Nos. 1-05-2422 & 1-05-2548 Consolidated
ILLINOIS HEALTH MAINTENANCE ) Appeal from the
ORGANIZATION GUARANTY ASSOCIATION, ) 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 ) Appeal from the
UNIVERSITY OF CHICAGO PRACTICE PLAN, ) Circuit Court of
) Cook County.
Plaintiffs-Appellants, )
) Nos. 04 CH 00405,
v. ) 04-CH-05539 and
) 04-CH-03730
DEIRDRE K. MANNA, Acting Director of the ) (consolidated)
Department of Insurance, )
)
Defendant )
) Honorable
(Illinois Health Maintenance Organization Guaranty ) Nancy J. Arnold,
Association, Defendant-Appellee). ) 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).
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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
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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. §1395dd (2000).
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denial of their claims to the Director. 215 ILCS 125/6-11(3) (West 2004). In May 2002, the
Director designated an employee of the Department of Insurance as hearing officer in the case.
In August 2002 (prior to the hearing), the Association filed a motion for leave to take
discovery. About a month later (September 23, 2002), the hearing officer issued an order
granting some of the Association’s discovery requests but denying most of them. The hearing
officer declined to allow any discovery regarding possible additional defenses, explaining that the
hearing would be limited to those defenses originally cited by the Association in denying the
Providers’ claims.
The parties filed motions for summary disposition. In its motions, the Association
sought, among other things, a decision affirming its Medicaid, referral, residency and
nonenrollment defenses. The Association also filed an alternative motion for summary
disposition arguing that, if the Association’s denial of the Hospitals’ claims were reversed, these
claims should be paid at a rate lower than the Hospitals’ usual and customary rate. According to
the Association, the Hospitals’ claims should be paid "at the rates payable by the Illinois
Department of Public Aid [(IDPA)] for those same services" (rate-of-payment defense). The
Providers’ motion for summary disposition requested a decision in Providers’ favor and an order
directing the Association to pay the full amount of the claims. In their memorandum in support
of their motion for summary disposition, the Providers argued, among other things, that the
Association was barred by collateral estoppel from asserting its Medicaid, referral, and rate-of-
payment defenses. According to the Providers, these same defenses were rejected by the Director
in an earlier proceeding to which the Association was a party. The Providers stated: "[T]he
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Director is bound by his prior Order on these identical issues and the Association is collaterally
estopped from challenging it." (In the prior proceeding (Shapo), the Director found the
Association liable to a number of health care providers, including the Hospitals, "for services
rendered by them to enrollees of an insolvent health maintenance organization (HMO) known as
MedCare HMO, Inc. (MedCare)." Illinois Health Maintenance Organization Guaranty Ass