548 F.Supp.3d 721
N.D. Ill.2021Background:
- Saint Anthony Hospital is a Chicago safety‑net hospital that depends heavily on Medicaid payments and treats a low‑income patient population.
- Illinois shifted most Medicaid enrollees into managed care (MCOs); providers bill MCOs for services rather than the state; many provider–MCO contracts contain arbitration clauses.
- Saint Anthony alleges MCOs have been denying, underpaying, and delaying payments (claims sometimes unpaid 90 days to 2 years), causing severe cash‑flow harm and owing the hospital over $20 million.
- Instead of suing the MCOs (arbitration clauses), Saint Anthony sued the Director of the Illinois Department of Healthcare and Family Services under §1983, claiming the State failed to ensure MCOs’ timely payments in violation of Medicaid provisions (notably 42 U.S.C. §1396u‑2(f), §1396a(a)(37)(A), and §1396a(a)(8)).
- The State moved to dismiss; the district court granted the motion, holding the cited Medicaid provisions do not create private rights enforceable under §1983 and, alternatively, the complaint failed to state a claim.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1396u‑2(f) and §1396a(a)(37)(A) create a private §1983 right for providers to timely payment by MCOs | These provisions require MCO contracts and state plan procedures ensuring 90%/99% payment deadlines and thus confer enforceable payment rights to providers | The provisions govern contract/plan content and aggregate payment procedures, not an individual entitlement; no private right under §1983 | Court: No §1983 private right; provisions set aggregate contractual/plan requirements, not unambiguous individual rights |
| Whether §1396a(a)(8) (reasonable promptness) creates a private §1983 right for providers to prompt payment | “Medical assistance” includes payment, so the reasonable‑promptness mandate gives providers enforceable rights | The text refers to individuals (beneficiaries), is vague ("reasonable"), and does not unambiguously confer rights on providers | Court: No §1983 private right; language targets beneficiaries, is amorphous, and lacks unmistakable rights‑creating terms |
| Even if a private right existed, whether Saint Anthony stated a claim and is entitled to injunctive relief against the State | State’s failure to oversee MCOs allows systemic untimely/denied payments; seeks injunction to force oversight, reporting, standardization, and, if necessary, contract termination | Complaint does not allege the state’s plan or MCO contracts lack statutorily required provisions; contractual remedies (including arbitration) and federal administrative enforcement are the proper routes | Court: Dismissed for failure to state a claim; plaintiff did not allege plan/contract defects and arbitration/administrative remedies are appropriate |
Key Cases Cited
- Gonzaga Univ. v. Doe, 536 U.S. 273 (private rights under federal statutes must be unambiguously conferred)
- Blessing v. Freestone, 520 U.S. 329 (three‑factor test for when a statute creates enforceable federal rights under §1983)
- Alexander v. Sandoval, 532 U.S. 275 (courts may not create private rights absent clear congressional intent)
- Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498 (historical recognition of §1983 enforcement for a Medicaid payment provision)
- Nasello v. Eagleson, 977 F.3d 599 (7th Cir. decision declining to recognize a private §1983 right under Medicaid spending provisions)
- BT Bourbonnais Care LLC v. Norwood, 866 F.3d 815 (7th Cir. recognized a procedural §1983 right where statute plainly conferred it)
- Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1 (Spending Clause conditions are enforced by the federal government; private suits are generally not the remedy)
- Armstrong v. Exceptional Child Center, Inc., 575 U.S. 320 (rights under federal law must be unambiguously created to permit §1983 suits)
- Heckler v. Chaney, 470 U.S. 821 (agency enforcement decisions are generally within agency discretion)