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From Health Law Daily, August 9, 2017

Nursing home operators have procedural right to enforce state compliance

By Paige Arnold, J.D.

Operators of long-term care facilities had right to declarative and injunctive relief requiring the state of Illinois to provide public process in setting payment rates under Medicaid Act, the U.S. Court of Appeals for the Seventh circuit decided. The court found that the operators’ interest in the payment process was immediate and the right to public process with full notice and comment rights had independent value (BT Bourbonnaise Care LLC, et. al., v. Norwood, August 8, 2017, Wood, D).

Background: Operators of 10 long-term care facilities (Operators) alleged that the Illinois Department of Healthcare and Family Services (IDHFS) did not properly adjust Medicaid reimbursement rates after change in ownership of purchased long-term care facilities. Each Operator purchased an existing long-term care facility in 2012, and each Operator resumed operation and services of the facility purchased. Furthermore, each Operator obtained a new state license and federal Medicare provider number. Most of the residents at these facilities qualified for Medicaid assistance. The Operators filed a cause of action seeking declaratory and injunctive relief and alleged that IDHFS violated federal law because it did not recalculate reimbursement rate after ownership change or provide a notice and comment process. The trial court denied the IDHFS Director’s motion to dismiss and the Director appealed.

Procedural right of public process under Medicaid statute: The Medicaid Act—42 U.S.C. § 1396(a)(13)(A)—requires states to use a public process, including notice and opportunity to comment, to determine reimbursement rates for providers. The court held that the Operators have procedural right to certain information as well as a procedural right to notice and comment under the statue. The Operators benefited from the payment process outlined under the statute. The court reasoned that the Operators have an immediate interest in the determination of payment process under the statue. Moreover, while vendors and patients also have an interest in the payment determination process, if Medicaid or private insurance is covering their expenses, then the Operator’s interest is more pressing. The court also determined that the statute was not vague and that the language of the statute clearly stated that a State must provide a plan for public process in determining payment.

The procedural rights under federal law have an independent value especially given that federal oversight was required for enforcement of Medicaid statute. The court rejected IDHFS’ argument that operators in general do not have a private right of action to enforce the payment and reimbursement process under the statue. The court recognized that the nature federal health care program encouraged the open flow of information on many aspects including compliance and enforcement.

The trial court was affirmed and IDHFS’s motion was denied.

The case is Nos. 16-3655 and 16-3968.

Attorneys: Jeffrey Dan (Crane, Heyman, Simon, Welch & Clar) for BT Bourbonnais Care, LLC. Frank Henry Bieszczat, Office of the Attorney General, for Felicia F. Norwood.

Companies: BT Bourbonnais Care, LLC

MainStory: TopStory CaseDecisions CMSNews BillingNews MedicaidPaymentNews ProgramIntegrityNews ProviderNews IllinoisNews IndianaNews WisconsinNews

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