IN THE UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

SAINT ANTHONY HOSPITAL, 

 Plaintiff, 

 v. 

THERESA EAGLESON, in her official capacity as 

Director of the Illinois Department of Healthcare 

and Family Services, 

 Defendant.

_________________________________________

MERIDIAN HEALTH PLAN OF ILLINOIS, INC.,

et al.,

 Intervenors.

 No. 20 CV 2561

 Honorable Steven C. Seeger

 Magistrate Judge Sunil Harjani

DEFENDANT’S REPLY MEMORANDUM OF LAW

IN SUPPORT OF MOTION TO DISMISS

KWAME RAOUL

Attorney General 

State of Illinois 

 Sunil Bhave

Richard S. Huszagh

Jason Kanter

Assistant Attorneys General

Office of the Attorney General

100 W. Randolph Street, 13th Floor

Chicago, IL 60601

Phone: (312) 814-2098

sbhave@atg.state.il.us

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TABLE OF CONTENTS 

 Page(s)

Introduction and Summary of Argument ........................................................................................ 1 

Argument ........................................................................................................................................ 2 

I. Plaintiff Has No Right to Require the Department to Force MCOs to Pay Hospitals on a 

30-Day/90-Day Schedule. ........................................................................................................... 2 

A. Section 1396a(a)(37) and Section 447.45 ....................................................................... 2 

B. Section 1396u-2(f) and Section 447.46 .......................................................................... 3 

1. A State’s Only Duty under Section 1396u-2(f) Is to Include in Its Contracts With 

MCOs a Default Schedule for MCO Payments to Medicaid Providers. ............................. 3 

2. Section 1396u-2(f) Does Not Require that MCOs Pay Hospitals on a 30-day/90-day 

Schedule. ............................................................................................................................. 8 

3. Plaintiff Cannot Enforce Section 1396u-2(f) under Section 1983. ............................ 14 

C. Section 1396a(a)(8) ....................................................................................................... 21

II. The Eleventh Amendment Bars Plaintiff’s Claims. ........................................................... 23 

Conclusion .................................................................................................................................... 24

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TABLE OF AUTHORITIES

Cases Page(s)

Appalachian Reg’l Healthcare v. Coventry Health & Life Ins. Co., 

2012 WL 2359439 (E.D. Ky. June 20, 2012)..................................................................... 13, 20

Appalachian Regional Healthcare v. Coventry Health & Life Ins. Co., 

970 F. Supp. 2d 687 (E.D. Ky. 2013) ..................................................................... 13–14, 20, 21

Armstrong v. Exceptional Child Center, Inc., 135 S. Ct. 1378 (2015)......................................... 18

Baylor Univ. Med. Ctr. v. Ark. Blue Cross Blue Shield, 

331 F. Supp. 2d 502 (N.D. Tex. 2004) ................................................................................. 6 n.3

Bio-Medical Applications of North Carolina, Inc. v. Electronic Data Systems Corp., 

412 F. Supp. 2d 549 (E.D. N.C. 2006).............................................................................. 20 n.11

Blessing v. Freestone, 520 U.S. 329 (1997) ................................................................................. 15

Blinder, Robinson & Co. v. S.E.C., 

837 F.2d 1099 (D.C. Cir. 1988)................................................................................................ 22

Bostock v. Clayton Cty., Georgia, 

140 S. Ct. 1731 (2020)............................................................................................................ 4, 5

Bourbon Cmty. Hosp., LLC v. Coventry Health & Life Ins. Co., 

2016 WL 51269 (W.D. Ky. Jan. 4, 2016)............................................................................. 6 n.3

Bratton v. Roadway Package Sys., Inc., 

77 F.3d 168 (7th Cir. 1996) ........................................................................................................ 7

BT Bourbonnais Care, LLC v. Norwood, 

866 F.3d 815 (7th Cir. 2017) ........................................................................................ 15, 19, 20

C.S. Sewell, M.D. P.C. v. Amerigroup Tennessee, Inc., 

2018 WL 6591429 (M.D. Tenn. Dec. 14, 2018)............................................................. 6 n.3, 18

Cabinet for Human Res. v. N. Ky. Welfare Rights Ass’n, 

954 F.2d 1179 (6th Cir. 1992) .................................................................................................... 9

Clayworth v. Bonta, 

140 F. App’x 677 (9th Cir. 2005) ......................................................................................... 6 n.3

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iii

Clayworth v. Bonta, 

295 F. Supp. 2d 1110, 1124–26 (E.D. Cal. 2003)................................................................. 6 n.3

Cmty. Health Care Ass’n of New York v. Shah, 

770 F.3d 129 (2d Cir. 2014).................................................................................................. 6 n.3

Commercial Contractors, Inc. v. United States Fid. & Guar. Co.,

524 F.2d 944 (5th Cir. 1975) ...................................................................................................... 7

Concilio De Salud Integral De Loiza, Inc. v. U.S. Dep’t of Health & Human Servs., 

538 F. Supp. 2d 139 (D.D.C. 2008)............................................................................ 16, 21 n.12

Crane v. Shewry, No. 207CV01639GEBJFM, 

2007 WL 2409665 (E.D. Cal. Aug. 21, 2007).................................................................. 22 n.13

Doctors Nursing & Rehabilitation Center, LLC v. Norwood, 

2017 WL 3838031 (N.D. Ill. Sept. 1, 2017) ..................................................................... 22 n.13

Encino Motorcars, LLC v. Navarro, 

136 S. Ct. 2117 (2016).............................................................................................................. 11

Envtl. Def. Fund, Inc. v. E.P.A., 

82 F.3d 451 (D.C. Cir. 1996)...................................................................................................... 8

Epic Sys. Corp. v. Lewis, 

138 S. Ct. 1612 (2018)................................................................................................................ 9

Ex parte Young, 

209 U.S. 123 (1908)............................................................................................................ 23–24

G. v. Hawaii, Dep’t of Human Servs., 

703 F. Supp. 2d 1078, 1099 (D. Haw. 2010).............................................................. 6 n.3, 8 n.4

Gadelhak v. AT&T Servs., Inc., 

950 F.3d 458 (7th Cir. 2020) .................................................................................................. 4, 5

GE Betz, Inc. v. Zee Co., 

718 F.3d 615 (7th Cir. 2013) .................................................................................................. 4, 5

Gonzaga Univ. v. Doe, 

536 U.S. 273 (2002)............................................................................................................ 14–16

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Greyer v. Ill. Dep’t of Corr., 

933 F.3d 871 (7th Cir. 2019) .................................................................................................. 4, 5

Guerrero-Lasprilla v. Barr, 

140 S. Ct. 1062 (2020)................................................................................................................ 9

Heckler v. Chaney, 

470 U.S. 821, 831 (1985).................................................................................................. 5, 7, 17

Illinois Council on Long Term Care v. Bradley, 

957 F.2d 305 (7th Cir. 1992) ............................................................................................. passim

In re Chicago, R. I. & P. Ry. Co., 

168 F.2d 587 (7th Cir. 1948) ...................................................................................................... 8

In re Dorner, 

343 F.3d 910 (7th Cir. 2003) ...................................................................................................... 8

In re Zyprexa Prod. Liab. Litig., 

489 F. Supp. 2d 230 (E.D.N.Y. 2007) ...................................................................................... 12

Intel Corp. Inv. Policy Comm. v. Sulyma, 

140 S. Ct. 768 (2020).................................................................................................................. 4

Jama v. Immigration & Customs Enf’t, 

543 U.S. 335 (2005).................................................................................................................... 6

Little Sisters of the Poor Saints Peter & Paul Home v. Pennsylvania, 

130 S. Ct. 2367 (2020)................................................................................................................ 4

Lockheed Corp. v. Spink, 

517 U.S. 882 (1996).................................................................................................................. 22

Long Term Care Pharmacy All. v. Ferguson,

362 F.3d 50 (1st Cir. 2004)....................................................................................................... 18

Martin v. Soc. Sec. Admin., 

903 F.3d 1154 (11th Cir. 2018) ................................................................................................ 12

McCready v. White, 

417 F.3d 700 (7th Cir. 2005) .................................................................................................... 16

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Medevac MidAtlantic, LLC v. Keystone Mercy Health Plan, 

817 F. Supp. 2d 515 (E.D. Pa. 2011)........................................................................ 8 n.4, 13, 18

National Medical Care, Inc. v. Rullan, 

2005 WL 2878094 (D.P.R. Nov. 1, 2005).................................................................... 14, 20, 21

New Prime, Inc. v. Oliveira, 

139 S. Ct. 532 (2019).................................................................................................................. 4

Patients’ Choice Medical Center of Humphries County, LLC v. Office of the Governor, 

2009 WL 531861 (S.D. Miss. Mar. 3, 2009).................................................................... 20 n.11

Peterson Steels v. Seidmon, 

188 F.2d 193 (7th Cir. 1951) ...................................................................................................... 7

