Cahokia Nursing and Rehabilitation Center et al. v. State of Illinois and Illinois Department of Public Aid n/k/a Illinois Department of Healthcare and Family Services

OPINION

STEFFEN, J.

THIS CAUSE comes to be heard on cross motions for partial summary judgment filed by the parties in this consolidated case, due notice having been given and oral arguments presented, this Court being fully advised, finds as follows:

Claimants are long-term care facilities located in the State and certified as Medicaid providers for participation in the Medical Assistance Program. The Respondent, Illinois Department of Public Aid, currently known as Illinois Department of Healthcare and Family Services (HFS), is charged with administering the Medical Assistance Program. Claimants bring this consolidated action claiming interest penalties due for vendor payments pursuant to the State Prompt Payment Act. (“Act”) 30 ILCS 540/0.01, et. seq.

The Amended Complaint sounds in three counts. In Count I, Claimants assert a late payment interest penalty claim for the period of January, 2000 through July, 2002 (“Initial Period”) in the amount of $1,443,145.53. In Count II, Claimants and six additional facilities assert new late payment interest penalty claims for July, 2002 through June, 2003 (“New Period”) in the amount of $2,396,358.78. In Count III, Claimants seek to invalidate allegedly improper administrative rules in the form of the instructions posted on the HFS website regarding interest penalties.

The matter now stands on motions for summary judgment on the issue of when interest begins to accrue on the unpaid principal amounts HFS owed the Claimants for the Initial and the New Period and the method by which to calculate interest. Both sides, by agreement, have split the issues for the sake of efficiency. Claimants filed two separate summary judgment motions on the issues of when interest begins to accrue under the Act and method by which to calculate interest. The HFS has filed a single motion on the issue of what constitutes a bill for services rendered to a Public Aid Recipient.

[*280] Claimants argue that for the Initial Period, since the prepayment report authorizes payment, interest begins to accrue sixty days from the date of the report, or alternatively, ninety days from the end of each month of service. Respondent urges the Court to find that a “bill” under the Act is the date when the document control number (DCN) is generated by HFS for services to each individual recipient. On the issue of how to calculate the interest penalty, Claimants argue for a per month or fraction thereof formula and Respondent for a per diem one.

STANDARD FOR DECISION

All matters are before the Court on motions for summary judgment. This Court’s Rule 20 provides that the pleadings and practice before this Court shall follow the Civil Practice Law and the Illinois Supreme Court Rules, except as otherwise provided by the Court of Claims or this Court’s rules. 74 Ill.Adm.Code 790.20.

Section 2-1005 of the Code of Civil Procedure, 735 ILCS 5/2-1005, provides in relevant part:

Any time after the opposite party has appeared or after the time within

which he or she is required to appear has expired, a plaintiff may move

with or without supporting affidavits for a summary judgment in his or

her favor for all or any part of the relief

and

a judgment shall be rendered without delay if the pleadings,

depositions, and admissions on file, together with affidavits, if any,

show that there is no genuine issue as to any material fact and that the

moving party is entitled to judgment as a matter of law.

Both Claimants and Respondent are in agreement that there are no factual disputes in this matter. Claimants are qualified long-term care vendors and there is no dispute over the type, nature or amount of principal medical payment due. The parties do dispute whether HFS also owes Claimants interest under the Act for possible late payments and the manner in which such interest is to be calculated. The resolution of these issues is not factual but squarely one of statutory interpretation and appropriate for summary judgment.

BILL PAYMENT PROCEDURES

The Departmental Report1 filed in this matter spells out in detail the bill payment procedures that were in place prior to the changes instituted in July,

The Departmental Report was filed with the Court on April 18, 2003. The Court’s July 7, 2002 order consolidated the cases. Since then, on July 7, 2004 a Supplemental Report to the Amended Complaint was filed. However, with respect to the issue of when interest begins to accrue it essentially adopts the reasoning of the initial Departmental Report.

[*281] 1992 that streamlined the procedure and resulted in the current paperless billing method. Essentially, prior to the changes, nursing home vendor payments used a “turnaround” invoicing system. Under that system, nursing facilities initially provided an “admit packet” for each medical assistance recipient under their care and the caseworker then prepared an “admit authorization” (DPA 2299) based on that. Every month, the Department would generate a separate invoice for each recipient based on the DPA 2299 and forward it to the nursing facility.

The nursing facility then had the responsibility of making corrections to each invoice and to mark each for truthfulness and accuracy, and return a fully completed certified invoice to the Department for processing. Upon receipt, the Department gave each separate returned invoice a DCN. The changes to the invoice were entered into the data and the claims were released for adjudication to determine the appropriate amount of payment. After adjudication, the documents went to claims processing and after approval there, were forwarded to the Comptroller’s office for payment. The vendor payment was made by the Comptroller’s office and the nursing facility would be advised that payment was forthcoming.

