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Doctors Nursing and Rehabilitation Center, LLC v. Norwood

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

September 1, 2017

Doctors Nursing and Rehabilitation Center, LLC, et al., Plaintiffs,
Felicia F. Norwood, in her official capacity as the Director of Illinois Department of Healthcare and Family Services, Defendant,


          Elaine E. Bucklo United States District Judge

         In these related actions, several healthcare providers and their patients sue Felicia Norwood, Director of the Illinois Department of Healthcare and Family Services (“HFS”), in her official capacity, seeking declaratory and injunctive relief for violations of Title XIX of the Social Security Act (the “Medicaid Act”) and its implementing regulations, the Americans with Disabilities Act (“ADA”), the Rehabilitation Act, and the Fourteenth Amendment. Before me is plaintiffs' motion for a preliminary injunction requiring defendant Norwood to process Medicaid applications and to provide Medicaid benefits with reasonable promptness in accordance with the Medicaid Act and timeliness standards set by federal regulations. [Case No. 1:16-cv-9837, ECF. No. 14]. For the reasons that follow, I grant plaintiffs' motion to the extent described below.


         Medicaid is an optional, cooperative federal-state healthcare program for providing medical assistance to needy individuals. Wilder v. Va. Hosp. Ass'n., 496 U.S. 498, 502 (1990). If a state elects to participate in the Medicaid program, as Illinois has, it must create a state plan that complies with the Medicaid Act and federal regulations. Id. In Illinois, the Department of Healthcare and Family Services is responsible for supervising and administering the state's Medical Assistance program. 305 ILCS §§ 5/2-12(3), 5/5-1 et seq.; see 42 U.S.C. § 1396a(a)(5).

         These related cases concern Illinois's provision of Medicaid benefits and the timeliness requirements for approving and providing such benefits. Plaintiffs in these matters are residents (“patient plaintiffs”) of twenty-four hour, long-term nursing care facilities who seek long-term care benefits under Illinois's state Medicaid plan and the healthcare providers (“facilities” or “institutional plaintiffs”) that operate these nursing facilities. The patient plaintiffs fall into two major categories: (1) those who are awaiting Medicaid or long-term care eligibility determinations, and (2) those who, despite receiving approval, are still awaiting long-term care benefits.

         Plaintiffs bring suit against Felicia Norwood, the Director of HFS, in her official capacity, because, they allege, she has failed to process plaintiffs' Medicaid applications and to provide Medicaid benefits with reasonable promptness, as required by the Medicaid Act and its implementing regulations. According to plaintiffs, HFS violates the regulatory timeliness requirements whenever it takes longer than ninety days to make a benefit eligibility determination and whenever it takes longer than twelve months to process and furnish payment for Medicaid benefits. Plaintiffs additionally assert that defendant Norwood's inaction violates the ADA, Section 504 of the Rehabilitation Act, and the Equal Protection Clause of the Fourteenth Amendment.

         Plaintiffs ultimately seek injunctive and declaratory relief to compel defendant's future compliance with the regulatory time limits for determining applicant eligibility and processing claims. In the interim, they seek preliminary injunctive relief because, they assert, the patient plaintiffs require the twenty-four hour nursing care they are currently receiving, have no means of paying for it, and are now in danger of losing it. See, e.g., Reis Decl. ¶¶ 3-5, 9 [Doc. No. 35-3]; Hart Decl. ¶¶ 3-5, 9 [Doc. No. 35-5]; Crowder Decl. ¶¶ 3-5, 9 [Doc. No. 35-6]. They seek preliminary relief to prevent irreparable harm to these individuals.

         On August 22 and 23, 2017, the parties presented evidence in a hearing on plaintiffs' preliminary injunction motion. Plaintiffs called five witnesses: Christopher Ries, the vice president of Carlyle Health Center and St. Vincent's Home (“Carlyle”), who gave testimony concerning five of the patient plaintiffs in Case No. 16-cv-9842; Donna Passini, business office manager of Regency Care of Morris (“Morris”), who testified about fifteen patient plaintiffs in Case No. 17-cv-640; Lisa Gordon, collections manager for Heritage Enterprises (“Heritage”), who presented evidence regarding twelve of the named plaintiffs in Case No. 16-cv-10614;[1] Gail McGinnis, collection director for Petersen Healthcare (“Petersen”), who gave testimony concerning thirty-one Petersen residents who are plaintiffs in Case No. 16-cv-9922; and Kayla Klauser, director of accounting at Sunset Home (“Sunset”), who presented evidence concerning three patient plaintiffs in Case No. 17-cv-104.[2]Together, plaintiffs' witnesses presented testimony and hundreds of pages of documents in support of sixty-six patient plaintiffs' claims.

