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Illinois Health Care Association v. Walters, No. 1-97-3820 1st Dist. 1/29/99 |
FIFTH DIVISION
January 29, 1999
No. 1-97-3820
HEARTLAND MANOR NURSING CENTER,
INC., Plaintiffs-Appellants, v. JOAN WALTERS, as Director of the Department of Public
Aid, Defendant-Appellee. of Cook County. No. 89-CH-1243 Honorable Edwin M. Berman, Robert V. Boharic, Judges
Presiding. JUSTICE THEIS delivered the opinion of the
court: Plaintiffs Illinois Health Care Association (IHCA)
and Heartland Manor Nursing Center, Inc. (Heartland), appeal from the circuit
court's order dismissing the amended complaint for lack of subject matter
jurisdiction. The court found that this action was against the state and,
therefore, only the Illinois Court of Claims could exercise jurisdiction. On
appeal, plaintiffs argue that the circuit court erred in finding that it lacked
jurisdiction because this action was not against the state. For the following
reasons, we affirm the judgment of the circuit court. On September 12, 1989, plaintiffs filed an amended
complaint in the circuit court of Cook County against the Director(1)
of the Illinois Department of Public Aid (IDPA). Plaintiff IHCA is a
professional trade organization which represents several hundred nursing homes
in Illinois. Plaintiff Heartland is an Illinois nursing home and a member of the
IHCA. In count I, plaintiffs alleged that the IDPA's method of calculating
reimbursement rates paid to nursing homes violated the Medicaid reimbursement
provisions of the Illinois Public Aid Code. Ill. Rev. Stat. 1985, ch. 23, pars.
5-5.4, 5-5.5. Plaintiffs claimed in count II that the IDPA violated the Illinois
Administrative Procedure Act (Ill. Rev. Stat. 1985, ch. 127, par. 1001 et
seq.) because certain regulations were not promulgated in accordance with
the prescribed rule-making procedures. Plaintiffs challenged IDPA's billing
system as violative of "AN ACT to require prompt payments by the State of
Illinois ***" (the State Prompt Payment Act) (Ill. Rev. Stat. 1985, ch. 127,
par. 132.401 et seq.) in count III. All three counts requested
declaratory, injunctive, and money damages relief. In light of this case's long procedural history,
only the pertinent background information will be narrated. Partial summary
judgment in plaintiffs' favor had been granted as to count II, so the case went
to trial on counts I and III. After presentation of plaintiffs' case in chief,
the court granted defendant's motion pursuant to section 2-1110 of the Code of
Civil Procedure. 735 ILCS 5/2-1110 (West 1992). This finding was reversed on
appeal in Illinois Health Care Ass'n v. Wright, 268 Ill. App. 3d 988,
999, 645 N.E.2d 1370, 1376 (1994), with instructions to determine whether the
circuit court or the Illinois Court of Claims had subject matter jurisdiction in
this case. Upon remand, the circuit court dismissed the case for lack of
jurisdiction as to counts I and III. Despite the previous decision granting
partial summary judgment as to count II, the court subsequently also dismissed
that count for lack of jurisdiction. On appeal, the only issue to be determined is
whether this is an action against the state. If a suit is filed against the
state, jurisdiction may be exercised only by the Illinois Court of Claims.
Senn Park Nursing Center v. Miller, 104 Ill. 2d 169, 186, 470 N.E.2d
1029, 1038 (1984). Relying primarily on Senn Park, plaintiffs contend
that their case is not against the state because defendant exceeded her
statutory authority. Accordingly, plaintiffs argue, this action is properly
heard in the circuit court. Whether a suit is brought against the state does not
depend on the named parties in the suit but, rather, on the issues raised and
the relief sought. Senn Park, 104 Ill. 2d at 186, 470 N.E.2d at 1038.
If a suit is brought against a state official, yet the judgment could operate to
control the actions of the state or subject it to liability, then the suit is,
in actuality, against the state. Senn Park, 104 Ill. 2d at 187, 470
N.E.2d at 1038. This preserves the doctrine of sovereign immunity by preventing
interference of both the state's performance of governmental functions and its
control over state funds. Senn Park, 104 Ill. 2d at 188, 470 N.E.2d at
1039. On the other hand, where a state officer acts in excess of his or her
statutory authority, the suit is not against the state because it is presumed
that the state does not violate its laws or the constitution. Senn
Park, 104 Ill. 2d at 189, 470 N.E.2d at 1039. Plaintiffs rely heavily on Senn Park to
support their claims. In Senn Park, as in the present case, the
Director of the IDPA was the only defendant. This, however, did not preclude the
court from engaging in an analysis of the issues raised and the relief sought.