Public Act 87-809 became effective on July 1, 1992 and instituted a streamline billing and payment procedure aimed at eliminating several layers of paperwork. The Departmental Report, submitted by HFS, outlines in great detail the policies and procedures that are currently in effect. The new system replaced turnaround billing with the Prepayment Report (Report) that is sent by HFS to each nursing facility and this initiates the payment procedure. The Report advises the nursing facility of the amount it may receive per resident for the preceding month; essentially representing the amount that the nursing care facility would have billed the Department for services in the preceding month. However the Report is only an estimate of what the facility may receive because there are various adjustments. The Remittance Advice that follows shows adjustments made during the adjudication process including recoupments for overpayments. Although nothing needs to be returned to the Department to initiate payment after receipt of the Prepayment Report, the nursing facility is still obligated to notify the Department of any changes that would affect payment and certify its services to the recipients. Changes may be sent to the Department at any time of the month and will be reflected in the adjustments process.

Certification of service and correctness of payment is appended to the Remittance Advice. Around the 15th of each month following the month of service a DCN is assigned to each individual claim. Adjudication of the claim may begin one day following the DCN. However, the time frame varies based on monetary considerations. Essentially, the time frame for adjudications is based on a schedule developed by the Department that corresponds to the Department’s spending plan as dictated by its appropriations.

A “bill” for services a long-term care facility renders in any given month is approved on the date that an adjudication process is completed and a voucher is sent to the Comptroller. Departmental Report at 3-4. The [*282] adjudication process begins after the DCN is assigned. The Report bears that after completing the data entry, the claims are released for adjudication to determine the appropriate amount of vendor payment to the nursing care facility for each resident recipient. After adjudication, all documents including the voucher are forwarded to Claims Processing for review and assembly required for submissions to the Comptroller. Upon determining that all materials, including the Remittance Advice, necessary for submission to the Comptroller for payment were prepared and organized, Claims Processing approves payment and an invoice voucher is forwarded to the Comptroller.

I. WHEN INTEREST BEGINS TO ACCRUE

Claimant’s first motion for partial summary judgment is based on when interest begins to accrue for late vendor payments by HFS. In addition to filing a response to this motion, Respondent has also filed a single motion for partial summary judgment on the issue of what constitutes a bill for services. Essentially, the answer to both motions begins with the central analysis of whether under this unique paperless system, a physical bill is in fact contemplated. The response to what is approval or receipt of this bill follows, as does the question of interest accrual. For the purpose of this analysis the claims should be separately considered under the Initial Claims Period and the New Claims Period as the applicable language regulating these periods varies.

A. Initial Claims Period

In Count I, Claimants assert a late payment interest penalty for the period of January, 2000 through March 2002, with one exception.2 The factual framework in applying these regulations is not in dispute and discussed in detail in the Departmental Report. The Court’s Rule 14 provides that Departmental Reports “shall be prima facia evidence of the facts set forth therein.” 74 Ill.Adm.Code 790.140.

Claimants argue that since the Prepayment Report authorizes payment, this is the date of the bill and therefore the 30 days for approval and sixty days for payment would start to accrue as of this date. In the alternative, since there is no physical submission of a bill, the last day of each month of service in the date of the bill, and interest would accrue 90 days from then (30 days for approval plus 60 days for payment). Respondents state that the unique nature and history of the DCN establishes that it, in fact, is the bill, Their calculation of the penalty period is the elapsed days between the date of the DCN and the date of payment. Therefore, the HFS is entitled to 90 days from the DCN; 30

Claim 03CC1873 by Northwest Home for the Aged includes a claim for July 2002 month of service. Although included in Count I, the legal analysis and findings on this claim are the same as Count II.

[*283] days to approve the bill after the DCN and 60 days thereafter for mailing payment.

The prevailing statuary language during this period was as follows:

…in any instance where a State official or agency is late in payment of

a vendor’s bill or invoice for good or services furnished to the

State,…properly approved in accordance with rules promulgated under

Section 3-3, the State official or agency shall pay interest to the vendor

in accordance with the following:

(1) Any bill approved for payment under this Section must be paid or

the payment mailed to the payee within 60 days of the date of approval.

If payment is not made or mailed to the payee within this 60 day

period, an interest penalty of 1.0% of any amount approved and unpaid

shall be added for each month or fraction thereof after the end of this

60 day period, until final payment is made.

30 ILCS 540/3-2 (prior to amendment effective July 1, 2002 pursuant to Public Act 92-384, Sec. 5)(emphasis added).

Joint Rule 900.60 defines the “Date of Approval of the Vendor’s Bill” as “the date on which the Agency Head or designee signs the voucher requesting the Comptroller’s Office or other agent of the State to issue a warrant to pay the bill” and Joint Rule 900.70(b) requires agencies to grant or deny that approval within 30 days after they receive a bill, or to pay interest beginning 90 days after receipt it they don’t. (74 Ill.Adm.Code 900.20)

Rule 900.80(f) further provides that:

When the parties do not contemplate submission of a physical bill to

the State, the date of the final receipt of the Goods or Services shall be

considered the date of the bill.

74 Ill.Adm.Code 900.80(f).

The pivotal issue in applying these provisions and rules is whether under the unique paperless system there is a bill and if so, what best represents a bill. The secondary issue is that if there is no bill, should interest accrue from the last date of the month of service or upon approval of charges based on DCN assignment. Upon consideration of all arguments and the Departmental Report, the Court is of the opinion that there is no physical bill and that the last date of service is the date of the bill. Furthermore, the accrual period should commence 60 days after approval as outlines above. However, if the charges are not [*284] approved or denied within 30 days of the date of the bill, interest shall accrue 90 days after the last date of service per Joint Rules 900.70(a) and (b).

