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January 2016 Newsletter
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Illinois Healthcare Law
IAHA Monthly Newsletter
January 2016
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IAHA's Newest Board Member

At its December meeting, the IAHA Board appointed Rick Hindmand of McDonald Hopkins, LLC, to the IAHA Board to fill a vacancy. Rick has been an IAHA member since 1995 and has served on the Symposium Committee (1999, 2005) and Communications Committee (2014, 2015).
Hospital Property Tax Exemption Law Declared Unconstitutional
Hospital to Appeal to Supreme Court

The Illinois Appellate Court, Fourth District, has ruled that Section 15-86 of the Property Tax Code - the new provision related to hospital property tax exemption enacted in 2012 - is unconstitutional. Carle Foundation v. Cunningham Township, 2016 IL App (4th) 140795 (January 5, 2016).

Carle Foundation Hospital has decided that it will file an appeal as of right with the Illinois Supreme Court.

The lawsuit was initially filed in 2007 in an effort to re-establish the exemption of four parcels of property under Section 15-65 (the "old" charitable exemption law) and Section 23-25(e), which permits a judicial determination of exemption.  The case was still pending when Section 15-86 became law in 2012.  Carle amended its lawsuit to claim that it was not only exempt under Section 15-65, but also entitled to exemption under Section 15-86.  The Circuit Court ruled that Section 15-86 would apply.  In an interlocutory appeal, the Appellate Court agreed and remanded the case to the trial court for further proceedings.
When the case returned to the Circuit Court, the City of Urbana and Cunningham Township argued that Section 15-86 was facially unconstitutional.  In contrast, the Champaign County defendants conceded that Section 15-86 was facially unconstitutional.  The Circuit Court ruled that Section 15-86 is facially unconstitutional. Carle Foundation v. Ill. Dep't of Revenue, Champaign Cty. Cir. Ct. No. 08-L-202 (August 28, 2014). The trial court's ruling emphasized the presumption that statutes are constitutional and the obligation of courts to refrain from "lightly or cavalierly declar[ing] unconstitutional that which the representatives of the people have seen fit to enact." Observing that "Section 15-86 was enacted at the virtual invitations of both the Illinois Appellate Court and two members of the Illinois Supreme Court" in the Provena case, the trial court concluded that it was more than reasonably possible to construe Section 15-86 to be constitutional.
In its January 5 opinion, the Appellate Court declared Section 15-86 unconstitutional for what appears to be a very simple reason: it does not mention the so-called "charitable use test" established in Article IX, Section 6 of the Illinois Constitution. Article IX, Section 6 says that the General Assembly may exempt from taxation property that is "used exclusively for charitable purposes."  Illinois courts have held that the General Assembly is free to impose other requirements for property tax exemption - in addition to the constitution's charitable use test - but that the constitutional test cannot be waived or altered by the General Assembly.  And Section 15-65 of the Property Tax Code said that in addition to being used for charitable purposes, the property had to be "owned by an institution of public charity."  This additional statutory test is sometimes called the "charitable ownership test."
The legislative findings supporting Section 15-86 state, "It is the intent of the General Assembly to establish a new category of ownership for charitable property tax exemption to be applied to not-for-profit hospitals and hospital affiliates in lieu of the existing ownership category of 'institutions of public charity.' "But because Section 15-86 does not specifically mention the constitutional test, the Appellate Court reasoned that the General Assembly had instructed the Department of Revenue to ignore the constitutional test and to grant exemptions based only on the criteria laid out in Section 15-86:
Nowhere does section 15-86 say, as a condition of the charitable exemption, that the
property must be "used exclusively for *** charitable purposes."  Instead, section 15-86 bestows a charitable exemption if, during the hospital entity's fiscal year ending in the year for which it seeks an exemption, the value of the "[s]ervices" in subsection (e) (35 ILCS 200/15-86(e) (West 2014)) that the hospital entity provided equals or exceeds the hospital entity's estimated property tax liability for the year for which it seeks an exemption. 35 ILCS 200/15-86(c) (West 2014).
If the legislature wished, it could provide that even though property is used exclusively for charitable purposes, the property shall be exempt from taxation only if, additionally, the
value of the charitable services equals or exceeds the estimated property tax liability - because, again, the legislature is free to make the terms of an exemption more restrictive than the terms in article IX, section 6. But the legislature lacks the constitutional authority to provide that, regardless of whether the property is used exclusively for charitable purposes, the property shall receive an exemption if the value of the charitable services equals or exceeds the estimated property tax liability - because that would be adding to or broadening the exemption in article IX, section 6.

