Charles Osborn, M.D., D.C., D/B/A Quest Health & Rehabilitation v. Ace American Insurance Company

IN THE
TENTH COURT OF APPEALS

No. 10-09-00046-CV

CHARLES OSBORN, M.D., D.C.,
D/B/A QUEST HEALTH & REHABILITATION,
Appellants
v.

ACE AMERICAN INSURANCE COMPANY,
Appellee

From the County Court at Law No. 1
Ellis County, Texas
Trial Court No. 08-C-3184

MEMORANDUM OPINION

After treating Wanda Johnson, a worker‖s compensation claimant, Dr. Charles

Osborn sued Ace American Insurance Company, the carrier for Johnson‖s employer, for

approximately $22,000 when Ace disputed and refused to pay Dr. Osborn‖s bills. Ace

filed a plea to the jurisdiction, asserting that the trial court lacked jurisdiction because

Dr. Osborn had failed to exhaust his administrative remedies. Both parties filed

evidence and briefing on the jurisdictional question.

After a hearing on the plea, the parties filed further briefing and evidence, and
the trial court held another hearing. The trial court granted the plea to the jurisdiction

in a detailed order. Dr. Osborn filed a motion for rehearing and more evidence, and the

trial court held another hearing, after which it entered another detailed order that

granted the plea and dismissed the case without prejudice. Dr. Osborn appeals.

Dr. Osborn‖s three issues are: (1) Did Ace conclusively establish that the trial

court did not have jurisdiction over Dr. Osborn‖s claims? (2) Did the trial court fail to

consider all of the possible bases for supporting its exercise of jurisdiction? (3) Is the

trial court‖s dismissal ruling supported by the law and the evidence?

Subject-matter jurisdiction is essential to the authority of a court to
decide a case. … A plea to the jurisdiction is the vehicle by which a party
contests the trial court‖s authority to determine the subject matter of a
cause. Whether a trial court has subject-matter jurisdiction over a cause is
a question of law and is reviewed de novo.

Cornyn v. County of Hill, 10 S.W.3d 424, 426-27 (Tex. App.—Waco 2000, no pet.)

(citations omitted); see also Stinson v. Ins. Co. of State of Pa., 286 S.W.3d 77, 83 (Tex.

App.—Houston [14th Dist.] 2009, pet. denied).

The plaintiff has the burden to allege facts affirmatively demonstrating
that the trial court has subject matter jurisdiction. Tex. Ass’n of Bus. v. Tex.
Air Control Bd., 852 S.W.2d 440, 446 (Tex. 1993). Dismissing a cause of
action for lack of subject-matter jurisdiction is proper only when it is
impossible for the plaintiff‖s petition to confer jurisdiction on the trial
court. Freeman v. Wirecut E.D.M., Inc., 159 S.W.3d 721, 727 (Tex. App.—
Dallas 2005, no pet.).

When the legislature grants an administrative body the sole
authority to make an initial determination in a dispute, the agency has
exclusive jurisdiction over the dispute. Thomas v. Long, 207 S.W.3d 334,
340 (Tex. 2006). If an administrative body has exclusive jurisdiction, a
party must exhaust all administrative remedies before seeking judicial
review of the decision. Id. Until the party has satisfied this exhaustion
requirement, the trial court lacks subject matter jurisdiction and must

Osborn v. Ace American Page 2
 dismiss those claims without prejudice to refiling. Id.

Through the workers‖ compensation statutory scheme, the
legislature has given a health care provider the right to a review when the
provider has rendered a medical service but has been paid a reduced
amount for that service. Tex. Lab. Code Ann. § 413.031(a)(1) (Vernon
2006). By granting the Division the sole authority to make an initial
determination of a medical fee dispute, the Legislature has given the
Division exclusive jurisdiction over such a dispute. See Thomas, 207
S.W.3d at 340; see also Howell v. Tex. Workers’ Compensation Comm’n, 143
S.W.3d 416, 435 (Tex. App.—Austin 2004, pet. denied).

HealthSouth Med. Ctr. v. Employers Ins. Co. of Wausau, 232 S.W.3d 828, 830-31 (Tex.

App.—Dallas 2007, pet. denied); see also Howell, 143 S.W.3d at 435-38.

When a plea to the jurisdiction challenges the existence of jurisdictional
facts, we consider relevant evidence submitted by the parties. Id. (citing
Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 555 (Tex. 2000)); see also Deese,
266 S.W.3d at 657. The standard of review for a jurisdictional plea based
on evidence “―generally mirrors that of a summary judgment under Texas
Rule of Civil Procedure 166a(c).‖‖‖ Deese, 266 S.W.3d at 657 (quoting
Miranda, 133 S.W.3d at 228).

Stinson, 286 S.W.3d at 83.