         Defendant called two witnesses. HFS's Manager of Policy and Rules for the Bureau of Long-Term Care Janene Brickey gave testimony about a chart she compiled (Defendant's Exhibit 1) with data she gathered from the state's Medicaid databases about the patient plaintiffs' application statuses. Defendant's other witness, Mark McCurdy, the Acting Bureau Chief of the Bureau of Long-Term Care, discussed another demonstrative exhibit (Defendant's Exhibit 2), which compiles the state's data concerning long-term benefit claims it has paid.[3] Although these witnesses both gave testimony concerning information they had personally gathered from the state's electronic databases, both admitted that they could not speak from personal knowledge as to any particular plaintiff. They could only speak to the information contained in the state's databases, not how that information arrived there.

         Of the patient plaintiffs discussed at hearing, plaintiffs assert that twenty-one[4] of them have not received Medicaid or long-term care eligibility determinations despite applying for benefits more than ninety days ago. To support these claims, plaintiffs offered the testimony described above, and, in most cases, documentation showing application dates, information requests, and any other status updates plaintiffs received. At the hearing, defendant disputed the status of many of these applications and offered explanations for the delay with respect to the others. She identified two applicants - A. Hanks and L. DeChausse - as deceased.[5] She also indicated that five applicants - C. Gleason, D. Katner, C. Marcoux, D. Cargnoni, and H. Mahair - were recently approved. The other fifteen patient plaintiffs in this group have either had their applications denied, [6]canceled, [7] or sent to HFS's Office of Inspector General (“OIG”) for review, [8] according to defendant. Conversely, plaintiffs contend that several denied applications were reopened, that several purported denial or cancellation notices were never received, that at least one applicant had multiple pending applications, and that regulatory time limits were not reset by OIG's involvement.

         The remaining forty-four patient plaintiffs discussed at the evidentiary hearing are those who, plaintiffs argue, have not had their claims for long-term care benefits promptly paid in the twelve months permitted by regulations. Based on the evidence presented at hearing, it appears that at least eleven, and perhaps thirteen, of these plaintiffs are now deceased.[9]Another eight of the individual plaintiffs identified do not have any pending claims for services older than twelve months.[10]Excluding these groups, plaintiffs have presented testimony and documents showing that at least twenty-seven patient plaintiffs in this category have been approved for Medicaid full coverage or long-term care benefits or both, and have unpaid claims for service periods more than twelve months old. According to plaintiffs' evidence, some of these individuals received approval notices more than twelve months ago and are still awaiting payment for services predating approval.[11] Others have received approval notices more recently, but still have unprocessed claims for service periods more than a year old.[12]

         In response, defendant elicited testimony concerning the differences between the Medicaid eligibility process and the process for approving an applicant's long-term care benefits. Defendant also offered testimony about the changes in claim processing that have taken place in the last year. According to Mr. McCurdy, claims for long-term care services performed before December 1, 2016, cannot be paid until a beneficiary is approved and added to a facility's roster. Hr'g Tr. vol. 2, 50-54 (Aug. 23, 2017). For these pre-December 2016 services, HFS is responsible for generating the actual claims for payment based on the information it has in its system. Id. HFS then processes these claims and sends them to the Illinois Comptroller's office for payment. Claims for benefits after December 1, 2016, on the other hand, are left to healthcare providers to generate and submit to HFS. Id. Finally, through Mr. McCurdy, defendant provided some information in Defendant's Exhibit 2 concerning payments that have been made for certain members of this group awaiting benefits. Comparing this information with the plaintiffs' evidence, however, it appears there are still claims pending for most of these individuals.


         To determine whether a moving party is entitled to a preliminary injunction, courts evaluate whether the party has demonstrated: (1) a likelihood of success on the merits; (2) a likelihood that he will “suffer irreparable harm in the absence of preliminary relief”; (3) “that the balance of the equities tips in his favor”; and (4) "that an injunction is in the public interest.” Winter v. Nat'l Res. Def. Council, 555 U.S. 7, 20 (2008); see also Abbott Labs. v. Mead Johnson & Co., 971 F.2d 6, 11-12 (7th Cir. 1992). A court deciding whether to grant a preliminary injunction “weighs all four factors ... seeking at all times to minimize the costs of being mistaken.” Abbott Labs., 971 F.2d at 12 (internal quotation marks omitted). Because these considerations are “interdependent, ” a court may determine that a greater showing as to one factor may lessen the showing needed for another. Judge v. Quinn, 612 F.3d 537, 546 (7th Cir. 2010).

