Vine Street Clinic v. Healthlink, Inc.

Docket No. 99790.
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
VINE STREET CLINIC et al., Appellants and Cross-Appellees, v.
HEALTHLINK, INC., Appellee and Cross-Appellant.
Opinion filed September 21, 2006.
JUSTICE KARMEIER delivered the judgment of the court, with
opinion
Chief Justice Thomas and Justices Freeman, Fitzgerald, and
Kilbride concurred in the judgment and opinion.
Justices Garman and Burke took no part in the decision.
OPINION
On March 4, 2003, plaintiff Vine Street Clinic (Vine Street) filed
a putative class action lawsuit in Sangamon County against defendant
HealthLink, Inc. (HealthLink), seeking a declaration that the
“percentage fee” provision of the parties’ services contract violated
section 22(A)(14) of the Medical Practice Act of 1987 (Act) (225
ILCS 60/22(A)(14) (West 2002)). Vine Street also sought a refund of
all administrative fees paid to HealthLink under the contract. On May
27, 2003, plaintiff Ursula Thatch, M.D., was granted leave to
intervene in this action, and Vine Street and Thatch (plaintiffs) were
allowed to amend their complaint. Plaintiffs’ amended complaint
sought a declaration that: (1) the percentage fee violated the Act; (2)
HealthLink’s new “flat fee” also violated the Act; and (3) HealthLink
was barred from collecting any administrative fees under the Illinois
Insurance Code (Insurance Code) (215 ILCS 5/1 et seq. (West
2002)). The amended complaint also sought injunctive relief and
recovery of all administrative fees previously paid to HealthLink.
On June 26, 2003, HealthLink filed a verified counterclaim for
declaratory relief, seeking a declaration that the flat fee does not
violate the Act, and asking the court to enter judgment against
plaintiff Thatch for any administrative fees that she owed. On July
30, 2003, the circuit court entered judgment on the pleadings, holding
that although HealthLink’s former percentage fee violated the Act, its
current flat fee did not. The circuit court further held that previously
paid monies were not recoverable because any alleged illegal contract
was unenforceable. Finally, the court granted defendant’s motion to
dismiss plaintiffs’ counts alleging: (1) the Insurance Code bars
HealthLink from collecting administrative fees; and (2) unjust
enrichment. Plaintiffs appealed and HealthLink cross-appealed.
The appellate court affirmed the circuit court’s ruling with respect
to the repayment of fees previously paid, but the majority held that
both the flat fee and the previously charged percentage fee were
prohibited by the Act. 353 Ill. App. 3d 929. The appellate court did
not address plaintiff’s argument that HealthLink violated the
Insurance Code. Justice Steigmann dissented, arguing that both the
percentage and flat fee were permissible. Appeal lies in this court as
a result of the appellate court thereafter granting an application for a
certificate of importance pursuant to Supreme Court Rule 316 (155
Ill. 2d R. 316). This court has granted leave to file an amicus curiae
brief in support of HealthLink to: (1) America’s Health Insurance
Plans; and (2) the American Federation of State, County and
Municipal Employees, AFL-CIO, and Egyptian Area Schools
Employee Benefit Trust. We have also granted the Illinois State
Medical Society leave to file an amicus brief in support of plaintiffs.
155 Ill. 2d R. 345.
Plaintiff Vine Street is a partnership consisting of physicians who
render psychiatric services, and plaintiff Thatch is an Illinois
physician specializing in obstetrics and gynecology. Defendant
HealthLink is an Illinois corporation that enters into participating
physician agreements with physicians, and different agreements with
those offering other health-care services, thereby creating a network
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of health-care providers. HealthLink makes these provider networks
available to members of health plans that are offered by insurance
carriers, self-funded employer groups, governmental entities and
union trusts (collectively payors). Participating physicians agree to
provide medical services to payor members at a discounted rate and
to send their claims for reimbursement to HealthLink. HealthLink
then processes the claims and sends them to the payor for benefit
determination and payment. Vine Street was a provider in
HealthLink’s network from 1989 to 2001, and during that time paid
HealthLink a 5% administrative fee that totaled at least $21,720.28.
Thatch is a provider in HealthLink’s network who, from 1993 until
June 30, 2002, paid HealthLink a percentage-based fee totaling
$25,079.06.
The Illinois Attorney General is charged with enforcing state law,
including the Act, and one duty of the Attorney General is to provide
written opinions on legal questions to certain government officers
and agencies. 15 ILCS 205/4 (West 2002). In an opinion letter dated
March 5, 2002, Attorney General James E. Ryan responded to an
inquiry made by Charles A. Hartke, assistant majority leader of the
House of Representatives, and concluded that section 3.7 of the
HealthLink agreement, requiring each participating physician to pay
HealthLink an administrative fee equal to 5% of the amount allowed
in HealthLink’s rate schedule for services provided to members by
the physician, violated section 22(A)(14) of the Act and was
therefore void under Illinois law. 2002 Ill. Att’y Gen. Op. No.
02–005, slip op. at 4. On May 30, 2002, HealthLink notified its
providers that to comply with the Attorney General’s opinion, it
would now charge a fixed flat fee instead of the percentage-based fee.
HealthLink calculated the flat fee based on two factors: (1) physician
speciality; and (2) volume of claims submitted by the physician
during the preceding calendar year. HealthLink calculated Thatch’s
new fixed flat fee at $600 per month. Thatch refused to pay the flat
fee. On May 27, 2003, as noted, plaintiffs filed their amended
complaint seeking, inter alia, a declaration that both the percentage-
based fee and the flat fee violated the Act, and the recovery of all fees
previously paid.