Prince George’s Hosp. Ctr. v. Advantage Healthplan Inc., 

985 F. Supp. 2d 38 (D.D.C. 2013).................................................................................... 7, 8 n.4

Rio Grande Community Health Center, Inc. v. Rullan, 

397 F.3d 56 (1st Cir. 2005)....................................................................................................... 21

Rotkiske v. Klemm, 

140 S. Ct. 355 (2019)............................................................................................................ 9, 21

Saint Francis Med. Ctr. v. Azar, 

894 F.3d 290 (D.C. Cir. 2018).................................................................................................. 12

Seminole Tribe of Fla v. Fla., 

517 U.S. 44 (1996).................................................................................................................... 24

Seminole Tribe of Fla. v. State of Fla., 

11 F.3d 1016, 1028-29 (11th Cir. 1994)............................................................................... 2411

Sommerfield v. City of Chicago, 

252 F.R.D. 407 (N.D. Ill. 2008).................................................................................................. 3

Tri-State Water Treatment, Inc. v. Bauer, 

845 F.3d 350 (7th Cir. 2017) ...................................................................................................... 9

United States v. Blankenship, 

382 F.3d 1110 (11th Cir. 2004) .................................................................................................. 7

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United States v. Mead Corp., 

533 U.S. 218 (2001).................................................................................................................. 11

United States v. Wells Fargo Bank, 

485 U.S. 351 (1988).................................................................................................................. 15

Walgreen Co. v. Hood, 

275 F.3d 475 (5th Cir. 2001) .................................................................................................... 18

Westside Mothers v. Olszewski, 

454 F.3d 532 (6th Cir. 2006) .................................................................................................... 18

Wyo. Outdoor Council v. United States Forest Serv., 

165 F.3d 43 (D.C.Cir.1999)................................................................................................ 11–12

Constitutional Amendment

U.S. CONST. amend. XI........................................................................................................... 23–24

Statutes

5 U.S.C. § 553(c) .................................................................................................................... 12 n.6

28 U.S.C. § 157(d).................................................................................................................. 11 n.5

42 U.S.C. § 1395ggg(b)(1)(B)(viii)(II)................................................................................... 10 n.5

42 U.S.C. § 1396a(a)(8)........................................................................................ 21, 22 & n.13, 23

42 U.S.C. § 1396a(a)(13).............................................................................................................. 19

42 U.S.C. § 1396a(a)(13)(A) ........................................................................................................ 22

42 U.S.C. § 1396a(a)(30)(A) ........................................................................................................ 18

42 U.S.C. § 1396a(a)(37)....................................................................................................... passim

42 U.S.C. § 1396a(bb)(5).............................................................................................................. 21

42 U.S.C. § 1396a(a)(53)(A) .................................................................................................. 11 n.5

42 U.S.C. § 1396b(g)(2) ......................................................................................................... 10 n.5

42 U.S.C. § 1396b(m)..................................................................................................................... 5

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42 U.S.C. § 1396b(m)(2)(A)(xii).......................................................................................... 21 n.12

42 U.S.C. § 1396c......................................................................................................................... 16

42 U.S.C. § 1396d(t)(3) .................................................................................................................. 5

42 U.S.C. § 1396n(b)(4) ............................................................................................... 9, 13, 20–21

42 U.S.C. § 1396-r(i)(1)(A).................................................................................................... 11 n.5

42 U.S.C. § 1396r-8(c)(4)(C)(ii)............................................................................................. 11 n.5

42 U.S.C. § 1396u-2 ..................................................................................................................... 17

42 U.S.C. § 1396u-2(a)(1)(A)(ii).............................................................................................. 6 n.3

42 U.S.C. § 1396u-2(e)............................................................................................................ 7, 16

42 U.S.C. § 1396u-2(e)(4)(A)..................................................................................................... 5, 7

42 U.S.C. § 1396u-2(e)(4)(B)....................................................................................................... 17

42 U.S.C. § 1396u-2(f) .......................................................................................................... passim

42 U.S.C. § 139u-2(h)(2)(B)......................................................................................................... 12

42 U.S.C. § 1983.................................................................................................................... passim

Pub. L. 97-35................................................................................................................................... 9

Pub. L. 105-33..................................................................................................................... 8, 10 n.5

Public Law No. 111-5................................................................................................................... 12

5 ILCS 5/5-30.1(g).......................................................................................................................... 2

Rules

Fed. R. Bankr. P. 8018.................................................................................................................... 8

Fed. R. Civ. P. 23(c) ............................................................................................................... 11 n.5

Fed. R. Civ. P. 24(a) ............................................................................................................... 10 n.5

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Fed. R. Civ. P. 24(b) ............................................................................................................... 10 n.5

Regulations

42 C.F.R. § 430.35........................................................................................................................ 16

42 C.F.R. § 438.14(b)(2)(iii)......................................................................... 11 n.5, 12–13, 19 n.10

42 C.F.R. § 438.60.................................................................................................................. 16–17

42 C.F.R. § 438.206(a)............................................................................................................ 11 n.5

42 C.F.R. § 438.608(a)(4)......................................................................................................... 6 n.3

42 C.F.R. § 438.66(a)...................................................................................................................... 7

42 C.F.R. § 438.66(b) ..................................................................................................................... 7

42 C.F.R. § 438.708.................................................................................................................. 7, 16

42 C.F.R. § 438.710.................................................................................................................. 7, 16

42 C.F.R. § 447.45.................................................................................................................. 12–13

42 C.F.R. § 447.45(d) ............................................................................................................... 3, 10

42 C.F.R. § 447.45(d)(2)..................................................................................................... 2, 11, 13

42 C.F.R. § 447.45(d)(3)..................................................................................................... 2, 11, 13

42 C.F.R. § 447.45(d)(4)........................................................................................................... 3 n.2

42 C.F.R. § 447.46.......................................................................................... 2, 11, 12–13, 22 n.13

42 C.F.R. § 447.46(c).................................................................................................................... 11

67 Fed. Reg. 40989 ......................................................................................................................... 9

Other Authorities

3 Oxford English Dictionary 773 (2d ed. 1989) ............................................................................. 8

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Introduction and Summary of Argument

Plaintiff has abandoned any claim under 42 U.S.C. § 1396a(a)(37). Instead, it now bases 

its prompt-payment claim against the Department almost exclusively on 42 U.S.C. § 1396u-2(f), 

which it says obliges state Medicaid agencies, like the Department, not just to include in their 

contracts with MCOs the requirement that the MCOs pay Medicaid providers’ claims in 

accordance with a certain schedule, but to affirmatively ensure that MCOs pay claims by all 

Medicaid providers, including hospitals, under a 30-day/90-day schedule (with 90% of clean 

claims paid within 30 days, and 99% paid within 90 days). Plaintiff is wrong in three critical 

respects. First, while providers have contractual rights against MCOs that they may enforce by 

traditional means, nothing in the text of the Medicaid Act imposes on state Medicaid agencies an 

additional statutory duty to ensure MCOs always comply with their contractual payment 

obligations to Medicaid providers, thereby effectively making state Medicaid agencies 

guarantors of the MCOs’ flawless performance of their contractual obligations to providers. 

That alleged duty is fundamentally inconsistent with the multi-tier, contract-based structure of 

managed care programs established by Medicaid law, under which providers have contracts and 

contractual rights with MCOs, not state Medicaid agencies. Second, the default schedule for 

MCO payments to providers prescribed by section 1396u-2(f), which MCOs and providers are 

expressly allowed to modify in the contracts between them, adopts the 30-day/90-day schedule 

only for payments to “practitioners” such as doctors, not “other providers” such as nursing 

homes and hospitals. Third, section 1396u-2(f) does not give providers individual rights against 

state Medicaid agencies that are enforceable under section 1983. And finally, Plaintiff’s claim 

against the Department fails for the additional reason that the Eleventh Amendment bars the 

relief it seeks.

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Argument

I. Plaintiff Has No Right to Require the Department to Force MCOs to Pay Hospitals 

on a 30-Day/90-Day Schedule.

Plaintiff contends that a state Medicaid agency “violat[es] federal law by [not] ensuring 

compliance by the MCOs with the requirement that claims be paid promptly.” (Dkt. 68 at 8.) 

Thus, according to Plaintiff, “[w]hen a state contracts with MCOs,” it must “ensure that MCOs 

pay 90% of claims submitted by a medical provider within 30 days of the MCOs receiving the 

claim, and . . . 99% of claims within 90 days of receipt — the same requirements for prompt 

payment imposed on states that administer Medicaid directly.” (Dkt. 9 at 4–5) (citing 42 U.S.C. 