The pleadings and evidence show that Ace was the workers‖ compensation

carrier for Johnson‖s employer, National Envelope Corporation. The Division of

Workers‖ Compensation ordered that Johnson was entitled to medical benefits for her

compensable injury. “Coventry Workers‖ Comp Services,” which Ace had contracted

with, preauthorized Dr. Osborn‖s treatment of Johnson. Ace refused to pay for almost

all of Dr. Osborn‖s treatment, contending that it was not causally related to the

compensable injury. The record is not well-developed, but Johnson‖s compensable

injury included cervical and lumbar sprains/strains and lumbar disc bulges and that

the disputed treatment consisted of Dr. Osborn‖s treatment following Johnson‖s lumbar

Osborn v. Ace American Page 3
laminectomy.1 Ace‖s position was that, while perhaps that treatment was medically

necessary to treat Johnson‖s condition, it was not reasonable and medically necessary to

treat her compensable injury.

After requesting reconsideration, Dr. Osborn sued Ace. Ace‖s principal

contention in the trial court was that Dr. Osborn failed to exhaust his administrative

remedies because he was required, but failed, to pursue administrative medical dispute

resolution of a fee dispute. Ace initially presumed—and considered it undisputed—

that Dr. Osborn had provided non-network care to Johnson.2 After Ace had filed its

plea to the jurisdiction, Dr. Osborn amended his petition, but he did not plead that he

had exhausted his administrative remedies, nor did he plead any facts relating to his

provision of network health care or that he was a member of a certified workers‖

compensation health care network.

It was undisputed that Dr. Osborn did not seek medical dispute resolution (he

admitted so in an interrogatory answer); thus, the threshold question before the trial

court, and now before us, is whether Dr. Osborn was required to exhaust administrative

remedies by seeking medical dispute resolution. See TEX. ADMIN. CODE §§ 133.305,

133.307; see also TEX. LAB. CODE ANN. § 413.031 (Vernon Supp. 2010). In the hearings

1 Specifically, Ace‖s notice of disputed issue(s) and refusal to pay benefits states in part: “We are
disputing entitlement of extent of injury because: treatment and surgical procedure of lumbar
laminectomy at L4-5/L5-S1 is not causally related to this Workers‖ Compensation injury which is limited
only to a cervical sprain/strain, left knee contusion, lumbar sprain/strain, and lumbar disc bulges at L1-2,
L2-3, L4-5, L5-S1 as per CCH Decision & Order.”

2Ace also argued that even if Dr. Osborn were to prevail in his position that he provided network care, he
was still required to exhaust administrative remedies because his bills were subject to retrospective
review. See generally TEX. INS. CODE ANN. §§ 1305.351 - .355 (Vernon 2009 & Supp. 2010); TEX. ADMIN.
CODE §§ 10.102 - .104. Given our disposition, we need not address this argument.

Osborn v. Ace American Page 4
and in the trial-court briefing, the trial court and the parties narrowed that question to

whether Dr. Osborn provided certified workers‖ compensation network health care or

non-network health care.3

Subsection 1305.004(a)(16) of Chapter 1305 of the Insurance Code, known as the

Workers‖ Compensation Health Care Network Act, defines “network” or “workers‖

compensation health care network” as an organization that is:

(A) formed as a health care provider network to provide health care
services to injured employees;
(B) certified in accordance with this chapter and commissioner rules; and
(C) established by, or operates under contract with, an insurance carrier.

TEX. INS. CODE ANN. § 1305.004(a)(16) (Vernon Supp. 2010) (emphases added).

Under Rule 133.305, health care is either certified network health care or non-

network health care, defined as:

(5) Network health care--Health care delivered or arranged by a certified
workers‖ compensation health care network, including authorized out-of-
network care, as defined in Insurance Code Chapter 1305 and related
rules.

(6) Non-network health care--Health care not delivered or arranged by a
certified workers‖ compensation health care network as defined in
Insurance Code Chapter 1305 and related rules. “Non-network health
care” includes health care delivered pursuant to Labor Code § 413.011(d-
1) and § 413.0115.

TEX. ADMIN. CODE § 133.305(5), (6) (emphases added).

3 We cannot dispute the trial court‖s following observation in its order on rehearing:

It is the position of the Trial Court that the complexity and confusion of the Texas
Workers‖ Compensation system is, in great part, the basis for the confusion and opposing
positions of the parties, this due to the series of administrative and bureaucratic
labyrinths through which the parties are forced to navigate (specifically the Plaintiff, who
though having provided valuable and effective healthcare services to the injured worker, has yet to
be compensated for said services).