In this court, HeathLink contends that: (1) neither its flat fee nor
its former percentage fee for administrative services violates section
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22(A)(14) of the Act; and (2) its administrative fees violate no public
policy. Plaintiffs contend herein that: (1) the lower courts erred by
allowing HealthLink to retain the administrative fees paid by
plaintiffs; (2) if the fees are not returned to plaintiffs, HealthLink
should be divested of these fees and the funds applied to benefit the
public; and (3) HealthLink was acting as an administrator under the
Illinois Insurance Code (215 ILCS 5/1 et seq. (West 2002)).
As it is the linchpin issue raised herein, we first address cross-
appellant HealthLink’s assertion that the appellate court erred in
finding that both its percentage and flat fees violated section
22(A)(14) of the Act. Because this issue concerns the construction of
a statute, it is a question of law, and our standard of review is de
novo. Bowman v. American River Transportation Co., 217 Ill. 2d 75,
80 (2005); Progressive Universal Insurance Co. of Illinois v. Liberty
Mutual Fire Insurance Co., 215 Ill. 2d 121, 128 (2005). The primary
rule of statutory construction is to ascertain and give effect to the
legislature’s “true intent and meaning.” Bowman, 217 Ill. 2d at 83;
Progressive Universal Insurance, 215 Ill. 2d at 134. “We determine
legislative intent by examining the language of the statute, which is
‘the most reliable indicator of the legislature’s objectives in enacting
a particular law.’ ” In re Detention of Lieberman, 201 Ill. 2d 300, 308
(2002), quoting Michigan Avenue National Bank v. County of Cook,
191 Ill. 2d 493, 504 (2000). “A court construing a statute should read
it as a whole, give the statutory language its plain meaning, and
import to the statute the fullest possible meaning to which it is
susceptible.” People v. Ferrell, 277 Ill. App. 3d 74, 77 (1995).
Further, when undertaking the interpretation of a statute, we must
presume that when the legislature enacted a law, it did not intend to
produce absurd, inconvenient or unjust results. Progressive Universal
Insurance, 215 Ill. 2d at 134.
Here, the relevant language of the Medical Practice Act of 1987
provides:
Ҥ22. Disciplinary action.
(A) The Department [of Professional Regulation] may
revoke, suspend, place on probationary status, or take any
other disciplinary action as the Department may deem proper
with regard to the license or visiting professor permit of any
person issued under this Act to practice medicine, or to treat
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human ailments without the use of drugs and without
operative surgery upon any of the following grounds:
***
(14) Dividing with anyone other than physicians with
whom the licensee practices in a partnership, Professional
Association, limited liability company, or Medical or
Professional Corporation any fee, commission, rebate or
other form of compensation for any professional services
not actually and personally rendered.” 225 ILCS
60/22(A)(14) (West 2002).
Well-reasoned opinions of the Attorney General interpreting or
construing an Illinois statute are persuasive authority and are entitled
to considerable weight in resolving a question of first impression,
although they do not have the force and effect of law. See Bonaguro
v. County Officers Electoral Board, 158 Ill. 2d 391, 399 (1994); see
also City of Springfield v. Allphin, 74 Ill. 2d 117, 130-31 (1978);
Sparks & Wiewel Construction Co. v. Martin, 250 Ill. App. 3d 955,
965 (1993). While our appellate court has reviewed the meaning of
section 22(A)(14) in somewhat similar contexts to the one presented
here, this court has never examined the parameters of section
22(A)(14)’s prohibition of percentage fee arrangements involving
Illinois licensed physicians, or, more specifically, whether entering
into participating physician agreements with a corporation such as
HealthLink, which required as an administrative fee a percentage of
the amount the physicians received for medical services performed,
is violative of section 22(A)(14). We therefore find the reasoning set
forth in the Attorney General’s March 2002 opinion letter to be
useful here in determining the propriety of the lower courts’ holdings
that the percentage fee set forth in section 3.7 of HealthLink’s
standard agreement with its participating physicians violated the fee
sharing prohibition of section 22(A)(14) of the Act.
Prior to May 30, 2002, section 3.7 of HealthLink’s participating
physician agreement stated, in pertinent part: “In consideration of the
services provided hereunder by HealthLink, each PHO Participating
Provider shall pay HealthLink an administrative fee equal to five
percent (5%) of the amounts allowed to the PHO Participating
Provider under the Rate Schedule for the provision of Medical
Services to Members by the Participating Provider.” As earlier stated,
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the Attorney General’s opinion letter concluded that section 3.7 of
HealthLink’s participating provider agreement was in violation of
section 22(A)(14) of the Act. The Attorney General’s finding was
essentially based upon several Illinois Appellate Court opinions
which the Attorney General found had “construed subsection
22(A)(14) to prohibit payments by physicians for management or
other services based upon a percentage of professional income.” 2002
Ill. Att’y Gen. Op. No. 02–005, slip op. at 3.
In the earliest of these cases, E&B Marketing Enterprises, Inc. v.
