Vine Street Clinic v. Healthlink, Inc.

SUPREME COURT CASES

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State: Illinois

Docket No: 99790 Rel

Preview:Docket No. 99790.

IN THE SUPREME COURT OF THE STATE OF ILLINOIS

VINE STREET CLINIC et al., Appellants and Cross-Appellees, v. HEALTHLINK, INC., Appellee and Cross-Appellant. Opinion filed September 21, 2006.

JUSTICE KARMEIER delivered the judgment of the court, with opinion Chief Justice Thomas and Justices Freeman, Fitzgerald, and Kilbride concurred in the judgment and opinion. Justices Garman and Burke took no part in the decision.

OPINION On March 4, 2003, plaintiff Vine Street Clinic (Vine Street) filed a putative class action lawsuit in Sangamon County against defendant HealthLink, Inc. (HealthLink), seeking a declaration that the "percentage fee" provision of the parties' services contract violated section 22(A)(14) of the Medical Practice Act of 1987 (Act) (225 ILCS 60/22(A)(14) (West 2002)). Vine Street also sought a refund of all administrative fees paid to HealthLink under the contract. On May 27, 2003, plaintiff Ursula Thatch, M.D., was granted leave to intervene in this action, and Vine Street and Thatch (plaintiffs) were allowed to amend their complaint. Plaintiffs' amended complaint sought a declaration that: (1) the percentage fee violated the Act; (2) HealthLink's new "flat fee" also violated the Act; and (3) HealthLink

was barred from collecting any administrative fees under the Illinois Insurance Code (Insurance Code) (215 ILCS 5/1 et seq. (West 2002)). The amended complaint also sought injunctive relief and recovery of all administrative fees previously paid to HealthLink. On June 26, 2003, HealthLink filed a verified counterclaim for declaratory relief, seeking a declaration that the flat fee does not violate the Act, and asking the court to enter judgment against plaintiff Thatch for any administrative fees that she owed. On July 30, 2003, the circuit court entered judgment on the pleadings, holding that although HealthLink's former percentage fee violated the Act, its current flat fee did not. The circuit court further held that previously paid monies were not recoverable because any alleged illegal contract was unenforceable. Finally, the court granted defendant's motion to dismiss plaintiffs' counts alleging: (1) the Insurance Code bars HealthLink from collecting administrative fees; and (2) unjust enrichment. Plaintiffs appealed and HealthLink cross-appealed. The appellate court affirmed the circuit court's ruling with respect to the repayment of fees previously paid, but the majority held that both the flat fee and the previously charged percentage fee were prohibited by the Act. 353 Ill. App. 3d 929. The appellate court did not address plaintiff's argument that HealthLink violated the Insurance Code. Justice Steigmann dissented, arguing that both the percentage and flat fee were permissible. Appeal lies in this court as a result of the appellate court thereafter granting an application for a certificate of importance pursuant to Supreme Court Rule 316 (155 Ill. 2d R. 316). This court has granted leave to file an amicus curiae brief in support of HealthLink to: (1) America's Health Insurance Plans; and (2) the American Federation of State, County and Municipal Employees, AFL-CIO, and Egyptian Area Schools Employee Benefit Trust. We have also granted the Illinois State Medical Society leave to file an amicus brief in support of plaintiffs. 155 Ill. 2d R. 345. Plaintiff Vine Street is a partnership consisting of physicians who render psychiatric services, and plaintiff Thatch is an Illinois physician specializing in obstetrics and gynecology. Defendant HealthLink is an Illinois corporation that enters into participating physician agreements with physicians, and different agreements with those offering other health-care services, thereby creating a network -2-

of health-care providers. HealthLink makes these provider networks available to members of health plans that are offered by insurance carriers, self-funded employer groups, governmental entities and union trusts (collectively payors). Participating physicians agree to provide medical services to payor members at a discounted rate and to send their claims for reimbursement to HealthLink. HealthLink then processes the claims and sends them to the payor for benefit determination and payment. Vine Street was a provider in HealthLink's network from 1989 to 2001, and during that time paid HealthLink a 5% administrative fee that totaled at least $21,720.28. Thatch is a provider in HealthLink's network who, from 1993 until June 30, 2002, paid HealthLink a percentage-based fee totaling $25,079.06. The Illinois Attorney General is charged with enforcing state law, including the Act, and one duty of the Attorney General is to provide written opinions on legal questions to certain government officers and agencies. 15 ILCS 205/4 (West 2002). In an opinion letter dated March 5, 2002, Attorney General James E. Ryan responded to an inquiry made by Charles A. Hartke, assistant majority leader of the House of Representatives, and concluded that section 3.7 of the HealthLink agreement, requiring each participating physician to pay HealthLink an administrative fee equal to 5% of the amount allowed in HealthLink's rate schedule for services provided to members by the physician, violated section 22(A)(14) of the Act and was therefore void under Illinois law. 2002 Ill. Att'y Gen. Op. No. 02

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