Court Opinion

ID: 9742947
Source: CourtListenerOpinion
Date Created: 2023-08-26 21:23:06.843689+00
Date Added: 2024-06-11T07:24:37.925907
License: Public Domain

MR. JUSTICE DOOLEY, dissenting: Although the majority purports to “share the defendant’s concern over the need to rid the public welfare program of abuse and fraud” (68 Ill. 2d at 554), its tortuous construction of the Federal Medicaid program (42 U.S.C. sec. 1396 et seq. (1970)) and the Illinois Public Aid Code (Ill. Rev. Stat. 1975, ch. 23, par. 1—1 et seq.) sanctions plaintiff’s concealment of its financial records and at the same time compels the Department of Public Aid to keep open the public purse. Affirming the plaintiff laboratories’ right to an injunction, in my opinion, condones Medicaid gouging and obfuscates established concepts of administrative law. It is clear that (1) the plaintiff was “without standing” to maintain this action under the circumstances; (2) there was no controversy capable of adjudication in this posture of the case; (3) the defendant’s regulation authorizing the suspension from the Medicaid program of vendors for fraud or abuse was within its authority conferred by the Public Aid Code; and (4) no right to the extraordinary remedy of injunction existed. To put the issues in focus, consider at the outset the Federal and State medical assistance programs. Under the Federal Medicaid program participating States must comply with the rules and regulations promulgated by the Department of Health, Education and Welfare. (45 C.F.R. sec. 250.18 et seq. (1976).) Failure to do so may result in the withholding of Federal funds from the State. (45 C.F.R. sec. 201.6 (1976).) Every State participating in the Medicaid program must provide for agreements with persons providing medical services under which such persons agree to maintain records necessary to fully disclose the extent of services provided and to furnish the State with information regarding any payments claimed by such medical provider as the State may from time to time request. (45 C.F.R. sec. 250.21 (1976).) The State must take whatever measures are necessary to assure proper auditing of records. 45 C.F.R. sec. 250.30(a)(3)(ii)(F) (1976). The Federal rules provide that a complete investigation of complaints of fraud or abuse must continue until resolved. (45 C.F.R. sec. 250.80(b)(2) (1976).) Such resolution may include “ [s] uspending the provider from participation in the Medicaid program.” 45 C.F.R. sec. 250.80(b)(2)(ii)(B) (1976). To facilitate Illinois’ participation in the Medicaid program, the Illinois Public Aid Code was amended by an addition to article V, entitled “Medical Assistance” (Ill. Rev. Stat. 1975, ch. 23, par. 5—1 et seq.). In numerous provisions of article V the legislature expressly delegates to the State agency (Department of Public Aid) the power to carry out specified functions involved in the medical assistance program by rule and regulation. More particularly, section 5 — 5 (Ill. Rev. Stat. 1975, ch. 23, par. 5—5) provides that the Department, by rule, shall determine the quantity and quality of the medical assistance for which payment will be authorized. Section 5 — 9 (Ill. Rev. Stat. 1975, ch. 23, par. 5—9) conditions entitlement to reimbursement to medical vendors on compliance with the rules and regulations of the Illinois Department of Public Aid. Section 12 — 4 and following sections of the Code enumerate the powers and duties of the Illinois Department of Public Aid. Section 12 — 4.2 (Ill. Rev. Stat. 1975, ch. 23, par. 12—4.2) empowers the Department “to investigate all matters pertaining to the fraudulent obtainment of public aid” and expressly includes vendors as proper subjects of investigation. Section 12 — 4.5 (Ill. Rev. Stat. 1975, ch. 23, par. 12—4.5) requires the Department to cooperate with the Federal government, in any reasonable manner not contrary to the Code, as may be necessary to qualify for Federal aid. Section 12 — 13 (Ill. Rev. Stat. 1975, ch. 23, par. 12—13) expressly delegates to the Department the power to “make all rules and regulations and take such action as may be necessary or desirable for carrying out the provisions of this Code, to the end that its spirit and purpose may be achieved and the public aid programs administered efficiently throughout the State.” (Emphasis added.) Pursuant to section 12 — 13 of the Code, defendant Trainor, Director of the Illinois Department of Public Aid, promulgated certain official rules and regulations. These included the suspension or termination of unqualified medical vendors who have defrauded or otherwise abused their participation in this Federal-State program. It is under this Federal-State medical assistance program that this case arises. Plaintiff Bio-Medical Laboratories, Inc., doing business as Gerson Clinical Laboratories, was granted permission to participate in the Illinois Medical Assistance Program (Medicaid) in 1969, and has continued to participate. After it was discovered that the Department of Public Aid’s reimbursements to plaintiff increased 58% over a three-month period, the Department appropriately ordered an audit under the mandate of