Columbia St. David's Healthcare System, L.P. D/B/A North Austin Medical Center v. Clara Sidney, Individually and as Personal Respresentative of Robert Sidney, Jr.

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-02-00429-CV

Hospitals and Hospital Systems, et. al., Appellants

v.

Continental Casualty Company, et al., Appellees

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 200TH JUDICIAL DISTRICT
NO. GN-001259, HONORABLE LORA J. LIVINGSTON, JUDGE PRESIDING

OPINION

Individual hospitals and hospital systems (“Hospitals”) appeal a declaratory judgment

in favor of Continental Casualty Company and others (“Insurers”) who pay worker’s compensation

medical claims.1 The Hospitals filed claims for medical dispute resolution after the invalidation of

the 1992 Acute Care Hospital Fee Guideline (“1992 Fee Guideline”). At issue is whether Texas

Worker’s Compensation Commission (the “Commission”) rule 133.305(a) bars the Hospitals’ claims

because they were filed with the Commission more than one year after the date the hospital services

were provided. See 28 Tex. Admin. Code § 133.305(a) (2000).2 The Hospitals appeal by the

1
The appendix to this opinion lists the appellants and appellees individually.
2
The rule in effect at the time this suit commenced was 133.305(a) and is the rule the parties
have cited to in their briefs. On July 15, 2000, this provision was moved from subsection (a) to
subsection (d) without substantive change. See 28 Tex. Admin. Code § 133.305(d) (2002). During
the pendency of this appeal, the rule was moved again without substantive change. See 27 Tex. Reg.
following two issues: (1) rule 133.305(a) does not bar the Hospitals’ resubmitted claims because the

time limit for filing claims under the statute was tolled by the pendency of the litigation brought to

invalidate the 1992 Fee Guidelines; and (2) application of rule 133.305(a) was temporarily waived

by the Commission in a 1997 settlement agreement. We will affirm the judgment of the trial court.

FACTUAL AND PROCEDURAL HISTORY

In 1992, the Commission adopted a new fee guideline which set forth reimbursement

rates to be paid to hospitals for inpatient medical treatment rendered to worker’s compensation

patients. This guideline, which took effect on September 1, 1992, established a new “per diem,” or

flat-rate structure, which was a significant departure from the way that inpatient hospitalizations had

previously been paid. Prior to the effective date of the 1992 Fee Guideline, the Texas Hospital

Association and several individual hospitals (collectively, “THA”) filed suit for declaratory judgment

challenging the guideline on both procedural and substantive grounds. See Tex. Gov’t Code Ann.

§ 2001.038 (West 2000). However, THA abandoned the substantive challenge to the guideline and

only argued that the adoption notice of the 1992 Fee Guideline failed to substantially comply with

the procedures of the Administrative Procedure Act (the “APA”). See id. The trial court upheld the

1992 Fee Guideline in February 1995 and THA appealed.3

12282 (2003) (to be codified at 28 Tex. Admin. Code § 133.307(d)). For convenience, we will cite
to former 133.305(a), since it is the version the parties cite.
3
Texas Hospital Association (“THA”) did not request that the trial court maintain the status
quo by issuing a temporary injunction against the Commission to enjoin the enforcement of Rule
133.305(a) in order to preserve the hospitals’ right to timely file medical dispute resolution claims
if and when the 1992 Guideline was set aside by the courts. Cf. Patient Advocates of Tex. v. Texas
Workers Comp. Comm’n, 80 S.W.3d 66, 80 (Tex. App.—Austin 2002, pet. filed).

2
 On December 6, 1995, this Court reversed the trial court on the grounds that the

Commission failed to follow the procedural requirements of the APA because the Commission’s

order adopting the guideline did not contain a sufficient “reasoned justification.” Texas Hosp. Ass’n

v. Texas Worker’s Comp. Comm’n, 911 S.W.2d 884, 888 (Tex. App.—Austin 1995, writ denied).