§§ 1396a(a)(37)(A), 1396u-2(f), 42 C.F.R. §§ 447.45(d)(2), (d)(3), 447.46 and 305 ILCS 5/5-

30.1(g)). But these provisions of the Medicaid Act and regulations on which Plaintiff relies do 

not support this characterization of the law, and in fact firmly refute it.

1

A. Section 1396a(a)(37) and Section 447.45

Plaintiff’s complaint relied heavily on 42 U.S.C. § 1396a(a)(37), which applies to direct 

state payments to Medicaid providers under a fee-for-service model. (Dkt. 1 at ¶¶ 27–28, 79–

87.) Section 1396a(a)(37) states that a State’s Medicaid plan must “provide for claims payment 

procedures which . . . ensure” payment, on the 30-day/90-day schedule that Plaintiff invokes, 

“for services covered under the plan and furnished by health care practitioners through 

individual or group practices or through shared health facilities.” 42 U.S.C. § 1396a(a)(37)

(emphasis added). But Plaintiff’s response to the Department’s motion to dismiss does not 

dispute, or even mention, the Seventh Circuit’s holding in Illinois Council on Long Term Care v. 

 

1

 Although Plaintiff also complains about the Department’s supposed failure to require MCOs to provide 

more “transparent” information when they deny or pay claims (Dkt. 1 at ¶¶ 55–65), Plaintiff does not 

allege that the Department has a duty under federal law to do so, only that “minimum transparency” is an 

appropriate “remedy” for its prompt payment claims. (Dkt. 26 at 20, n.23.) The Department disputes 

that, but the insufficiency of these claims thus eliminates the need to address this issue.

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Bradley, 957 F.2d 305, 306, 308–10 (7th Cir. 1992), which held that this schedule in section 

1396a(a)(37) applies only to “practitioners” (e.g., doctors) in individual or group practices or 

shared health facilities, not “other providers,” such as nursing homes and hospitals. Thus, 

Plaintiff has abandoned any claim under section 1396a(a)(37). See Sommerfield v. City of 

Chicago, 252 F.R.D. 407, 419 (N.D. Ill. 2008) (“[F]ailure to properly develop an argument with 

citation to relevant legal authority and to the record constitutes a forfeiture of the argument.”) 

For similar reasons, Plaintiff’s prompt-payment claim finds no support in the associated 

regulation, section 447.45(d), which governs payments by state Medicaid agencies under a 

traditional fee-for-service arrangement and, in subsections (d)(2) and (d)(3), which track section 

1396a(a)(37)’s 30-day/90-day payment schedule for only “practitioners” in an individual or 

group practice or who practice in a shared health facility. 42 C.F.R. § 447.45(d).2

B. Section 1396u-2(f) and Section 447.46

As noted, Plaintiff now rests its claim against the Department in this action almost 

entirely on section 1396u-2(f) of the Medicaid Act, 42 U.S.C. § 1396u-2(f), which controls a 

state Medicaid plan’s managed care provisions governing MCO payments to providers. But 

section 1396u-2(f) does none of the things that Plaintiff attributes to it.

1. A State’s Only Duty under Section 1396u-2(f) Is to Include in Its 

Contracts With MCOs a Default Schedule for MCO Payments to 

Medicaid Providers.

First, section 1396u-2(f) does not impose on state Medicaid agencies the duty that 

Plaintiff attributes to it — to “ensure” that MCOs pay all providers in accordance with the 30-

 

2

 Plaintiff posits that its complaint also asserts a right to payment within 12 months under section 

447.45(d)(4), which sets that deadline for direct state Medicaid agency payments of “all other claims,” 

and applies to non-practitioner providers such as nursing homes and hospitals (Dkt. 26 at 20), despite 

Illinois Council on Long Term Care’s holding to the contrary, 957 F.2d at 308, 310. But the Court need 

not decide whether Plaintiff’s complaint does so because, in any event, this regulation cannot create 

enforceable rights under section 1983. See (Dkt. 24 at 21).

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day/90-day schedule Plaintiff invokes. This issue is governed by the principle that statutes must 

be interpreted according to the ordinary meaning of their plain language, New Prime, Inc. v. 

Oliveira, 139 S. Ct. 532, 539 (2019); Intel Corp. Inv. Policy Comm. v. Sulyma, 140 S. Ct. 768, 

776 (2020), and that courts are not free to supplement what Congress enacted based on their 

views about what would be good policy, Little Sisters of the Poor Saints Peter & Paul Home v. 

Pennsylvania, 140 S. Ct. 2367, 2381 (2020); Bostock v. Clayton Cty., Georgia, 140 S. Ct. 1731, 

1738, 1753 (2020); Gadelhak v. AT&T Servs., Inc., 950 F.3d 458, 466 (7th Cir. 2020); Greyer v. 

Ill. Dep’t of Corr., 933 F.3d 871, 879 (7th Cir. 2019) (“[I]t is not a judge’s job to add to or 

otherwise re-mold statutory text to try to meet a statute’s perceived policy objectives.”) (citations 

and internal quotation marks omitted); GE Betz, Inc. v. Zee Co., 718 F.3d 615, 624–25 (7th Cir. 

2013). And here, the straightforward meaning of section 1396u-2(f)’s language refutes

Plaintiff’s interpretation of it.

In contrast with section 1396a(a)(37), which expressly requires the agencies to adopt 

procedures to “ensure” payments under a specified schedule, section 1396u-2(f) does not require 

state Medicaid agencies to “ensure” payments to providers on any schedule. Instead, in keeping 

with the Medicaid Act’s framework for managed care programs, in which MCOs enter into 

separate contracts with state Medicaid agencies and with Medicaid providers, the sole obligation

that section 1396u-2(f) imposes on state Medicaid agencies is to “provide” in their “contract . . . 

with [the MCO]” that the MCO pay providers “on a timely basis consistent with the claims 

payment procedures described in section 1396a(a)(37)(A),” subject to the MCO’s and provider’s 

right to agree to a different schedule. 42 U.S.C. § 1396u-2(f). But Plaintiff does not allege that 

the Department failed to meet that requirement here. Nor could it, as Plaintiff does not dispute 

that the Department included the provision required by section 1396u-2(f) in its contracts with 

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the MCOs. And nothing in the text of section 1396u-2(f) imposes on state Medicaid agencies an 

additional implicit duty to ensure strict performance by MCOs of their payment obligations to 

providers, so that an MCO never breaches those obligations. Nor is the Court at liberty to add 

such a duty to the statute that Congress enacted just because doing so might be good policy 

(which the Department disputes it would be). See Bostock, 140 S. Ct. at 1738, 1753; Gadelhak, 

950 F.3d at 466; Greyer, 933 F.3d at 879; GE Betz, 718 F.3d at 624–25. 

In addition, absent clear language to the contrary, a State’s power to enforce its rights 

against an MCO, which the Medicaid Act expressly acknowledges, involves a matter within the 

State’s discretion, not subject to private or judicial control. See 42 U.S.C. § 1396u-2(e)(4)(A) 

(“In the case of a managed care entity which has failed to meet the requirements of this part or a 

contract under section 1396b(m) or 1396d(t)(3) of this title, the State shall have the authority to 

terminate such contract . . . .”) (emphasis added). As the Supreme Court explained in Heckler v. 

Chaney, 470 U.S. 821, 831 (1985), “an agency’s decision not to prosecute or enforce, whether 

through civil or criminal process, is a decision generally committed to an agency’s absolute 

discretion.” And nothing in section 1396u-2(f) suggests that Congress intended to eliminate that 

discretion in connection with the MCOs’ contractual obligations to pay providers under the 

default schedule section 1396u-2(f) prescribes, or any alternate schedule agreed to by an MCO 

and an individual provider. 

Plaintiff cannot fairly contend, moreover, that reading such an implied duty into section 

1396u-2(f) is necessary to prevent frustration of Congress’s objectives in enacting it. Under the 

statutory scheme that Congress established for managed care programs pursuant to a state plan, 

where MCOs have separate contracts with state Medicaid agencies and with medical service 

providers, the providers may enforce their right to timely payment directly under their contracts 

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6

with the MCOs — either under the default payment schedule specified in section 1396u-2(f), or 

under the alternate payment schedule specifically agreed to by the MCO and provider.3 No need

exists, therefore, to supplement what section 1396u-2(f) does say with something it does not say

to fulfill Congress’s goal of enabling Medicaid providers to receive timely payment. See Jama

v. Immigration & Customs Enf’t, 543 U.S. 335, 341 (2005) (“We do not lightly assume that 

Congress has omitted from its adopted text requirements that it nonetheless intends to apply, and 

our reluctance is even greater when Congress has shown elsewhere in the same statute that it 

knows how to make such a requirement manifest.”).