         In the instant actions, plaintiffs move for a preliminary injunction addressing individual patient plaintiffs in seven related cases and a class of approximately three hundred patients in a related class action. Because the claims in these cases are the same, I will examine the preliminary injunction factors for both categories of claims - pending applications and pending payments - generally.

         A. Likelihood of Success on the Merits

         To show that preliminary injunctive relief is appropriate, plaintiffs must demonstrate that they are likely to succeed on the merits of their claims. The threshold for this requirement is low. D.U. v. Rhoades, 825 F.3d 331, 338 (7th Cir. 2016) (citing Michigan v. U.S. Army Corps of Eng'rs, 667 F.3d 765, 782 (7th Cir. 2011)). To satisfy their burden, plaintiffs “must show that [they have] a ‘better than negligible' chance of success on the merits of at least one of [their] claims.” Girl Scouts of Manitou Council, Inc. v. Girl Scouts of U.S. of Am., Inc., 549 F.3d 1079, 1096 (7th Cir. 2008) (quoting Ty, Inc. v. Jones Grp., Inc., 237 F.3d 891, 897 (7th Cir. 2001)). If plaintiffs can show that they have at least “some likelihood of success on the merits, ” they will meet this threshold requirement. Stuller, Inc. v. Steak N Shake Enterprises, Inc., 695 F.3d 676, 678 (7th Cir. 2012).

         Plaintiffs of course argue that they are likely to succeed on all of their claims, but, for present purposes, I assess the likelihood that they will succeed on their section 1983 claims alleging violations of the Medicaid Act's reasonable promptness requirement, the cause of action at the center of these lawsuits. According to plaintiffs, defendant has violated 42 U.S.C. § 1396a(a)(8), which requires state Medicaid agencies to “provide that all individuals wishing to make application for medical assistance under the plan shall have opportunity to do so, and that such assistance shall be furnished with reasonable promptness to all eligible individuals.” Plaintiffs argue - and I agree - that section 1396a(a)(8) creates enforceable rights that may be pursued through section 1983 actions. See Mem. Op. & Order [Doc. No. 50] at 17 (June 7, 2017). To prevail on these section 1983 claims, plaintiffs will need to prove that defendant Norwood, in her capacity as HFS Director, has deprived them of their rights to reasonably prompt Medicaid eligibility determinations and benefits pursuant to section 1396a(a)(8).

         Defining “reasonable promptness” is key to determining whether section 1396a(a)(8) has been violated. The accompanying federal regulations provide some clarity. In the eligibility determination context, the regulations require that state Medicaid agencies establish certain timeliness and performance standards for processing Medicaid applications. See 42 C.F.R. § 435.912. These mandatory timeliness standards permit agencies no more than ninety days to determine the eligibility of applicants who apply for Medicaid on the basis of disability and forty-five days to determine the eligibility of all other applicants. 42 C.F.R. § 435.912(c)(3). Because all plaintiffs in these cases applied based on disability, only the ninety-day requirement is involved. Hr'g Tr., vol. 1, at 6 (Aug. 22, 2017). According to the regulations, these timeliness requirements “cover the period from the date of application ... to the date the agency notifies the applicant of its decision.” 42 C.F.R. § 435.912(c)(1). In other words, after a Medicaid applicant submits an application, a state agency may take no more than ninety days to notify the applicant, or the applicant's designated recipient, [13] of the agency's eligibility determination in order to meet the reasonable promptness requirement.[14] The only permissible exceptions to these timeliness standards are for “unusual circumstances, ” which include instances where an agency cannot reach a determination because an applicant or examining physician fails to take a required action, or where there is an emergency “beyond the agency's control.” 42 C.F.R. § 435.912(e).

         Defendant argues that these timeliness standards apply only to initial determinations of Medicaid eligibility and not to decisions regarding the provision of specific benefits under state healthcare programs like long-term care benefits. Despite defendant's contentions, the regulations do not appear to carry this limitation. According to 42 C.F.R. § 435.911, a regulatory section implementing 42 U.S.C. § 1396a(a)(8) as well as § 1396a(a)(10)(A), which requires the provision of skilled nursing services to eligible individuals, Medicaid agencies must “promptly and without undue delay consistent with [the section 435.912] timeliness standards ... furnish Medicaid to eligible individuals” who submit applications for benefits. 42 C.F.R. § 435.911(c)(1); see also 42 C.F.R. § 435.930 (“The agency must- (a) Furnish Medicaid promptly to beneficiaries without any delay caused by the agency's administrative procedures; (b) Continue to furnish Medicaid regularly to all eligible individuals until they are found to be ineligible....”). ...

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