On February 11, the U.S. Court of Appeals for the Seventh Circuit ruled that consultants who provide services to nursing homes and long-term care facilities lack standing to sue the state Medicaid agency and its contracted Managed Care Organizations on behalf of patients.
In Bria Health Servs., LLC v. Eagleson, No. 18-3076 (7th Cir. Feb. 11, 2020), the plaintiff-consultants asserted that the state agency responsible for administering the Medicaid program—the Illinois Department of Healthcare and Family Services (HFS)—and the Medicaid managed care organizations (MCOs) that HFS used to deliver health benefits to Medicaid recipients had violated various federal laws and regulations by not paying outstanding bills owed to the consultants’ clients. Regarding standing, the plaintiff-consultants argued that they had been authorized to bring claims on behalf of Medicaid beneficiaries residing in their clients’ nursing homes because each resident had designated the consultants as authorized representatives under the Medicaid regulations to bring “action as necessary to establish eligibility for Medicaid.” The consultants pointed to the regulation at 42 C.F.R. § 435.923, which allows beneficiaries to designate authorized representatives to act on their behalf in relations with state Medicaid agencies, for the authority to bring suit on behalf of the residents.
The Seventh Circuit, however, upheld the district court’s grant of the defendants’ 12(b)(1) motion to dismiss for lack of subject matter jurisdiction. The court explained that the language of 42 C.F.R. § 435.923 confines the power of the authorized representative to Medicaid eligibility actions and determinations. Therefore, the regulation did not authorize the plaintiff-consultants to bring civil claims on behalf of Medicaid beneficiaries.
The court noted that even if the regulation had authorized the consultants to bring a civil claim on behalf of the residents, the plaintiffs would still have to show some other support for their “representative standing” under Article III jurisprudence. The court pointed out that if a plaintiff cannot show an injury of their own, they must invoke some sort of recognized exception to the general standing requirements, such as a guardian bringing a claim on behalf of a minor, a next friend for a real party in interest who is disabled, or an association suing on behalf of its members. Even if 42 C.F.R. § 435.923 had by its terms conferred authority to bring a civil suit on behalf of beneficiaries, the court recognized that the plaintiffs had cited no support for the theory that a regulation could confer representative standing on the mere basis of authorization.
This case highlights the importance of considering—at any stage of litigation—whether subject matter jurisdiction exists, particularly when the plaintiff is not the injured party or when an authorized representative is involved in a suit. It also highlights to MCOs that even if representative authority is conferred by regulation, it may not be enough for a representative plaintiff to establish Article III standing.