April 26, 2017
from the United States District Court for the Northern
District of Illinois, Eastern Division. No. 16 C 5765 -
Milton I. Shadur, Judge.
WOOD, Chief Judge, and Flaum and Sykes, Circuit Judges.
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.
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).
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-
(A) for a public process for determination of rates of
payment under the plan for ... nursing facility services, ...
(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 ...