Court of Appeals of Texas, Third District, Austin
Facility Insurance Company; Midwest Employers Casualty Company; ACE American Insurance Company; Houston General Insurance Company; UPS Ground Freight Inc.; Hartford Casualty Insurance Company; WC Solutions; Poly-America, LP; British American Insurance Company; Clarendon National Insurance Company; entry Insurance, A Mutual Company; St. Paul Fire & Marine Insurance Company; American Zurich Insurance Company; Employers Insurance Company of Wausau; Zurich American Insurance Company; CompPac Trust of Texas; Netherlands Insurance Company; American Home Assurance Company; and Fidelity & Guaranty Insurance Company, Appellants
Vista Hospital of Dallas, Vista Medical Center Hospital, and Surgery Specialty Hospitals of America, Appellees
THE 126TH DISTRICT COURT OF TRAVIS COUNTY NO.
D-1-GN-15-005812, HONORABLE KARIN CRUMP, JUDGE PRESIDING
Chief Justice Rose, Justices Kelly and Smith
L. Kelly, Justice
an appeal in a suit for judicial review of an administrative
decision. The administrative decision arose from a
dispute over reimbursement for workers' compensation
medical benefits. Appellants are insurance companies, or
"certified self-insureds," who provide coverage
under the Texas workers' compensation system
(collectively, the Carriers). Appellees are Vista Hospital of
Dallas, Vista Medical Center Hospital, and Surgery Specialty
Hospitals of America (collectively, Vista). Vista alleged
systematic underpayment of claims by the Carriers beginning
in 2002. Vista initially claimed a "fair and
reasonable" payment of 70%-100% of their billed charges.
After a 2008 regulatory change required the kind of services
that Vista rendered to be reimbursed at 200% of the Medicare
allowable reimbursement going forward, Vista revised its
calculations to that amount. A panel of State Office of
Administrative Hearings (SOAH) judges issued a Decision and
Order, awarding reimbursement to Vista based on its revised
calculations because SOAH determined those amounts to be
"fair and reasonable." The trial court affirmed
SOAH's decision, and this appeal ensued.
issues, which can be grouped into three categories, the
Carriers challenge (1) alleged procedural problems with
Vista's presentation of its case before SOAH, (2) the
evidence supporting SOAH's findings and conclusions that
the Carriers' reimbursement calculations did not result
in "fair and reasonable" reimbursement to Vista
(and that Vista's competing calculations did), and (3)
SOAH's award of interest to Vista. We affirm.
underlying disputes are the latest in a long-running series
between Vista and carriers of workers' compensation
policies over reimbursement for covered medical expenses.
See generally Vista Med. Ctr. Hosp. v. State Office of
Risk Mgmt., No. 03-17-00352-CV, 2018 WL 3999595 (Tex.
App-Austin Aug. 22, 2018, no pet.) (mem. op.); Vista Med.
Ctr. Hosp. v. Texas Mut. Ins. Co., 416 S.W.3d 11 (Tex.
App-Austin 2013, no pet.); Vista Healthcare, Inc. v.
Texas Mut. Ins. Co., 324 S.W.3d 264 (Tex. App-Austin
2010, pet. denied).
Framework for Medical Reimbursement
law requires that "health care reimbursement policies
and guidelines" govern reimbursement of health care
providers who provide services to injured workers covered by
workers' compensation. See Tex. Lab. Code §
413.011(a); Vista Med. Ctr. Hosp., 2018 WL 3999595,
at *1. The Division of Workers' Compensation (Division),
housed within the Department of Insurance, is tasked with
developing the fee guidelines that govern reimbursement for
different types of medical care. See Tex. Lab. Code
§§ 401.011(8) (defining "commissioner" as
"the commissioner of workers' compensation"),
402.00111(a) (providing that commissioner of workers'
compensation administers Division), 413.011(a) (directing
commissioner to adopt fee guidelines); Vista Med. Ctr.
Hosp., 2018 WL 3999595, at *1.
the Division adopts a fee guideline for a certain type of
medical care, workers' compensation carriers must
reimburse providers of that type of care in accord with the
guideline. See id. (citing Tex. Lab. Code §
413.016(b)). But if no fee guideline (or negotiated contract)
applies to a certain type of medical care, carriers must
reimburse providers of that type of care at "a fair and
reasonable reimbursement amount." 28 Tex. Admin. Code
§ 134.1(e)(3) (2018) (Tex. Dep't of Ins., Div. of
Workers' Comp., Medical Reimbursement).
and the Carriers' Disputes Over Vista's Bills
provided outpatient medical services to injured workers from
2002 to 2008 under policies issued by the Carriers. In the
fifty-three instances underlying this appeal, Vista billed
one or more of the Carriers for these services. Vista's
original bill in each instance was on a Uniform Bill (UB)
form-the standard bill form required by the Division. See
id. § 133.10(b)(2) (2018) (Tex. Dep't of Ins.,
Div. of Workers' Comp., Required Billing Forms/Formats).
