Health Care Service Corporation, an Unincorporated Division of Which is Blue Cross and Blue Shield of Texas v. East Texas Medical Center

ACCEPTED
12-15-00287-CV
TWELFTH COURT OF APPEALS
TYLER, TEXAS
    12/11/2015 2:03:07 PM
Pam Estes
CLERK

NO. 12-15-00287-CV

IN THE COURT OF APPEALS FILED IN
12th COURT OF APPEALS
TWELFTH COURT OF APPEALS TYLER, TEXAS
TYLER, TEXAS 12/11/2015 2:03:07 PM
PAM ESTES
HEALTH CARE SERVICE CORPORATION, AN UNINCORPORATEDClerk
DIVISION OF WHICH IS BLUE CROSS AND BLUE SHIELD OF TEXAS,

Appellant,

vs.

EAST TEXAS MEDICAL CENTER,

Appellee

On Appeal from the
st
241 Judicial District Court of
Smith County, Texas
The Honorable Jack Skeen, Presiding Judge

APPELLEE EAST TEXAS MEDICAL CENTER’S BRIEF IN RESPONSE TO
APPELLANT’S MOTION TO STAY TEMPORARY INJUNCTION

DEBORAH RACE
STATE BAR NO. 16448700
IRELAND, CARROLL & KELLEY, PC
6101 S. BROADWAY, SUITE 500
TYLER, TEXAS 75703
TEL: (903) 561-1600
FAX: (903) 581-1071
drace@icklaw.com

ATTORNEY FOR EAST TEXAS MEDICAL CENTER

TABLE OF CONTENTS

TABLE OF CONTENTS .................................................................................................. i

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

INTRODUCTION ............................................................................................................1

RESPONSE TO BCBS’ BACKGROUND FACTS .................................................................4

1. For years ETMC has sought inclusion as an in-network institutional
provider in BCBS PPO and during those years, BCBS has failed to
comply with Section 1301.051 of the Insurance Code by unreasonably
and negligently withholding that designation.. ................................................4
2. The trial court acted within it discretion in granting this injunction, and
ETMC, by introducing extensive evidence, more than met its burden to
prove it was entitled to injunctive relief. ..........................................................6
3. The trial court made extensive findings which were supported by the
evidence. .........................................................................................................11

SUMMARY OF THE ARGUMENT ..................................................................................11

ARGUMENT AND AUTHORITIES .................................................................................14

1. This injunction should remain in place pending this appeal and trial. ...........14
2. BCBS’ continued unreasonable refusal to permit ETMC to be an in-
network institutional provider without any explanation was negligent
and in violation of the Insurance Code. ..........................................................17
3. BCBS is not being “coerced” into a contract with ETMC, but was
simply ordered to cease and desist from excluding ETMC from its
PPO network pending trial at rates dictated by BCBS. BCBS has
already done this, so any harm BCBS alleges will be caused by
implementing the injunction should not be a factor. ......................................21

i 

4. The injunction as entered was more than supported by the record, and
the trial court acted well within its discretion granting ETMC this
relief. ...............................................................................................................22
5. While BCBS styled its motion as also being one to review the denial
of supersedeas under Rule 29.2, BCBS never asked the trial court for
a supersedeas bond. .........................................................................................24

CONCLUSION AND PRAYER FOR RELIEF  ....................................................................26

CERTIFICATE OF SERVICE  .........................................................................................29

ii 

INDEX OF AUTHORITIES

CASES

Butnaru v. Ford Motor Co., 84 S.W.3d 198,
(Tex. 2002) ..................................................................................... 2, 11, 13, 14, 18

LaFaucheur v. Williams, 807 S.W.2d 20
(Tex.App.—Austin 1991, no writ.) ............................................................... 13, 23

Love v. Travelhost, Inc., 156 S.W.3d 615
(Tex.App.—Dallas 2004, no pet.) ........................................................................14

RP&R, Inc. v. Territo, 32 S.W.3d 396
(Tex. App.—Houston [14th Dist.] 2000 ................................................................17

