Illinois Health Maintenance Organization Guaranty Ass'n v. Department of Insurance

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State: Illinois

Court: 1st District Appellate

Docket No: 1-05-2422, 1-05-2548 Cons. Rel

Case Date: 03/05/2007

Preview:Nos. 1-05-2422 & 1-05-2548 Consolidated

ILLINOIS HEALTH MAINTENANCE ORGANIZATION GUARANTY ASSOCIATION,

) Appeal from the ) Circuit Court of ) Cook County. Plaintiff-Appellee and Cross-Appellant, ) ) Nos. 04 CH 00405, v. ) 04-CH-05539 and ) 04-CH-03730 THE DEPARTMENT OF INSURANCE, ) (consolidated) DEIRDRE K. MANNA, Acting Director of the ) Department of Insurance, and GLENN R. GASIOREK, ) ) Defendants ) ) Honorable (University of Chicago Hospitals and University of ) Nancy J. Arnold, Chicago Practice Plan, Defendants-Appellants and ) Judge Presiding. Cross-Appellees). ) ______________________________________________________________________________ UNIVERSITY OF CHICAGO HOSPITALS and UNIVERSITY OF CHICAGO PRACTICE PLAN, Plaintiffs-Appellants, v. DEIRDRE K. MANNA, Acting Director of the Department of Insurance, Defendant (Illinois Health Maintenance Organization Guaranty Association, Defendant-Appellee). ) ) ) ) ) ) ) ) ) ) ) ) ) ) Appeal from the Circuit Court of Cook County. Nos. 04 CH 00405, 04-CH-05539 and 04-CH-03730 (consolidated)

Honorable Nancy J. Arnold, Judge Presiding.

JUSTICE ROBERT E. GORDON delivered the opinion of the court: The central issue in these appeals is whether the Illinois Health Maintenance Organization Guaranty Association (Association) is liable to the University of Chicago Hospitals (Hospitals) and the University of Chicago Practice Plan (Practice Plan) (collectively, Providers)

Nos. 1-05-2422 & 1-05-2548 Cons for unpaid claims for services rendered to enrollees of a health maintenance organization (HMO) which was declared insolvent. The Association was created by section 6-6 of the Illinois Health Maintenance Organization Guaranty Association Law (Act) (215 ILCS 125/6-6 (West 2004)) for the express purpose of protecting HMO enrollees "and their beneficiaries, payees and assignees, subject to certain limitations" (215 ILCS 125/6-2 (West 2004)), against the insolvency of an HMO. In August 2001, the Providers submitted unpaid claims totaling more than $6 million to the Association for services rendered to enrollees of American Health Care Providers, Inc. (AHCP), an HMO which had been declared insolvent. Early the next year (2002), the Association denied most of the Providers' claims. The bulk of the claims were denied on the ground that the Providers were not entitled to recover under the Act for services provided to Medicaid enrollees (Medicaid defense). Most of the Providers' claims were for services rendered to AHCP enrollees who were Medicaid patients. The Providers appealed the denial of their claims to the Illinois Director of Insurance (Director). 215 ILCS 125/6-11(3) (West 2004).1 Subsequently, the parties filed motions for summary disposition. On December 5, 2003, the Director issued an order rejecting, among other things, the Association's Medicaid defense, and

1

Section 6-6 of the Act provides that the Association "shall be supervised by the Director

and is subject to this Act and the applicable provisions of the Illinois Insurance Code." 215 ILCS 125/6-6 (West 2004). 2

Nos. 1-05-2422 & 1-05-2548 Cons directing the Association to pay $5,084,922.19 to the Hospitals and $292,229.62 to the Practice Plan. The Association and the Providers filed complaints for administrative review with the circuit court of cook county, chancery division. The Association sought the reversal of those portions of the Director's order that were adverse to the Association, particularly the rejection of the Medicaid defense, while the Providers challenged that part of the order declining to award prejudgment and postjudgment interest. In May 2005, the circuit court reversed the Director's rejection of the Association's Medicaid defense. In so doing, the court upheld the denial of most of the claims the Association had rejected. The circuit court also affirmed the Director's denial of prejudgment and postjudgment interest. In August 2005, the Association and the Providers filed notices of appeal. The Providers argue on appeal that the circuit court erred in (1) reversing the Director's rejection of the Association's Medicaid defense, and (2) failing to award prejudgment and postjudgment interest. In its cross-appeal, the Association contends, among other things, that the circuit court erred in upholding the Director's rejection of certain additional defenses asserted by the Association. By order dated October 18, 2005, the parties' appeals were consolidated. For the reasons set forth below, we affirm in part and reverse in part the judgment of the circuit court. BACKGROUND On May 11, 2000, the circuit court entered an order of liquidation with a finding of insolvency against AHCP. Prior to this liquidation, the (University of Chicago) Hospitals and the Practice Plan, a group of physicians who were employees and faculty members of the 3

Nos. 1-05-2422 & 1-05-2548 Cons University of Chicago, had provided various medical services to AHCP enrollees for which the Providers had not been paid. Most of these services were rendered on an emergency basis.2 For the period at issue, the Providers had no agreement with AHCP to supply medical services to its enrollees. On August 3, 2001, subsequent to AHCP's liquidation, the Providers submitted unpaid claims totaling more than $6 million to the Association. This total included $5,609,609.72 for the Hospitals and $415,620.93 for the Practice Plan. The majority of the Providers' claims were for services provided to AHCP enrollees who were Medicaid recipients. In early 2002, the Association notified the Providers that it was denying most of their claims. Some $5.2 million ($5,013,329.53 for the Hospitals and $209,192.35 for the Practice Plan) of the Providers' $6.025 million in claims were denied on the ground that the Providers were not entitled to recover under the Act for services provided to Medicaid enrollees. The Association also denied any claims that it concluded were (1) the responsibility of other medical groups under contract with AHCP (referral defense), (2) for services provided to enrollees who did not reside in Illinois or Wisconsin on the date of the liquidation (residency defense), and (3) for charges incurred either before the effective date of coverage or after the termination date of coverage for a particular AHCP enrollee (nonenrollment defense). In a letter dated February 21, 2002 (and a supplemental letter dated March 12, 2002), the Providers appealed the Association's

2

Under federal law, hospitals with emergency departments are required to provide

medically necessary services when requested. 42 U.S.C.

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