Ryan, 209 Ill. App. 3d 626 (1991), a marketing firm agreed to
promote the name and practice of a physician engaged in private
practice, primarily to insurance carriers, in return for a consulting fee
of 10% on all billings collected by the physician in connection with
such referrals. The appellate court held that the agreement was a fee
splitting contract, in violation of section 16(14) of the Medical
Practice Act (Ill. Rev. Stat. 1985, ch. 111, par. 4433(14)), and was
therefore void as against public policy. E&B Marketing, 209 Ill. App.
3d at 628-30. The fact that the contracting physician collected the
fees from insurance companies, rather than from individual patients,
had no effect upon the illegality of the underlying fee splitting
contract. E&B Marketing, 209 Ill. App. 3d at 629-30.
Although not noted by the Attorney General, E&B Marketing was
clearly based on section 16(14) of the Medical Practice Act, which is
not identical to section 22(A)(14) of the Medical Practice Act of
1987. Rather section 16(14) stated that anyone licensed or certified
under the Medical Practice Act was subject to disciplinary action for:
“Directly or indirectly giving to or receiving from any physician,
person, firm or corporation any fee, commission, rebate or other form
of compensation for any professional services not actually and
personally rendered.” Ill. Rev. Stat. 1985, ch. 111, par. 4433(14).
Section 16(14) further stated that nothing therein prohibited those
licensed under the Act from practicing medicine in a partnership,
corporation or as an association and “pooling, sharing, dividing or
apportioning the fees and monies received.” Ill. Rev. Stat. 1985, ch.
111, par. 4433(14). The Medical Practice Act was repealed effective
December 31, 1997. See E&B Marketing, 209 Ill. App. 3d at 629 n.1.
Thus, it was based on this earlier statutory language that the court
in E&B Marketing found: “The Act, in its plain terms, prohibits the
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receipt of any fee or commission, direct or indirect, for professional
services not actually rendered. E&B’s receipt of money ‘indirectly’
through insurance companies was in direct violation of the Act.”
E&B Marketing, 209 Ill. App. 3d at 629-30. We must therefore ask
whether the differences between the language of the now-repealed
section 16(14) and the language of section 22(A)(14) affect the
Attorney General’s finding that HealthLink’s percentage-based fee
violates the current Act. A comparison of the two sections reveals
that, of the portion at issue here, only the language in the first phrase
of the first sentence has been changed. Section 16(14) begins:
“Directly or indirectly giving to or receiving from any physician,
person, firm or corporation any fee ***,” whereas section 22(A)(14)
begins: “Dividing with anyone other than physicians with whom the
licensee practices in a partnership, Professional Association, limited
liability company, or Medical or Professional Corporation any fee
***.”
Examining the plain language of these two sections, we find that
they both prohibit traditional “fee splitting,” i.e., “a dividing of a
professional fee for a specialist’s medical services with the
recommending physician,” (Webster’s Third New International
Dictionary 835 (1986)), as well as prohibiting the sharing of such a
fee with any other “person, firm or corporation” (Ill. Rev. Stat. 1985,
ch. 111, par. 4433(14)). The phrases at issue appear to differ only in
that the legislature moved to the first sentence of section 22(A)(14)
the language setting forth, in more inclusive terms, the exemption
from the fee sharing prohibition for those physicians practicing in a
“partnership, Professional Association, limited liability company, or
Medical or Professional Corporation.” 225 ILCS 60/22(A)(14) (West
2002). Therefore, we conclude that the Attorney General’s analysis
of the issue before us was not affected by the slightly different
language of now-repealed section 16(14).
Support for this conclusion comes from comparing the remaining
cases examined by the Attorney General. In Lieberman & Kraff,
M.D., S.C. v. Desnick, 244 Ill. App. 3d 341 (1993), which also
construed the language of section 16(14), the appellate court
invalidated a contract for the sale of a medical practice which
provided compensation to the seller over a 20-year period, holding
that the contract was an illegal fee-sharing agreement, regardless of
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the fact that the purpose of the contract was benign. In similar fashion
to E&B Marketing, the court in Lieberman & Kraff, 244 Ill. App. 3d
at 345, found that “nothing in the language of the statute indicates an
intent to restrict the reach of the statute solely to conduct traditionally
known as fee splitting,” i.e., that which occurs “when a physician
refers a patient to another physician and then collects a portion of that
patient’s fee.” Rather, the issue is whether the parties’ agreement
violates the statute as written. Lieberman & Kraff, 244 Ill. App. 3d at
345.
“When read as a whole, the plain language of section 16
of the Medical Practice Act prohibits the sharing, pooling,
dividing, or apportioning of professional fees by physicians
unless the fee agreement falls within one of the enumerated
exceptions. The statute specifically permits physicians who
practice within the framework of a partnership, corporation or
association to share fees. (Ill. Rev. Stat. 1985, ch. 111, par.
4433(14).) *** However, the reach of the statute is not
limited to ‘fee splitting.’ The Medical Practice Act also
prohibits all other fee-sharing arrangements not specifically
authorized.” Lieberman & Kraff, 244 Ill. App. 3d at 345.
Nine months later, the appellate court decided Practice
Management Ltd. v. Schwartz, 256 Ill. App. 3d 949, 952 (1993), a
case which reviewed a percentage-fee agreement for management
services and the referral of patients between, inter alios, plaintiff, a
business which employed unlicensed optometrists, and defendants,
two licensed ophthalmologists, under “the pertinent section of the
Illinois Medical Practice Act of 1987 (Act) (225 ILCS 60/22(A)(14)
(West 1992)).” We first observe that the court in Schwartz actually
erred in basing its decision on section 22(A)(14) of the Medical
Practice Act of 1987, where, as the Lieberman & Kraff court noted,
“under the Regulatory Agency Sunset Act, the repeal [of the Medical
Practice Act] does not become effective until December 31, 1997.