the Federal requirements and the State Code. The audit was to cover the period January 1975 through June 1976. On November 24, 1976, defendant’s chief assistant notified the laboratory that if it failed to submit certain business records to the Department as required by the rules within 15 days, the laboratory would not be allowed to participate in the Medicaid program. Two days later representatives of defendant and the laboratory conferred and reached an agreement regarding the duty of the laboratory to disclose certain records. After that agreement, defendant notified the laboratory that no further action would be taken pursuant to the Department’s threat of suspension. On November 30, 1976, the Department’s auditors filed their report with the Director citing certain discrepancies in the laboratory’s billing procedures which had resulted in overpayment of $9,990.75. The audit, based upon a sample of the bills, disclosed that the laboratory had nine different types of billing discrepancies. The laboratory admits that it engaged in sequential billing, which is not only impermissible, but exceeded the State payment schedule. In the absence of the laboratory’s records, which it refused to make available, the auditors, by extrapolation, determined that an estimated $321,291.60 in over-payments had been made to the laboratory during an 18-month period. The alleged improper billing procedures, and the laboratory’s refusal to turn over records for audit required by law, caused the Department’s auditors to recommend to the Director of Public Aid that the laboratory be suspended from further participation as a Medicaid vendor and that action be taken to recoup the overpayments. But before any such administrative action was taken— and here it must be emphasized that the record on appeal indicates that Gerson Clinical Laboratories was never served with a notice of intent to terminate its status as an authorized medical vendor — the laboratory instituted this independent proceeding in the courts for an injunction against the Illinois Director of Public Aid, alleging that defendant “intended” to suspend plaintiff from the program. Defendant’s motion to dismiss the injunction suit was supported by an affidavit that Trainor had taken no official action to implement the auditors’ recommendations; that any future action taken by the Department would be subject to the Department’s rules and regulations; and that the laboratory would not be terminated as a participating vendor until procedural requirements under those rules had been met. Yet the trial court granted a temporary restraining order. The cause, for some unknown reason, was transferred to another judge. Defendant’s motion to dismiss the injunction proceeding was then denied on the ground that defendant was without authority to proceed administratively under its rules providing for suspension of unqualified medical vendors who have defrauded or otherwise abused their participation in the Federal-State program. I vigorously disagree with the majority’s summary dismissal of the threshold administrative law issues of “standing” and “ripeness.” The doctrine of “standing” is a basic principle of administrative law. It is designed to insure that the party seeking relief from administrative action has a personal stake in the outcome of the controversy, and that the challenged action has caused him injury in fact, financial or otherwise. Sierra Club v. Morton (1972), 405 U.S. 727, 31 L. Ed. 2d 636, 92 S. Ct. 1361; Association of Data Processing Service Organizations, Inc. v. Camp (1970), 397 U.S. 150, 25 L. Ed. 2d 184, 90 S. Ct. 827. Here, at the time plaintiff filed suit for an injunction, it had in no way, financially or otherwise, been aggrieved by administrative action. Plaintiff was merely being required to submit its records for investigation as required by law. It is undisputed that plaintiff had not been served with any notice of intent to terminate its status as a Medicaid vendor. The majority regards that fact as involving the issue of “ripeness” rather than “standing.” In my judgment the absence of any adverse administrative action causing, plaintiff financial or other injury also affects the issue of “standing.” It can only be assumed that plaintiff realized that if it supplied the Department of Public Aid with the information to which it was entitled under the law, the records would show that plaintiff had overcharged the Department. Hence, plaintiff would be suspended as a Medicaid vendor, and an action would lie against it for the overcharge. There has been no interruption of an existing relationship between the Department of Public Aid and the plaintiff, as in Gonzalez v. Freeman (D.C. Cir. 1964), 334 F.2d 570, 574, relied on by the majority. To the contrary, the affidavit of the Director of Public Aid specifically states that the relationship is ongoing and would not be terminated until all procedural requirements had been met. I fail to perceive that plaintiff, by virtue of being investigated, is deprived of an ongoing relationship sufficient to entitle it to “standing.” Even if one were to assume that plaintiff could establish “standing” by