Court Refuses To "Micromanage" Hospital Arrangements

Thanks to Lisa Harms Hartzler of Sorling Northrup
The Illinois Appellate Court, First Division, upheld the dismissal of a physician group's complaint against two managed care associations (MCAs) serving Swedish Covenant Hospital, holding that the plaintiff failed to state a cause of action for either an antitrust violation or tortious interference with prospective economic advantage.  Boffa Surgical Group LLC v. Managed Healthcare Associates Ltd., 2015 IL App (1st) 142984 (December 23, 2015).
The plaintiff was a group of surgeons (Physician Group) with privileges at Swedish Covenant who were not asked to participate as members of the two defendant MCAs.  The Physician Group claimed that by excluding its physicians from membership in their networks, the MCAs violated Section 3(2) of the Illinois Antitrust Act (740 ILCS 10/3(2)) and committed tortious interference with prospective economic advantage. Both allegations were dismissed for failure to state a cause of action for which relief could be granted. 
On appeal, the Physician Group argued that their exclusion from membership in the MCAs unreasonably restrained competition at the hospital by limiting the number of physicians who could provide services to the hospital's patients, limited referrals by physicians with privileges at the hospital, limited the public's access to the Physician Group's services, and intentionally prevented the Physician Group from obtaining prospective business at the hospital.

The appellate court found that the Physician Group's allegations were inadequate to support an antitrust violation because the surgeons continued to have privileges at Swedish Covenant and other institutions in Illinois and that there were 21 other hospitals or medical centers within 20 miles of Swedish Covenant. That the surgeons could not practice as they would have preferred, as members of the MCAs' networks, was not enough to demonstrate a restraint of trade in the applicable market or persuade the court to "micromanage" the hospital's managed healthcare arrangements.
The court also held that pleading a sufficient cause of action for tortious interference with prospective economic advantage requires an allegation of business expectancy with a specific third party as well as action by the defendant directed toward that third party. In this case, the Physician Group alleged only that the MCAs' conduct prevented unnamed physicians from referring patients to the Physician Group and prevented unnamed patients from receiving services from it. Even if excluding the Physician Group from the MCA networks likely dissuaded other physicians from making referrals or dissuaded patients from using their services, the Physician Group did not allege any conduct by the MCAs directed at any specific patients.  Consequently, Plaintiff's claim was properly dismissed as failing to allege any action by the MCAs directed at a third party.

No Pharmacist Duty To Monitor Patient Prescription History

Thanks to Courtney Posnik of Clark Hill PLC
In a December 28 decision, the Illinois Appellate Court, First District, declined to hold that under the Illinois Controlled Substances Act, 720 ILCS 570/100, et seq., pharmacists have a duty to "(1) monitor the patient's prescription history, (2) determine whether prescriptions were 'excessive'; or (3) warn the prescribing physician or the patient of that determination." Hernandez v. Walgreen Co., 2015 IL App (1st) 142990. 
In Hernandez, the special administrator of the Estate of Gilbert Hernandez ("Hernandez") sued the prescribing physician and pharmacies operated by Walgreen Company ("Walgreen") and Osco Drug ("Osco") that filled Hernandez's prescriptions for methadone. Hernandez suffered from chronic back pain and allegedly died from methadone intoxication.

The circuit court of Cook County granted the pharmacies' motion for summary judgment dismissing the plaintiff's claims against them based upon the lack of a recognized duty owed by the pharmacies. Plaintiff appealed, arguing that the pharmacies breached a duty of good faith dispensing in failing to monitor the frequency of Hernandez's methadone prescriptions. Plaintiff relied on the Illinois Controlled Substances Act, which provides that pharmacists may access prescription history "solely for a medical purpose."720 ILCS 570/318(j)(2). Plaintiff's claims against the prescribing physician were not at issue in the appeal.

The appellate court affirmed the circuit court's dismissal of the pharmacies from the lawsuit, holding that under the Illinois Controlled Substances Act, a pharmacist is not required to make use of the prescription-monitoring program, and accordingly, no duty attaches to a pharmacist to actively monitor a patient's history to detect excessive prescriptions.