Thus, the statute *** remains in effect. See Ill. Rev. Stat. 1991, ch.
127, par. 1904.9.” Lieberman & Kraff, 244 Ill. App. 3d at 344 n.1.
However, as we have previously found, the differences in the
language of section 16(14) and section 22(A)(14) do not, for our
purposes, change the analysis of whether a prohibited fee
arrangement occurred. The Schwartz court held that the fee
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agreement was improper, even though some legitimate management
services were performed by the unlicensed optometry business,
because the agreement allowed the business to be compensated
through a percentage of the net profits generated by the licensed
physicians, and the Act prohibits not only fee splitting, but all other
fee-sharing arrangements not specifically authorized therein.
Schwartz, 256 Ill. App. 3d at 953-55, citing Lieberman & Kraff, 244
Ill. App. 3d at 345.
Finally, in TLC The Laser Center, Inc. v. Midwest Eye Institute
II, Ltd., 306 Ill. App. 3d 411 (1999), the appellate court held that a
service contract violated section 22(A)(14) because it provided, in
part, for an annual fee to be paid by the defendant medical practice
to the plaintiff, an unlicensed corporation, in addition to specific
reimbursements. Although the fee was not calculated on a straight
percentage, the court found a “direct relation” between the revenues
generated by the practice and the fee the physicians were required to
pay to plaintiffs. TLC, 306 Ill. App. 3d at 428. With respect to this fee
arrangement, the TLC court observed:
“Section 22 of the Medical Practice Act does not only
prohibit sharing of fees for patient referrals; Illinois courts
have struck down contracts for the sale of a medical practice
(see Lieberman & Kraff v. Desnick, 244 Ill. App. 3d 341, 614
N.E.2d 379 (1993)) and contracts which involved
‘performance of some legitimate management services’ (see
Practice Management Ltd. v. Schwartz, 256 Ill. App. 3d 949,
954, 628 N.E.2d 656 (1993)) on the basis that the contracts
ran afoul of the statute. The ‘*** Medical Practice Act also
prohibits all other fee-sharing arrangements not specifically
authorized.’ Lieberman & Kraff, 244 Ill. App. 3d at 345, 614
N.E.2d at 382. The policy reasons behind the prohibition are
the danger that such an arrangement might motivate a
nonprofessional to recommend a particular professional out
of self-interest, rather than the professional’s competence. In
addition, the judgment of the professional might be
compromised, because the awareness that he would have to
split fees might make him reluctant to provide proper (but
unprofitable) services to a patient, or, conversely, to provide
unneeded (but profitable) treatment. Practice Management,
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256 Ill. App. 3d at 953, 628 N.E.2d at 658, quoting E&B
Marketing Enterprises, Inc. v. Ryan, 209 Ill. App. 3d 626,
630, 568 N.E.2d 339, 342 (1991).” TLC, 306 Ill. App. 3d at
427-28.
It is evident from this quotation that the reasoning used by the
TLC court to find a violation of section 22(A)(14) of the Act was the
same reasoning applied in prior appellate court decisions which were,
or should have been, made under the previous, but equivalent, section
16(14) of the Medical Practice Act. Thus, the Attorney General
reasonably relied on this unchanging line of Illinois cases to conclude
that HealthLink’s participating physician agreement, which included
a percentage fee for its services, was violative of section 22(A)(14)
of the Act and therefore void under Illinois law. While we believe the
Attorney General’s opinion letter is entitled to considerable weight,
it is not binding on the courts (Bonaguro v. County Officers Electoral
Board, 158 Ill. 2d at 399), and thus should be considered in light of
the arguments raised by the parties herein.
HealthLink claims that we should follow Practice Management
Associates, Inc. v. Orman, 614 So. 2d 1135 (Fla. App. 1993), a
Florida case construing section 22(A)(14)1 and holding that it did not
preclude physicians from agreeing to pay a percentage of their profits
to an unlicensed entity in exchange for marketing and management
services provided by that entity. As the Attorney General’s opinion
points out, several of the decisions from our appellate court
specifically disagreed with Orman, finding that while the Florida
court interpreted our Act to prohibit only traditional fee splitting, the
language of our statute is broad and nothing therein evinces an intent
by our legislature to limit the prohibition to unaffiliated physicians.
See Schwartz, 256 Ill. App. 3d at 952-54; Lieberman & Kraff, 244 Ill.
App. 3d at 347. We too cannot agree with the Florida court that the
intent of section 22(A)(14) “is to prohibit fee splitting for patient
referrals in the traditional sense and that the [nonprofessional
corporation’s percentage-fee based] contract does not fall within the
conduct proscribed.” Orman, 614 So. 2d at 1138.
1
We again note that it was section 16(14), and not section 22(A)(14),
which was in effect in 1993, when Orman was decided.
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Next, we examine an alternative argument made by plaintiffs
which not only is without merit, but which also unnecessarily
confuses those attempting to construe section 22(A)(14) of the Act.
Plaintiffs contend that the meaning of “professional services” in
section 22(A)(14) is not limited only to medical services, as this
interpretation ignores the term “anyone” in the phrase “[d]ividing
with anyone.” Indeed, plaintiffs’ reply brief states that the legislature
intended section 22(A)(14) to prohibit the division of fees between
licensees and “any other individual or entity that may render
professional services.” (Emphasis in original.) We disagree.