virtue of the pending recommendations of defendant’s auditors for suspension because of discrepancies in plaintiff’s billing procedures resulting in substantial overpayments, and for plaintiff’s refusal to permit the audit of its records as required by law, there still exists the separate and distinct threshold issue of “ripeness,” i.e., whether a case or controversy exists, capable of adjudication. The majority fails to differentiate between these distinct administrative law concepts. It merely concludes that the concept of “ripeness” applies in our case by analogy to Abbott Laboratories v. Gardner (1967), 387 U.S. 136, 148, 18 L. Ed. 2d 681, 691, 87 S. Ct. 1507, 1515. The “ripeness doctrine” requires final administrative action before a case challenging administrative action can be reviewed by the court. This doctrine is designed “to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way by the challenging parties.” Abbott Laboratories v. Gardner (1967), 387 U.S. 136, 148-49, 18 L. Ed. 2d 681, 691, 87 S. Ct. 1507, 1515. The Abbott Laboratories case involved both an amendment to the Federal Food, Drug and Cosmetic Act (21 U.S.C. sec. 301 et seq.) and a Federal regulation. The Federal law required manufacturers of prescription drugs to print the “established name” of the drug prominently and in type at least half as large as that used thereon for any “proprietary name” for such drug. The Commissioner of Food and Drugs, exercising authority delegated to him, promulgated certain regulations designed to implement the Federal statute. Amongst these was the following: “ ‘If the label or labeling of a prescription drug bears a proprietary name or designation for the drug or any ingredient thereof, the established name, if such there be, corresponding to such proprietary name or designation, shall accompany each appearance of such proprietary name or designation.’ (21 C.F.R. sec. 1.104(g)(1).)” (387 U.S. 136, 138, 18 L. Ed. 2d 681, 685-86, 87 S. Ct. 1507, 1510.) A similar rule was made applicable to advertisements for prescription drugs. The court held that the issues presented were appropriate for judicial resolution at that time. It emphasized: “First, all parties agree that the issue tendered is a purely legal one: whether the statute was properly construed by the Commissioner to require the established name of the drug to be used every time the proprietary name is employed. Both sides moved for summary judgment in the District Court, and no claim is made here that further administrative proceedings are contemplated. *** Second, the regulations in issue we find to be ‘final agency action.’ ” (Emphasis in original.) 387 U.S. 136, 149, 18 L. Ed. 2d 681, 691-92, 87 S.Ct. 1507, 1515-16. The mere recital of the basis of the decision shows its inapplicability as a precedent for this case. Here there has been no final administrative action — at most an aborted investigation in which the plaintiff refused to make its records available as required by law. The facts are highly controverted — just what services did the plaintiff render, and how much did plaintiff overcharge the Department of Public Aid. There is no agreement between the parties that the case involves only the resolution of a legal issue as there was in Abbott Laboratories v. Gardner (1967), 387 U.S. 136, 18 L. Ed. 2d 681, 87 S. Ct. 1507. Those distinguishing factors are entirely overlooked by the majority. It apparently did have some difficulty with the concept of “ripeness” in view of its statement: “Absent defendant’s announced intention, we would agree that plaintiff’s action was premature.” (68 Ill. 2d at 546.) The court then concluded that “ [d] efendant’s threat of action, however, along with the recommendation of the auditors, constituted a sufficient final determination to warrant judicial consideration.” 68 Ill. 2d at 546. Just what threat did defendant make? The majority divines the “threat” from the allegations in plaintiff’s complaint “that defendant, James Trainor, has informed the plaintiff that he intends to forthwith suspend the plaintiff from the Public Aid Program.” (68 Ill. 2d at 545.) Such allegation was expressly rebutted by defendant’s unequivocal assertion in his affidavit in support of his motion to dismiss that he took no official action to implement the auditors’ recommendation. The record on review includes all the pleadings and supporting documents. It is undisputed that plaintiff was never served with any “Notice of Intent” to terminate its status as an authorized. Medicaid vendor; nor was plaintiff in any way informed that defendant intended to suspend it from the program. Just how can recommendations, which are merely advisory to the Director, be deemed final agency action? That assumption is specifically negated by defendant’s affidavit stating that any action taken by the Department would be in accordance with the Department’s rules and regulations, and that plaintiff would not be terminated until procedural requirements had been satisfied. In no way can this case be deemed to present “final agency action,” a determinative factor in the Abbott Laboratories decision. Under this analysis of the record, the