Shamrock Psychiatric Clinic, P.A. v. Texas Health and Human Services Commission Charles Smith, Executive Commissioner of the Texas Health and Human Services Commission And Stuart W. Bowen Jr., Inspector General for the Texas Health and Human Services Commission Office of Inspector General

Opinion

ACCEPTED 03-15-00349-CV 8167970 THIRD COURT OF APPEALS AUSTIN, TEXAS 12/9/2015 4:58:35 PM JEFFREY D. KYLE CLERK NO. 03-15-00349-CV

In the FILED IN 3rd COURT OF APPEALS Third Court of Appeals AUSTIN, TEXAS Of Texas 12/9/2015 4:58:35 PM JEFFREY D. KYLE Clerk

SHAMROCK PSYCHIATRIC, P.A. Appellant, V.

TEXAS DEPARTMENT OF HEALTH AND HUMAN SERVICES, KYLE JANEK, MD, EXECUTIVE COMM’R AND DOUGLAS WILSON, INSPECTOR GENERAL Appellees,

On appeal from the 126th District Court, Travis County, Texas Cause NO. D-1-GV-14-001833

APPELLANT’S REPLY BRIEF

Jason Ray Texas Bar No. 24000511 Jennifer S. Riggs Texas Bar No. 16922300 RIGGS & RAY, P.C. 506 West 14th Street, Suite A Austin, Texas 78701 512 457-9806 512 457-9066 – Facsimile jray@r-alaw.com

ATTORNEYS FOR APPELLANT TABLE OF CONTENTS

TABLE OF CONTENTS .......................................................................................... ii

INDEX OF AUTHORITIES.................................................................................... iii

SUMMARY OF REPLY ARGUMENT ................................................................... 1

REPLY ARGUMENT ............................................................................................... 3

Issue: Did the trial court have jurisdiction over the SOAH ALJ’s dismissl of the payment hold hearing? ..................................................................................... 4

I. The HHSC “non-suit” did not deprive the SOAH of jurisdiction over the payment hold matter . .............................................................................................................. 4

II. The payment hold matter and the trial court’s mandamus jurisdiction regarding same are governed by Janek v. Harlingen Family Dentistry, P.C., 451 S.W.3d 97, 99 (Tex. App.—Austin 2014, no pet.). .............. 5

Issue: Did the trial court have jurisdiction to order the HHSC and the SOAH to give Shamrock a hearing?............................................................................... 7

I. The jurisdiction to order that the HHSC provide a hearing is governed by Hawkins v. Community Health Choice, Inc., 127 S.W.3d 322 (Tex. App.—Austin 2004, orig. proceeding) ............ 7

II. The SOAH must resolve the fact questions .......................................... 9

III. The exhaustion doctrine does not apply here ...................................... 11

PRAYER ............................................................................................................. 12

CERTIFICATE OF COMPLIANCE ....................................................................... 12

CERTIFICATE OF SERVICE ............................................................................... 13

Appellant’s Reply Brief Page ii INDEX OF AUTHORITIES

CASES

Hawkins v. Community Health Choice, Inc., 127 S.W.3d 322 (Tex. App.—Austin 2004, orig.proceeding) ......2, 7, 8, 9 , 10

Janek v. Harlingen Family Dentistry, P.C., 451 S.W.3d 97 (Tex. App.—Austin 2014, no pet.) ...............................5, 6, 11

Lindsay v. Sterling, 690 S.W.2d 560 (Tex. 1985) ................................................... 11

Texas Mut. Ins. v. Ledbetter, 251 S.W.3d 31 (Tex. 2008) ......................................... 4

STATUTES

TEX GOV’T CODE CH. 2260 .................................................................................. 8

TEX GOV’T CODE 531.1201(a) .......................................................................... 8, 9

Appellant’s Reply Brief Page iii SUMMARY OF REPLY ARGUMENT

At issue in this case is the trial court’s jurisdiction to decide the scope of

jurisdiction of the State Office of Administrative Hearings (SOAH), who was

acting as the HHSC’s fact finder. The trial court simply failed to address the

jurisdictional issues, dismissing the case for lack of trial court jurisdiction. That

was error.

In addition, the underlying SOAH case presents two distinct jurisdictional

issues: (1) whether the SOAH continued to have jurisdiction over the payment hold

hearing (credible allegation of fraud) and (2) whether the SOAH had jurisdiction

over the final notice of overpayment hearing (general recoupment). It is undisputed

in this case that the payment hold hearing was timely requested. Even if the

SOAH was correct that it lacked jurisdiction over the second matter, that does not

mean the first matter was moot.