We held the 1992 Fee Guideline void and unenforceable and issued an injunction which prohibited

the Commission from continuing to enforce the void fee guideline. Having dropped their substantive

challenge to the validity of the 1992 Fee Guideline, the Hospital’s only recourse to prove their

entitlement to more money was through the filing of requests for dispute resolution with the Medical

Review Division on each individual claim.

Although the 1992 Fee Guideline was rendered void and unenforceable by this Court,

the executive director of the Commission issued a memorandum to all worker’s compensation

insurance carriers and the Hospitals advising that the Commission would appeal the Texas Hospital

Association ruling. The memorandum also stated that the Medical Review Division would take no

action on requests for medical dispute resolution where the sole basis for the request was that the

1992 Fee Guideline had been declared void.4

From September 1, 1992 (the date on which the 1992 Fee Guideline became effective)

to August 1, 1997 (the date a new guideline was effectuated), the Hospitals continued to treat

worker’s compensation patients and accept payment for services under the 1992 Fee Guideline. The

Hospitals did not file requests challenging the amounts of the payments for the claims in dispute.

4
Health care providers who disagree with an insurance company’s denial of a claim or the
amount reimbursed for the claim are entitled to have their dispute reviewed by the Commission’s
Medical Review Division. See Tex. Lab. Code Ann. § 413.031 (West Supp. 2003).

3
Following the final action by the supreme court denying the Commission’s application for writ of

error and overruling its motion for rehearing, the Hospitals sought to have all claims for medical

services rendered during the prior five-year period reexamined through the medical dispute

resolution process and paid under the more generous fee guidelines that were in place prior to the

implementation of the 1992 Fee Guideline. This resulted in over 20,000 claims being submitted to

the Medical Review Division, most of which were past the one-year limitation period imposed by

rule 133.305(a). See 28 Tex. Admin. Code § 133.305(a).

Through a series of letters, the Commission indicated that it intended to apply rule

133.305(a)—the one-year rule—to those claims that were more than one year past the original date

of service. The Hospitals filed suit once again, and on the eve of trial the two parties agreed to a

Compromise Settlement Agreement (hereinafter “Settlement Agreement”) in which the Commission

agreed to “accept and process” each of the 20,000 disputed claims.

The process of examining the claims commenced, but every claim for additional

payment was denied. The denials were not based on the one-year rule, but rather that the hospital

failed to meet its burden to show that the amount paid under the 1992 Fee Guideline did not meet

the reimbursement standards set forth in the Worker’s Compensation Act. See Tex. Lab. Code Ann.

§ 413.011(d) (West Supp. 2003). The Hospitals disputed these determinations and sought a hearing

at the State Office of Administrative Hearings (“SOAH”).5 See Tex. Lab. Code Ann. § 413.031(k)

5
The Administrative Law Judge (“ALJ”) stated that the issue of the propriety of payments
made pursuant to the 1992 Fee Guideline will be measured against the statutory standards of section
413.011(d) of the Texas Labor Code, which provides that “guidelines for medical services fees must
be fair and reasonable . . . .” See Tex. Labor Code Ann. § 413.011(d) (West 2003). The Hospitals
have the burden of proof to show that the payments violated this statute. The ALJ ruled that

4
(West Supp. 2003). The Administrative Law Judge (“ALJ”) ordered the parties to brief several

threshold legal issues, including whether the one-year rule applied to the Hospitals’ claims filed out

of time, as asserted by the Insurers. The ALJ held against the Insurers, finding that the Commission

was authorized to waive and/or suspend its own one-year rule and properly did so through the

Settlement Agreement. The Insurers filed suit against the Commission challenging its authority to

waive the one-year rule. The Hospitals intervened, this time on the side of the Commission. The

trial court rendered judgment in favor of the Insurers, upholding the validity and enforceability of

rule 133.305(a). It is this decision that the Hospital intervenors appeal, as the Commission chose

not to appeal.6

DISCUSSION

Whether rule 133.305(a) applies to bar the 20,000 pending medical fee dispute claims

is a question of law. We review the trial court’s conclusions of law de novo and will uphold them

if they can be sustained on any legal theory supported by the evidence. Raymond v. Rahme, 78

S.W.3d 552, 554 (Tex. App.—Austin 2002, no pet.). Even if we find a conclusion of law to be

incorrect, we will not reverse a judgment if it can be sustained on any correct legal theory supported

by the evidence. Id.; Cohn v. Commission for Lawyer Discipline, 979 S.W.2d 694, 697 (Tex.