Under the interpretation of section 22(A)(14) which we have now
adopted, the conduct which the legislature seeks to prohibit is the
agreement by a licensee to share a percentage of the fees he or she
earned for “professional services *** actually and personally
rendered,” with “anyone,” “other than physicians with whom the
licensee practices.” 225 ILCS 60/22(A)(14) (West 2002). This
interpretation contemplates that words and phrases should not be
construed in isolation, as plaintiffs’ argument necessitates, but must
be interpreted in light of “other relevant provisions of the statute.”
Alternate Fuels, Inc. v. Director of the Illinois Environmental
Protection Agency, 215 Ill. 2d 219, 238 (2004), citing Michigan
Avenue National Bank, 191 Ill. 2d at 504.
Here, our examination of the entirety of section 22 and another
section of the Act supports our holding that only the sharing of a
percentage of the licensee’s fees for medical “professional services
not actually and personally performed” by the licensee was meant to
be prohibited. First, the final sentence of section 22(A)(14) itself
reads:
“Nothing contained in this subsection shall abrogate the right
of 2 or more persons, holding valid and current licenses under
this Act, to each receive adequate compensation for
concurrently rendering professional services to a patient and
divide a fee; provided, the patient has full knowledge of the
division, and, provided, that the division is made in
proportion to the services performed and responsibility
assumed by each.” (Emphasis added.) 225 ILCS 60/22(A)(14)
(West 2002).
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Next, section 22(A)(25) states that another ground for
disciplinary action occurs when a licensee commits: “Gross and
wilful and continued overcharging for professional services,
including filing false statements for collection of fees for which
services are not rendered ***.” (Emphasis added.) 225 ILCS
60/22(A)(25) (West 2002). Finally, section 26 of the Act, entitled
“Advertising,” states: “Any person licensed under this Act may
advertise the availability of professional services in the public media
or on the premises where such professional services are rendered.”
(Emphases added.) 225 ILCS 60/26(1) (West 2000).
These “other relevant provisions of the statute” corroborate our
determination that the plain meaning of “professional services” in
section 22(A)(14) of the Act encompasses only medical services. See
Alternate Fuels, 215 Ill. 2d at 238; see also Andrews v. Kowa
Printing Corp., 217 Ill. 2d 101, 106 (2005) (courts should consider
a statute in its entirety, keeping in mind the subject it addresses and
the legislature’s apparent objective in enacting it). Thus, “[b]y
definition, it is impossible for a nonphysician to render ‘professional
services’ to a patient.” 353 Ill. App. 3d at 935. We therefore reject
plaintiffs’ claim that section 22(A)(14) was meant to prohibit the
division of fees between licensees and any other individual or entity
that may render professional services under the Act, as “professional
services” cannot be performed by anyone other than those licensed
to practice medicine.
As earlier noted, examining the language of the statute is the best
indicator of the legislature’s intent in enacting a particular law. In re
Detention of Lieberman, 201 Ill. 2d at 308. In section 22(A) of the
Act, the legislature sets forth a number of grounds upon which the
Department of Professional Regulation may take disciplinary action
with regard to the license of, inter alios, “any person issued under
this Act to practice medicine.” 225 ILCS 60/22(A) (West 2002). One
of these grounds for disciplinary action, deliniated in section
22(A)(14), involves: “Dividing with anyone other than physicians
with whom the licensee practices in a partnership, *** any fee,
commission, rebate or other form of compensation for any
professional services not actually and personally rendered.”
(Emphases added.) 225 ILCS 60/22(A)(14) (West 2002).
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Based on the foregoing, we conclude that plaintiffs main
argument is correct; i.e., that section 22(A)(14) of the Act prohibits:
(1) “traditional” fee splitting for patient referrals between licensees,
except those in a partnership or corporate-type relationship and
licensees concurrently rendering professional services to a patient;
and (2) fee-sharing agreements whereby a licensee “divides with
anyone,” for any service rendered to the licensee, a percentage of the
monies earned by the licensee for medical services he or she has
performed. 225 ILCS 60/22(A)(14) (West 2002). Thus, where
HealthLink’s agreement with plaintiffs required them to pay
HealthLink an administrative fee, equal to 5% of the amounts
allowed in HealthLink’s rate schedule for medical services provided
to members by plaintiffs, the agreement was in violation of section
22(A)(14). “Nonphysicians can receive a fee for services rendered,
apart from referral, but cannot receive a percentage of the physician’s
profit, or its equivalent.” 353 Ill. App. 3d at 935. We therefore hold
that the lower courts herein, as well as the Attorney General, properly
found that HealthLink’s percentage-fee based contract with plaintiffs
was void as against Illinois law.
Next, we examine HealthLink’s contention that the appellate
court erred in holding that the Act also prohibits HealthLink’s fixed
flat fee, which was established in response to the Attorney General’s
opinion. The appellate court reasoned, in part, as follows:
“HealthLink argues the flat fee currently paid by
physicians is for administrative services, such as
administrating and implementing HealthLink’s policies,
procedures, and programs, and not for patient referrals.
*** [However,] [t]he fact that HealthLink does not
technically refer a member-patient to a specific provider does
not negate the fact that HealthLink exercises substantial
control over its member-patients.” 353 Ill. App. 3d at 935.