Osborn v. Ace American Page 5
 Both sides presented evidence on the network versus non-network issue. Ace

filed the affidavit of Renee Scott, which states:

I work for Ace American Insurance Company. My title is that of
Medical Programs Coordinator and I have held that position since
February 2006. One of my duties as the Medical Programs Coordinator is
to serve as a liaison between the carrier, third party administrator, and the
health care network.

Ace American Insurance Company has contracted with health care
networks for injuries covered by the Texas Workers‖ Compensation Act.
The only health care network that could pertain to the compensable injury
of Wanda Johnson is Coventry Health Care Workers Compensation, Inc.
d/b/a Coventry Workers‖ Comp Network. Coventry Workers‖ Comp
Network is certified by the Division of Workers‖ Compensation to operate
as a health care network. I have attached to this affidavit a document
printed from the Texas Department of Insurance‖s website showing the
name of the health care network, its certificate number 6087, and its date
of certification on May 31, 2007.

I am aware that the Plaintiff in this lawsuit is Charles Osborn, M.D.,
D.C. d/b/a Quest Health & Rehabilitation as reflected in the style of the
case set out above. I have personally investigated whether Dr. Osborn or
Quest Health & Rehabilitation has a contract with or is otherwise
employed by Coventry Workers‖ Comp Network. Based on my
investigation, I can state that neither Dr. Osborn nor Quest Health &
Rehabilitation have a contract or are otherwise employed by Coventry
Workers‖ Comp Network. In other words, they are not member doctors of
the health care network utilized by Ace American Insurance Company.
Even though it does not apply, I have also confirmed in my investigation
that Dr. Osborn nor Quest Health & Rehabilitation do not have a contract
with and are not employed by Intracorp/Lockheed Martin Aero
Employee Select Network, which is the only other health care network in
which Ace American Insurance Company has a contract.

I have also investigated whether National Envelope, the employer
of Wanda Johnson who is the injured employee, has elected to receive
workers‖ compensation health care services for its injured employees.
Based on my investigation, I can state that National Envelope has not
made such an election, and, as a result, Wanda Johnson does not receive
health care for her compensable injury of July 5, 2005 through the
Coventry Workers‖ Comp Network. All health care received by Ms.

Osborn v. Ace American Page 6
 Johnson for her workers‖ compensation injury would be non-network
health care.

It is my understanding that Dr. Osborn alleges that he has provided
health care to Wanda Johnson through a health care network. It is my
understanding that Dr. Osborn does have a contract for a broad based
network, such as a preferred provider organization, but he does not have
a contract with and is not an employee of the Coventry Workers‖ Comp
Network. If Dr. Osborn does maintain that he is in that health care
network, he would have a contract to that effect as required by the Texas
Insurance Code.

Dr. Osborn filed a supplemental affidavit; one sentence conclusorily states that

he provides “healthcare services within the network of Focus WC Bridge, a certified

workers‖ compensation network.” With his motion for rehearing (in which he tacitly

admitted that he did not have a contract with Coventry), Dr. Osborn filed this

additional evidence:

A form letter to him from “Coventry/FOCUS,” which states: “You are receiving
this letter because Coventry Healthcare Services and FOCUS Healthcare
management send patients to you by virtue of your contractual commitment
with Beech Street to provide health care services to patients who have a job
related illness or injury.”

A form letter to him from FOCUS Healthcare Management stating that “FOCUS
Healthcare Management, Inc. accesses your services through a business
relationship and contract with: Beech Street.”

An “Explanation of Review,” apparently from Ace (or from ESIS, its apparent
administrator) relating to the one charge that Ace did pay Dr. Osborn for. It
references the network as “FOCUS WC BRIDGE” and the network plan as
“FOCUS/BEECH STREET.” For the $70.00 charge, it references a “network
reduction” of $14.00 with the explanation of “network import re-pricing –
contracted provider.”

In the context of this case and the record evidence, Dr. Osborn‖s one-sentence

statement that Focus WC Bridge is a “certified workers‖ compensation network” is

Osborn v. Ace American Page 7
conclusory. See Willis v. Nucor Corp., 282 S.W.3d 536, 548 (Tex. App.—Waco 2008, no

pet.) (“‖A conclusory statement is one that does not provide the underlying facts to

support the conclusion. … A conclusory statement may set forth an unsupported legal

conclusion or an unsupported factual conclusion.‖”). Conclusory evidence is not

competent and, as such, is no evidence and does not raise a fact issue. See Schindler v.

Baumann, 272 S.W.3d 793, 796 (Tex. App.—Dallas 2008, no pet.); see also Texas Division-

Tranter, Inc. v. Carrozza, 876 S.W.2d 312, 314 (Tex. 1994); Davis v. Dillard’s Dep’t Store,

Inc., No. 11-06-00027-CV, 2008 WL 1903794, at *2 (Tex. App.—Eastland May 1, 2008, no

pet.).