Plaintiff’s strained reading of section 1396u-2(f) also conflicts with the Medicaid Act’s 

enumeration of specific rights and obligations of state Medicaid agencies vis-à-vis MCOs, such 

as monitoring the MCOs’ performance of their duties under their contracts with the agency, and 

 

3

 The multi-tier structure of managed care programs under a state Medicaid plan, based on contract 

rights under separate contracts between state Medicaid agencies and MCOs and between MCOs and 

providers, is widely recognized in the Medicaid Act, regulations, and case law. See, e.g., 42 U.S.C. 

§ 1396u-2(a)(1)(A)(ii) (referring to “provider agreements with managed care entities”); 42 C.F.R. 

§ 438.608(a)(4) (providing that a “State, through its contract with the MCO,” shall require the MCO to 

notify the State about various events, “including the termination of the provider agreement with the 

MCO”); Cmty. Health Care Ass’n of New York v. Shah, 770 F.3d 129, 137 (2d Cir. 2014) (explaining that 

under managed care system, “the state enters into a contract with an MCO . . . [and] [t]he MCO, in turn, 

contracts with a health service provider . . . to provide medical services to its enrollees”); see also 

Clayworth v. Bonta, 295 F. Supp. 2d 1110, 1124–26 (E.D. Cal. 2003) (describing contract-based rights of 

MCOs and providers under waiver-based managed care program under 42 U.S.C. § 1396n(b)(4)), rev’d in 

part on other grounds, 140 F. App’x 677 (9th Cir. 2005); G. v. Hawaii, Dep’t of Human Servs., 703 F. 

Supp. 2d 1078, 1099 (D. Haw. 2010) (“[I]f the MCOs do not comply with the terms of the QExA 

Contracts, the Plaintiffs’ remedy is a breach of contract action in state court.”). And under this structure,

courts have often addressed state-law breach of contract claims by Medicaid providers against MCOs. 

See, e.g., C.S. Sewell, M.D. P.C. v. Amerigroup Tennessee, Inc., No. 2:17-CV-00062, 2018 WL 6591429, 

at *5–6, 9 (M.D. Tenn. Dec. 14, 2018) (dismissing Medicaid provider’s section 1983 claim against MCO 

asserting violation of Medicaid Act and regulations, but denying motion to dismiss claim for declaratory 

relief on provider’s state-law “claims for breach of contract . . . and violation of Tennessee’s Prompt

Payment Act”); Bourbon Cmty. Hosp., LLC v. Coventry Health & Life Ins. Co., No. 3:15-CV-00455-

JHM, 2016 WL 51269, at *7 (W.D. Ky. Jan. 4, 2016) (declining to exercise supplemental jurisdiction, 

after dismissing federal claims by Medicaid provider against MCO, over Medicaid provider’s “state law 

claims for breach of contract [and] breach of Kentucky’s prompt pay laws”); Baylor Univ. Med. Ctr. v. 

Ark. Blue Cross Blue Shield, 331 F. Supp. 2d 502, 505, 512 (N.D. Tex. 2004) (remanding to state court 

Medicaid provider’s claims against MCO for breach of contract and violation of state insurance code’s 

prompt payment provisions).

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terminating those contracts in specified circumstances, 42 U.S.C. § 1396u-2(e); 42 C.F.R. 

§§ 438.66(a), (b), 438.708, 438.710. This detailed statutory and regulatory monitoring and 

enforcement regime excludes implying the additional duty Plaintiff proposes, under which state 

Medicaid agencies must never let an MCO breach its contractual obligations to pay providers on 

a timely basis. As a general matter of contract law, a party need not always insist on the other 

party’s strict performance or enforce its rights in the event of a breach, including for a 

performance deadline. United States v. Blankenship, 382 F.3d 1110, 1134 (11th Cir. 2004); 

Bratton v. Roadway Package Sys., Inc., 77 F.3d 168, 175 (7th Cir. 1996); Commercial 

Contractors, Inc. v. United States Fid. & Guar. Co., 524 F.2d 944, 954 (5th Cir. 1975); Peterson 

Steels v. Seidmon, 188 F.2d 193, 195–96 (7th Cir. 1951). And nothing in the Medicaid Act and 

regulations suggests that this principle is inapplicable to a state Medicaid agency’s rights under 

its contract with an MCO. To the contrary, the Medicaid Act provides that, if an MCO fails to 

fulfill its obligations, a State “shall have the authority to terminate [an MCO’s] contract” in 

specified circumstances, 42 U.S.C. § 1396u-2(e)(4)(A) (emphasis added), contradicting the 

notion that state Medicaid agencies have an affirmative duty to prevent an MCO from ever 

violating those obligations, see Prince George’s Hosp. Ctr. v. Advantage Healthplan Inc., 985 F. 

Supp. 2d 38, 50 (D.D.C. 2013) (“The fact that the Medicaid statute expressly authorizes such 

sanctions [against MCOs] further underscores that it was Congress’s intent for states 

themselves—rather than private third parties—to police compliance with the requirements of the 

Medicaid program.”); see also Heckler, 470 U.S. at 831 (“An agency generally cannot act against

each technical violation of the statute it is charged with enforcing [because, among other things, 

it] must not only assess whether a violation has occurred, but whether agency resources are best 

spent on this violation or another[.]”).

4

 

4

 It is possible that providers, as intended third-party beneficiaries, may enforce certain MCO obligations 

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2. Section 1396u-2(f) Does Not Require that MCOs Pay Hospitals on a 

30-day/90-day Schedule.

Second, the default schedule for MCO payments to providers in section 1396u-2(f) does 

not require MCOs to pay hospitals, like Plaintiff, under the 30-day/90-day schedule that it 

claims. Section 1396u-2(f), added to the Medicaid Act in 1997 by Public Law No. 105-33, § 

4708(c), provides that a state Medicaid agency’s contract with an MCO must require it to pay 

Medicaid providers for covered services “on a timely basis consistent with the claims payment 

procedures described in section 1396a(a)(37)(A), unless the health care provider and the [MCO]

agree to an alternate payment schedule.” 42 U.S.C. § 1396u-2(f) (emphasis added). And, as 

explained in Illinois Council on Long Term Care, the 30-day/90-day schedule specified in 

section 1396a(a)(37) applies only to practitioners, not other providers like hospitals. 957 F.2d at 

306, 308–10. Under section 1396u-2(f)’s plain meaning, therefore, an MCO’s contractual 

payment schedule is “consistent with” section 1396a(a)(37) as long as it is “compatible” with 

that section — i.e., by requiring compliance with the 30-day/90-day schedule for payments to 

practitioners in individual or group practices or shared health facilities, even if it does not follow 

that same schedule for other providers. See Envtl. Def. Fund, Inc. v. E.P.A., 82 F.3d 451, 457 

(D.C. Cir. 1996) (“‘consistent’ means ‘agreeing or according in substance or form,’ that is 

‘congruous’ or ‘compatible’”) (quoting 3 Oxford English Dictionary 773 (2d ed. 1989), 

amended, 92 F.3d 1209 (D.C. Cir. 1996); In re Chicago, R. I. & P. Ry. Co., 168 F.2d 587, 594 

(7th Cir. 1948) (“‘Consistent with the public interest’ is the same as ‘compatible with the public 

interest.’); see also In re Dorner, 343 F.3d 910, 913 (7th Cir. 2003) (under Fed. R. Bankr. P. 

 

under their contracts with state Medicaid agencies. Compare Prince George’s Hosp. Ctr., 985 F. Supp. 

2d at 43–51 (holding that provider did not have third-party rights) and Medevac MidAtlantic, LLC v. 

Keystone Mercy Health Plan, 817 F. Supp. 2d 515, 528–32 (E.D. Pa. 2011) (same), with G. v. Hawaii, 

703 F. Supp. 2d at 1099 (leaving open question whether third-party rights exist). But this Court need not 

decide that issue, which does not change the analysis for Plaintiff’s claims against the Department.

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8018(a)(1), which states that local bankruptcy rules must be “consistent with” national rules, “[a]

local rule that countermands a national rule is not consistent with it”). And because, when 

Congress enacted section 1396u-2(f), it was presumed to be familiar with the Seventh Circuit’s 

interpretation of section 1396a(a)(37) in Illinois Council on Long Term Care, see GuerreroLasprilla v. Barr, 140 S. Ct. 1062, 1072 (2020); Tri-State Water Treatment, Inc. v. Bauer, 845 

F.3d 350, 355 (7th Cir. 2017), if Congress wanted to require MCOs to pay all providers

“according to” the 30-day/90-day schedule contained in section 1396a(a)(37), it easily could 

have, and would have, said so. Thus, Plaintiff’s assertion that “[a]n MCO could not pay a 

‘provider’ ‘consistent with’ Section (37)(A)’s ‘procedures’ other than by applying the 30/90-day 

schedule” (Dkt 26 at 4) is wrong.