App.—Houston [14th Dist.] 1998, no pet.).

invalidation of the 1992 Fee Guideline on procedural grounds does not mean that payments made
pursuant to the guideline are invalid automatically, consistent with the memorandum from the
executive director of the Commission indicating that the Medical Review Division would take no
action on requests for medical dispute resolution where the sole basis for the request was that the
1992 Fee Guideline had been declared void.
6
The SOAH proceedings have been stayed pending the outcome of this decision.

5
 The Hospitals contend that after ten years of litigation and a previous victory in

having the 1992 Fee Guideline declared void, they are now being denied the opportunity to finally

be paid what they feel would be a “fair and reasonable” amount for their services. One obstacle

standing in the way of this pursuit is rule 133.305(a), which dictates that all requests for review of

disputed fees must be submitted to the Commission no later than one calendar year from the date(s)

of service.7 This rule has been upheld for over a decade. See Patient Advocates of Tex. v. Texas

Workers Comp. Comm’n, 80 S.W.3d 66, 80 (Tex. App.—Austin 2002, pet. granted) (stating that

primary purpose of statute of limitations is to ensure that claims are asserted within reasonable time,

giving opposing party fair opportunity to prepare defense while evidence is still available).

Tolling

By their first issue, the Hospitals assert that the application of rule 133.305(a) was

tolled during the five years that their lawsuit challenging the 1992 Fee Guideline was winding its

way through the courts, ending with this Court’s opinion in Texas Hospital Association. See Texas

Hosp. Ass’n, 911 S.W.2d at 888 (holding that Commission failed to follow procedural requirements

in enacting guideline because Commission’s order adopting guideline did not contain sufficient

“reasoned justification”). The Hospitals claim that their right to seek additional reimbursement

7
Section 133.305(a) provides:

(a) A request for review of medical services and dispute resolution . . . shall be
submitted to the commission . . . no later than one calendar year after the
dates of service in dispute.

28 Tex. Admin. Code § 133.305(a) (West 2000) (emphasis added).

6
through the medical dispute resolution process depended entirely on the outcome of their challenge

to the 1992 Fee Guideline.8 Relying on Hughes v. Mahaney & Higgins, the Hospitals argue that

limitations periods are tolled for the second action if the viability of the second cause of action

depends upon the outcome of the first. 821 S.W.2d 154, 157 (Tex. 1991). The Hospitals’ reliance

on Hughes is misplaced. The actual rule stated in Hughes is that “where a person is prevented from

exercising his legal remedy by the pendency of legal proceedings, the time during which he is thus

prevented should not be counted against him in determining whether limitations barred his right.”

Id. (emphasis added); see Holmes v. Texas A&M Univ., 145 F.3d 681, 685 (5th Cir. 1998) (“Texas

permits the tolling of a statute of limitation only where a plaintiff’s legal remedies are precluded by

the pendency of other legal proceedings”) (emphasis added).

The Hospitals were not “prevented” or “precluded” from seeking additional

reimbursement. The Hospitals claim that seeking additional reimbursement through the

Commission’s medical dispute resolution process depended entirely on the outcome of their

challenge to the 1992 Fee Guideline. However, no pending legal proceeding prevented the Hospitals

from timely filing their claims at the Commission. The declaratory judgment action was not the

exclusive method to challenge the validity of the 1992 Fee Guideline; therefore, the institution of

8
The Hospitals also seem to argue that their claims for additional payments did not accrue
until after the 1992 Fee Guideline was rendered void because their claims were not evident before
that time. This argument is without merit. The 1992 Fee Guideline was being challenged on
procedural, not substantive grounds. Moreover, the language of rule 133.305 clearly states that the
one-year time period begins to run on the date the hospital services were rendered. It is the
Commission’s rule that defines when a claim accrues, as well as how long the provider has to file
it. The Hospitals’ failure to seek an agency determination on the issue of additional reimbursement
is not protected by their suit for declaratory relief under the APA.