Furthermore, Ace points out that Dr. Osborn (1) did not present evidence that

Focus WC Bridge was a “certified workers‖ compensation health care network,” as that

term is used in the Workers‖ Compensation Act and the Insurance Code; (2) did not

present evidence that the network reduction and network import re-pricing were for

“network health care” pursuant to a certified workers‖ compensation health care

network; and (3) did not present evidence that Beech Street was an approved “certified

workers‖ compensation health care network.”

Ace argues that its evidence incontrovertibly established that Dr. Osborn was not

in a certified workers‖ compensation health care network because Scott‖s affidavit

showed that (1) Dr. Osborn did not have a contract with Coventry Workers‖ Comp

Network, the only certified workers‖ compensation health care network pertinent to his

care for Johnson; (2) Dr. Osborn was not a member doctor of the health care network

used by Ace; (3) Johnson‖s employer had not elected to participate in a certified

Osborn v. Ace American Page 8
workers‖ compensation health care network with Ace (see TEX. INS. CODE ANN. §

1305.005(b) (Vernon 2009)); and (4) Dr. Osborn has a contract with a health-care

network, but it is not with a certified workers‖ compensation health care network. Ace

also notes that the Insurance Code requires a certified workers‖ compensation health

care network to “enter into a written contract with each provider … that participates in

the network.” TEX. INS. CODE ANN. § 1305.152(a) (Vernon 2009). Dr. Osborn appears to

have a contract with Beech Street, but there is no evidence of the nature of Beech Street‖s

network.

Once Ace presented sufficient evidence conclusively establishing that Dr. Osborn

did not provide health care for Johnson within a certified workers‖ compensation health

care network, the burden of proof shifted to Dr. Osborn to present evidence sufficient to

raise a fact issue. See Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995). He

presented evidence that he provided health care to Johnson within a network of some

type, but he did not present evidence that he provided health care to Johnson within a

statutorily defined and unique certified workers‖ compensation health care network.

Based on our review of the evidence and applicable law, we hold that the trial court did

not err in sustaining Ace‖s plea to the jurisdiction because Dr. Osborn has not exhausted

his administrative remedies.4 See, e.g., Centre for Neuro Skills, Inc.-Texas v. Association

Cas. Ins. Co., No. 05-06-00719-CV, 2007 WL 2380168, at *2 (Tex. App.—Dallas Aug. 22,

2007, pet. denied). We overrule issues one and three.

4 Ace took the position in the trial court that, despite the passing of time and upon dismissal of the case,
the applicable administrative rules allow Dr. Osborn an opportunity to pursue his administrative
remedies because Ace disputed the extent of injury.

Osborn v. Ace American Page 9
 Dr. Osborn‖s second issue asserts that his suit was proper because his right to

payment was subject to the Division‖s “Decision and Order” and he thus had a right to

sue when Ace did not comply with that order by refusing to pay his bills. See TEX. LAB.

CODE ANN. § 410.208(b) (Vernon 2006). The Order provides that Johnson “sustained a

compensable cervical sprain/strain, lumbar sprain/strain, lumbar disc bulges at L1/2,

L2/3, L4/5, and L5/S1, and left knee contusion injury in the course and scope of

employment… .” It further states that Johnson “remains entitled to medical benefits for

the compensable injury in accordance with TEXAS LABOR CODE §408.021.”

Subsection 408.021(a) states in part: “An employee who sustains a compensable

injury is entitled to all health care reasonably required by the nature of the injury as and

when needed.” TEX. LAB. CODE ANN. § 408.021(a) (Vernon 2006). We agree with Ace‖s

assertion that this statute does not state that any treatment designated as related to the

compensable injury must be automatically reimbursed by the carrier. Instead, the

health care that the employee is entitled to must be “reasonably required” by the nature

of the compensable injury, and that is apparently what the entire dispute between the

parties is over: Ace has refused to pay for almost all of Dr. Osborn‖s treatment,

contending that it was not causally related to Johnson‖s compensable injury. And as we

have just held, that dispute must first be exhausted administratively. Accordingly, we

overrule issue two.

Having overruled Dr. Osborn‖s three issues, we affirm the trial court‖s dismissal

without prejudice of this cause. See Thomas v. Long, 207 S.W.3d 334, 340 (Tex. 2006) (“If

an administrative body has exclusive jurisdiction, a party must exhaust all

Osborn v. Ace American Page 10
administrative remedies before seeking judicial review of the decision. Until the party

has satisfied this exhaustion requirement, the trial court lacks subject matter jurisdiction

and must dismiss those claims without prejudice to refiling.”).

REX D. DAVIS
Justice

Before Chief Justice Gray,
Justice Davis, and
Justice Scoggins
Affirmed
Opinion delivered and filed September 14, 2011
[CV06]

Osborn v. Ace American Page 11