The court ultimately determined that the suit was not against the state because
it was an action to compel a public official to perform a clear and mandatory
duty. Senn Park, 104 Ill. 2d at 189, 470 N.E.2d at 1039 ("plaintiffs
sought a writ of mandamus against [the Director of the IDPA] personally
to direct him to pay them in accordance with the prior approved State plan").
Discretionary authority was not conferred on the Director nor was such
discretion necessary in order for him to perform. Consequently, the court did
not consider the cause of action to be against the state. Importantly, this
conclusion did not frustrate the purposes of sovereign immunity because the
state could not claim interference with its functions when the act complained of
was unauthorized by statute. Senn Park, 104 Ill. 2d at 188, 470 N.E.2d
at 1039. The issues raised and relief sought in count I of
this case lead us to conclude, unlike Senn Park, that this count
constitutes an action against the state. In count I, plaintiffs complain that
the IDPA violated sections 5-5.4(2) through (4) of the Public Aid Code. Ill.
Rev. Stat. 1985, ch. 23, pars. 5-5.4(2) through (4). This statute prescribes the
requirements and parameters the IDPA must follow in determining reimbursement
rates paid to nursing homes. The reimbursement rate is based on a formula that
includes three components: nursing rate, capital rate, and support rate. The
nursing rate component covers the direct costs of caring for nursing- home
residents. Reimbursement of nursing care is calculated by assessing each
resident's utilization of services and the level of care provided. This periodic
resident assessment is done by nurse surveyors with the aid of a patient
assessment instrument called the "Inspection of Care Guidelines." The surveyors
determine the level of care required by the residents and which services the
residents have used. The services provided by the nursing homes have previously
been assigned minutes per day, which eventually translate into costs. Plaintiffs allege that defendant violated the
statute when conducting patient assessments by failing to take into account the
actual costs as required in sections 5-5.4(2) through (4). In 1985, the IDPA
used the patient assessment instrument to determine that the amount of
reimbursement would be reduced by approximately $4 per resident. Rather than
impose this reduction immediately and all at once, the IDPA instituted a
graduated reduction of the reimbursement rate to take place over a period of
years. Plaintiffs argue that this was an arbitrary manipulation of the patient
assessment instrument and, therefore, not based on actual costs. Plaintiffs
further claim that the assessment instrument failed to adequately measure the
residents' nursing care needs because the assigned minutes and staffing levels
had not been reviewed periodically and were not based on time and motion
studies. Finally, plaintiffs contend that the capital and support rate
components of the reimbursement formula were flawed because two-year-old cost
reports were used to set current rates rather than the "most currently available
cost reports." Ill. Rev. Stat. 1985, ch. 23, par. 5-5.4(1). To cure these
alleged deficiencies, plaintiffs requested that the court order the IDPA to
"[c]onduct a validated time and motion study to determine the actual time
required to perform each component of nursing care" and to "[d]esign a payment
system that adequately compensates nursing homes in compliance with the payment
standards" provided in the statute. A reading of the statute establishes that the IDPA
has substantial discretion in determining a method for calculating reimbursement
rates. Specifically, the sections at issue state: Under the express language of the statute, the IDPA
has the authority to develop a methodology for formulating reimbursement rates
based on certain factors. The IDPA has the power to develop these calculations
without interference from other entities or persons. The statute's only
constraint on the IDPA in creating a formula is that the IDPA must "take into
account" certain factors. However, there is no restriction as to how or to what
extent those factors must be considered. Unlike Senn Park, plaintiffs are not asking
the IDPA to perform clear, mandatory, and nondiscretionary tasks, but are
requesting that the reimbursement rates be calculated in a particular manner
using a method they desire. These requests invade the discretionary nature of
the statute and frustrate the doctrine of sovereign immunity. Having the IDPA
calculate reimbursements rates in a certain way relinquishes control of state
operations and funds to plaintiffs. As the court in Brucato v. Edgar,
128 Ill. App. 3d 260, 470 N.E.2d 615 (1984), so aptly stated: See also Management Ass'n of Illinois, Inc. v.
Board of Regents of Northern Illinois University, 248 Ill. App. 3d 599,
615, 618 N.E.2d 694, 705 (1993). Thus, it is for the Court of Claims to
determine whether the methodology created by the IDPA, in its discretion,
violated the statute. Plaintiffs' final contention in count I is that
defendant did not use the "most currently available cost reports" to set
reimbursement rates. Ill. Rev. Stat. 1985, ch. 23, par. 5-5.4(1). The Court of
Claims has jurisdiction over this claim as well. A distinction has been made
between cases based on a present claim for damages and those seeking to enjoin a
state official from taking future action in excess of her delegated authority.
