United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
Robert Blakey United States District Judge.
related cases, Plaintiffs Heritage Operations Group, LLC and
Rock River Health Care, LLC each sued the Director of the
Illinois Department of Healthcare and Family Services (HFS),
then Felicia Norwood and now Patricia Bellock, and the
Administrator of the Centers for Medicare and Medicaid
Services (CMS), Seema Verma. Heritage and Rock River
(collectively, the Plaintiffs), each acting on behalf of
numerous long-term care facilities that it operates in
Illinois, allege that HFS violated federal Medicaid laws and
their due process rights when it retroactively changed
Medicaid's reimbursement rates for those facilities. The
facilities also allege that CMS acted unlawfully by approving
the Illinois Medicaid plan under which HFS changed the
first brought suit in November 2017 and moved for a temporary
restraining order (TRO) shortly thereafter. Defendants
opposed the TRO and simultaneously moved to dismiss
Heritage's complaint for failure to state a claim; on
September 18, 2018, this Court granted Defendants' motion
to dismiss without prejudice and denied Heritage's motion
for a TRO. 17-cv-8609  . Heritage filed an amended
complaint in October 2018. 17-cv-8609 .
September 26, 2018, Rock River filed a complaint
substantively identical to that of Heritage on behalf of a
different set of nursing homes; the case was reassigned to
this Court as related to Heritage's case. 18-cv-6532 
April 5, 2019, Defendant Bellock filed a motion to dismiss
both Plaintiffs' amended complaints. 17-cv-8609 ;
18-cv-6532 . Defendant Verma also filed a motion to
dismiss Rock River's amended complaint. 18-cv-6532 .
As is discussed below, Count IV of Heritage's amended
complaint-its only count against Verma- remains identical to
that which this Court previously dismissed, and according to
Heritage is “repled for purposes of appeal” only.
17-cv-8609  ¶¶ 196-98. Accordingly, CMS and
Heritage agreed to forego an additional round of briefing on
Count IV. 17-cv-8609  ¶ 3.
reasons explained below, this Court grants Defendants'
motions with prejudice.
The Complaints' Allegations
Court incorporates by reference, and presumes familiarity
with, its prior opinion addressing Defendants' motion to
dismiss in Heritage's case, 17-cv-8609 , and thus
only briefly revisits the facts from which the parties'
operate long-term care facilities throughout Illinois. 
¶¶ 1-3. These nursing facilities receive per diem
reimbursement for Medicaid beneficiaries from HFS, which
administers the Illinois Medicaid program. Id.
¶¶ 4, 25. CMS administers Medicaid at the federal
level. Id. ¶ 10.
is a voluntary program, jointly funded by the federal and
state governments, with the primary purpose of providing
medical care for poor, elderly, and disabled individuals.
Id. ¶¶ 7-8. States that choose to fund
Medicaid must administer their programs in accordance with
the authorizing legislation in Title XIX of the Social
Security Act, 42 U.S.C. § 1396, et seq., also
known as the Medicaid Act. Id. ¶ 8. To
participate in Medicaid, a state must submit its state plan
for medical assistance to CMS for approval. Id.
Medicaid Act requires each state plan to include certain
procedural and substantive elements. Id. ¶ 20.
Relevant here, state plans must provide “a public
process for determination of rates under the plan” that
involves: (1) publishing proposed rates and the methodologies
and justifications underlying the proposed rates; (2) giving
providers, beneficiaries, and “other concerned State
residents” a “reasonable opportunity” to
review and comment on the published materials; and (3)
publishing the final rates and the methodologies and
justifications underlying the final rates. Id.
(quoting 42 U.S.C. § 1396a(a)(13)(A)). States must also
provide public notice of any “significant proposed
change” in their statewide methods and standards for
setting payment rates. Id. ¶ 22 (quoting 42
C.F.R. § 447.205(a)).
Illinois' plan, the per diem reimbursement that nursing
facilities receive from HFS consists of three separate
components: (1) support cost; (2) nursing cost; and (3)
capital cost. Id. ¶ 26. This case concerns the
nursing component, also known as the direct care component.
See Id. ¶¶ 43-72. This component pays for:
(1) the mean wages and benefits of all the licensed staff,
registered nurses, licensed practical nurses, certified
nursing assistants, social workers, and nursing supervisors
who care for a resident; (2) direct care consultants; and (3)
health care supplies used by or for a resident in a 24-hour
period. Id. ¶ 27.
time the state reimburses nursing facilities, they have
already provided their services to residents. Id.
¶ 28. At the time of reimbursement, Plaintiff facilities
have generally already paid their nursing staff as well.
Id. ¶ 29.
The Nursing Component and ...