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Facility Insurance Co. v. Vista Hospital of Dallas

Court of Appeals of Texas, Third District, Austin

December 5, 2019

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


          Before Chief Justice Rose, Justices Kelly and Smith


          Chari L. Kelly, Justice

         This is an appeal in a suit for judicial review of an administrative decision.[1] 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.

         In nine 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.


         The 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).

         Legal Framework for Medical Reimbursement

         State 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), [2] 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.

         Once 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).

         Vista and the Carriers' Disputes Over Vista's Bills

         Vista 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.

         The 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.

         Ultimately, 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."

         The fifty-three disputes remained on SOAH's docket for several years.

         Legal Developments While the Disputes Were Pending Before SOAH

         In the meantime, there were developments in the law affecting workers' compensation reimbursement.

         In 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).

         Labor 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.

         Following 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.

         In 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. at 400-28.

         The 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, [3] times two.

         The 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.

         Vista Changes its "Fair and Reasonable" Calculations in the Pending Disputes

         When 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 calculations did.

         Vista 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 reasonable reimbursement."

         Final Hearing Before SOAH, Evidence Presented, and Result

         In 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.

         Pham 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.

         Vista 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.

         Pham was the only witness to testify. The Carriers' counsel cross-examined her extensively, but the Carriers did not offer any witness of their own.

         Ultimately, 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."

         The 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 request.
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 1, 2008.
13. The [2008 Fee Guideline] was adopted in order to provide fair and reasonable reimbursement for hospital outpatient services.
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 ...

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