The point is reinforced by the materially different language that Congress used in section 

1396n(b)(4), 42 U.S.C. § 1396n(b)(4), which applies to managed care programs under a CMS 

“waiver” of a state plan’s requirements and long predated the separate managed care program 

under a CMS-approved state plan authorized by section 1396u-2. See 67 Fed. Reg. 40989–90 

(describing waiver-based managed care programs authorized in 1981 by Pub. L. 97–35 § 

2175(b)). Significantly, section 1396n(b)(4), unlike later-enacted section 1396u-2(f), allows 

such waivers if, among other things, “providers . . . are paid on a timely basis in the same 

manner as health care practitioners must be paid under section 1396a(a)(37)(A).” 42 U.S.C. 

§ 1396n(b)(4) (emphasis added). This provision, enacted before section 1396u-2(f), shows that 

when Congress intends all “providers” to be paid under the 30-day/90-day schedule for 

“practitioners,” it says precisely that — which it did not do in section 1396u-2(f). See Rotkiske 

v. Klemm, 140 S. Ct. 355, 361 (2019); Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1626 (2018); 

see also Jama, 543 U.S. at 341; Cabinet for Human Res. v. N. Ky. Welfare Rights Ass’n, 954 

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F.2d 1179, 1184 (6th Cir. 1992) (“Congress . . . knows how to impose binding obligations on a 

state when it wishes to do so”).

Nor does section 1396u-2(f)’s use of the term “provider,” as opposed to the term 

“practitioner,” support Plaintiff’s interpretation of the section, as it maintains. (Dkt. 26 at 3–4.) 

Section 1396u-2(f) requires that, unless an MCO and provider agree otherwise, all “providers” 

be paid on a “timely basis,” and that this be “consistent with” section 1396a(a)(37), which 

prescribes a specific schedule — the 30-day/90-day schedule — only for “practitioners.” Thus, 

the general requirement that all “providers” be paid on a “timely basis” does not require that all

providers be paid under the schedule applicable to “practitioners” set forth in section 

1396a(a)(37). Indeed, this very distinction is reflected in section 447.45(d) of CMS’s 

regulations, which predate the enactment of section 1396u-2(f) and, establishing procedures for 

the “[t]imely processing of claims,” separately prescribes the 30-day/90-day schedule for 

specified “practitioners,” and a 12-month schedule for “all other claims,” including claims by all 

other providers. 42 C.F.R. § 447.45(d); see also Illinois Council on Long Term Care, 957 F.2d at 

306, 310. Thus, “timely” payment is not limited to payment under the 30-day/90-day schedule. 

For the same reason, there is no merit to Plaintiff’s argument that “[i]f Section u-2(f)

imposes no payment schedule for ‘providers,’” the Department’s interpretation renders 

“superfluous” its exception allowing an MCO and a provider to agree to a separate payment 

schedule. (Dkt. 26 at 4–5.) Section 1396u-2(f), like section 447.45, does impose a payment 

schedule for “providers” by requiring that they be paid “on a timely basis.” It is just not the 

same schedule for specified practitioners.5

 

5

 It is fairly common, moreover, for statutes, court rules, and regulations, including Medicaid statutes and 

regulations (including the amendment to the Medicaid Act that added section 1396u-2(f)), to require that 

certain actions be done on a “timely” basis without prescribing an exact period of time to do them. See, 

e.g., 42 U.S.C. § 1395ggg (b)(1)(B)(viii)(II), enacted by Pub. L. 105-33, § 4015, and since repealed; 42 

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Even if there were any doubt about section 1396u-2(f)’s meaning, it is resolved by 

CMS’s regulation implementing it, section 447.46, which states that, subject to an alternate 

schedule agreed to between an MCO and a provider, “[a] contract with an MCO must provide 

that the organization will meet the requirements of § 447.45(d)(2) and (d)(3).” 42 C.F.R. 

§ 447.46. And, as explained in Illinois Council on Long Term Care, 957 F.2d at 306, these 

specified provisions (§§ 447.45(d)(2) and (d)(3)), like section 1396a(a)(37), explicitly apply only 

to “practitioners,” not “other providers,” whose payments are instead governed by the 12-month 

payment deadline contained in § 447.45(d)(4). Accordingly, even if the text of section 1396u2(f) were not clear that its 30-day/90-day schedule applies only to practitioners, not hospitals, 

this Court should defer to CMS’s reasonable interpretation of the statutory provision set forth in 

its regulation. See, e.g., Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2124 (2016); 

United States v. Mead Corp., 533 U.S. 218, 229–30 (2001). 

Downplaying the actual text of section 447.46(c), Plaintiff quotes parts of the rulemaking 

commentary, including the preamble, for adoption of this regulation. (Dkt. 26 at 6–7). But the 

actual text of section 447.46(c) as formally adopted — which makes clear that section 

1396a(a)(37)’s 30-day/90-day schedule incorporated by section 1396u-2(f) applies only to 

 

U.S.C. §1396b(g)(2) (requiring Secretary of HHS to conduct “timely sample onsite surveys” of 

institutions in which Medicaid recipients receive care); Fed. R. Civ. P. 24(a), (b) (requiring that request 

to intervene in federal proceedings be made “[o]n timely motion”); 28 U.S.C. § 157(d) (requiring that 

party seeking to withdraw a case from the bankruptcy court must proceed “on timely motion”); Fed. R. 

Civ. P. 23(c) (requiring court to determine whether to certify action as class action “at an early practicable 

time”). See also 42 U.S.C. § 1396a(a)(53)(A) (requiring that State Medicaid plan provide for notifying in 

a “timely manner” pregnant, breastfeeding, and postpartum women (and children under 5) who are 

eligible for benefits under special supplemental nutrition program); 42 U.S.C. § 1396r(i)(1)(A) (requiring 

Secretary of HHS to update “on a timely basis” information related to nursing homes); 42 U.S.C. § 1396r8(c)(4)(C)(ii) (requiring Secretary of HHS to make publicly available “on a timely basis” information 

submitted to Congress relating to covered outpatient drugs that have been misclassified); 42 C.F.R. 

438.14(b)(2)(iii) (requiring State contracts with MCOs (among others) which enroll Native Americans to 

demonstrate sufficient “Indian health care providers participating in provider network to ensure “timely 

access” to services); 42 C.F.R. 438.206(a) (requiring each State to ensure that all services under State plan 

be made available to enrollees of MCO (among others) in a “timely manner”).

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practitioners, not hospitals — controls over language in the preamble for its adoption. See Wyo. 

Outdoor Council v. United States Forest Serv., 165 F.3d 43, 53 (D.C.Cir.1999) (“language in the 

preamble of a regulation is not controlling over the language of the regulation itself”). And if 

section 1396u-2(f) were ambiguous, deference must be given to that text of the regulation, not 

the regulation’s preamble. See Saint Francis Med. Ctr. v. Azar, 894 F.3d 290, 296–97 (D.C. Cir. 

2018); Martin v. Soc. Sec. Admin., 903 F.3d 1154, 1162 (11th Cir. 2018); see also In re Zyprexa 

Prod. Liab. Litig., 489 F. Supp. 2d 230, 273 (E.D.N.Y. 2007).

6

Plaintiff also misplaces reliance on section 1396u-2(h)(2)(B), which, for MCOs that serve 

certain Native Americans, mandates that contracts with them require them “[t]o agree to make 

prompt payment (consistent with rule for prompt payment of providers under section 1396u-2(f) 

of this title) to Indian health care providers . . . .” 42 U.S.C. § 1396u-2(h)(2)(B). According to 

Plaintiff, this provision, adopted 12 years after section 1396u-2(f) (in 2009, by Pub. L. 111-5,

§ 5006), reflects an understanding that section 1396u-2(f)’s 30-day/90-day schedule applies to all 

“providers.” (Dkt. 26 at 5.) Even if a later Congress’s understanding of an enactment more than 

a decade earlier had any weight, Plaintiff is doubly wrong. First, this provision just requires 

payments “consistent with” section 1396u-2(f)’s payment rules for providers, which, as 

explained above, does not require that all providers be paid under the 30-day/90-day schedule 

that section 1396a(a)(37) mandates for specified practitioners. Second, CMS’s regulation 

implementing this provision, unlike its regulation for section 1396u-2(f) (section 447.46), 

explicitly states that a State’s contract with an MCO covering such services must require the 

MCO to “[m]ake payment to all [Indian health care providers] in its network in a timely manner 

 

6

 Plaintiff also reads too much into the catchall term “provider” in the preamble to the final adoption of 

section 447.46, which simply implements the Administrative Procedure Act’s requirement of a “concise 

general statement of [the rule’s] basis and purpose,” 5 U.S.C. § 553(c), without distinguishing, as the 

regulation itself does, between practitioners and other providers.