We agree with HealthLink that the flat fee now in place is for
administrative services and not for patient referrals. Therefore, the
appellate court’s similar conclusion, that HealthLink does not make
patient referrals to specific providers, appears at odds with its
additional finding that there is no “significant difference” between
making a network of thousands of physicians available to payors for
use by member-patients, as HealthLink does, and making an
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agreement with certain physicians to send them specific patients. 353
Ill. App. 3d at 935. It is the member-patient who makes the choice of
physician, not HealthLink, and this fact constitutes the difference
between a prohibited referral for a percentage of the physician’s fee
and the provision of a service to both HealthLink’s participating
physicians and its payors. See Schwartz, 256 Ill. App. 3d at 954
(although plaintiffs provided legitimate management services, the
method of payment for these services was improper, as were the
patient referrals, where plaintiffs referred patients of the optometrists
the company employed to specific opthalmologists for medical
services which only a licensed physician could provide).
In the instant case, this court has concluded that HealthLink’s
percentage fee was violative of section 22(A)(14) because the
agreement required participating physicians to pay HealthLink a
portion of the fee they received from each patient for medical
services they performed. As the Attorney General stated in the
addendum to his opinion letter, “it has not been suggested that the
object of the agreement is violative of public policy, or that the
services that Healthlink provides are improper in any way. The only
aspect of the agreement found invalid *** was the basis upon which
the fees for the administrative services performed under the
agreement are calculated.” 2002 Ill. Att’y Gen. Op. No. 02–005,
Addendum, slip op. at 2. Accordingly, HealthLink amended its
participating physician agreements to allow a flat fee for
administrative services to be paid monthly on a basis independent of
the physician’s fees.
HealthLink’s flat fee is not based or linked to revenue, gross
receipts or billings collected. Instead, it is based on the volume of
claims that HealthLink processed for a physician during the prior
year and the physician’s specialty. For example, a participating
physician who submitted a large number of claims for relatively
inexpensive procedures and who made a modest income might pay
a higher administrative fee to HealthLink than a physician in the
same specialty who submitted fewer claims, but for more expensive
procedures, and who earned a higher income. Because a higher
volume of claims or a more complicated specialty translates into a
higher volume of work for HealthLink, the flat-fee arrangement now
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charged to participating physicians fairly compensates HealthLink
without being a prohibited division of the physician’s remuneration.
Thus, the appellate court erred in comparing HealthLink’s flat
fee, based on claims volume, with the fee charged by the
nonprofessional entity in TLC, which was based on revenue volume.
353 Ill. App. 3d at 937; see TLC, 306 Ill. App. 3d at 428 (although
the contract did not structure the annual fee in literal terms of a
percentage of the practice’s revenue per se, the fee clearly increased
as the revenues increased). Here, in contrast, because HealthLink’s
flat fee is based on the volume and complexity of the administrative
services provided, the fee will not automatically increase as the
revenue of the participating physician increases. We therefore find
that where HealthLink’s monthly flat fee does not constitute
prohibited fee sharing, it is not violative of section 22(A)(14).
As to plaintiffs’ claim that the flat fee is against public policy, we
first note that the general purpose of the Medical Practice Act of 1987
is to protect the public health and welfare from those not qualified to
practice medicine. Ikpoh v. Department of Professional Regulation,
338 Ill. App. 3d 918, 926 (2003), citing Carter-Shields v. Alton
Health Institute, 201 Ill. 2d 441, 458 (2002). Further, we have
established that the goal of section 22(A)(14) is to prevent persons
licensed under the Act from sharing a percentage of their fees with
anyone except those licensees specifically set forth. The underlying
purpose of this prohibition, as earlier noted, is to eliminate the danger
of a nonprofessional recommending a particular physician out of self-
interest, rather than the physician’s competence, and to maintain the
professional independence of physicians. See TLC, 306 Ill. App. 3d
at 427.
As to the former danger to the public, HealthLink’s flat fee is
charged to each participating physician for administrative services
rendered, not for referrals and, thus, no “recommendation”
component exists. As for the latter danger, in Schwartz, the appellate
court held “fee-splitting arrangements” violated public policy by
creating a danger that: “ ‘a doctor, knowing that he had to split his
fees with one who did not render medical services, might be hesitant
to provide proper services to a patient. Conversely, unneeded
treatment might be rendered just because of the need to split fees.’ ”
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Schwartz, 256 Ill. App. 3d at 953, quoting E&B Marketing, 209 Ill.
App. 3d at 630. Here, however, HealthLink’s flat-fee agreement
places no such improper influence on the professional choices made
by its participating physicians, because it does not require a sharing
of professional fees which would relate patient care to an increase or
decrease in revenue.
“ ‘An agreement is against public policy if it is injurious to
the interests of the public, contravenes some established
interest of society, violates some public statute, is against
good morals, tends to interfere with the public welfare or
safety, or is at war with the interests of society or is in
conflict with the morals of the time.’ ” E&B Marketing, 209
Ill. App. 3d at 630, quoting Marvin N. Benn & Associates,
Ltd. v. Nelsen Steel & Wire, Inc., 107 Ill. App. 3d 442, 446
(1982).
Given our conclusion that HealthLink’s flat-fee agreement does not
contravene any public policy underlying section 22(A)(14), we opine
that the agreement also meets the E&B Marketing test set forth
above.
