The decision comes after St. Anthony Hospital on Chicago's Southwest Side filed a lawsuit against state officials.
In its ruling, the court cited an investigation by the Better Government Association, "Milking Medicaid," which looked into the impact of privatizing the state's health care system.
The U.S. Court of Appeals for the 7th Circuit ruled Saint Anthony Hospital "alleged a viable claim for relief" when it sued state officials for not adequately overseeing the insurance companies they contracted as managed care organizations, according to the BGA.
"In nutshell, St. Anthony is saying this is really a system that's largely bereft of government oversite, said David Jackson of the BGA. "The for-profit companies, the insurance firms, are boosting their profits by denying and reducing reimbursements to providers like St. Anthony's."
The decision opens the door for safety net hospitals for the underserved to recover millions of dollars in Medicaid payments.
"It's not just a lot of money at stake," said Jackson. "These providers represent illinois' most vulnerable citizens. Low ioncome families, foster children, pregnant women, elderly people.