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as required for payments to practitioners in individual or group practices under 42 CFR 447.45 

and 447.46.” 42 C.F.R. § 438.14(b)(2)(iii). This shows that when a statute authorizes CMS to 

do so, and it intends to do so, it knows exactly how to require an MCO to pay all providers under 

the 30-day/90-day schedule applicable to practitioners under sections 1396a(a)(37), 447.45, and 

447.46.

Finally, none of the district court decisions on which Plaintiff relies justifies a different 

understanding of what section 1396u-2(f) means regarding the default schedule for MCOs to pay 

hospitals. In Medevac MidAtlantic, LLC v. Keystone Mercy Health Plan, 817 F. Supp. 2d 515, 

526–27 & nn.82–85 (E.D. Pa. 2011), the district court, after holding that section 1396u-2(f) does 

not create rights enforceable under section 1983, suggested in dicta that section 1396u-2(f), like 

section 1396n(b)(4), extends section 1396a(a)(37)’s payment schedule for specified practitioners 

to all Medicaid providers, including hospitals. But the court’s conclusory observations about 

section 1396u-2(f) did not examine the meaning of its text or note the material differences 

between that text and the language of section 1396n(b)(4). That dicta therefore deserves no 

weight here.

In Appalachian Regional Healthcare v. Coventry Health & Life Ins. Co., 970 F. Supp. 2d 

687 (E.D. Ky. 2013), the court’s comments about the meaning of section 1396u-2(f) were 

irrelevant to the case and reflected the court’s fundamental misunderstanding of the nature of the 

State’s managed care program, which was operated under a state plan “waiver” pursuant to 

section 1396n(b)(4), not a plan provision governed by section 1396u-2(f), id. at 699–700; see 

also Appalachian Reg’l Healthcare v. Coventry Health & Life Ins. Co., No. 5:12-CV-114-KSF, 

2012 WL 2359439, at *1 (E.D. Ky. June 20, 2012) (explaining that State operated managed care 

program under CMS waiver). Compounding this error in its analysis, the court simply assumed

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that section 1396u-2(f) required the state Medicaid agency to do what the plaintiff providers 

claimed, without any discussion or meaningful examination of the statute’s text to determine 

whether it makes state Medicaid agencies responsible for MCOs’ payment obligations to 

Medicaid providers, or what payment schedule it adopts for hospitals, as opposed to doctors and 

other Medicaid practitioners. Thus, the court’s statements about the meaning of section 1396u2(f) have no persuasive value. The same is true for the district court’s decision in National 

Medical Care, Inc. v. Rullan, No. CIV. 04-1812 (HL), 2005 WL 2878094 (D.P.R. Nov. 1, 2005), 

which Appalachian Regional Healthcare cited for its section 1983 ruling, 970 F. Supp. 2d at 

698. In National Medical Care, the only issue decided by the court was whether sections 

1396a(a)(37) and 1396u-2(f) create rights that a Medicaid provider can enforce under section 

1983. 2005 WL 2878094, at *7-8. The court treated the two as equivalent without examining, 

or even mentioning, their different language, id. at *7–8 & n.18, and the case says nothing, or 

nothing meaningful, about the content of section 1396u-2(f) in terms of what duties it imposes on 

a state Medicaid agency, or what payment schedule it presumptively prescribes for MCOs.7

3. Plaintiff Cannot Enforce Section 1396u-2(f) under Section 1983.

Third, Plaintiff has no claim under section 1983 because section 1396u-2(f) does not give 

providers an “unambiguously conferred right,” using language that is “unmistakably clear,” to 

have state Medicaid agencies ensure that MCOs unfailingly comply with the payment schedule 

Plaintiff advocates. Gonzaga Univ. v. Doe, 536 U.S. 273, 283, 286 (2002). 

On this issue, the Court must distinguish between section 1396u-2(f) as written by 

Congress and section 1396u-2(f) as rewritten by Plaintiff. As noted above (at 3–7), section

 

7

 That Illinois has adopted, as a matter of state law and policy, a 30-day deadline for all provider 

payments by MCOs (see Dkt. 24 at 7) does not mean, as Plaintiff contends, that the Department agrees 

with Plaintiff’s interpretation of Sections 1396a(a)(37) or 1396u-2(f), even if that were relevant to how 

the Court should interpret them.

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1396u-2(f), by its express terms, merely requires state Medicaid agencies to include in their 

contracts with MCOs a default schedule for the MCOs’ payments to Medicaid providers, which 

each provider may renegotiate. Regardless of whether section 1396u-2(f) creates a right 

enforceable under section 1983 to have that default schedule included in the State-MCO contract,

and whether any such right is enforceable by a Medicaid provider, there is no plausible argument 

that section 1396u-2(f) establishes “unambiguously conferred rights” under which States have 

significant additional duties not set forth in the statute’s actual text and, as Plaintiff contends, 

“must ensure that MCOs pay . . . claims submitted by a medical provider” under the 30-day/90-

day schedule Plaintiff advocates (Dkt. 9 at 4–5).

8

 Under the test established in Blessing v. 

Freestone, 520 U.S. 329 (1997), and refined in Gonzaga, Plaintiff’s claimed right to enforce this 

version of section 1396u-2(f) under section 1983 fails badly.

In particular, section 1396u-2(f), as Plaintiff interprets it, cannot be said to establish an 

“unambiguously conferred right,” BT Bourbonnais Care, LLC v. Norwood, 866 F.3d 815, 820 

(7th Cir. 2017) (quoting Gonzaga, 536 U.S. at 283), grounded in statutory text which 

“‘unambiguously impose[s] a binding obligation’” that does not “leave any room for discretion 

on the part of the state,” id. at 822 (quoting Blessing v. Freestone, 520 U.S. 329, 341 (1997)),

and “is not so vague and amorphous that its enforcement would strain judicial competence,” id.

at 821. Because they are not in section 1396u-2(f)’s actual text, neither the “right” that Plaintiff 

claims to have, nor the “obligation” it says the statute imposes on the Department, can plausibly 

be said to be “unambiguous.” See United States v. Wells Fargo Bank, 485 U.S. 351, 354 (1988) 

(“[E]xemptions from taxation are not to be implied; they must be unambiguously proved.”). To 

the contrary, the only unambiguous obligation created by section 1396u-2(f) is the duty of a state 

 

8

 Indeed, it is ironic that Plaintiff accuses the Department of “completely ignoring” the language of 

section 1396u-2(f) (Dkt. 26 at 11), when it is Plaintiff that has done so and attributed to the statute 

obligations it nowhere expresses.

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Medicaid agency to include in its contracts with MCOs a default schedule for their payments to 

Medicaid providers. In sum, even if section 1396u-2(f) could plausibly be read to implicitly 

impose on States a further duty to force MCOs always to conform to that schedule, as Plaintiff 

claims, that further duty cannot possibly be characterized as unambiguous. Similarly, because 

the Medicaid Act explicitly allows a State, in its discretion, to sanction an MCO or even 

terminate its contract for violating its contractual obligations to the State, 42 U.S.C. § 1396u2(e); see also 42 CFR §§ 438.708, 438.710, and further expressly authorizes CMS, in its 

discretion, to withhold funds to a State for its payments to an MCO that materially violates its 

obligations, 42 U.S.C. § 1396c; 42 C.F.R. § 430.35; see Concilio De Salud Integral De Loiza, 

Inc. v. U.S. Dep’t of Health & Human Servs., 538 F. Supp. 2d 139, 148 (D.D.C. 2008) (holding 

that HHS Secretary has discretion, not subject to private control, whether to withhold federal 

funding for a State not in compliance with its plan), it cannot be said that the limited language in 

section 1396u-2(f) on which Plaintiff relies establishes an “unambiguously conferred right” by 

Medicaid providers to have States prevent MCOs from ever failing to comply with the default 

payment schedule to which they must agree in their contracts with States. And the fact that such 

an implied obligation and right would benefit providers fails to satisfy this strict standard. See 

McCready v. White, 417 F.3d 700, 703 (7th Cir. 2005) (“Rights” differ from “broader or vaguer 

‘benefits’ or ‘interests’ that some statutes create.”) (citing Gonzaga, 536 U.S. at 283).

In addition, Plaintiff’s version of section 1396u-2(f) implies a vague and amorphous 

obligation whose enforcement would strain judicial competence. Indeed, apart from describing 

the result to be achieved, it is telling that Plaintiff has never explained the means by which the 

Department supposedly could fulfill this obligation, or how a court would enforce it. Federal 

law prohibits a State (with minor exceptions not relevant here) from paying Medicaid providers 

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in a managed care program for medical services to persons enrolled with an MCO. 42 C.F.R. 