Vista computed its billed amounts according to its usual and
customary fee schedule. Vista listed on the UBs the
"procedure codes" corresponding with the services
or procedures that it performed.
Carriers paid Vista some, but not all, of the amounts
requested. Vista asked the Carriers to reconsider and to
reimburse it at 100% of the billed charges. When the Carriers
refused, Vista requested Medical Dispute Resolution before
the Division. See generally 28 Tex. Admin. Code
§ 133.305 (2018) (Tex. Dep't of Ins., Div. of
Workers' Comp., MDR-General). Before the Division, Vista
contended that "fair and reasonable" reimbursement
required compensation at no less than 70% of its billed
charges in each dispute.
the Division determined that Vista was not entitled to any
reimbursement beyond what the Carriers had already paid. So,
from 2004 to 2009, Vista sought de novo contested case
hearings before SOAH for each of the fifty-three disputes,
again contending that reimbursement at 70%-100% of its billed
charges was "fair and reasonable."
fifty-three disputes remained on SOAH's docket for
Developments While the Disputes Were Pending Before SOAH
meantime, there were developments in the law affecting
workers' compensation reimbursement.
2006, the Division promulgated Rule 134.1, which requires
"fair and reasonable" reimbursement to be, among
other things, "consistent with the criteria of Labor
Code § 413.011." See 31 Tex. Reg. 3561,
3564 (2006) (formerly codified at 28 Tex. Admin. Code §
134.1(d)(1) (Tex. Dep't of Ins., Div. of Workers'
Comp., Medical Reimbursement)), renumbered to subsection
134.1(f) by 33 Tex. Reg. 364, 393 (2008).
Code section 413.011's "fair and reasonable"
criteria expressly apply to the Division's creation of
fee guidelines. See Tex. Lab. Code § 413.011(d)
("Fee guidelines must be fair and reasonable . . .
."). The criteria are that fee guidelines must be
"designed to ensure the quality of medical care,"
must be "designed . . . to achieve effective medical
cost control," and "may not provide for payment of
a fee in excess of the fee charged for similar treatment of
an injured individual of an equivalent standard of living and
paid by that individual or by someone acting on that
individual's behalf." Id. In the absence of
a fee guideline for a certain type of medical care, that care
must be reimbursed at "fair and reasonable" rates.
promulgation of Rule 134.1, Vista took the position that, for
health care services for which the Division had not yet
created any fee guideline, the rule could only require
"fair and reasonable" reimbursement and could not
also require that reimbursement comply with Labor Code
section 413.011 because that statute expressly addresses only
fee guidelines. See Vista Healthcare, 324 S.W.3d at
267, 269-71. Vista challenged the rule in separate
reimbursement disputes from those at issue in this appeal.
The Division interpreted Rule 134.1 as properly incorporating
Labor Code section 413.011's criteria even when no fee
guideline is in place, and, in 2010, this Court deferred to
the Division's interpretation and rejected Vista's
challenge. See id. at 272-73.
2008, the Division promulgated a new fee guideline to govern
"medical services provided in an outpatient acute care
hospital on or after March 1, 2008" (the 2008 Fee
Guideline). See 28 Tex. Admin. Code §
134.403(a), (e) (2018) (Tex. Dep't of Ins., Div. of
Workers' Comp., Hospital Facility Fee
Guideline-Outpatient), adopted by 33 Tex. Reg. 400,
400-28 (2008). The Division crafted the 2008 Fee Guideline to
satisfy, for outpatient-services reimbursement, the criteria
in Labor Code section 413.011(d). See 33 Tex. Reg.
2008 Fee Guideline uses reimbursement amounts prescribed by
the federal Centers for Medicare and Medicaid Services for
certain procedure codes, instead of using any health care
provider's usual and customary charges for those
procedure codes. The guideline also requires that outpatient
facilities be reimbursed at "200 percent" of
"[t]he sum of the Medicare facility specific
reimbursement amount and any applicable outlier payment
amount" as provided in "the most recently adopted
and effective Medicare Outpatient Prospective Payment System
(OPPS) reimbursement formula and factors as published
annually in the Federal Register." 28 Tex.
