AFFINITY BIOTECH INC v. STATE OF ILLINOIS DEPARTMENT OF HEALTHCARE AND FAMILY SERVICES (2016)

ORDER

This claim is before the Court on Respondent's Motion to Dismiss the First Amended Complaint.

Claimant is a provider of hemophilia treatment medication, in conjunction with the Illinois Hemophilia Program (the “Program”). The Program permits the Illinois State Department of Healthcare and Family Services (the ““Department”) to reimburse hemophilia drug treatments issued by participating medical providers who supply the drug to qualifying patients. Provider participation is authorized by the Illinois Hemophilia Care Act. 410 ILCS §420. Medical providers must secure participation in the Program through a contract outlining, among other things, the terms of reimbursement. Patient qualification for provider reimbursement is primarily based on the patients ability to pay for the treatment with existing primary healthcare insurance or personal funds.

In order to seek Department reimbursement as a participant provider in this program, Claimant is bound by, among other resources, the Department Handbook for Providers of Medical Services (“Provider Handbook”). This handbook provides that, “The Illinois Department of Healthcare and Family Services is, by federal and state law, the payor of last resort. Payment can be made through the Departments Medical Programs only after all other known resources of payment, both private and governmental, have been explored and exhausted.” Provider Handbook §120. The Provider Handbook also requires that, “providers retain the responsibility for determining the status of a patients eligibility for third party coverage and benefits prior to making charges to the Department.” Provider Handbook §120. Additionally, the State is entitled by statute to recovery of improper reimbursement payments. 89 Ill. Adm.Code §140.30(a).

In July and August of 2013 Claimant provided prescription services to “J.K.” who was a patient who required treatment under the Program. J.K. qualified for Department reimbursement in all regards, except for his failure to pay his ““Patient Participation Fee” (“PPF”). When the patient files initially, the Department determines the amount of the PPF that the patient is responsible for paying. In J.K.'s case, it was $4,945.00, or approximately 1.7% of the cost of the medication. The PPF payment was not collected from J.K. during either time he visited Claimant for medication. J.K. did not ever request a reduction in the PPF payment. After the first payment reimbursement was requested for the July medication, the Department informed Claimant that it had to collect the PPF payment from J.K. in order to obtain full reimbursement.

J.K. also reported having some form of private primary healthcare insurance through CMR, as well as a prescription drug plan through CVS. Under the regulations set forth in the Provider Handbook, any insurance policy providing coverage to a hemophilia patient must be explored and exhausted prior to a medical provider submitting a request for Department reimbursement. The same letter that told Claimant to collect J.K.'s PPF payment also reminded Claimant of its responsibility to explore and bill the insurers before requesting a reimbursement from the Department.

Claimant contends that it obtained express Departmental approval for each hemophilia treatment for J.K., each month, when the prescription was refilled. The Department approved the payment each time, based on the information provided by Claimant. Claimant contends that J.K. wrote on his application that “the insurance is maxed out [and] does not pay towards factor.” Claimant has not submitted any evidence to demonstrate that it billed either of J.K.'s insurers, or investigated J.K.'s insurance beyond J.K.'s handwritten representations on his application, pursuant to Program requirements.

Claimant has not filed a claim with either of J.K.'s insurers for reimbursement or to verify the lack of coverage. Claimant has also not filed suit against either of J.K.'s healthcare providers. Respondent argues that this is grounds for dismissal in the Court of Claims, under Court of Claims Rules Section 790.60 (“Section 790.60”). 705 ILCS §505/25 and Section 790.60 provide, in relevant part, that:

“… the claimant shall, before seeking final determination of his claim before the Court of Claims, exhaust all other remedies, whether administrative, legal or equitable, against all other sources of recovery for the injury or damages sought to be recovered by the claim, provided that no frivolous or unreasonable action is required to be brought against any third party in order to comply with this exhaustion of remedies requirement.”

The central question is thus whether Claimant must first make additional inquiries of, or bring suit against, either of J.K.'s insurance providers, in to meet the exhaustion of remedies requirement under Section 790.60. Further at issue is whether such an action would be “frivolous and unreasonable” under Section 790.60.

Claimant has submitted no documents or evidence demonstrating that it has made any independent inquiry to determine whether J.K.'s insurance policies cover the hemophilia payments. In fact, Claimant relied solely upon the handwritten representations made on J.K.'s application, which claimed that the insurance policies did not provide coverage and were maxed out. Claimant made no further inquiry and effectively accepted this as fact in further communications with the Department. Claimant did not bill either insurer, file suit against either insurer, or even reach out to either insurer to inquire about potential coverage. Thus, Claimant has not made any independent action to ascertain whether J.K.'s insurance policies truly did or did not offer coverage.

