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Jul 2019

Illinois Medicaid Managed Care Reform Legislation Passes Effective July 1, 2019

Governor of Illinois, J.B. Pritzker is expected to sign the comprehensive Medicaid managed care reform legislation that recently passed unanimously through the Illinois General Assembly.

The bills’ sponsors, primarily the state’s healthcare providers, frame it as a key step in addressing ongoing problems with Illinois’ Medicaid managed care program. Below is a summary developed by SAC highlighting the core components of SB1321. We hope you find it both informational and helpful.


In 2014, with the introduction of mandatory-managed Medicaid, Illinois’ hospitals found themselves faced with significant administrative barriers to obtaining authorization and reimbursement for medically necessary services provided to Medicaid-eligible patients.  Since that time, providers have been forced to divert resources away from patient care and toward administrative overhead to mitigate the negative effects of the mandated Managed Care Organization (MCO) practices. These include inappropriate service authorization and payment denials and extremely limited care coordination assistance (if any), among others.

Initially, Illinois hospitals attempted to work collaboratively with the MCOs to standardize key processes and address overarching policy concerns on behalf of members.  For example, requests were made for the development of transparent billing guidelines, assistance in the root-cause-analysis of claim denials, and clarity on authorization requirements and discharge planning assistance. Progress was unfortunately, however, slow and incremental.

About SB1321

Subsequently, Illinois hospitals began working with the General Assembly on legislation to obtain immediate relief from longstanding and systemic issues, many of which have plagued the program for years. SB1321 is designed to stabilize Illinois’ Medicaid managed care program and address significant issues in the state’s Medicaid eligibility determination processes. It lays the foundation needed to reduce inappropriate payment denials, significantly ease administrative burden, and enhance patient care.

While the MCOs must still demonstrate willingness to partner with hospitals, this legislation helps level the playing field through:

  • Reimbursement for Stays Beyond Medical Necessity – Beginning July 1, 2019, the Illinois Department of Healthcare and Family Services (HFS) must implement a methodology to reimburse hospitals for inpatient stays continuing beyond the point of medical necessity when HFS, the MCO, and/or the hospital are unable to secure appropriate post-discharge placement.
  • Expedited Payments – MCOs must expedite payments to providers identified on HFS’ expedited provider list. Periodic interim payment programs, mutually agreed to by the MCO and the hospital, may be used to satisfy this requirement.
  • Timely Payment Interest Penalties – MCOs must calculate and pay timely payment interest penalties (at least equal to the penalty required under the Insurance Code), when due, within 30 days of claim payment. MCOs may not ask providers to request or apply for such payments.
  • Dispute Resolution Process – By January 1, 2020, HFS must implement a dispute resolution process, with specific timeframes, through which providers may challenge an MCO’s determination to deny, in whole or in part, reimbursement for medically necessary services. If the MCO’s proposed resolution is unsatisfactory, or the MCO fails to respond, the provider may ask HFS to review the dispute and issue a final, written decision.
  • Claims Rejection/Denial Management – HFS will procure, if available, technology to establish a clearinghouse through which all Medicaid managed care claims must be submitted before automatically transmitting them to the MCOs. HFS’ having a record of all claims submitted to the MCOs will significantly enhance the HFS’s ability to identify and resolve the root causes of claim denials.
  • Timely Filing Extension for Eligibility Errors – HFS must extend the standard timely-filing period when there is an eligibility error and traditional Medicaid, rather than an MCO, is ultimately determined responsible for payment.
  • Provider Effective Dates – MCOs must comply with a standard policy that sets forth the date a Medicaid-enrolled, contracted provider becomes eligible for payment of medically necessary and covered services.
  • Provider Directory Updates – MCOs must update their provider directories within 30 days of a complete and accurate roster being submitted on the HFS-approved universal roster template.
  • Operational Standardization – HFS will work with stakeholders, including IHA, to improve the operational performance of and standardize operations across the MCOs, with the goal of reducing both inappropriate payment denials and administrative burden.
  • Medical Loss Ratios – On an annual basis, HFS must publically report each MCO’s Medical Loss Ratio, inclusive of premium revenue and aggregate benefit expenses, defined as paid claims, sub-capitation payments, other claim payments, direct reserves, gross recoveries, and quality improvement activities.
  • Value-Based Payment Models – HFS will convene stakeholders to discuss the development of alternative value-based payment models.

In addition to reducing inappropriate denials and easing administrative burden, this bill provides a pathway for improved communication between HFS, the MCOs, and hospitals.

Portions of this summary were adopted from the Illinois Hospital Association’s June 3, 2019 Memo and Technical Summary of SB 1321 and the June 11, 2019 Illinois Chapter of the American Association of Healthcare Administrative Management’s Medicaid Managed Care Reform Legislation Update.

If you have any questions, please contact SAC attorney Marcus Morrow in our Illinois office at or at (312) 626-1870.

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