Court of Claims Victory Favors Nursing Homes on Interest for Late Medicaid Payments

December 11, 2008

Healthcare Update - December 2008

Author(s): Edward Clancy, John J. Durso

Ungaretti & Harris attorneys successfully petitioned the Court of Claims to grant summary judgment to our nursing home clients on the amount of interest the state owed the facilities for late Medicaid payments under the State Prompt Payment Act (30 ILCS 540 et seq.) (the “Act”). In relation to nursing homes, where the Illinois Department of Healthcare and Family Services (“HFS”) makes payments under a “unique paperless system,” the Court found that “there is no physical bill” and held that late-payment “interest on the unpaid principal begins to accrue 90 days after the last day of each month of service.” For all Medicaid providers, the Court held that “interest penalties shall be calculated on a per month or fraction thereof basis and not a per diem basis.” In deciding these issues, the Court looked to legislative history and intent, as well as HFS regulations, and found that the Act’s intention is for the State to pay providers on time and, if it does not, to pay penalties for late payments. Because the state’s obligation for payment of interest on late payments is now clear, securing an award for late-payment interest, which took us over three years in this case, should now proceed much more quickly.

Of particular benefit for nursing homes, the Court agreed with our position that HFS, which administers the Medicaid program, must approve or disapprove Medicaid charges for nursing home residents, within 30 days of the end of the month in which the facility provides services. HFS waives the right to disapprove such Medicaid charges, if it fails to do so within the 30-day period. Absent HFS disapproving a nursing home’s Medicaid charges, the Court ruled that Medicaid payments for services provided are due no later than 90 days from the end of the month. If HFS does not make such payments within that time, interest begins to accrue on the 90th day.

Of benefit for all Medicaid providers, the Court agreed with our position on the calculation of interest for late payments. Interest penalties of 1% accrue on a per-month or fraction-of-month basis, rather than on a per diem basis, as HFS argued. That is, for any portion of a month that HFS is late making a Medicaid payment, the provider is entitled to a full 1% interest on the payment and not merely per-diem interest. For example, if the state is one day late, providers are entitled to 1% interest; if the state is 31 days late, providers are entitled to 2% interest; and so on. Although the procedures for Medicaid reimbursement for virtually all other providers (hospitals, etc.) differ from that of nursing homes (other providers submit “bills”), this ruling still positively affects the underlying interest calculations on late payments for all providers.

Even though Illinois has one of the lowest Medicaid reimbursement rates in the country, it is once again extremely delinquent on its Medicaid payments. In a recent report, Comptroller Dan Hynes says that Illinois finished the first three months of Fiscal Year ’09 with a mountain of unpaid bills and record delays in payments. As if that is not bad enough, the report goes on to say that both the backlog of bills and payment delays will increase through the end of the current calendar year. Once bills reach the Comptroller’s office, the current average delay in payment is 42 days, “an historical record at this time of year.” Keep in mind that state agencies often hold on to bills before submitting them to the Comptroller’s office, which accounts for healthcare providers receiving payment well in excess of three months after providing services. Many of our clients have once again filed claims against the state for late-payment interest.

Please call Ed Clancy (312.977.4487) or John Durso (312.977.4440) if you would like additional information on how to proceed in securing interest on late Medicaid payments.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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