Triantaphyllis v. v. Gamble, (Tex. App. – Houston
[14th Dist.] 2002, pet. denied)). ...............................................................................2

Tri Star Petroleum Co. v. Tipperary Corp.101 S.W.3d 583
(Tex. App. – El Paso 2003, no pet.)............................................................... 18, 19

STATUTES

Tex. Ins. Code §1301.051 ......................................................... 4, 5, 6, 14, 16, 19, 20

RULES

Tex.R.App.P. 29.2 ...................................................................................................24

Tex.R.App.P. 29.3 ....................................................................................................25

Tex.R.App.P. 24 .......................................................................................................26

iii 

INTRODUCTION

This case, including the accelerated appeal and underlying suit, represents an

exceptional case, and one of extreme importance to not only the appellee, East

Texas Medical Center (“ETMC”)1, but also to the entire East Texas community.

But for the district court’s order, which appellant [Health Care Service

Corporation, an unincorporated division of which is Blue Cross Blue Shield of

Texas (“BCBS”)] asks this Court to stay, ETMC will not be able to fulfill its

mission or to continue to offer the level of services it currently offers and upon

which the community relies. (11-10-15 hearing Vol 12 72 ll 7-9). ETMC’s mission

is:

We continuously strive to bring an unmatched spirit of excellence to
the art and science of health care. We measure our success by how
our efforts improve the quality of life for people in communities in
East Texas.

(RR1 58 ll 4-8). As Byron Hale, Senior VP and CFO for ETMC explained, “Your

Honor, we've exhausted all available remedies. We must have this to maintain our

mission.” (RR1 87 ll 10-11). And as the record confirms, Mr. Hale was correct.

1
  ETMC Regional Healthcare System is actually made up of numerous regional hospitals
throughout East Texas, with ETMC Tyler being the flagship. While all of the regional hospitals
are in BCBS PPO network, ETMC Tyler has remained excluded. (RR 1 88 ll 10-25). ETMC is
the only full-service acute care hospital in Texas that is involuntarily excluded from the BCBS
PPO network. Throughout this response, ETMC will be used to refer to ETMC Tyler.
2
The 1st volume of the November 10, 2015, hearing on the Application for Temporary Injunctive
Relief will be referred to as RR1. 
1 

As noted, this is an accelerated appeal from the granting of a temporary

injunction. The Texas Supreme Court has instructed that:

Whether to grant or deny a temporary injunction is within the trial
court's sound discretion. Walling, 863 S.W.2d at 58; State v. Walker,
679 S.W.2d 484, 485 (Tex. 1984) A reviewing court should reverse an
order granting injunctive relief only if the trial court abused that
discretion. Walling, 863 S.W.2d at 58; Walker, 679 S.W.2d at 485.
The reviewing court must not substitute its judgment for the trial
court's judgment unless the trial court's action was so arbitrary that it
exceeded the bounds of reasonable discretion. Johnson v. Fourth Ct.
of Appeals, 700 S.W.2d 916, 918 (Tex. 1985); Davis v. Huey, 571
S.W.2d 859, 861-62 (Tex. 1978).

Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002).

While this response is filed in relation to BCBS’ request for this Court to

stay the injunction pending this accelerated appeal, BCBS appears to go much

further into the actual merits of its appeal. The real question at issue at this stage

should be whether emergency relief is really necessary. See Triantaphyllis v.

Gamble, 2002 Tex.App. LEXIS 3747, *4 (Tex. App. – Houston [14th Dist.] 2002,

pet. denied). And as seen below, it is not. BCBS has never articulated that it will

suffer any harm by either the issuance of this injunction or allowing the injunction

to remain in place. However, because BCBS has elected to delve much deeper into

the merits at this stage, ETMC will follow suit.

From the very first page of its motion to stay filed in this Court, BCBS

paints a false impression of the injunction and the harm it alleges it will cause

BCBS. For example, BCBS argues that the injunction requires BCBS to contract
2 

with ETMC, and argues that if BCBS prevails on appeal the contract will need to

be undone, leading to the confusion of ETMC patients and BCBS members. (Mtn

at 1). However, as shown below, the injunction did not require BCBS to contract

with ETMC, but simply required it to designate ETMC as an in-network PPO

provider at rates dictated by BCBS and already in place pending the trial. (A copy

of the injunction is included at Tab 1 of the Appendix).

