Most of St. Anthony’s patients are on Medicaid, a government-run program for the poor and disabled. The hospital claimed at the time of its original suit that it was in financial distress, losing about 98% of its cash reserves, allegedly because managed care organizations had delayed and reduced Medicaid payments. As of February 2020, St. Anthony said it was missing more than $20 million in payments.

“Like many community hospitals and other providers serving underserved communities, they depend on Medicaid payments to be able to provide that healthcare,” said Edward Feldman, a partner at Chicago law firm Miller Shakman Levine & Feldman, which is representing St. Anthony. “The state has the power and the authority to fix the problem.”

The federal district court in Chicago previously dismissed St. Anthony’s lawsuit, but the U.S. Court of Appeals for the 7th Circuit ruled this week that providers have a right to ask for payment under the federal Medicare and Medicaid Act of 1965, meaning St. Anthony can now proceed with its suit in federal district court.

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“The state has tools available to remedy systemic slow payment problems—problems alleged to be so serious that they threaten the viability of a major hospital and even of the managed care Medicaid program as administered in Illinois,” the judges wrote in their opinion. “If St. Anthony can prove its claims, the chief state official could be ordered to use some of those tools to remedy systemic problems that threaten this literally vital healthcare program.”

There are two main ways that states pay providers for services covered by Medicaid. The first is a fee-for-service program in which the state pays providers directly based on set fees. The second is under a managed care program, in which the Department of Healthcare and Family Services contracts with managed care organizations to deliver Medicaid health benefits that the state pays for. Illinois pays a flat monthly rate for each Medicaid patient insured under a managed care organization.

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Over the years, Illinois has transformed into a healthcare payment system dominated by managed care plans, which are designed to improve people’s health while also controlling costs by ensuring all care is quality, necessary care. The state launched managed care in its Medicaid program in 2006, a shift that has made hospitals like St. Anthony more reliant on timely payment from managed care organizations.

Illinois currently contracts with six managed care plans provided by Blue Cross Community Family Health Plan, CountyCare Health Plan, IlliniCare Health, Meridian Health Plan, Molina Healthcare and NextLevel Health, according to the Department of Healthcare and Family Services website.

The Department of Healthcare and Family Services, which is run by Director Theresa Eagleson, didn’t immediately provide comment.

“The opinion is a victory not just for St. Anthony but all providers who serve a Medicaid population,” Feldman said. “We can remedy this systemic problem.”

In fiscal 2020, St. Anthony reported losing nearly $18 million on $103 million in revenues, according to available annual filings.

This story first appeared in our sister publication, Crain’s Chicago Business.