The U.S. Court of Appeals for the Seventh Circuit ruled in August that 10 operators of Illinois long-term care facilities can move forward with a lawsuit against the Illinois Department of Healthcare and Family Services (IDHFS), the organization that administers the state’s Medicaid program. 

The plaintiffs allege that Felicia F. Norwood, in her capacity as director of IDHFS, violated the federal Medicaid Act by unlawfully failing to provide a public process for resetting the facilities’ reimbursement rates after a change in ownership.

The IDHFS sought dismissal of the suit, arguing that private parties may not enforce the law’s requirements. In her opinion, Seventh Circuit Judge Diane P. Wood disagreed with Norwood, saying the requirements clearly were intended to benefit the long-term care facilities, the rights protected by the law were clear, and the law imposed a binding obligation on the IDHFS.

“The right to a public process, with full notice-and-comment rights, is not a meaningless one, any more than the information produced pursuant to a request under the Freedom of Information Act is pointless,” Wood wrote. “As the Supreme Court has repeatedly reminded us, the primary way in which the Medicaid Act is enforced is through federal oversight and the threat of withdrawal of federal funds. The Secretary of HHS is empowered to withhold funds if a state does not act in accordance with an approved plan.”

Illinois has been under increased scrutiny with regard to its Medicaid program, as the state’s recent two-year budget impasse caused processing and payment delays for both beneficiaries and healthcare providers. In June, a federal judge ordered Illinois to start paying $293 million in state money toward Medicaid bills every month and an additional $1 billion over the course of the next year.

Wood’s opinion affirmed a lower court’s denial of Norwood’s motion to dismiss or stay the proceedings, allowing it to continue.