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BT Bourbonnais Care, LLC v. Norwood

United States Court of Appeals, Seventh Circuit

August 8, 2017

BT BOURBONNAIS Care, LLC, et ah, Plaintiffs-Appellees,
v.
Felicia F. NORWOOD, Director, Illinois Department of Healthcare and Family Services, Defendant-Appellant.

          Argued April 26, 2017

         Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 16 C 5765 - Milton I. Shadur, Judge.

          Before WOOD, Chief Judge, and Flaum and Sykes, Circuit Judges.

          WOOD, Chief Judge.

         This case represents an effort by ten operators of nursing homes in Illinois to be paid what they believe they are owed. Providers that depend on Medicaid funding must go through an administrative process in which their reimbursement rate is calculated. The plaintiffs contend that their rates were not properly adjusted after a change in ownership of the nursing homes they run. Before that issue can be resolved, however, there are two significant hurdles plaintiffs must clear: first, they must show that they have a private right of action for a violation of the relevant part of the Medicaid statute, 42 U.S.C. § 1396a(a)(13)(A); and, second, they must show that the Eleventh Amendment does not categorically bar this case from going forward.

         I

         Our plaintiffs are ten operators of long-term care facilities, generally called nursing homes, located in Illinois. For ease of exposition, we'll call them the Operators. In 2012 each of them purchased existing nursing homes and took over all operations and services. Each Operator obtained a new license from the state and a new Medicare provider number from the federal government; the old licenses and Medicare numbers were retired. Most of the residents in the affected nursing homes qualify for Medicaid assistance. Through the Illinois Department of Healthcare and Family Services (IDHFS), the state administers the Medicaid funds in accordance with a complex array of federal statutes and regulations. See 42 U.S.C. §§ 1396 to 1396w-5; Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 502 (1990); Bontrager v. Indiana Family & Soc. Sews. Admin., 697 F.3d 604, 605 (7th Cir. 2012). IDHFS reimburses nursing homes for Medicaid-eligible expenses on a per diem basis, but the rate itself must be calculated annually based on the costs of running the facility. III. Admin. Code tit. 89, § 140.561-3. When ownership of a home changes, state law requires IDHFS to calculate a new rate based on the new owner's report of the costs it has accrued during at least the first six months of operation. Id. § 140.560(a).

         The Medicaid Act, 42 U.S.C. § 1396a, requires states to use a public process, complete with notice and an opportunity to comment, when it determines payment rates. The relevant language of the statute reads as follows:

(a) ... .
A State plan for medical assistance must-
(13) provide-
(A) for a public process for determination of rates of payment under the plan for ... nursing facility services, ... under which-
(i) proposed rates, the methodologies underlying the establishment of such rates, and justifications for the proposed rates are published,
(ii) providers, beneficiaries and their representatives, and other concerned State residents, are given a reasonable opportunity for review and comment on the proposed ...

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