Admin. Code § 134.403(f)(1)(A) (2018) (Tex. Dep't of
Ins., Div. of Workers' Comp., Hospital Facility Fee
Guideline-Outpatient). The 200% figure is called a Payment
Adjustment Factor (PAF) or "200% of Medicare." An
outpatient facility's ultimate reimbursement under the
2008 Fee Guideline is, roughly, the Medicare-prescribed
amount for the services performed, plus any outlier payment,
2008 Fee Guideline included a Preamble explaining its origin
and underlying reasoning. The Preamble explained the
Division's purpose behind promulgating the guideline; the
extensive research that informed its choices; and how the
guideline meets the applicable statutory requirements,
including Labor Code section 413.011's criteria. The
Preamble also explained why the Division's research
supported the 200% PAF. For all this, the Preamble explains,
the Division relied on data from the years preceding 2008.
Changes its "Fair and Reasonable" Calculations in
the Pending Disputes
Vista presented the fifty-three fee disputes to the Division,
it calculated its reimbursement requests based on its view
that Rule 134.1 should not require it to satisfy Labor Code
section 413.011's criteria. Then, in response to the 2008
Fee Guideline's promulgation and to this Court's
rejection of Vista's position on Rule 134.1 in Vista
Healthcare, Vista changed its methodology for
calculating "fair and reasonable" reimbursement in
the fifty-three disputes. Even though Vista's underlying
claims preceded the 2008 Fee Guideline change, Vista
recalculated their reimbursement requests from their initial
70%-100% of billed charges to the Medicare-prescribed
reimbursement amounts for those same procedure codes, added
any applicable outlier amounts, and applied the 200% PAF.
These new calculations, Vista represents, resulted in lower
overall amounts requested for reimbursement than its original
laid out these new calculations in "Exhibit 1"
documents that it filed with SOAH in each of the fifty-three
disputes. In November 2013, Jacquelyn Pham, the Vice
President of Business Financial Services for Dynacq
Healthcare, swore to an affidavit in support of the
"Exhibit 1" documents' new calculations. In it,
she said that Vista's use of the 200% PAF resulted in
"fair and reasonable" reimbursement. And she said
that using the 2008 Fee Guideline for the fifty-three
disputes produced "fair and reasonable reimbursement
amount[s] which take into consideration all of the factors
in the Texas Labor Code that are to be considered in the
development of fee guidelines in the adjudication of fair and
Hearing Before SOAH, Evidence Presented, and Result
April 2015 before a panel of three administrative-law judges,
SOAH held its final hearing in the fifty-three disputes.
Vista's evidence included its "Exhibit 1"
documents; the 2008 Fee Guideline (including its Preamble);
and testimony from Pham, who had provided the affidavit in
support of Vista's position.
testified about her qualifications, training, and experience
to opine about Vista's calculation methodology. She also
testified about how Vista calculated the "fair and
reasonable" reimbursement amount on each "Exhibit
1," including applying the 200% PAF, and that Vista and
payors have been using the same method for several years.
represented that, in every dispute, its "fair and
reasonable" calculations produced lower overall
reimbursement amounts than its original calculations
produced. But the Carriers were unwilling to reimburse Vista
at the newly calculated amounts.
was the only witness to testify. The Carriers' counsel
cross-examined her extensively, but the Carriers did not
offer any witness of their own.
the SOAH panel concluded that the Carriers should reimburse
Vista at the rates calculated under the 2008 Fee Guideline,
less amounts that the Carriers had already paid. The
panel's Decision and Order specified that the panel
"derive[d] a methodology for determining fair and
reasonable reimbursement." The Decision and Order's
fourth conclusion of law said that "Vista met its burden
of proving by a preponderance of the evidence that it had not
been reimbursed a fair and reasonable amount by the Carriers
for the services provided."
panel included the following findings relevant here in its
Decision and Order:
4. The responsible Carrier reimbursed Vista . . . for the
services provided to the injured worker in each case.
5. Vista requested additional reimbursement in each of the
cases, and in each case the responsible Carrier denied the
11. At the time Vista provided the services at issue in each
case, there was no applicable fee guideline.
12. The Division adopted [the 2008 Fee Guideline], found at
28 Texas Administrative Code § 134.403, effective March
13. The [2008 Fee Guideline] was adopted in order to provide
fair and reasonable reimbursement for hospital outpatient
14. The [2008 Fee Guideline] is based on
nationally-recognized studies, including data from other
state systems, and research conducted by the federal Centers
for Medicare and Medicaid Services (CMS).
15. Pursuant to the [2008 Fee Guideline], the Division
adopted a Payment Adjustment Factor (PAF) for outpatient
hospital fees of 200%, effective March 1, 2008.
16. The [2008 Fee Guideline] methodology provides a reliable
method for calculating fair and reasonable reimbursement ...