The term “bill” was not defined in the statute prior to July 1, 2001, but the Joint Rules defined it as “the vendor’s standard bill or invoice for goods or services”. The July 1, 2001 amendment defined a “proper bill or invoice” as one that included all the necessary information for payment as specified by a State Agency and in rules adopted in accordance with this Act. The conclusion that there is not a physical bill or vendor’s standard invoice in the current system is supported by the Departmental Report as well as other statements and admissions made by both parties. The HFS Informational Notice of May 22, 1992 stated, “Invoices will no longer be generated or mailed to long-term care Providers”. Joint Rule 900.70(a) speaks of review of “Vendor’s Bill … within thirty days of physical receipt of the bill”. 74 Ill.Adm.Code 900.70(a) (emphasis added). The Department has admitted that Claimants need not submit a physical bill. The current handbook payment sections both reflect the lack of a physical bill being submitted as part of the “paperless billing” system. Claimants argue in their motions that they do not and cannot submit a bill to the State. Claimants’ Motion for Partial Summary Judgment on Issue of When Interest Begins to Accrue, Page 8.

Claimants’ argument to consider the Prepayment Report as the date of the bill or approval fails. Although, the Prepayment Report initiates the payment process, the adjudication of the amount can still follow to reflect outstanding credits or claims rejection. It is therefore reasonable to conclude that the Report is not one that an agency head would rely upon to ask for a payment warrant from the Comptroller. If the amount of payment is not settled per recipient and the Prepayment Report is only an estimation of charges, it cannot be construed to be a bill.

Respondent’s argument that the DCN IS THE BILL ALSO HAS SOME STRENGTHS AND FAILINGS AS EXPLORED BELOW. The detailed record explains the purpose and assignment of the DCN. It appears that the DCN is assigned to separate and individually document each patient’s charges. It is only upon doing so that changes made by each nursing facility are entered into the system to accurately reflect charges as opposed to the Prepayment Report which is only an estimation of charges. This process supports Respondent’s argument that the Prepayment Report is not the bill. But as Claimant correctly points out, there is no judicial or statutory support to hold that the DCN is the bill.3

Rather, in light of the extensive evidence that there is no formal bill under the unique paperless billing system, this Court declines to hold as a matter

3 Claimant’s Brief in Support of Motion for Partial Summary

Judgment, Page 14.

[*285] of law that either the DCN or the Prepayment Report are truly what the statutory scheme contemplates to be the bill. The Court finds that to do so would create an artificial entity because neither truly qualifies as a bill. Rather, Joint Rule 900.80(f) effective during the entire initial claims period governs and “(w)hen the parties do not contemplate submission of a physical bill to the State, the date of the final receipt of the Goods and Services shall be construed the date of the bill.” 74 Ill.Adm.Code 900.80(f). This language precisely describes the facts in this claim, and Joint Rules are meant to cover events when a situation arises which is not covered or where the proper course of action is unclear. 74 Ill.Adm.Code 900.140. Since the HFS pays Claimants for long-term care services they render each month, the last day of each month is the “date of final receipt” of each Claimant’s services and effectively the “date of the bill”.

The secondary issue is what constitutes approval under the current scheme. Joint Rule 900.60 defines the “Date of Approval of the Vendor’s Bill” as “the date on which the Agency Head or designee signs the voucher requesting the Comptroller’s Office or other agent of the State to issue a warrant to pay the bill” and Joint Rule 900.70(b) requires agencies to grant or deny that approval within 30 days after they receive a bill, or to pay interest beginning 90 days after receipt if they don’t. 74 Ill.Adm.Code 900.20. Claimants argue that approval and payment should occur 90 days from the Prepayment Report or end of each month of service. Respondent argues that since the DCN is the bill, payment is due 90 days thereafter; 30 days for approval and 60 days for payment.

The Court finds that since the last day of the month of service is the date of the bill, payment is due at the latest 90 days from this day. However, if charges are approved for payment prior to 30 days from the date of the bill (i.e. the last date of the month of service) then payment is due even earlier - within 60 days of approval. The Court finds that approval is when an Agency Head or designee signs a voucher requesting the Comptroller’s officer to pay the bill. The Court’s reasoning follows.

During the entire period of time that covers the Initial Claims Period, Joint Rule 900.70 (a) and (b) provided as follows:

a) An agency shall review each Vendor’s bill and shall either deny the

bill in whole or in part , ask for more information necessary to review

the bill, or approve the bill in whole or in part, within thirty days after

physical receipt of the bill.

b) If the Date of Approval of the Vendor’s bill is after this 30 day

period…late payment interest shall be due if the Date of Payment is not

within 90 days (30 days for approval and 60 day (sic) for payment)

after receipt of the bill.