The appellate court also held that imposing such a duty would run contrary to Illinois precedent, which has recognized a pharmacist's narrow duty to warn of a contraindication where "a pharmacy has patient-specific information about drug allergies, and knows that the drug being prescribed is contraindicated for the individual patient." Otherwise, Illinois precedent cautions "against requiring a pharmacy to monitor a patient, make medical judgments, or otherwise interject itself in the physician-patient relationship."

Exception Must Apply to Disclosures of Mental Health Records

Thanks to April Simmons, Loyola University School of Law
The Illinois Appellate Court, First District, reversed the Circuit Court's order granting the Plaintiff's motion to compel the production of mental health records and holding the defense attorney in contempt for failure to provide such documents, stating that the plaintiffs necessity for the documents must fit within the exceptions of the Mental Health and Developmental Disabilities Confidentiality Act (Confidentiality Act). Stuckey v. The Renaissance at Midway, 2015 IL App (1st) 143111, (December 18, 2015).

The Plaintiff, John Stuckey, the attorney-in-fact for Robert Holman, filed a motion in the Circuit Court to compel the production of information regarding John Doe, a patient that assaulted Robert Holman during his care at the Defendant's long term care facility, the Renaissance at Midway. The Plaintiff requested "information regarding the resident who assaulted Robert Holman, including his name, address, social security number, whether a criminal background check had been completed on him, and whether there were any prior incidents of aggression between this resident and any other residents or employees at Renaissance."

Renaissance argued the information HIPAA, the physician-patient privilege, and the Confidentiality Act precluded disclosure of the information.  Plaintiff argued that neither the physicians-patient privilege nor the Confidentiality Act were applicable. Additionally, the Plaintiff argued that redacted records may be disclosed under a protective order as allowed by HIPAA.  The Circuit Court agreed with the Plaintiff, after an in-camera inspection, and ordered Renaissance to produce the redacted records.  Renaissance refusal to comply with the Court's order resulted in Defense counsel being held in "friendly contempt."

The Appellate Court referred to the decision in Reda v. Advocate, 199 Ill 2d 47, 60, 262 Ill. Dec. 394, 765 N.E. 2d 1002 (2002), noting the importance of the confidentiality of mental health records.  Confidentiality motivates people to seek treatment and encourages candor between the patient and the therapist. Therefore, persons seeking release of mental health information must show the disclosure is authorized by the Confidentiality Act.

The Appellate Court found that it was undisputed by all parties that John Doe was the recipient of mental health or developmental disabilities services while at Renaissance. The Court found that all documents were prepared by a nurse or social worker at Renaissance and pertained to the services Jon Doe was provided and therefore are protected under the Confidentiality Act.
The Court distinguished the Plaintiff and Circuit Court's reliance upon Giangiulio v. Ingalls Memorial Hospital, 365 Ill.App3d.823, 302Ill.Dec.812, 850 N.E.2d 249 (2006). Giangiulio dealt with the disclosure of the actual weapon used in an attack, not the disclosure of information pertaining to Jane Doe's medical or mental condition.  Thus, Giangiulio does not support disclosing protected mental health records.

Upon the finding that the records are protected under the Confidentiality Act, the Plaintiff bears the burden of demonstrating that the disclosure of the documents are within an exception.  In the Circuit Court, the Plaintiff did not rely on any specific exception and argued instead that the Act simply did not apply to the records. Based upon the Plaintiff's failure to identify an appropriate exception for the disclosure of the documents, the Appellate Court found the discovery order improper. Consequently, the finding of contempt from refusal to comply with the improper order is reversed.

Illinois Register
The links to each Illinois Register go to the cover page.
It is not possible to link to individual pages within the Register. Use the search function
 within the PDF to search for the Register page that you wish to review.

(regulations that agencies intend to address)
  • Health Facilities and Services Review Board- page 1267.
  • Department of Human Services - page 1273.
  • Department of Revenue - page 1376.
Adverse Health Care Events Reporting Code
77 Ill. Adm. Code 235
Page 375 

Hospital Licensing Requirements
77 Ill. Adm. Code 250
Page 411 
Accident and Health Reserves
50 Ill. Adm. Code 2004
Page 211


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