Ellis v. Board of Governors of State Colleges & Universities, 102
Ill. 2d 387, 395, 466 N.E.2d 202, 206 (1984). A case seeking to enforce a
present claim must be brought in the Court of Claims. Effective September 1, 1989, the legislature changed
the language on which plaintiffs based their complaint. Prior to the
substitution, the statute read, in pertinent part: The changed language states as follows: This substitution mooted any requested injunctive
relief related to this claim. Consequently, all that remains is a declaratory
judgment as to whether the statute was violated during the years that the "most
currently available" language was the law and, if so, whether plaintiffs were
damaged. Because there is no future action to be taken on this issue, the issue
has become a present claim for damages. Jurisdiction, therefore, is properly
exercised by the Court of Claims. In sum, after examining the issues and relief sought
in count I, we conclude that jurisdiction is properly exercised by the Illinois
Court of Claims. The fact that plaintiffs sued only the Director in an attempt
to demonstrate that this suit is not against the state is unpersuasive. Because
plaintiffs sought to compel compliance of a discretionary and nonministerial
matter that would result in plaintiffs controlling state funds and interfering
with the state's performance of governmental functions, this is a lawsuit
against the state. The circuit court was correct in determining that it lacked
subject matter jurisdiction. The Court of Claims has jurisdiction over counts II
and III as well. In count II, part of the relief sought was a court order
mandating the IDPA's compliance with the Administrative Procedure Act when
enacting rules such as "Inspection of Care Guidelines." On August 28, 1991, the
IDPA adopted "Inspection of Care Guidelines's" rules pursuant to the procedures
prescribed by the statute. See 15 Ill. Reg. 13390, 13399. This action cured the
alleged violation complained of by plaintiffs and mooted their request for
injunctive relief. As to count III, effective July 24, 1992, the State
Prompt Payment Act was amended to eliminate its coverage as to nursing homes. 30
ILCS 540/1 (West 1992). This, too, mooted any potential need by the IDPA to
reform its billing system to conform with the procedures mandated in the
statute. Mooting the injunctive aspects of these counts
eliminated any need for defendant to take future action if the statutes were
found to be violated. However, plaintiffs' claims for declaratory relief and
damages, if any, for the period of time when the statutes allegedly were
violated were not mooted. The elimination of injunctive relief coupled with the
existence of possible money damages transformed the requests for future action
into present claims for damages that could subject the state to liability. Thus,
these counts also must be heard in the Court of Claims. Ellis, 102 Ill.
2d at 395, 466 N.E.2d at 206. We must emphasize that we express no opinion
regarding whether plaintiffs' allegations have any merit. Our sole concern in
this case was the issue of jurisdiction and we have made no determination as to
whether defendant violated the statutes in question. For the foregoing reasons, we affirm the circuit
court's dismissal of all counts for lack of subject matter
jurisdiction. Affirmed. HARTMAN and GREIMAN, JJ., concur. Joan Walters is the successor to Robert W. Wright, the original named
defendant in this case.
ILLINOIS HEALTH CARE
ASSOCIATION and
Appeal from the Circuit
Court
"§ 5-5.4. Standards of Payment--Department of Public Aid. The
Department of Public Aid shall develop standards of payment of skilled nursing
and intermediate care services in facilities providing such services under
this Article which:
***
(2) Shall take into account the actual
costs incurred by facilities in providing services for recipients of skilled
nursing and intermediate care services under the medical assistance program.
(3) Shall take into account the medical
and psycho-social characteristics and needs of the patients.
(4) Shall take into account the actual
costs incurred by facilities in meeting, licensing and certification standards
imposed and prescribed by the State of Illinois ***." Ill. Rev. Stat. 1985,
ch. 23, pars. 5-5.4(2),(3),(4).
"[W]hile it is true that an action to restrain a State official
from acting in contravention of the law or exceeding his authority thereunder
is not considered to be against the State [citation], it is well settled that
where the action seeks to control the officer's conduct in governmental
matters with respect to which he has been granted discretionary authority
[citation], and if a judgment for plaintiff could operate to control the
actions of the State or subject it to liability, it will be deemed an action
against the State even though it is not a named party therein."
Brucato, 128 Ill. App. 3d at 264, 470 N.E.2d at 618.
"Such rates will be based upon the most currently available cost
reports ***." Ill. Rev. Stat. 1985, ch. 23, par. 5-5.4(1).
"Such rates will be based upon the rates calculated for the year
beginning July 1, 1990, and for subsequent years thereafter shall be based on
the facility cost reports for the facility fiscal year ending at any point in
time during the previous calendar year, updated to the midpoint of the rate
year. The cost report shall be on file with the Department no later than April
1 of the current rate year. Should the cost report not be on file by April 1,
the Department shall base the rate on the latest cost report filed by each
skilled care facility and intermediate care facility ***." Ill. Rev. Stat.
1989, ch. 23, par. 5-5.4(1).