Finally, we note that plaintiffs’ definition of “professional
services,” which we earlier rejected, makes no more sense in a flat-
fee context. Because HealthLink’s provision of administrative
services to plaintiffs does not encompass medical “professional
services” within the meaning of the Act, no violation of section
22(A)(14) can occur. This reading of section 22(A)(14) gives the
statutory language its plain and ordinary meaning without reading
into it exceptions, limitations or conditions which conflict with the
express legislative intent. See Alternate Fuels, 215 Ill. 2d at 238.
Accordingly, we hold that the flat fee HealthLink now charges its
participating physicians for administrative services which HealthLink
performs for them is not violative of section 22(A)(14) of the Act, nor
is it against public policy.
Next, we address plaintiffs’ contention that the lower courts erred
in allowing HealthLink to retain the percentage and flat fees it
previously collected from plaintiffs. We agree with the lower courts
herein that plaintiffs are not entitled to recover any fees previously
paid, be they percentage-based or flat fees. 353 Ill. App. 3d at 937.
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The lower courts’ decision not to reimburse plaintiffs for the fees
paid pursuant to their HealthLink contracts reflects the maxim that
“the law will not aid either party to an illegal act, but will leave them
without remedy as against each other,” with the caveat that they are
of equal knowledge, wilfulness and wrongful intent, or in pari
delicto. Rees v. Schmits, 164 Ill. App. 250, 258 (1911); see also King
v. First Capital Financial Services Corp., 215 Ill. 2d 1, 33-34 (2005)
(the doctrine of in pari delicto embodies the principle that a plaintiff
who has participated in wrongdoing may not recover damages
resulting from the wrongdoing). Plaintiffs argue that the lower courts
failed to recognize that two of the exceptions to the availability of the
in pari delicto defense are present in this case where: (1) there is no
parity in the culpability of the parties; and (2) there exists a necessity
to support the public interest or policy. See Evans v. Funk, 151 Ill.
650, 657-58 (1894). We find that neither exception exists under the
facts of this case.
As to the first exception, plaintiffs claim they are only seeking to
be restored to the status quo, and that they are not in pari delicto with
HealthLink, because they were coerced into signing the contracts in
order to have access to patients. Yet we see nothing of record to
suggest that the agreements were anything other than arm’s-length
transactions between HealthLink and plaintiffs. Thus, we concur with
the appellate court’s finding that: “This is not a case *** where
anyone ‘held a gun’ to plaintiffs’ heads. Plaintiffs could have sought
relief from the courts, the Attorney General, or the Department of
Professional Regulation at any time.” 353 Ill. App. 3d at 937. Further,
it is the plaintiffs, as licensees under the Act, who have violated
section 22(A)(14), not HealthLink. 353 Ill. App. 3d at 938, citing
TLC, 306 Ill. App. 3d at 428-29 (“the physician is the wrongdoer”
under the Act).
We are similarly unimpressed with plaintiffs’ related argument
that the voluntary payment doctrine should not apply because the fees
were paid to HealthLink under circumstances amounting to
compulsion. Plaintiffs have not alleged that the money paid to
HealthLink was a result of fraud, misrepresentation or mistake of
fact. Instead, plaintiffs argue the agreements were illegal and against
public policy. However, money voluntarily paid under a claim of
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right to the payment, and with knowledge of the facts by the person
making the payment, cannot be recovered by the payor solely because
the claim was illegal. Kanter & Eisenberg v. Madison Associates,
116 Ill. 2d 506, 512 (1987); see also Harris v. Johnson, 218 Ill. App.
3d 588, 594 (1991) (if a party has advanced money under an
agreement that is against public policy, that party cannot obtain
redress); Evans v. Funk, 38 Ill. App. 441, 444 (1890) ( “No rule of
law is better settled than that money voluntarily paid in consideration
of the payee doing, or agreeing to do, something opposed to public
policy, can not be recovered back”).
Therefore, we find ourselves in agreement with the appellate
court’s reasoning (353 Ill. App. 3d at 937), which relied on the
following passage from Practice Management v. Schwartz:
“Where a contract is illegal or against public policy, the
contract should not be enforced, because to allow such relief
would undermine the policy considerations in prohibiting fee
splitting. (O’Hara v. Ahlgren, Blumenfeld & Kempster
(1989), 127 Ill. 2d 333, 537 N.E.2d 730; Schnackenberg v.
Towle (1954), 4 Ill. 2d 561, 123 N.E.2d 817). In order to
discourage professionals and nonprofessionals from
attempting illegal fee splitting, the court will leave the parties
where they have placed themselves. Leoris v. Dicks (1986),
150 Ill. App. 3d 350, 501 N.E.2d 901.” Schwartz, 256 Ill.
App. 3d at 955.
In the instant case, where we have found the percentage-based fee
agreement between plaintiffs and HealthLink to have violated the
broad prohibition against sharing fees set forth in section 22(A)(14),
the proper course is for the parties to be left “where they have placed
themselves.” 353 Ill. App. 3d at 937.
We also reject plaintiffs’ contention that HealthLink is prohibited
from retaining fees paid under the agreements because the necessity
to support public policy prevents defendants from using in pari
delicto as a defense. It is true that in Evans, 151 Ill. at 657, this court
stated that “this general rule has its exceptions, arising out of
necessity or from unyielding principles of public policy, or from the
different conditions of the parties.” However, the exception to the use
of the in pari delicto defense in Evans stemmed “from the strongest
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necessity of upholding the principles of public policy, in maintaining
the purity and honor of the courts of justice free from all scandal or
suspicion of improper conduct on the part of the judges.” Evans, 151
Ill. at 658.
