McCauley v. City of Chicago, 671 F.3d 611, 616 (7th Cir. 2011) (internal quotation marks and brackets omitted)). As McCauley, id. (internal quotation marks again omitted) went on to reconfirm, claimants "must give enough details about the subject-matter of the case to present a story that holds together."

         Because the focus of Rule 12(b)(6) motions is on the pleadings, they "can be based only on the complaint itself, documents attached to the complaint, documents that are critical to the complaint and referred to in it, and information that is subject to proper judicial notice" (Geinosky v. City of Chicago, 675 F.3d 743, 745 n.1 (7th Cir. 2012)). But a nonmovant has more flexibility, for it "may elaborate on [its] factual allegations so long as the new elaborations are consistent with the pleadings" (id.). This opinion evaluates Norwood's motion in accordance with those principles.

         Factual Background

         On June 27, 2012 each of the Operators took ownership of a separate nursing home immediately following the purchase of those nursing homes by ten real estate companies (Complaint ¶¶ 28-37, 44-53). Each sale involved a complete turnover of control at a market value price (Complaint ¶ 42). On acquiring the nursing homes Operators obtained new operating licenses from the Illinois State Board of Health, with new Medicare numbers and providers (Complaint ¶¶ 59-62). Operators filed reports with the Department from July 1 through December 31, 2012 (Complaint ¶ 64).

         Under the guidance of Illinois statutes, the Department distributes facility-specific per diem reimbursements for Medicaid-related costs (Complaint ¶¶ 69-93). Operators allege that despite their complete change in ownership, the Department and Norwood have refused to re-examine the per diem, reimbursing Operators at the prior rates that were set in 2004 (Complaint ¶ 98). Operators aver that the Department never provided a "public process" where it explained why it kept the rates the same despite that change in ownership (Complaint ¶ 100).

         Operators are asking for declaratory and injunctive relief under Section 1983 for violations of Section 1396a(a)(13)(A), the federal law that dictates the need for a public process involving opportunities to review and comment on the determination of rates of Medicaid payments (Complaint ¶¶ 105-06). What follows in the text treats in the first instance with the availability of Section 1983 to address that claim for relief, then follows with a brief treatment of Norwood's other unpersuasive contentions.

         Ability To Invoke Section 1983

         Norwood's main argument is that Section 1396a(a)(13)(A) does not violate any federal rights of Operators, who therefore cannot bring a case under Section 1983. Analysis of that contention properly begins with a look at some history of the relationship between Sections 1396a(a) and 1983.

         Section 1983 is in place to protect individuals from the deprivation of any legal or constitutional rights "under color of law" -- that is, by governmental action. As for Section 1396a(a), it was significantly expanded in 1973, and then in 1980 Congress passed the Boren Amendment, which requires a reasonably calculated reimbursement to Medicaid providers. Those two statutes were linked in 1990 when Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498 (1990) held that the ...


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