§ 438.60. And, according to Plaintiff, it is not enough for a Medicaid provider to be able to 

enforce its contract directly against an MCO, under state law, if an MCO breaches the contract’s 

payment schedule. Instead, Plaintiff insists, section 1396u-2(f) imposes on state Medicaid 

agencies a duty to prevent such a breach from ever occurring. But that alleged duty would 

require a state Medicaid agency to create a duplicate accounting system for every MCO and 

monitor all of its claim and payment information, including information sufficient to determine 

itself whether provider claims are “clean” (e.g., for services that are medically necessary, with 

any required prior authorization, and correctly coded with all relevant data), how much is owed 

under the provider’s contract, and when it is owed. That is absurd, especially because the 

purpose of a managed care program under section 1396u-2 is to have MCOs assume the day-today functions previously performed by States under a traditional fee-for-service model.9

 And it 

is entirely unclear just how a State could actually prevent an MCO from ever failing to comply 

with the applicable payment schedule for a specific provider, or for all providers generally. That 

is especially true because the Medicaid Act does not allow a State to peremptorily terminate an 

MCO’s contract for noncompliance with its obligations. 42 U.S.C. § 1396u-2(e)(4)(B). For 

similar reasons, it is equally unclear how a court would enforce this supposed obligation. See 

Heckler, 470 U.S. at, 831 (“recognition of the existence of discretion is attributable in no small 

part to the general unsuitability for judicial review of agency decisions to refuse enforcement”). 

Doing so would either require the court itself to become immersed in the minutia of provider 

claim information, or to adopt the unreasonable stance of accepting either the MCO’s or the 

 

9

 Simply monitoring an MCO’s payment aging information for all of the providers in its network 

collectively would not achieve what Plaintiff demands because it would require a State to accept the 

validity of the MCO’s characterization of whether a claim was clean and payable, at what amount, and 

when, and it would fail to account for separately negotiated payment schedules with individual providers, 

which Plaintiff says a State must do. (Dkt. 26 at 14–15.)

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provider’s position on what is payable and when. For this reason as well, the Court should reject 

Plaintiff’s contention that its interpretation of section 1396u-2(f) can be enforced against a State 

under section 1983.

If that were not enough, Medicaid providers are not the intended beneficiaries of section 

1396u-2(f), but rather incidental beneficiaries of Congress’s desire to facilitate the provision of 

medical care to individuals entitled to it — the intended beneficiaries of the Medicaid Act — by 

protecting against the danger that providers would refuse to provide such care. The primary 

purpose of the Medicaid Act is to provide medical assistance to these eligible individuals, and 

statutory provisions that indirectly support that purpose by requiring an adequate network of 

providers, and payments to them, are typically considered to create only incidental benefits for 

providers, not statutory rights that providers may enforce under section 1983. See Armstrong v. 

Exceptional Child Center, Inc., 135 S. Ct. 1378, 1387–88 (2015) (plurality) (“We doubt . . . that 

providers are intended beneficiaries (as opposed to mere incidental beneficiaries) of the 

Medicaid agreement, which was concluded for the benefit of the infirm whom the providers were 

to serve . . . .”); C.S. Sewell, 2018 WL 6591429, at *6 (surveying cases); see also Westside 

Mothers v. Olszewski, 454 F.3d 532, 542–43 (6th Cir. 2006) (“The only reference [in § 

1396a(a)(30)(A)] to Medicaid providers is as indirect beneficiaries ‘enlisted’ as subordinate 

partners in the administration of Medicaid services.”). That reasoning applies to section 1396u2(f). Medevac MidAtlantic, 817 F. Supp. 2d at 530 (“[D]irect payment to providers . . . help[s]

effectuate the parties’ intent to implement a Medicaid managed care program for the benefit of 

eligible Medicaid recipients. Medevac is thus an incidental, not intended, beneficiary.”); see also

Long Term Care Pharmacy All. v. Ferguson, 362 F.3d 50, 57–58 (1st Cir. 2004); Walgreen Co. 

v. Hood, 275 F.3d 475, 478 (5th Cir. 2001); C.S. Sewell, 2018 WL 6591429, at *5–6. Even 

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Plaintiff recognizes that this was Congress’s goal in enacting section 1396a(a)(37), which section 

1396u-2(f) partly incorporates. (Dkt. 26 at 15: “Section 37(A)’s prompt payment rule 

encourages individual doctors to serve Medicaid patients.”).

In addition, the text of section 1396a(a)(37), adopted in part for section 1396u-2(f)’s 

timely payment standard, does not state that its payment benchmarks must be satisfied on a 

provider-by-provider basis, as opposed to being met in the aggregate for all providers in an 

MCO’s network. See 42 U.S.C. §§ 1396a(a)(37) and 1396u-2(f).10 Again, therefore, section 

1396u-2(f) fails to reflect a Congressional intent to create individual rights to the benefit of 

providers.

The Seventh Circuit’s decision in BT Bourbonnais Care, LLC v. Norwood, 866 F.3d 815 

(7th Cir. 2017), on which Plaintiff relies (Dkt. 26 at 12–13), dealt with a statute whose terms are 

plainly distinguishable, and thus it does not support Plaintiff’s position about section 1396u-2(f). 

The statute at issue in BT Bourbonnais Care, section 1396a(a)(13), explicitly requires States to 

“provide . . . for a public process for determination of rates of payment” to certain Medicaid 

providers “under which . . . providers . . . are given a reasonable opportunity for review and 

comment on the proposed rates . . . .” 42 U.S.C. § 1396a(a)(13) (emphasis added). That express 

language, the court held, gives providers a clear procedural right, enforceable under section 

1983, to participate in this public rate-setting process, because they are the directly intended 

 

10

 Section 1396u-2(f)’s allowance for individually agreed payment schedules is not inconsistent with 

having a State generally measure an MCO’s compliance with the section’s default payment schedule on 

an aggregate basis for all of its Medicaid providers, as Plaintiff maintains. Under a managed care 

program, a State cannot efficiently monitor MCO payments to each provider, nor should it do so. And if 

a State believes that an MCO is not meeting the payment schedule in its state contract, an MCO can 

always show that any departure from that schedule results from following different schedules for 

particular providers. Moreover, as 42 C.F.R. § 438.14(b)(2)(iii) shows, requiring payment to all

providers under a specific schedule is readily mandated by suitable language. And the theoretical 

possibility of discriminatory payment delays for some providers, which Plaintiff invokes, is illusory as a 

practical matter because it would require additional claims processing procedures by MCOs, who have no 

incentive to adopt them.

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beneficiaries of the statute, and it does not just set an aggregate plan requirement, but establishes 

an individual procedural right that is not “so vague and amorphous” that enforcing it “would 

strain judicial competence.” 866 F.3d at 821–22. Given these distinct features of section 

1396a(a)(13), BT Bourbonnais Care does not support a similar conclusion for section 1396u2(f). 

Nor do the district courts’ decisions in Appalachian Regional Healthcare and National 

Medical Care support Plaintiff’s position, as it claims.11 As noted above (at 13–14),

Appalachian Regional Healthcare involved a waiver-based managed care program under Section 

1396n(b)(4), 970 F. Supp. 2d at 920, for which provider payments are governed by that section, 

not section 1396u-2(f), making its discussion of section 1396u-2(f) not only irrelevant, but 

inexplicable. See also Appalachian Reg’l Healthcare v. Coventry Health & Life Ins. Co., No. 

5:12-CV-114-KSF, 2012 WL 2359439, at *1 (E.D. Ky. June 20, 2012) (explaining that State 

operated managed care program under CMS waiver). In addition, the court wrongly treated a 

State’s obligations under section 1396a(a)(37) and section 1396u-2(f) as the same, thus failing to 

distinguish between a State’s own payment obligations in a fee-for-service arrangement and its 

distinct obligations under a managed care arrangement, in which payments to providers are made 

by MCOs, and a State’s only express duty under section 1396u-2(f) is to bind MCOs by contract 

to pay providers in a timely manner consistent with section 1396a(a)(37), unless they agree 

otherwise. Indeed, the court, in treating the claimed right against a State under section 1396u-

 

11 Plaintiff largely ignores the other cases, such as Bio-Medical Applications of North Carolina, Inc. v. 

Electronic Data Systems Corp., 412 F. Supp. 2d 549 (E.D. N.C. 2006), and Patients’ Choice Medical 

Center of Humphries County, LLC v. Office of the Governor, No. 3:08-cv-696-WHB-LRA, 2009 WL 

531861 (S.D. Miss. Mar. 3, 2009), holding that section 1396a(a)(37)(A) does not create rights enforceable 

under section 1983. Plaintiff purports to distinguish them by saying that it “is not seeking directly to 

enforce Section 37(A) . . . .” (Dkt. 26 at n.19.) But Plaintiff insists that section 1396u-2(f) creates 

individual rights in providers because it incorporates section 1396a(a)(37), which, unlike section 1396u2(f), addresses payments to certain healthcare practitioners directly by a State itself, not by MCOs.