Respondent has argued that interest does not accrue until after approval and since the DCN is the bill, payment is due 90 days therefrom. The Court concurs with Respondent’s position that interest accrues after approval of [*286] charges, however in light of Joint Rules 900.70(a) and (b), the approval process cannot be prolonged to the Claimants’ detriment. The spirit and purpose behind Section 3-2 of the Act is to require the State and its agencies to pay vendors interest on amounts due them within 60 days after approval. To hold as the Respondent urges would allow the State to control payment by possibly prolonging the approval process. As the departmental Report indicates, currently, adjudication of the claim may begin one day following the DCN. However, the time frame varies based on monetary considerations. Essentially, the time frame for adjudications is based on a schedule developed by the Department that corresponds to the Department’s spending plan as dictated by its appropriations. Holding that the DCN is the bill creates a danger where payment dates are not determined by sound statutory guidelines but by the monetary health of the state.

Based on this reasoning, and the mandate of Joint Rules 900.70(a) and (b), the HFS must approve, deny or ask for more information regarding a Claimant’s bill within 30 days of receipt (In the absence of a formal, physical bill, this date is the last day of month of service). If the HFS fails to take any of those actions within those 30 days, interest begins to run 60 days thereafter - or a total of 90 days after the date of “bill” (i.e. the last day of the month of service). If HFS approves the bill for payment under Joint Rule 900.60 as evidenced by the issuance of a voucher to the Comptroller requesting payment within 30 days after the date of the “bill” (i.e. the last day of the month of service), then payment is due within 60 days of this date. Therefore, for the Initial Claims Period, there is no physical bill and the last day of the date of service is the date of the bill. Payment on the bill is due within 60 days of approval of the bill. However, if the bill is not approved or rejected pursuant to Joint Rule 900.70(a) within 30 days, then the bill is due within 90 days of the date of the bill (i.e. 30 days for approval and 60 days for payment).

B. New Claims Period

In Count II of the Complaint, Claimants seek late interest penalties on payments for services from July 2002 through June 2003. During this time period, Section 3-2 of the Act provided in relevant part that:

… in any instance where a State official or agency is late in payment of

a vendor’s bill or invoice for good or services furnished to the

State,…properly approved in accordance with rules promulgated under

Section 3-3, the State official or agency shall pay interest to the vendor

in accordance with the following:

Any bill approved for payment under this Section must be paid or the

payment issued to the payee within 60 days of receipt of a proper bill or

invoice. If payment is not issued or mailed to the payee within this 60

day period, an interest penalty of 1.0% of any amount approved and [*287]

unpaid shall be added for each month or fraction thereof after the end

of this 60 day period, until final payment is made.

30 ILCS 540-2 (as amended effective July 1, 2002 pursuant to Public Act 92-384, sec. 5).

This amendment of the Act made the HFS’s receipt of a proper bill or invoice, rather than its approval of a bill, the event that triggers the running of the 60 day period before interest begins to accrue. However, this amendment does little to clarify the confusion created by a statutory scheme that speaks of a “proper bill or invoice” or a “bill properly approved in accordance with rules” as it is meant to apply to a system where both parties do not contemplate submission of a bill and there is in fact no physical bill. Both sides have made arguments asking the Court to hold either the DCN or the Prepayment Report as the bill. This Court declines to create such a bill for the reasons stated in the Initial Claims Analysis.

Unfortunately, the legislative changes have added confusion, not clarification. The application of the amendment to the paperless billing system does little to clarify if there is a bill or what should be a bill under the system or what a proper bill or approval is. The amended language of Section 3-2 appears meant specifically for vendors that in fact submit invoices to the State, not medical vendors who are directed not to submit invoices. However, medical vendors such as Claimants are currently clearly subject to the directives of Section 3-2 of the Act. As Respondent points out, the paperless system when it was first instituted was not subject to the Prompt Payment Act.4 Once it did become subject to the Act, the system was not evaluated with regards to conformity with the Prompt Payment Act5, thereby creating a system that is arguably confusing and imbalanced. This Court’s finding is meant to apply the statutory language to the paperless billing framework to allow for a scheme that is fair, clear and closest to the intent and purpose of the Act.

The Court’s determination begins with the finding that there is no physical bill under the current system. Joint Rule 900.80(f) provides that the date of the HFS’s final receipt of a Claimant’s services “shall be considered the

Public Act 87014 Article II, section 2-17, effective 7/24/91 added to the definition of goods and services in Section 540/1 of the Prompt Payment Act: “however goods and services do not include medical assistance provided to public aid recipients prior to July 1, 1992…”

HFS became subject to the Act on July 23, 1994; the paperless system had been in place for more then 7 years but was never evaluated to conform to the new requirements. See Respondent’s Brief on When Interest Begins to Accrue, Page 5.

[*288] date of the bill”.6 This date would be the last day of each month that a Claimant provides medical services. This analysis is identical to the Initial Claims Period.

Neither HFS nor Claimants expect to receive or submit a physical bill. The Department has admitted that the Claimants need not submit a physical bill to the Department to initiate payment procedures for monthly services. The Departmental Informational Notice dated 5/22/92 and its current handbook payment sections both reflect the lack of a physical bill being submitted to the Department as part of the paperless system. Further, the Department admits in its Response that Claimants do not need to submit bills. In light of this clear understanding, the Court believes that Joint Rule 900.80(f) governs. When the parties do not contemplate submission of a physical bill to the State, the date of final receipt of the goods or services shall be considered the date of the bill.