The HHSC withheld money from Shamrock on the basis of specific statutory

authority over credible allegations of fraud. The HHSC abandoned those

allegations and, at that time, then had a mandatory and ministerial duty to return

the money withheld. The HHSC cannot use the payment hold process to

effectively get a “leg up” on the second hearing.

It is possible the HHSC might ultimately prevail on some of its final

overpayment allegations, but the HHSC must seek relief in district court to reduce

Appellant’s Reply Brief Page 1 the debt to judgment. That kind of adjudication is a matter within the exclusive

jurisdiction of the judicial branch. The HHSC must use proper legal process to

pursue that alleged debt; it cannot use the statutory temporary hold process to

circumvent proper legal process.

With respect to the second hearing (the overpayment hearing), the decision

in Hawkins v. Community Health Choice, Inc., 127 S.W.3d 322 (Tex. App.—

Austin 2004, orig. proceeding), controls here. As in that case, the HHSC may have

had a defense about the timeliness of Shamrock’s request for a hearing, but the

issue was whether there should be a hearing and, more important, whether the trial

court had jurisdiction to order that a hearing be provided.

The SOAH ALJ should not have simply dismissed the second hearing (the

final overpayment hearing) simply because the HHSC attempted to “dismiss” the

payment hold hearing. The question is not only whether the ALJ should have

“ordered” the HHSC to amend its pleadings, but also whether the final

overpayment was already at issue in the various filings by the HHSC. Fact

questions also existed about waiver and/or consent to jurisdiction. Those questions

were never resolved by the SOAH ALJ, or if they were resolved, were resolved in

Shamrock’s favor.

Appellant’s Reply Brief Page 2 Finally, the exhaustion doctrine does not apply because the HHSC never

entered an agency order on the SOAH ALJ’s Order No. 11. There was no final

agency order for Shamrock to appeal.

Appellant’s Reply Brief Page 3 REPLY ARGUMENT

Issue: Did the trial court have jurisdiction over the payment hold hearing?

I. The HHSC “non-suit” did not deprive the SOAH of jurisdiction over the payment hold matter.

Shamrock’s request for a payment hold hearing was, practically speaking, a

request for affirmative relief from the HHSC’s payment hold. The HHSC had no

right to dismiss Shamrock’s appeal of the payment hold. The only way the HHSC

could deprive the SOAH Administrative Law Judge of jurisdiction over

Shamrock’s appeal was to make the appeal moot by returning all of Shamrock’s

money that the HHSC had withheld as a result of the payment hold.

This situation is analogous to the parties’ rights to non-suit under Texas

Rules of Civil Procedure Rule 162. A party can non-suit its claims, but such

nonsuit will not affect pending claims for affirmative relief. Texas Mut. Ins. v.

Ledbetter, 251 S.W.3d 31, 37 (Tex. 2008). Here, Shamrock had appealed the

HHSC payment hold and sought return of its money. Without the HHSC sua

sponte releasing Shamrock’s money or a final agency indicating that Shamrock

should not be subject to the payment hold, the HHSC could not deprive the SOAH

of jurisdiction over Shamrock’s request for relief from the payment hold.

That payment hold appeal stands alone. The HHSC cannot argue both that

the payment hold hearing was somehow combined with the final overpayment

Appellant’s Reply Brief Page 4 hearing, and at the same time argue that the HHSC never put the final overpayment

at issue. The SOAH ALJ should have proceeded with the payment hold hearing.

II. The payment hold matter and the trial court’s mandamus jurisdiction regarding same are governed by Janek v. Harlingen Family Dentistry, P.C., 451 S.W.3d 97, 99 (Tex. App.—Austin 2014, no pet.)

The relief that could have and should have been granted to Shamrock when

the HHSC abandoned its allegations of a credible allegation of fraud was that the

money that had been withheld by the HHSC would be returned to Shamrock. See

Janek v. Harlingen Family Dentistry, P.C., 451 S.W.3d 97, 99 (Tex. App.—Austin

2014, no pet.). When the HHSC abandoned its payment hold claim against

Shamrock, it did not return Shamrock’s money.

The purpose of a temporary payment hold is to secure the HHSC’s financial

position pending the overpayment hearing, for which the OIG shoulders its burden

of showing that the money in fact constituted an “overpayment.” The HHSC has

effectively taken money due to Shamrock without ever reducing that alleged final

overpayment to a judgment or order. By abandoning its payment hold claim but

keeping the money, the HHSC prevented Shamrock from getting any relief. The

HHSC has circumvented Shamrock’s statutory right to a payment hold hearing and

abused the statutory temporary payment hold process.