In interpreting Section 790.60's exhaustion of alternative remedies requirement, this Court has stated, “If an alternative source of recovery for the claimed injury is shown to exist, in whole or in part, our Act and our rule command that no judgment can be entered by this Court until that potential recovery is resolved and reduces the State's liability.” Thompson v. State, 64 Ill.Ct.Cl. 198, 199 (2011). Under Thompson, the Claimant has not fully investigated the possibility of alternative recovery from the insurers, nor has the matter been litigated in any court. Claimant bases its reliance on the patients representations made on the application for treatment. Reading Section 790.60 under the Thompson decision, Claimant still has a “potential recovery” in the form of further investigation, filing a claim for reimbursement from either insurer, or filing a suit against either insurer to judicially determine whether coverage exists. Claimant has not submitted any supporting documentation regarding either insurance policy to demonstrate that any such insurance filing or complaint would be “frivolous or unreasonable.”

In order for a claimant to have an obligation to pursue and exhaust another remedy, it must have “sufficient time to both become aware of [the] other remedies and to pursue them accordingly.” Lyons v. State, 34 Ill.Ct.Cl. 268, 271 (1981). “In this case, Claimant knew that J.K. had insurance policies, but relied on J.K.'s representations of no coverage and did no independent investigation to verify those claims.

The Provider Handbook requires that hemophilia providers “explore and exhaust… all other known resources of payment.” Claimant knew of the two policies before filing this claim in the Court of Claims, and therefore could reasonably have pursued the insurer before filing this Complaint, pursuant to Section 790.60.

The reasoning in Lyons is further echoed in Hughes v. State, 49 Ill.Ct.Cl. 56, 60 (1997), which requires that if two paths exist for the Claimant to seek recovery, filing against the State in the Court of Claims must be the last. In Hughes, the Claimants had the option of filing suit against four other tortfeasors, but instead elected to pursue a suit against the State instead. The Court found that, “The exhaustion requirement is not an option to be accepted or rejected by Claimants. It is mandatory” Hughes, at 60. The Section 790.60 exhaustion of remedies prerequisite “requires the Claimant to first pursue a claim against … other potentially culpable parties before bringing an action against the [State].” Mapel v. Illinois State University, 61 Ill.Ct.Cl. 215, 222 (2008). The term “potentially culpable parties” applies here, where Claimant has failed to produce any evidence showing that it has met the exhaustion standard set forth under Mapel.

This Court has previously held that, in order to fully exhaust every alternative remedy, a claimant must attempt to exhaust the source of the remedy “in good faith.” Schwartz v. State, 50 Ill.Ct.Cl. 384, 388 (1997). Claimant has not taken any action to determine whether there was any insurance coverage in this case. Claimant has provided no evidence to demonstrate such ““good faith” attempts, much less simple communication with the insurers, or filing for reimbursement from either of them.

A factually analogous case is presented in Commerce Bank v. Illinois Department of Children and Family Services, 61 Ill.Ct.Cl. 200, 201 (2009). In Commerce Bank, DCFS placed a child with new foster parents, who tragically allowed the child to perish. Id. In defending the suit, the State asserted that there was a foster child insurance policy which should first be adjudicated to set off any remaining liability against the State of Illinois. Id. Based on this, the Court decided that until suit was brought against the insurer to determine coverage, all remedies had not been exhausted. Id. Prior to the final opinion, the circuit court determined that parental immunity prevented a claim against the foster parents, which prevented triggering the insurance coverage. Id. However, the Commerce Bank court stated that, “… it is to be considered under a theory that claimant is obliged to seek any possible satisfaction or recovery before determination in this Court…” Id. Similarly, Claimant in this case has not pursued either of J.K.'s insurers to seek possible reimbursement for the medication, nor has any evidence presented shown any form of communication with the insurers.

In summary, Claimant has failed to make any sort of investigation into the existence or coverage of two insurance policies, as required by the Provider Handbook, and the rules of this Court under Section 790.60. There is no argument that any further pursuit of the insurance would have been “frivolous or unreasonable.” Therefore, the Court finds that the Claimant did not exhaust the potential remedy of insurance coverage through CMR or CVS.

IT IS HEREBY ORDERED that this claim is DISMISSED.

KUBASIAK J.