El Paso County Hospital District v. Texas Health & Human Services Commission

400 S.W.3d 72, 56 Tex. Sup. Ct. J. 571, 2013 WL 2150666, 2013 Tex. LEXIS 395
CourtTexas Supreme Court
DecidedMay 17, 2013
DocketNo. 11-0830
StatusPublished
Cited by13 cases

This text of 400 S.W.3d 72 (El Paso County Hospital District v. Texas Health & Human Services Commission) is published on Counsel Stack Legal Research, covering Texas Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
El Paso County Hospital District v. Texas Health & Human Services Commission, 400 S.W.3d 72, 56 Tex. Sup. Ct. J. 571, 2013 WL 2150666, 2013 Tex. LEXIS 395 (Tex. 2013).

Opinion

Justice DEVINE

delivered the opinion of the Court.

This appeal raises two questions about an earlier appeal and opinion from this Court. See El Paso Hosp. Dist. v. Tex. Health & Human Servs. Comm’n, 247 S.W.3d 709 (Tex.2008). The earlier appeal concerned a suit by fourteen Texas hospitals against the Texas Health and Human Services Commission and its Executive Commissioner (collectively “HHSC”), which challenged a “cutoff date” used by HHSC to cap the collection of data used to calculate Medicaid reimbursement rates for inpatient services. In that suit, the hospitals asserted two claims for declaratory relief under section 2001.038 of the Administrative Procedure Act (“APA”). Id. at 711. First, they claimed that the cutoff date was an invalid “rule” because it was not adopted via the APA’s formal rule-making procedures. Second, they argued that the part of the agency’s appeal rule, which HHSC applied to deny them administrative relief from the cutoff date’s effect on their rates, was inapplicable. This Court agreed that the cutoff date was an invalid rule and that, as a result, the appeal rule, as interpreted by HHSC to deny the hospitals’ administrative appeals, did not apply. Id. We declared the cutoff-date rule invalid and enjoined its enforcement. Id. at 715-16.

We further remanded the cause to the district court where the hospitals argued that our judgment, enjoining the enforcement of the cutoff-date rule, should apply retroactively to provide them a basis to reopen their earlier administrative appeals and to seek reimbursement for the underpayment of past Medicaid claims calculated under the invalid cutoff-date rule. HHSC responded that the injunction should only operate prospectively because the earlier administrative proceedings were concluded before the Court’s injunction and could not be reopened under agency rules. The district court agreed with the hospitals; the court of appeals agreed with HHSC. The court of appeals reversed the district court’s judgment, in part, concluding that our 2008 opinion and judgment did not purport to reopen past rate determinations or closed administra[74]*74tive proceedings. 351 S.W.3d 460, 488 (Tex.App.-Austin 2011). We agree and affirm the court of appeals’ judgment.

I

When a Texas hospital provides inpatient services to a Medicaid beneficiary, HHSC reimburses the hospital with Medicaid funds. 1 Tex. Admin. Code § 355.8063 (2004) (Tex. Health & Human Servs. Comm’n, Reimbursement Methodology for Inpatient Hospital Services) (hereinafter, “Former Rule § 355.8063”).1 Since 1986, HHSC (or its predecessor) has determined the amount of reimbursement through a “prospective payment system.” Id. § 355.8063(a); 11 Tex. Reg. 2988 (1986). Under this system, HHSC calculates the payment rates in advance and then uses those rates to pay reimbursement claims submitted over the next several years, until the rates are recalculated. This rate-calculation process is tied to the state fiscal year (“FY”), which runs from September 1 through August 31. See Tex. Gov’t Code § 316.071; see also El Paso Hosp. Dist., 247 S.W.3d at 713. The process provides for these rates to be recalculated or rebased every three years. Former Rule § 355.8063(a), (b)(5), (h).

According to HHSC, the rate-calculation process has historically taken around ten months to complete. As part of this process, HHSC first collects two sets of data from a prior fiscal year (the “base year”): (1) data from reimbursement claims submitted by all Texas hospitals for treating Medicaid patients admitted in that year, and (2) data from the reported costs of treating those patients. Id. § 355.8063(b)(5). HHSC then inputs that data in a formula that yields each hospital’s “standard dollar amount” (“SDA”), which approximates that hospital’s average cost for treating an average Medicaid case in the base year. Id. § 355.8063(a), (b)(4), (c). All hospitals are then sorted into “payment divisions,” each of which is a group of hospitals whose individual SDAs fall within a certain range of each other. Id. § 355.8063(a). For each payment division, HHSC computes a weighted average of the individual SDAs of that division’s hospitals, and that weighted average is the reimbursement rate for all hospitals in that division. Id. § 355.8063(b)(4), (c). Reimbursement for a particular service is determined by multiplying this weighted average reimbursement rate by a “relative weight,” which reflects the complexity of the services. Id. § 355.8063(b), (c).

Before the rates become final, a hospital may seek to correct alleged errors in its individual SDA calculation via an administrative-appeal procedure. Id. § 355.8063(k). But an appeal cannot challenge the rate-calculation methodology itself. Id. § 355.8063(k)(2). If HHSC grants an appeal, it adjusts the hospital’s SDA for the next fiscal year. Id. § 355.8063(k)(l)(A). In addition, if correcting an error at any time (not just in an appeal) changes a hospital’s payment division — and thus, its rate — HHSC reprocesses the hospital’s reimbursement claims that were paid with the wrong rate during the current fiscal year and pays them according to the corrected rate. Id. § 355.8063(c). But “[n]o corrections are made to payment rates for services provided in previous state fiscal years.” Id.

When HHSC began using this prospective-payment system in 1986, it applied a cutoff date to end the data-collection stage in a rate recalculation. HHSC decided to [75]*75cutoff the collection of claims data six months after the end of the base year (on February 28) to assure time for it to have the new rates in place by the start of the next fiscal year (beginning September 1). As a result, data from three to five percent of paid claims from the relevant base year were typically left out of a rate recalculation. HHSC imposed this cutoff date without adopting it as a rule under the APA’s rule-making procedures. El Paso Hosp. Dist., 247 S.W.3d at 711.

In 2001, fourteen Texas hospitals2 challenged HHSC’s use of the cutoff date. They theorized that the cutoff date excluded data from their rate recalculations that, if included, would increase their rates.3 To assert their challenge, the hospitals filed administrative appeals during the 2000-2001 rate recalculation, claiming that the cutoff date caused “data entry” errors. HHSC denied the appeals at the informal stage, ruling that the hospitals were not raising true data entry errors, which are appealable, but instead were contesting the rate-calculation methodology, which is not. Former Rule § 355.806S(k)(2). HHSC further denied the hospitals’ requests to refer them to the next appeal step — formal administrative hearings. At the time there was no provision for judicial review of the denial decisions. See 351 S.W.3d at 466. In September 2001, the new rates went into effect for FY 2002. El Paso Hosp. Dist., 247 S.W.3d at 713.

In August 2002, the hospitals sued HHSC under section 2001.038 of the APA for declaratory and injunctive relief regarding two agency rules. First, they claimed the cutoff date was a “rule” under the APA and was thus invalid because it had not been adopted under the APA’s procedures.

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Bluebook (online)
400 S.W.3d 72, 56 Tex. Sup. Ct. J. 571, 2013 WL 2150666, 2013 Tex. LEXIS 395, Counsel Stack Legal Research, https://law.counselstack.com/opinion/el-paso-county-hospital-district-v-texas-health-human-services-tex-2013.