It is important to note in support of this reasoning that the issue of no billing by vendors in this unique paperless system is well settled. The HFS treats long-term facilities like Claimants differently for payment purposes than other vendors. It does not require, indeed does not allow them, to submit a bill. Instead, HFS initiates the calculation, adjudication and payment directives on its own. As noted by Claimant, HFS has admitted in discovery and in the Departmental Report it filed in this matter that they initiate and carry forward all payment procedures. The HFS Response Brief states, “(t)he paperless system removed a significant billing burden from the Claimants. The Claimants do not have to engage in the burdensome administrative detail of submitting monthly bills to the Department.”7 Finally the Informational Notice attached to the Departmental Report sent to the long-term care providers such as Claimants advised:

The Department has also elected to implement a totally automated

billing system, which will mean elimination of Form DPA 2298, Long

Term Care Turnaround Billing Invoice… Invoices will no longer be

generated or mailed to long-term care providers. Instead, a report will

be generated on the 15th of each month and sent to…long term care

providers. This report will provide client specific information taken

from the Recipient Data Base and will be the same information used to

authorize payment.

HFS Informational Notice of May 22, 1992 (emphases added).

The Rules were amended effective July 1, 2002 to state “When the parties do not contemplate submission of a physical bill to the State, such as to make scheduled payments per the terms of a contract, the date of final receipt or acceptance, whichever is later, of the Goods or Service shall be considered the date of the bill.”

Respondent’s Response Brief to Motion for Partial Summary Judgment on Issue of When Interest Begins to Accrue, Page 7.

[*289] These considerations reaffirm that in fact, there is no “bill” and the receipt of a “proper bill or invoice” cannot follow. To hold otherwise would necessitate a finding that HFS generates a bill for itself, adjudicates the same, and then sends and receives the same and finally forwards it for remittance.

The question still remains that in the absence of a physical bill, when does the 60 day accrual period begin? Claimant has proposed that since the Section 3-2 amendment, there is no approval requirement and the 60 days are measured from the last date of service. The Respondent argues simply that the DCN is the bill. The Court agrees with Claimant’s proposition that the Section 3-2 amendment changed the approval requirement and made the receipt of the bill the event that triggers the accrual period. However this Court is of the opinion that the amended Section 3-2 still requires that the 60 day period accrues only after receipt of a proper bill or invoice.

The language of the Act as it applies to this New Claims Period suggests that the State official or agency shall pay interest for late vendor payments for bills or invoice…properly approved. The Act further clarifies that any bill…must be paid…within 60 days of receipt of a proper bill or invoice. 30 ILCS 540/3-2 (emphasis added). The emphasized language suggests that the accrual period should commence only upon a proper bill or a properly approved bill and not simply the date of the bill. The spirit and purpose of the amended Act is not only to ensure prompt payment to vendors such as Claimants but also to ensure such payment is based on a proper bill or properly approved bill sufficient to put the State on notice that a certain payment is due and owing. The Court finds that to construe the penalty period as beginning simply from the last day of the month does not ensure that the bill is a proper bill or a properly approved bill. Therefore, while the last day of the month is the date of the bill, the Act allows the State time to review charges accruing to this date for the “bill” to become a “proper bill” or “properly approved bill.”

The last day of the month of service is not such a date because the record clearly shows that the billing and charges are in their infancy at this stage and that there is considerable adjudication and adjustments that occur after this time. The Departmental Report illustrates that the individual patient charges have not been separated as evidenced by a DCN. Further, the nursing facility still has not received a Prepayment Report and has not had a chance to verify or correct the State’s assessment of charges. The process of adjudication and corrections for overpayment has not been started. Also, Joint Rule 900.60 defines the “Date of Approval of the Vendor’s Bill” as “the date on which the Agency Head or designee signs the voucher requesting the Comptroller’s Office or other agent of the State to issue a warrant to pay the bill.” 74 Ill. Adm. Code. 900.20. So as stated above, although the last date of the month may be the date of the bill, it is not the date of a proper bill or properly approved invoice as is contemplated by Section 3-2 or as defined by the Joint Rules.

Respondent has urged the Court to find that the DCN date meets the criteria of the bill and that interest should accrue 90 days there from. However, upon evaluating the language, spirit, and analysis of the amended Section 3-2 [*290] and Joint Rule 900.70, this Court finds that the appropriate time to measure the accrual should be 90 days from the last day of service. Rule 900.70(a) and (b) state:

a) An agency shall review each Vendor’s bill and shall either deny the

bill in whole or in part, ask for more information necessary to review

the bill, or approve the bill in whole or in part, within thirty days after

physical receipt of the bill.

b) If the Date of Approval of the vendors bill is after this 30 day

period…late payment interest shall be due of the Date of Payment is

not within 90 days (30 days for approval and 60 day (sic) for payment)

after receipt of the bill.

Joint Rules 900.70(a) and (b).

