Court: Appellate Court of Illinois; September 26, 1988; Illinois; State Appellate Court
Hoardwood, Inc., the licensee of Ora G. Morrow Nursing Center, appeals a March 4, 1985, ruling from the Cook County circuit court affirming the Illinois Department of Public Aid’s (IDPA) decision to suspend the facility from the Illinois Medical Assistance Program from June 30, 1982, to October 15, 1982. The court upheld IDPA’s authority to require an indemnification agreement to protect against potential Federal funding losses as a condition for continued program participation.
Following an inspection by the Illinois Department of Public Health (IDPH) on March 5, 1982, deficiencies violating Federal and State regulations were identified, including inadequate nursing staff and poor patient care. Consequently, IDPH decided to terminate the facility’s Medicaid certification effective June 30, 1982. Hoardwood was notified of its right to an administrative hearing regarding this termination, as well as IDPA’s intent to suspend its vendor eligibility due to the cessation of certification.
Hoardwood requested a hearing on June 23, 1982, which was held on December 7, 1982. A survey conducted by IDPH on October 15, 1982, confirmed the facility's eligibility for certification. The hearing officer concluded on January 7, 1983, that there were valid grounds for both the termination and the suspension of the facility. The IDPH Director approved this recommendation, and the facility was certified to participate in the Medicaid program starting October 16, 1982.
On February 14, 1984, the IDPA’s final administrative decision noted a payment of $219,672 made to the nursing home during the suspension, which could affect Federal funding. Hoardwood’s continued participation was contingent upon either repaying this amount or signing an indemnity agreement. Subsequently, Hoardwood filed a complaint for judicial review on March 8, 1984.
A hearing on March 4, 1985, upheld the IDPA's administrative decision regarding a suspension from June 30 to October 15, 1982, and mandated an indemnification agreement between the plaintiff and the IDPA. The plaintiff contends that the decision is void because the Executive Deputy Director allegedly lacked authority to make binding decisions or enforce penalties, referencing Illinois Revised Statutes. These statutes stipulate that the Director or hearing officer must conduct hearings and issue decisions within specified timeframes, with all decisions being binding on involved parties.
Conversely, the defendant asserts the validity of the Executive Deputy Director's decision, which is supported by the Public Aid Code granting the IDPA authority to regulate Medicaid provider eligibility. The Illinois Administrative Code indicates that the Director should make final decisions based on findings from hearings. Although the term "shall" typically indicates a mandatory requirement, it may be interpreted as directory based on context and judicial precedent.
Moreover, it is customary for agency directors to delegate authority during their absence or for specific ongoing responsibilities. In this case, the Director received a copy of the decision, implying delegation of authority to the Executive Deputy Director for this matter. Administrative agencies are permitted to establish procedures necessary for their functions, and they possess the power to execute their duties effectively. While an agency's interpretation of its governing law is not definitive, it is relevant in decision-making processes.
In Heerey v. Zoning Board of Appeals and National Consolidated Industries, reviewing courts are advised to grant substantial discretion to administrative agencies regarding the interpretation and application of their rules, intervening only in cases of plain error. The legislature’s omission of explicit language regarding the authority of the 'Director or his designee' does not imply a contrary intent, particularly when such an interpretation could hinder the efficient operation of the State Medicaid plan. The Executive Deputy Director's execution of the final administrative decision was deemed appropriate; however, requiring the plaintiff to enter into an indemnification agreement with the State of Illinois as a condition for continued participation in the Medicaid program exceeded his authority. Such a requirement was not supported by relevant Federal and State regulations. The Medicaid program, funded jointly by Federal and State governments, necessitates States to submit a compliant plan to the Secretary of Health and Human Services to participate. The Illinois Department of Public Aid (IDPA) is designated as the agency responsible for managing the State Medicaid plan. Federal law allows the government to recover overpayments made to States under the Medicaid program.
The Federal government can adjust future payments to a State if an overpayment is determined, as per 42 U.S.C. 1396(b)(d)(2). In this case, no such determination has been made. The defendant seeks an indemnification agreement from the plaintiff to protect the Illinois Department of Public Aid (IDPA) in case future federal findings deem prior payments improper. The IDPA is authorized to make Medicaid payments, suspend or terminate facility eligibility, and recover improperly paid funds. In this instance, the IDPA chose to suspend rather than terminate the plaintiff's eligibility, and there are no laws allowing funding termination solely based on a facility's suspension.
Federal regulations require administrative procedures to be followed for service suspensions or terminations, including informing recipients of their right to a hearing. A hearing request must be submitted within 10 days of receiving a notice of action. The notice in this case was signed on June 10, 1982, and received on June 18, 1982; the plaintiff requested a hearing on June 23, 1982, complying with regulations.
Defendants argue the suspension was due to regulatory violations, which would exempt them from continuing services until a hearing decision. However, since the IDPA allowed services to continue during the suspension, requiring an indemnification agreement contradicts federal regulations that ensure federal financial participation for services pending a hearing decision. Consequently, the trial court's affirmation of the IDPA's decision requiring indemnification for the $219,672 in federal Medicaid funds during the decertification period was improper. The circuit court's order is affirmed in part and reversed in part, with the judges Buckley and O’Connor concurring.