This part of the underlying case is governed by this Court’s decision in

Janek v. Harlingen Family Dentistry, P.C., 451 S.W.3d 97. In that case, this Court

Appellant’s Reply Brief Page 5 determined that the trial court had jurisdiction to order that the HHSC return

money withheld on a temporary payment hold when the SOAH judge determined

that the HHSC had no credible evidence of fraud, and the HHSC did not appeal

that decision. Similar considerations apply here, especially since there has been no

finding that Shamrock committed fraud.

The HHSC attempts to distinguish Harlingen on the basis that Harlingen

involved a final proposal for decision and an agency order based on that proposal

for decision, whereas this case does not. (Appellees’ Brief, pp. 17-18) The HHSC

also maintains that this case is different because SOAH Order No. 11 did not order

any funds subject to the payment hold be released to Shamrock. (Appellees’ Brief,

p. 18). Although Order No. 11 did not purport to resolve the validity of the

payment hold or the credibility of the allegation of fraud the HHSC used to support

it, the practical legal effect of the order was the same as that in the Harlingen case,

because there is no finding that the HHSC possessed a credible allegation of fraud

against Shamrock.

When it abandoned its allegations of fraud against Shamrock, the payment

hold simply ceased. Assuming that the HHSC could abandon its claims while

Shamrock’s appeal was not withdrawn, the HHSC’s action was the equivalent of

an admission that it had insufficient evidence of fraud to sustain the payment hold.

The limited nature of Order No. 11 and its lack of any findings of fact or

Appellant’s Reply Brief Page 6 conclusions of law cannot change the legal effect of the HHSC abandoning its

payment hold or the statutory limits on payment holds.

SOAH Order No. 11 is procedurally significant only in this sense: it was not

a proposal for decision on which the HHSC could base a final agency order. Thus,

Order No. 11 did not trigger the Administrative Procedure Act requirements

applicable to final agency orders (i.e. motions for rehearing). The HHSC cannot

allege both that there was no final agency order and that a “final order” was not

followed by a timely motion for rehearing and subsequent lawsuit. (Appellees’

brief, p. 19)

Mandamus was the proper remedy. It was the only remedy available to

Shamrock.

Issue: Did the trial court have jurisdiction to order the HHSC and the SOAH to give Shamrock a hearing?

I. The jurisdiction to order that the HHSC provide a hearing is governed by Hawkins v. Community Health Choice, Inc., 127 S.W.3d 322 (Tex. App.—Austin 2004, orig. proceeding)

The trial court also erred in concluding that it lacked jurisdiction to consider

an application for writ of mandamus to compel the agency to provide a hearing on

the final overpayment hearing. In that regard, this part of the case is governed by

the decision in Hawkins v. Community Health Choice, Inc., 127 S.W.3d 322 (Tex.

App.—Austin 2004, orig. proceeding).

Appellant’s Reply Brief Page 7 The Community Health case involved disputed payments in the Texas

Medicaid Managed Care program. Community Health filed a lawsuit seeking a

writ of mandamus to compel the HHSC to submit a disputed payment matter to the

SOAH for a contested case hearing. The HHSC filed a plea to the jurisdiction,

contending that Community Health’s failure to provide timely pre-suit notice

deprived the trial court of jurisdiction. The trial court denied the plea to the

jurisdiction and granted Community Health’s writ of mandamus compelling the

HHSC to refer the dispute to SOAH for resolution pursuant to the provisions of

Chapter 2260 of the Texas Government Code. This Court determined that the trial

court had not erred in granting the relief requested.

The Community Health court found as follows:

While we agree that proper notice is a prerequisite to suit under chapter 2260, the issue here is whether appellee has in fact complied with the notice provisions of chapter 2260. This is a disputed question of fact that should be presented to SOAH. Appellants would have us read Little–Tex to mean that the referring agency has the exclusive authority to decide whether and to what extent an adverse party is in compliance with chapter 2260. . . . Were the agency charged with making the referral the ultimate finder of fact, then conceivably no issues of fact would make it past the agency determination. Such a reading would essentially eliminate the need for a referral to SOAH altogether and frustrate the legislature’s intent to provide an alternate procedure of resolving contractual disputes with government agencies.

Community Health, 127 S.W.3d at 325.