administrative law doctrine of “ripeness” was violated by plaintiff. This is a classic example of the reason for the “ripeness doctrine,” which is “to protect the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way.” (Abbott Laboratories v. Gardner (1967), 387 U.S. 136, 148, 18 L. Ed. 2d 681, 691, 87 S. Ct. 1507, 1515.) For that reason alone the case should be dismissed and the injunction dissolved. There is, however, an even more cogent reason for dismissal. This goes to the merits of the case. It goes to the determination of whether the defendant’s regulation authorizing suspension or termination from participation of vendors for fraud or abuse of their participation in the Medicaid program was within the express or implied authority of the Code. The regulation must be viewed in the context of the Federal-State Medicaid program under which it was promulgated. I have alluded to the applicable Federal statutes and regulations pertaining to State participation in the Medicaid program and to the provisions of the Illinois Public Aid Code. These show that in order to be a participant in the Federal medical assistance program and receive Federal funds, the State of Illinois must comply with the rules and regulations promulgated by the Department of Health, Education and Welfare, otherwise Federal funds must be withheld; that Illinois must include in its agreements with persons providing medical services a requirement that they maintain records necessary to fully disclose the extent of the services provided and furnish the State with information regarding any payments made or claims by such medical provider as the State may request; and that the Department of Public Aid must take whatever measures are necessary to assure appropriate auditing of records. Section 5 — 9 of the Public Aid Code conditions eligibility of medical vendors, such as plaintiff, to participate on compliance with the rules and regulations of the Department of Public Aid, and section 5 — 5 requires all dispensers of medical services to keep records in accordance with regulations promulgated by the Department. Section 12 — 4 and following sections empower the Department to investigate fraudulent obtainments of public aid, including payments to vendors. As previously noted, the Code is replete with express delegations of rule-making power, the most comprehensive of which is section 12 — 13, which confers on the Department of Public Aid power to make all rules and regulations “as may be necessary or desirable for carrying out the provisions of this Code to the end that its spirit and purpose may be achieved and the public aid programs administered efficiently throughout the State.” The controverted rule terminating a vendor’s participation in the Medicaid program was promulgated after congressional action. Congress gave the Secretary of Health, Education and Welfare authority to suspend or terminate vendors guilty of committing fraud or other abuses under the Medicare program. Congress further provided for termination of Federal payments to States for services furnished by a vendor under the Medicaid program if such vendor has been found guilty of committing fraud or abuse under applicable State law. 42 U.S.C. sec. 1396b(i)(2) (Supp. III 1973). The majority opinion interprets that legislative history as indicating that since Congress did not require the States to suspend Medicaid vendors, no such power can be implied. There is another interpretation. In my judgment, that legislative history should strengthen the resolve of this court to sustain the contested rule, since it effectuates Federal policy and would prevent Illinois from losing Federal funds. If investigations of fraud or abuse by medical vendors can be stymied by the tortured construction of the Public Aid Code, as the majority has done, so as to permit injunctions to hamstring administrative investigations of vendors who would gouge the public purse, it takes no occult power to anticipate that Federal funds would be required by Federal law to be withheld from Illinois. 45 C.F.R. sec. 201.6 (1976). The majority, in denying the validity of the rule in question, disregards the fact that vendor participation, whether initial or continued, is not prescribed in the Code. If the Department of Public Aid can provide by rule who are qualified vendors, it can also provide by rule who are disqualified from further participation by reason of their overcharging the State, or failing to comply with rules of the Department of Public Aid. The majority further finds the rule objectionable because it vests discretionary authority in an administrative officer without intelligible standards as guides. In my judgment there were intelligible standards for the rule-making power — such standards as the United States Supreme Court has recognized as sufficient in adjudging the propriety of administrative action. In Mourning v. Family Publications Service, Inc. (1973), 411 U.S. 356, 36 L. Ed. 2d 318, 93 S. Ct. 1652, the court sustained a regulation involving a consumer credit disclosure requirement promulgated by the Federal Reserve Board under section 105 of the Truth in Lending Act (15 