Traditionally, and in keeping with the principle of freedom of
contract, this court has been reluctant to declare a private contract as
void as contrary to public policy. H&M Commercial Driver Leasing,
Inc. v. Fox Valley Containers, Inc., 209 Ill. 2d 52, 57 (2004).
“In considering whether any contract is against public policy
it should be remembered that it is to the interests of the public
that persons should not be unnecessarily restricted in their
freedom to make their own contracts. Agreements are not
held to be void, as being contrary to public policy, unless they
be clearly contrary to what the constitution, the statutes or the
decisions of the courts have declared to be the public policy
or unless they be manifestly injurious to the public welfare.”
Schumann-Heink v. Folsom, 328 Ill. 321, 330 (1927).
See also H&M Commercial Driver, 209 Ill. 2d at 57. Thus, we
believe that Evans is an example of the extreme circumstances
needed to forego the general rule of in pari delecto, i.e., where the
public welfare must be protected from manifest injury. The same
vehement need to support public policy by forcing HealthLink to
refund the illegal percentage-based fees paid by plaintiffs is absent
here.
Regarding HealthLink’s flat fees, as Justice Steigmann stated in
his partial dissent below: “[T]he goal of the Act is to regulate the
licenses of physicians, not to prevent them from entering into
legitimate contracts or relieve them of the corollary duty to pay for
services *** rendered pursuant to such contracts.” 353 Ill. App. 3d at
941 (Steigmann, J., specially concurring in part and dissenting in
part). Thus, where we have found that HealthLink’s flat fee is neither
illegal nor against public policy, the parties’ agreements requiring
payment by plaintiffs of a fixed monthly amount for administrative
services must be upheld.
Moreover, we need not address plaintiffs alternative request that,
if this court declines to return the fees to plaintiffs, “the Court
[should] draw upon its equitable powers to require [HealthLink] to
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fully account for and then apply the illegal fees toward a public fund
or charity.” This request stems from plaintiffs’ belief that allowing
HealthLink to keep its collected fees has a more deleterious effect on
public policy and the prohibition against physician fee sharing than
does returning those monies to plaintiffs. However, as we have found
that HealthLink’s percentage fees can be retained by virtue of the in
pari delicto defense, and that its flat fees do not violate either the Act
or public policy, no further consideration is necessary. Additionally,
we note that, even had we the desire to examine this contention, it is
not properly brought here where plaintiffs have failed to: (1) raise it
at any time in the lower courts (People ex rel. Waller v. 1989 Ford
F350 Truck, 162 Ill. 2d 78, 90-91 (1994) (issues not raised in either
the trial court or the appellate court are considered waived and may
not be raised for the first time on appeal to this court); or (2) cite any
authority for this novel remedy (People v. Ward, 215 Ill. 2d 317, 332
(2005) (a point raised in a brief but not supported by citation to
relevant authority fails to satisfy the requirements of Supreme Court
Rule 341(e)(7), and is thus forfeited).
Plaintiffs additionally claim that HealthLink is an
“Administrator” as that term is defined in sections 511.101 and
370g(g) of the Insurance Code (215 ILCS 5/511.101, 370g(g) (West
2002)), and that under these definitions HealthLink violated the Code
by collecting unauthorized fees from health-care providers. As earlier
noted, although plaintiffs raised this issue on direct appeal, it was not
considered by the appellate court. We choose to briefly address the
issue in the interest of judicial economy (People v. Wilson, 143 Ill. 2d
236, 249 (1991), as we may dispose of it without examining the
merits of plaintiffs’ argument. Plaintiffs are without standing to seek
the return of administrative fees under the Code because such a
private right of action is not available. See Weis v. State Farm Mutual
Automobile Insurance Co., 333 Ill. App. 3d 402, 406 (2002) (the
enforcement of the insurance rules was clearly delegated to the
Department of Insurance and, as such, a plaintiff cannot plead or
pursue a private action based on an insurer’s violation of these rules);
215 ILCS 5/401 through 407 (West 2004); see also Village of
McCook v. Illinois Bell Telephone Co., 335 Ill. App. 3d 32, 36
(2002). Accordingly, where this count of plaintiffs’ complaint does
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not allege a valid cause of action, we affirm its dismissal by the
circuit court.
Thus, based upon the foregoing, we agree with the appellate
court’s holdings that HealthLink’s percentage based fee violates
section 22(A)(14) of the Act, and that plaintiffs cannot recover any
monies paid pursuant to their participating provider agreements with
HealthLink. However, we disagree with the appellate court’s finding
that the fixed flat fee charged to plaintiffs by HealthLink violates
section 22(A)(14) of the Act or this state’s public policy.
Additionally, we find plaintiffs’ claim that HealthLink should be
required to divest itself of any fees paid by plaintiffs was forfeited,
and that plaintiffs’ claim that those fees should be returned to them
based on a violation of the Illinois Insurance Code was properly
dismissed.
The appellate court’s judgment is affirmed in part and reversed
in part, and the circuit court’s judgment is affirmed.
Appellate court judgment affirmed
in part and reversed in part;
circuit court judgment affirmed.
JUSTICES GARMAN and BURKE took no part in the
consideration or decision of this case.
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