Similar considerations apply here. Both Chapter 531 and Chapter 2260 of

the Texas Government Code confer the right to a contested case hearing. The

Appellant’s Reply Brief Page 8 version of section 531.1201 applicable prior to September 1, 2015 provided as

follows:

(a) A provider must request an appeal under this section not later than the 15th day after the date the provider is notified that the commission or the commission's office of inspector general will seek to recover an overpayment or debt from the provider. On receipt of a timely written request by a provider who is the subject of a recoupment of overpayment or recoupment of debt arising out of a fraud or abuse investigation, the office of inspector general shall file a docketing request with the State Office of Administrative Hearings or the Health and Human Services Commission appeals division, as requested by the provider, for an administrative hearing regarding the proposed recoupment amount and any associated damages or penalties. The office shall file the docketing request under this section not later than the 60th day after the date of the provider's request for an administrative hearing or not later than the 60th day after the completion of the informal resolution process, if applicable.

TEX. GOV’T CODE 531.1201.

Section 531.1201 merges the notice for a payment hold hearing and a

general recoupment hearing. As a result, a timely request for a payment hold

hearing satisfies the requirement for a hearing on a general recoupment hearing.

The HHSC effort to require two (or more) notices is simply not supported by the

language of the statute.

And even if the request for a hearing on the payment hold is not deemed

sufficient to trigger section 531.1201 with respect to the general recoupment

hearing, the Community Health decision rationale applies here. If the HHSC is the

ultimate finder of fact on the timeliness and sufficiency of a request for a hearing,

Appellant’s Reply Brief Page 9 then conceivably no issues of fact would ever make it past the HHSC

determination. “Such a reading would essentially eliminate the need for a referral

to SOAH altogether and frustrate the legislature’s intent” to provide a remedy

under section 531.1201. See Community Health, 127 S.W.3d at 325.

II. The SOAH must resolve fact questions.

Here, the SOAH judge apparently viewed this matter as if the sole disputed

issue with respect to the second hearing (the final overpayment hearing), was

whether the administrative law judge had the authority “to require OIG to amend

its pleadings to assert an overpayment claim in this case.” (App. Ex. 2) Although

Shamrock does not contend that the SOAH judge has the authority to issue a writ

of mandamus to compel the HHSC to “do” anything, as indicated in Shamrock’s

initial brief, certainly the judge has the authority to enforce the parties’ agreement.

The consequence of doing so may not be an order to replead, but it could include

what amount to “death penalty” sanctions that have the same effect.

Applying the Community Health decision, even assuming that the ALJ’s

stated legal reasoning was correct, it was an incomplete analysis of the facts and

law applicable in this case. As indicated in Shamrock’s initial brief, the HHSC’s

allegation regarding the final overpayment claim was already a matter of record.

(Appellant’s Brief, pp. 15-16) Was that sufficient? The pleadings in administrative

proceedings are not tested by the technical niceties of pleading and practice

Appellant’s Reply Brief Page 10 applicable in court trials. In addition, by entering into the agreement, did the

HHSC waive more formal notice? Did the HHSC effectively consent to hearing

over the final overpayment claims? The SOAH judge did not address these issues.

The trial court had jurisdiction to order that the HHSC provide a contested case at

which these factual issues could be resolved.

III. The exhaustion doctrine does not control here

Shamrock does not dispute that a party seeking to appeal a final agency

decision ordinarily must exhaust administrative remedies. But that requirement

applies to an appeal of a final agency order. Here, the HHSC admits that Order No.

11 was not a final agency order such as that at issue in the Harlingen case. (See

Appellees’ Brief, pp. 17-18) The HHSC never acted on or adopted the Order No.

11. As a result, the remedies allegedly not exhausted were not available. For that

reason, cases such as Lindsay v. Sterling, 690 S.W.2d 560 (Tex. 1985) and its

progeny are inapplicable.

Appellant’s Reply Brief Page 11 PRAYER

For these reasons, Shamrock prays that this Court reverse the trial court

order dismissing the case for want of jurisdiction and instruct the trial court to

issue a Writ of Mandamus requiring that the OIG release the funds withheld under

the payment hold, and to docket its general overpayment claims at the SOAH, as

requested by Shamrock.

Respectfully submitted,

____________________________________ Jason Ray State Bar No. 24000511 Jennifer S. Riggs State Bar No. 16922300 RIGGS & RAY, P.C. 506 West 14th Street, Suite A Austin, Texas 78701 512 457-9806 512 457-9066 – Facsimile

CERTIFICATE OF COMPLIANCE

I certify that this Brief complies with TRAP Rule 9.4 and contains 2,479

words in Times New Roman typeface of 14-point.

______________________________ Jason Ray

Appellant’s Reply Brief Page 12 CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing document was

served by eservice on December 9, 2015 to the following:

Eugene A. Clayborn Assistant Attorney General Deputy Chief, Administrative Law Division Office of the Attorney General of Texas P.O. Box 12548, Capitol Station Austin, Texas 78711-2548 Eugene.clayborn@texasattorneygeneral.gov

Appellant’s Reply Brief Page 13