7
such suit did not shield the Hospitals from timely filing their requests for medical dispute resolution.9

The Hospitals were free to challenge the validity of the 1992 Fee Guideline before the agency in

addition to seeking a declaratory judgment. See Tex. Gov’t Code Ann. § 2001.038(d) (“[a] court

may render a declaratory judgment without regard to whether the plaintiff requested the state agency

to rule on the validity or applicability of the rule in question.”).

Additionally, the Hospitals could have continued to seek additional reimbursement

with supporting evidence showing the additional amount is fair and reasonable. As this Court held

in Methodist Hospitals v. Texas Worker’s Compensation Commission, guidelines merely assist

carriers and the Commission in determining whether medical charges are “fair and reasonable.” 874

S.W.2d 144, 149-50 (Tex. App.—Austin 1994, no writ). The Commission is free to compensate

providers an amount it deems has been shown to be appropriate. Id. Section 413.031(b) of the

Texas Labor Code provides:

(b) A health care provider who submits a charge in excess of the fee guidelines . . .
is entitled to a review of the medical service to determine if reasonable medical
justification exists for the deviation . . . .

Tex. Lab. Code Ann. § 413.031(b) (emphasis added).

After this Court invalidated the 1992 Fee Guideline in 1996, the Commission indicated that it would

not take any action on requests for medical dispute resolution where the sole basis for the request

was that the 1992 Fee Guideline had been declared void.

9
The Administrative Procedure Act (the “APA”) provides an additional, but not exclusive,
vehicle to challenge the validity or applicability of a rule. It provides that the “validity or
applicability of a rule “may” be determined in an action for declaratory judgment . . . .” Tex. Gov’t
Code Ann. § 2001.038 (West 2000).

8
 The Hospitals argue that due to the position taken by the Commission in 1996, any

effort on their part to seek additional reimbursement would have been futile. We disagree. The

Hospitals offer no explanation as to why they did not file any requests for dispute resolution between

the time this suit was initiated in September 1992 and February 1997, when the supreme court took

its final action. The memorandum from the executive director of the Commission indicated that they

would take no action on requests for medical dispute resolution seeking additional reimbursement

based solely upon the 1992 Fee Guideline being declared void. However, the Hospitals could have

pursued additional reimbursement if they could provide “reasonable medical justification” for the

additional amount pursuant to section 413.031(b). Just because the fee guideline had been

invalidated on procedural grounds does not necessarily mean that the amount paid under the fee

guideline on any given claim was not “fair and reasonable.” The Hospitals could have submitted the

claims for additional reimbursement with supporting evidence to show the additional amount is fair

and reasonable. This they did not do.

Moreover, the Hospitals could have sought an injunction against the application of

rule 133.305(a) during the pendency of their suit to invalidate the 1992 Fee Guidelines, as the

plaintiffs did in Patient Advocates. 80 S.W.3d 66. In Patient Advocates, the plaintiffs sought and

were granted a temporary injunction against the application of rule 133.305(a) during the pendency

of their suit to invalidate the Commission’s 1996 Medical Fee Guideline.10

10
The opinion in Patient Advocates does not refer to the temporary injunction against the
application of rule 133.305(a); however, the order granting a temporary injunction in Patient
Advocates was made a part of the record in this case.