It is evident that the language of the Prompt Payment Act does not comport with the paperless billing system. The current application is wholly dependent on a physical bill and here there is simply no bill. Rather than create an artificial “bill”, this Court finds that because the language of the Act and its application to the current system is not clear, it should be evaluated in light of the spirit and intent of the Act and by observing the Joint Rules that are aimed at addressing such situations where the course is unclear or confusing. The language of Joint Rule 900.70 dictates limiting the time an agency is allowed to approve or adjudicate the charges. The Act seeks to ensure that vendors are paid in time and that there are penalties for late payments or non-payment of a proper or approved invoice. In evaluating the New Claims Period under this criteria, the Court is of the opinion that it is appropriate to allow the State no more than 30 days from the date of the bill to determine that the bill is, in fact, a proper bill. If the HFS fails to take any of those actions within those 30 days, the 60 day period begins to run, and interest on the unpaid principal begins to accrue 90 days after the last day of each month of service. Therefore, under the New Claims Period, the interest penalty begins no more than 90 days from the last day of month of service - 30 days to review from the date of the bill and 60 days thereafter for payment.

II. METHOD OF CALCULATION OF INTEREST PENALTY

Claimants’ second motion for partial summary judgment concerns the issue of how late payment interest penalties the HFS owes Claimants under the Act should be calculated. Section 3-2 of the Act requires State agencies to pay an interest penalty of 1 percent of any amount remaining unpaid “for each month or fraction thereof” after the end of the 60-day period, until final payment is made. 30 ILCS 540/3-2. Claimants urge this court to interpret this as [*291] requiring a per month and not a per diem calculation of interest owed.8 Respondent HFS simply replies that it is bound by the Joint Rules of the Office of the Comptroller and the Department of Central Management Services (“Joint Rules”), which require a per diem method. HFS concedes that there is a conflict between the Joint Rules and the Act visa vis the method of interest payment calculation but that they are without discretion and obligated to follow the Joint Rules. The Joint Rules currently provide for a daily interest penalty calculation of .00033 (01/30). Respondent suggests that this Court find this to be the appropriate method of interest penalty calculation until the Joint Rules are amended to comport with the Act.

The Act in its current version provides the following method of calculation:

(1) Any bill approved for payment under this Section must be paid or

the payment issued to the payee within 60 days of receipt of a proper

bill or invoice. If payment is not issued to the payee within this 60 day

period, an interest penalty of 1% of any amount approved and unpaid

shall be added for each month or fraction thereof after the end of this

60 day period, until final payment is made.

30 ILCS 540/3-2. (Emphasis added).

The Joint Rules provide the following method of calculation:

a) Interest is calculated at the rate of 1% per month. This results in a

daily interest factor of .00033 (01/30).

b) For each day payment is late, the amount late shall be multiplied by

the daily interest factor to determine the late payment charge.

74 Ill. Adm. Code 900.100. (emphasis added).

Section 3-3 of the Act states:

The State Comptroller and the Department of Central Management

Services shall jointly promulgate rules and policies to govern the

uniform application of this Act. These rules and policies shall include

procedures and time frames for approving a bill or invoice from a

vendor for goods or services furnished to the State. These rules and

A per diem calculation would assess an additional, pro-rated penalty amount for each additional day the principal remains unpaid; a per month calculation would access a full additional 1 percent of the principal amount for each month or portion of every month it remains unpaid.

[*292] policies shall provide for procedures and time frames applicable to

payment plans as may be agreed upon between State agencies and

vendors. These rules and policies shall be binding on all officials and

agencies under this Act’s jurisdiction…

30 ILCS 540/3-3. (Emphasis added).

The parties are in agreement that Claimants are qualified medical care providers and that they would be entitled to late payment interest if principal amounts were more than 60 days late. The central issue in this motion for partial summary judgment is whether Sec. 3-2 of the Act requires that any interest penalties due be calculated on a per month or a per diem basis.

The resolution of this issue rests on statutory construction of Sec. 3-2 of the Act as well as a legal interpretation of whether it would be appropriate to apply the Joint Rules to the Act to explain, interpret or administer the plain language of the Act. This analysis rests on whether the language of the Act plainly and clearly dictates a per month penalty calculation. Additionally, the issue is whether a state agency’s administrative rules should be implemented to alter or enforce the Act in this manner.

Upon a careful review of the case law as well as the oral and written arguments submitted by both sides, this Court is of the opinion that the plain reading of the language of the Act clearly dictates a per month interest penalty calculation as it relates to this type of case. The Joint Rules are in drastic conflict to this plain language and cannot be applied to change the meaning and application of the statutory intent of the Act. The Court’s reasoning and analysis follows and is substantially in agreement with the arguments proposed by Claimants in their motion on this issue.

First, the plain language of the Act provides that “an interest penalty of 1% of any amount approved and unpaid shall be assessed for each month or fraction therefore”. 30 ILCS 540/3-2. Applying this language to the medical vendor payment arena seems to logically dictate a per month calculation of penalties. This reading of the language is not only supported by its plain meaning but also the extensive legislative history and committee notes accompanying this Legislation.9 87th General Assembly, Illinois House of Representative, Transcription of Floor Debate, June 18, 1992. The statements by the legislators supporting the passage of the Act show that the legislature intended to force the State to be current in its vendor payments and to penalize it for not doing so. Id.