U.S.C. sec. 1604 (1970)). The Supreme Court held that Congress, in enacting the Truth in Lending Act, had validly delegated broad authority to the Board to promulgate all regulations reasonably necessary to insure that the objectives of the Act were fulfilled and entrusted its construction to an agency with the necessary experience and resources to monitor its operation. In considering the validity of regulations promulgated pursuant to such broad authority, the court stated: “The standard to be applied in determining whether the Board exceeded the authority delegated to it under the Truth in Lending Act is well established under our prior cases. Where the empowering provision of a statute states simply that the agency may ‘make *** such rules and regulations as may be necessary to carry out the provisions of this Act,’ we have held that the validity of a regulation promulgated thereunder will be sustained so long as it is ‘reasonably related to the purposes of the enabling legislation.’ ” (Footnote omitted.) 411 U.S. 356, 369, 36 L. Ed. 2d 318, 330, 93 S. Ct. 1652. See also K. Davis, Administrative Law of the Seventies sec. 2.17, at 39 (1976); Thorpe v. Housing Authority (1969), 393 U.S. 268, 280-81, 21 L. Ed. 2d 474, 483, 89 S. Ct. 518, 525. The standard set forth in section 12 — 13 of the Code is certainly no less detailed than that involved in the Mourning case. That section of the Code delegates to the Department of Public Aid the power to “make all rules and regulations and take such action as may be necessary or desirable for carrying out the provisions of this Code, to the end that its spirit and purpose may be achieved and the public aid programs administered efficiently throughout the State.” Ill. Rev. Stat. 1975, ch. 23, par. 12—13. It is patent that the contested regulation here providing for suspension from the Medicaid program of unqualified medical vendors who have defrauded or otherwise abused their participation under the Medicaid program is reasonably related to the purpose of the Code. It is designed to abet the administration of the program by effectuating the mandated authority to inspect and audit records of participating vendors and ferret out those who abuse or defraud the Department. The relationship between the rule and the purpose of the Code is highlighted by a view of the concrete realities. In fiscal year 1976 the total Medicaid expenditure in Illinois was in excess of $868,000,000 and the amount budgeted for fiscal year 1977 is approximately $912,000,000, of which approximately 50% comes from the. Federal government, according to the affidavits filed by defendant. Under the implementing regulations of the Federal Medicaid program, Illinois must take steps to identify situations which may involve fraud in its Medicaid program and eliminate fraudulent vendors from the system. (45 C.F.R. sec. 250.80(a)(1) (1976).) Failure to do so can lead to a withholding of the Federal government’s contribution to Illinois Medicaid costs. A regulation designed to ferret out such abuse is related to the purpose of the enabling legislation. There is no issue here that plaintiff was, or would be, arbitrarily deprived of its participation in the Medicaid program by administrative action. At the time plaintiff filed suit for the injunction, no official administrative action had been taken. However, had such action been taken, it would have been in accordance with the Department’s published rules and regulations governing vendors. They provide for notice and the right to a formal administrative review of decisions to withhold payments or terminate participation. (Rules of Practice in Administrative Proceedings, Department of Public Aid, Medical Assistance Program Reviews, Rules 503.02, 503.03, 504.03.) Official action adversely affecting a vendor may not be taken without notice and, if requested, a hearing into the charges against the vendor. Under these circumstances I fail to perceive the hardship inflicted upon the plaintiff which gives it the right to negate the administrative machinery of the Illinois Medicaid program. That the Code authorizes prosecutional authorities to take court action certainly cannot preclude the administrative agency from exercising its rule-making powers for the effective administration of the Code. If the public purse must be kept open until a conviction of fraud can be finalized, while vendors proceed to overcharge the Department and flaunt the Department’s express power to investigate and its mandate to audit such vendors, then the Department cannot carry out the stated purpose of administering efficiently the public aid programs. Lastly, it is established law that injunction is an extraordinary remedy. It is an even more extraordinary remedy when it is invoked, absent any emergency, against an administrative agency even before final agency action. And it is legally indefensible when that injunctive remedy is granted to a plaintiff whose allegedly illegal actions of refusing to disclose its records as required by law make impossible the orderly operation of the administrative process. For these many reasons I am compelled to disagree with the majority opinion.