9
 The Hospitals did not challenge the validity of rule 133.305(a) and this Court has held

that rule 133.305(a) is valid. Id. at 80. Therefore, rule 133.305(a) applies to bar the Hospitals’

claims filed more than one year from the date of service unless the Hospitals can show they are

somehow excused from timely acting. The Hospitals could have done one of two things to preserve

their claims—either file for a temporary injunction pending the outcome of their challenge on the

validity of the 1992 Fee Guidelines or request payment in excess of the fee guideline supported by

evidence showing that a different amount is fair and reasonable. The Hospitals did neither. They

filed a declaratory action seeking to invalidate the 1992 Fee Guidelines. They did not seek to enjoin

enforcement of rule 133.305(a) pending the outcome of that suit, nor did they submit any claims to

medical dispute resolution, requesting the board to consider a request for payment in excess of the

fee guidelines during the pendency of their suit. Therefore, we hold that rule 133.305(a) was not

tolled while the 1992 Fee Guideline was being challenged. Issue one is overruled.

Waiver

In their second issue, the Hospitals advance the theory that the Commission

suspended rule 133.305(a) in 1997 when it entered into the Settlement Agreement with the Hospitals.

On July 29, 1997, the executive director of the Commission and the Hospitals entered into a

settlement in which the Commission agreed to “accept and process requests for medical dispute

resolution” for claims arising from “services provided on or after September 1, 1992 and prior to

February 14, 1997.” The language of the Settlement Agreement does not expressly waive the one-

year statute of limitations. To the contrary, the Settlement Agreement provides that “all provisions

of the Commission’s rules shall apply to procedures for and determinations of the claims submitted.”

10
The Hospitals argue that the actions of the executive director in agreeing to consider claims which

were more than one year past the date of service implies a waiver of the one-year rule.

Assuming without deciding that the terms of the Settlement Agreement implied a

waiver of the one-year rule, the executive director does not have the authority to effectuate such a

waiver of a lawfully enacted agency rule. The duties of the executive director are set forth in

sections 402.041 and 402.042 of the labor code. See Tex. Lab. Code Ann. §§ 402.041-.042 (West

1996). Those enumerated powers specifically reserve “rule-making” to the members of the

Commission. Section 402.004 clarifies that the Commission may take action only by a majority vote

of its six members who are appointed to the Commission for six-year terms. See id. §§ 402.001-.004

(West 1996). Therefore, we find that there can be no implied waiver by virtue of the Settlement

Agreement.

Even if the Settlement Agreement had been effective to waive the one-year rule, it

would not have revived claims that were already stale when the agreement was signed, i.e., claims

that were more than one year past the date of service. It is well settled that after a cause of action

is barred by a statute of limitations the defendant has a right to rely on such statute as a defense. See

Baker Hughes, Inc. v. Keco R.& D., Inc., 12 S.W.3d 1, 4 (Tex. 1999) (statute which extended

limitations for misappropriation of trade secrets to three years could not revive claim that was time-

barred under previous two-year rule); Continental S. Lines v. Hilland, 528 S.W.2d 828, 831 (Tex.

1975) (amendment to rule governing suits in assumed name did not remove bar of statute of

limitations where limitation period had run prior to effective date of amendment); AT&T Corp. v.

Rylander, 2 S.W.3d 546, 554 (Tex. App.—Austin 1999, pet. denied) (holding statute which enabled

11
new limitations scheme for requesting tax refund could not revive claims on which limitations had

already run under previously applicable residual period). In this case, the insurance carriers had a

vested right to rely on rule 133.305(a) as a defense against claims brought more than one year after

the date of service and this right could not be waived by the Commission entering into the Settlement

Agreement.

CONCLUSION

Commission rule 133.305(a) requires that all requests for review of medical services

and dispute resolution be submitted no later than one calendar year after the date(s) of service in

dispute. 28 Tex. Admin. Code § 133.305(a). Because we find the application of the one-year rule

has not been tolled or waived, we will affirm the judgment of the trial court.

David Puryear, Justice

Before Chief Justice Law, Justices B. A. Smith and Puryear

Affirmed

Filed: May 30, 2003

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