See transcript of Floor Debate, 87th General Assembly, House of Representative, June 18, 1992. Several legislators argued in favor of the interest penalties and urged the need to make them comparable to the penalties imposed on vendors. The Illinois House passed the bill on a veto of 81 to 12 and pursuant to the Governor’s mandatory veto changes voted 116-0 to accept the chances and pass the bill.

[*293] Secondly, while no Illinois court has directly addressed whether Sec. 3- 2 requires a per month or per diem calculation, the legislative history shows that the intent was to impose penalties on the State similar to the penalties the State imposed on private taxpayers for late payments. Id. Therefore, applying the tax penalty statutes and case law to this case is not only appropriate due to the legislative intent to make these penalties comparable but also because both share the common “each month and fraction thereof” language. Claimant’s legal analysis cited generally below is both on point and not refuted by Respondent.

In Kousins v. Anderson, 229 Ill. App. 3d 486, 593 N.E.2d 1095 (2d Dist. 1992), the Illinois Appellate Court for the Second District considered a taxpayer’s challenge to Lake County’s Calculation of a penalty for overdue real estate taxes under a statute that provided that when such taxes are not paid when due they should bear interest “at the rate of 1 % per month.” 593 N.E.2d at 1096 (citing Ill.Rev.Stat. 1987, ch. 120, par. 705 (now 35 ILCS 200/21-15, as amended)). When the taxpayers waited until July 12, 1985 to pay real estate taxes that were due on June 2, 1985, the county assessed a penalty of 1 percent for the entire month of June and the entire month of July (i.e., construing the statute’s “1 % per month” language to require a per month, rather than a per diem, calculation of the amount of the late payment interest penalty). 593 N.E. 2d at 1097. The Appellate Court upheld that construction, finding that the legislature’s use of the term “monthly” rather than “per annum” in the statute supported the county’s argument that delinquent real estate taxes “are subject to an interest penalty for each additional month or fraction of a month.” 593 N.E.2nd at 1100.

More significant was the fact that shortly after the Kousins case had reached the Appellate Court for the first time, the legislature had amended the statute at issue there to add to the words “per month” the new phrase “or any portion thereof.” Id. at 1101. The Court found that this legislative amendment of an ambiguous statute that had so recently been the subject of a challenge in the courts was an expression of the legislature’s intent that late payment interest penalties on delinquent real estate taxes should be assessed “for the entire month when such taxes remained unpaid for any portion of the month.” Id. (emphasis added). Interpreting the statutory language to require a per diem, rather than a per month, assessment of the interest penalty would render the “per month or any portion thereof” language surplusage. Id..

Here, there is no need for the legislature to amend the key language of Sec. 3-2 of the Prompt Payment Act to make its intent clear. The “for each month or fraction thereof” language it included in passing that section initially already corresponds to the amended “per month or any portion thereof” language of the tax statute that the Kousins court held required a per month, rather than a per diem, calculation of a late payment interest penalty.

In Hillers v. Boylan, 233 Ill. App. 3d 3, 598 N.E. 2d 402 (4th Dist. 1992), the Illinois Appellate Court for the Fourth District relied on the reasoning and holding of Kousins to again hold that the “per month or any portion thereof” language of the same tax penalty statute (Ill.Rev.Stat. 1987, ch. 120, par.705 [*294] (now 35 ILCS 200/21-15)) required a per month, rather than per diem, calculation of the penalty for late payment of real estate taxes. 598 N.E.2d at 404-405.

Lastly, this Court finds Claimant’s argument that HFS has used the “for each month or fraction thereof” language to impose a per month penalty calculation against medical vendor facilities like the Claimant most persuasive. It appears from the briefs and arguments raised by both sides that the HFS itself has interpreted an administrative rule to implement a “provider participation fee” on facilities like the Claimant.10 Rule 89 Ill.Adm.Code 140.94(f) imposes a penalty for late payment of a fee by medical vendors and states that vendors “shall be assessed a penalty of ten (10%) percent of the delinquency of deficiency for each month, or fraction thereof. The “for each month or fraction thereof” language of this statute is almost identical to the penalty calculation provision of the Act.

Based on this reasoning as well as the plain reading of the Act and the supporting legislative history, this Court is not persuaded by Respondent’s argument that the language of the Act is unclear. It follows then that it is unnecessary to look at the Joint Rules for clarification or application of the Act.

This analysis is supported by case law that interprets a state agency’s limited rulemaking authority. The Court in Van’s Material v. dept. of Revenue, 131 Ill.2d 196, 545 N.E.2d 695, (1989), cited by Claimant in their favor, held that a court’s primary goal in construing a statute is to give effect to the legislature’s intent in enacting that statute. While an administrative rule interpreting a statute is due some respect, it is not binding on the courts. 545 N.E.2d at 699. Nor is an administrative agency’s erroneous construction of a statute binding on the courts. Id. The Illinois Supreme Court has clarified that a statute may not be altered or added to by an agency’s exercise of rule-making power under the statute. Northern Illinois Automobile Wreckers and Rebuilders Ass’n v. Dixon, 75 Ill.2d 53, 387 N.E.2d 320, 324 (1979).

