Litigation

Hospital wins new trial in $20 mln dispute with Humana over judge swap

4 minute read

REUTERS/Jim Young

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(Reuters) - Illinois' highest court has ordered a new trial in a lawsuit by a hospital accusing Humana Inc of cheating it out of $20 million, finding the trial court wrongly refused to let the hospital exercise its right under the state's law to switch judges.

In a unanimous opinion Thursday, the Illinois Supreme Court said that Palos Community Hospital had been entitled to take advantage of an Illinois statute allowing parties in civil cases one chance to substitute the judge as of right, rejecting a doctrine recognized by lower courts that a judge could not be substituted after parties had a chance to "test the waters" with the original judge.

"Today's decision is important for two reasons: (1) it provides a uniform, clear standard throughout Illinois for exercising the right to a single substitution of judge and (2) it opens up a new chapter in Palos' attempt to receive appropriate payment from Humana for the medical care that it has provided," Everett Cygal of Schiff Hardin, a lawyer for Palos, said in a statement.

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Humana and its attorney Tacy Flint of Sidley Austin did not immediately respond to requests for comment.

The dispute arose from a 1985 contract between the Palos Heights, Illinois hospital and a health maintenance organization called Michael Reese Health Plan (MRHP), in which Palos agreed to discount its medical fees in exchange for the HMO steering patients to the hospital. Humana later acquired MRHP.

Palos later entered into a separate agreement with a different Humana subsidiary, ChoiceCare, which would compensate the hospital at higher discounted rates than those in the MRHP agreement.

In its 2013 lawsuit in Cook County Circuit Court, the hospital alleged that despite that agreement, Humana inappropriately reimbursed the hospital not at the ClearChoice rates but the lower ones applicable to the MRHP contract, resulting in an under-payment of more than $20 million.

In April 2017, Palos moved for substitution of the judge as of right. Judge Diane Shelley denied the motion under the "test the waters" doctrine, however, finding that the hospital had already gotten a hint of her views at a hearing on a discovery issue.

A jury found in favor of Humana in 2018, and Palos appealed on numerous grounds. A mid-level appeals court upheld the verdict last year.

Justice Mary Jane Theis, however, wrote Thursday that the "test the waters" doctrine was not consistent with the current law, despite its recognition by some lower courts.

"A party having 'been able to form an opinion as to the court's disposition toward his or her case' is not among the criteria listed in the statute," Theis wrote, quoting Shelley's 2017 order. "Thus, the test the waters doctrine is an improper basis on which to deny a motion for substitution of judge as of right."

As a result, Theis said, all orders in the case since April 2017 were void, and the case must return to the trial court.

The case is Palos Community Hospital v. Humana Inc et al, Illinois Supreme Court, No. 2021 IL 126008.

For Palos: Everett Cygal of Schiff Hardin

For Humana: Tacy Flint of Sidley Austin

Read more:

Humana defeats Illinois hospital's $20 million lawsuit on appeal

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