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2(f) as clear and readily enforced, failed to acknowledge that it is an MCO, not the State, that 

must pay providers, and correspondingly failed to recognize the difficulties in how a State is 

supposed to prevent MCOs from failing to comply with section 1396u-2(f)’s payment schedule, 

and in how a court is supposed to compel a State to do that. 970 F. Supp. 2d at 699. The court in 

National Medical Care similarly treated section 1396u-2(f) as imposing on a State obligations 

that are substantively identical to those under section 1396a(a)(37), despite the key differences in 

their language and the contexts in which they apply. 2005 WL 2878094, at *7–8 & n.18. 

The court compounded this error by also treating section 1396a(a)(37) and section 1396a(bb)(5) 

as materially equivalent, despite the clear differences between them, and following Rio Grande 

Community Health Center, Inc. v. Rullan, 397 F.3d 56, 75 (1st Cir. 2005), which held that 

section 1396a(bb)(5) is enforceable under section 1983. 2005 WL 2878094, at *8.12

C. Section 1396a(a)(8)

Section 1396a(a)(8) of the Medicaid Act, which states that a State’s Medicaid plan must 

provide that “medical assistance under the plan . . . shall be furnished with reasonable 

promptness to all eligible individuals,” 42 U.S.C. § 1396a(a)(8) (emphasis added), likewise does 

not support Plaintiff’s contentions that the Department must force MCOs to pay Medicaid 

providers under the 30-day/90-day schedule that Plaintiff advocates, and that providers have a 

right to enforce this duty under section 1983. When Congress wants to impose a specific 

schedule to pay certain Medicaid providers, it knows how to do so, as it did in sections 

 

12 For similar reasons, Plaintiff’s claim under Section 1396b(m)(2)(A)(xii) fails even more obviously. 

That section provides that “no payment shall be made . . . to a State with respect to expenditures incurred 

by it for payment . . . for services provided by [an MCO under its contract with a State] unless . . . such 

contract, and the entity complies with the applicable requirements of section 1396u-2 of this title.” 42 

U.S.C. § 1396b(m)(2)(A)(xii). This section, by its terms, imposes a duty only on the federal government, 

not on States. And even that “duty” is discretionary, and thus beyond private control in a section 1983 

action. See Concilio De Salud Integral De Loiza, 538 F. Supp. 2d at 148.

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1396a(a)(37) and 1396n(b)(4). See, e.g., Rotkiske, 140 S. Ct. at 361. Thus, section 1396a(a)(8) 

— which refers to furnishing medical assistance to “eligible individuals” with “reasonable 

promptness” — cannot plausibly be read to mandate a specific schedule. In Illinois Council on 

Long Term Care, the Seventh Circuit rejected a similar claim based on Section 1396a(a)(13)(A), 

stating: “Section 1396a(a)(37)(A) shows that when Congress wanted to impose time limits for 

the payment of certain Medicaid claims, it did so explicitly.” 957 F.2d at 308. See also 

Lockheed Corp. v. Spink, 517 U.S. 882, 897 (1996) (“When Congress includes a provision that 

specifically addresses the temporal effect of a statute, that provision trumps any general 

inferences that might be drawn from the substantive provisions of the statute.”); Blinder, 

Robinson & Co. v. S.E.C., 837 F.2d 1099, 1113 (D.C. Cir. 1988) (“The statute itself indicates 

that Congress full well knows how to express a time restriction . . . .”). For the same reason, 

section 1396a(a)(8) cannot be given the meaning Plaintiff attributes to it, mandating a specific 

deadline for MCO payments to providers.13

Nor can section 1396a(a)(8) reasonably be read to create rights for specific providers, as 

 

13 Relying on Doctors Nursing & Rehabilitation Center, LLC v. Norwood, No. 1:16-CV-10255, 2017 WL 

3838031 (N.D. Ill. Sept. 1, 2017), which was decided in the context of a motion for a preliminary 

injunction, Plaintiff maintains that section 1396a(a)(8)’s reasonable promptness requirement for providing 

medical assistance to individuals incorporates the 30-day/90-day schedule that it says section 1396u-2(f) 

and section 447.46 adopt for payment to non-practitioner providers. (Dkt 26 at 10.) Even if this 

contention were sound, it means that Plaintiff’s claim under section 1396a(a)(8) is no better than, and 

adds nothing to, its claim under section 1396u-2(f), which lacks merit for the reasons discussed above. In 

addition, Doctors Nursing’s assumption that section 1396a(a)(8) creates an independent duty to pay 

providers, even by incorporating the terms of other statutory provisions, is highly doubtful. See Illinois 

Council on Long Term Care, 957 F.2d at 308; see also Crane v. Shewry, No. 2:07-cv-01639-GEB-JEM, 

2007 WL 2409665, at *2 (E.D. Cal. Aug. 21, 2007) (holding that section 1396a(a)(37), not section 

1396a(a)(8), governs schedule for payments to providers, and rejecting provider’s claim under section 

1396a(a)(8) “because it addresses providing services to individual beneficiaries, not to [defendant’s] 

reimbursing claims submitted by providers”). Moreover, Doctors Nursing, under this doubtful 

assumption, held that “a violation of section 1396a(a)(8)’s reasonable promptness requirements may be 

shown when an application for Medicaid or long-term care eligibility has been pending for more than 

ninety days or when a claim for payment for medical assistance goes unpaid for more than twelve 

months.” 2017 WL 3838031, at *6 (emphasis added). Plaintiff’s extrapolation of this to conclude that 

section 1396a(a)(8) requires a faster payment schedule for MCO payments to providers is neither 

logically mandated by Doctors Nursing nor even plausible.

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opposed to individuals eligible for Medicaid assistance, that they may enforce under section 

1983. Section 1396a(a)(8) speaks directly to benefits to “individuals” receiving Medicaid 

services, and it is clear, for section 1983 purposes, that they, not providers, are the only persons 

who could be deemed the target beneficiaries of section 1396a(a)(8) able to enforce it. It is 

significant, therefore, that although the cases are divided over whether section 1396a(a)(8) 

creates rights in individual Medicaid patients that are enforceable under section 1983, no case 

has ever found that section 1396a(a)(8) is enforceable by a Medicaid provider. (See Dkt. 24 at 

22-23.) 

II. The Eleventh Amendment Bars Plaintiff’s Claims.

Plaintiff concedes, as it must, that the Eleventh Amendment prevents the Court from 

granting much of the relief sought in its complaint, including enforcement of state law and 

ordering the Department to pay amounts Plaintiff says are due from the MCOs. (Dkt. 26 at 26-

27.) But the other relief Plaintiff seeks, including judicial control of the Department’s 

discretionary decisions about what actions to take if an MCO violates its obligations, is also 

barred by the Eleventh Amendment. Perhaps, if the Department had no discretion at all, and 

instead had a statutory duty, enforceable under section 1983, to ensure perfect compliance by 

MCOs with the 30-day/90-day payment schedule that Plaintiff advocates, the Eleventh 

Amendment would not prevent the court from enforcing that duty, consistent with the limits of 

Ex parte Young, 209 U.S. 123 (1908). But if any duty by the Department to act against the 

MCOs that fail to meet the payment schedule prescribed by section 1396u-2(f) is subject to the 

Department’s discretion regarding what level of MCO noncompliance warrants action, the 

Eleventh Amendment precludes the court from interfering with that discretion. See Ex Parte 

Young, 209 U.S. at 158 (“There is no doubt that the court cannot control the exercise of the 

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discretion of an officer. It can only direct affirmative action where the officer having some duty 

to perform not involving discretion, but merely ministerial in its nature, refuses or neglects to 

take such action.”); Seminole Tribe of Fla. v. State of Fla., 11 F.3d 1016, 1028-29 (11th Cir. 

1994), aff’d sub nom. Seminole Tribe of Fla v. Fla., 517 U.S. 44 (1996). And, as described 

above, the Medicaid Act and regulations plainly give the Department such discretion (which the 

Department maintains is an aspect of its rights, not any duty). For this reason, too, Plaintiff’s 

claims against the Department lack merit. 

Conclusion

For the foregoing reasons and those set forth in the Department’s memorandum in 

support of its motion to dismiss, that motion should be granted and this action should be 

dismissed with prejudice.

Respectfully submitted,

KWAME RAOUL By: /s/ Sunil Bhave_____________________

Attorney General Sunil Bhave

State of Illinois Richard S. Huszagh

Jason Kanter

Assistant Attorneys General

Office of the Attorney General

100 W. Randolph Street, 13th Floor

Chicago, IL 60601

Phone: (312) 814-2098

sbhave@atg.state.il.us

CERTIFICATE OF SERVICE

The undersigned attorney hereby certifies that on August 4, 2020, a copy of the foregoing 

was served via CM/ECF on all parties of record.

/s/ Sunil Bhave___________

Assistant Attorney General

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