Consequently, an administrative regulation that conflicts with a statutory act cannot be used to negate the clear language and intent of such act. Therefore, the Court finds that the Act requires a per month calculation of interest penalties and grants a partial summary judgment tin favor of the Claimant.

III. REQUEST FOR INJUNCTIVE RELIEF

In Count III, Claimants seek to have the Court invalidate allegedly improper administrative rules in the form of the instructions posted on the HFS website regarding interest penalties. As such, Claimants’ request amounts to a request for injunctive relief against the State. However, the Court of Claims

Section 5-4.32 of the Public Aid Code, 305 ILCS 5.5-4.32, expressly provides that it imposes the 15 percent fee on long term care facilities only for the period July 1, 1992 through June 30, 1992. [*295] 44 Il.Ct.Cl. 186 (1990). Since no Illinois statute provides jurisdiction for the Court of Claims to issue injunctions against the State, Claimant’s request for an injunction against the State prohibiting the State from posting or following allegedly improper administrative rules must be denied. Id.

CONCLUSION

Upon due consideration of applicable statutes, case law, and arguments from both parties, this Court finds that for the Initial Claims Period there is no bill and the last day of the month of service is the date of the bill. Interest accrues 60 days after approval of charges as outlined in this opinion, but if said approval is not within 30 days of the date of the bill, then interest accrues 90 days from the date of the bill (i.e. the last day of the month of service). For the New Claims Period, since the parties do not contemplate submissions or receipt of a physical bill, the last day of each month of service is the date of the bill. Consequently, the payment would be due no later than 90 days from this date - 30 days after the date of the bill for agency review and 60 days thereafter for payment. Any interest penalties shall be calculated on a per month or fraction thereof basis and not a per diem basis. And finally, Claimants’ request for injunctive relief is denied.

ORDER

STEFFEN, J.

This Court, having considered the Claimant’s Motions for Partial Summary Judgment on the Issues of When Interest Begins to Accrue and Method of Calculation of Interest Penalty, Respondent’s Response to the same as well as the Motion by Respondent on the Issue of What Constitutes a Bill for Services and having heard the arguments of counsel for all parties, and being otherwise fully advised in the premises, IT IS HEREBY ORDERED that:

1. Respondent’s Motion for Partial Summary Judgment on What Constitutes a Bill is denied.

2. Claimant’s Motion for Partial Summary Judgment on When Interest Begins to Accrue is granted as follows:

A. For all claims that relate to any month of service prior to July 2002 (Initial Claims Period), there is no bill and the last day of the month of service is the date of the bill. Interest accrues 60 days after approval of charges if said approval occurs within 30 days of the date of the bill. However, if charges are not approved as outlines in the opinion within 30 days after the date of the bill, interest accrues 90 days after the date of the bill (i.e. the last day of the month of service).

[*296] B. For all claims that relate to any month of service from July 2002 onwards (New Claims Period), there is no bill and the last date of the month of service is the date of the bill. Interest accrues 90 days from the date of the bill (i.e. 30 days fro review from the date of the bill and 60 days thereafter for payment).

3. Claimant’s Motion for Partial Summary Judgment on Method of Calculation of Interest Penalty is granted as follows: Any late payment interest penalties shall be calculated on a per month, rather than a per diem basis, such that every fraction of each new 30-day period following the initial 60 day interest free period shall result in an additional penalty of 1 percent of the unpaid principal amount. Interest calculations shall be determined on an individual medical recipient basis not on a lump sum amount due for the entire month for a facility and interest penalty calculation per recipient is to be calculated only if the penalty exceeds $5.00 per section 900.100(a) of the administrative rules.

4. Claimant’s Motion to order HFS to desist from printing, publishing, or otherwise following any guidelines contrary to the above order is hereby denied.

The matter is hereby remanded to the Commissioner for a factual determination of the award based on the above ruling of law.

ORDER

STEFFEN, J.

This matter is before the Court in this cause upon the Joint Stipulation of Claimants, CAHOKIA NURSING AND REHABILITATION CENTER, et al., and Respondents, STATE OF ILLINOIS and ILLINOIS DEPARTMENT OF PUBLIC AID.

This claim is by all Claimants listed in the Appendix. List of Claimants attached to the Amended Consolidated Verified Complaint, and against the State of Illinois and the Illinois Department of Healthcare and Family Services (“HFS”), formerly known as the Illinois Department of Public Aid (“DPA”). This claim is an action by Claimants to recover interest penalties on payments due to them for medical services pursuant to the Medicaid program, pursuant to the State Prompt Payment Act, 30 ILCS 540/0.01 et seq. Claimants allege that they are entitled to interest penalties on late payments from HFS and/or DPA for medical services provided to Medicaid recipients.

Claimants and Respondents have agreed to an entry of an award to Claimants in the amount of One Million, Two Hundred Seventy-nine Thousand, Eight Hundred Ten and 45/100 dollars ($1,279.810.45), in full and final satisfaction of the claim herein.

Based on the foregoing, Claimants are hereby awarded the sum of One Million Two Hundred Seventy-nine Thousand, Eight Hundred Ten and 45/100 dollars ($1,279,810.45), in full and final satisfaction of the claim herein.