BCBS also contends that “Without a stay, both BCBS and the public will be

harmed.” Id. It argues that some of that harm will come from BCBS having to

unwind the contract if it ultimately prevails, leading to disruption of care and the

confusion of patients and BCBS members alike. Id. However, BCBS has largely

already complied with the injunction and designated ETMC as a BCBS in-network

PPO provider. In fact, BCBS’ website now reflects that ETMC Tyler is in-network

and states: “The cost of inpatient and outpatient care provided by this acute care

hospital is somewhat more affordable compared to peers.” (RR Supp. Motion Ex.

1). As a result, patients and members alike have had and are continuing to schedule

procedures at ETMC under this new arrangement.3 BCBS is also already pre-

certifying its members for in-network services at ETMC and is accurately

reimbursing ETMC under the rates set forth in the injunction.

3
As Mr. Carroll noted in his letter to this Court on the date BCBS filed this motion ETMC had
already treated 492 Blue Cross PPO patients and had 181 more scheduled for procedures. Those
numbers have increased to 630 treated since then. (A copy of Mr. Carroll’s letter is contained at
Tab 2 of the Appendix).

3 

One other misimpression left by BCBS’ opening statement, and even the

title of its motion, is BCBS’ complaint that the district court refused to supersede

the judgment. BCBS even asks this Court in the title of its motion to “review the

denial of supersedeas.” While BCBS requested the trial court to stay the

implementation of this injunction, BCBS never requested any form of supersedeas

in the underlying proceedings.

The Honorable Jack Skeen was careful in granting this injunction, even

questioning a BCBS representative at length in an attempt to be sure he fully

understood BCBS’ argument. (RR1 pp. 270-284). Judge Skeen did not abuse his

discretion in granting the temporary injunction, and for all of the reasons set forth

below, ETMC respectfully asks that this Court not stay the injunction pending this

Court’s decision on BCBS’ accelerated appeal.

RESPONSE TO BCBS’ BACKGROUND FACTS

1. For years ETMC has sought inclusion as an in-network institutional
provider in BCBS PPO and during those years, BCBS has failed to
comply with Section 1301.051 of the Insurance Code by unreasonably
and negligently withholding that designation.

BCBS is correct that there has never been an in-network PPO contract

between ETMC Tyler and BCBS, but it wasn’t for lack of effort on ETMC’s part.

The evidence showed that ETMC has consistently sought inclusion as an

institutional provider in BCBS PPO network for at least two decades and for at

least the past ten years BCBS has never even bothered to explain why ETMC Tyler
4 

has not been allowed that designation. (RR1 65 ll 1-13). While BCBS argues that

this is all perfectly legal (Mtn at 3), ETMC believes its exclusion from BCBS’ PPO

is negligent and also illegal under Section 1301.051 of the Texas Insurance Code.

That section reads:

(a) An insurer shall afford a fair, reasonable, and equivalent
opportunity to apply to be and to be designated as a preferred provider
to practitioners and institutional providers and to health care providers
other than practitioners and institutional providers, if those other
health care providers are included by the insurer as preferred
providers, provided that the practitioners, institutional providers, or
health care providers:
(1) are licensed to treat injuries or illnesses or to provide
services covered by a health insurance policy; and
(2) comply with the terms established by the insurer for
designation as preferred providers.
(b) An insurer may not unreasonably withhold a designation as a
preferred provider.
(c) An insurer shall give a physician or health care provider who, on
the person’s initial application, is not designated as a preferred
provider written reasons for denial of the designation.
(d) Unless otherwise limited by this code, this section does not
prohibit an insurer from rejecting a physician’s or health care
provider’s application for designation based on a determination that
the preferred provider benefit plan has sufficient qualified providers.
(e) An insurer may not withhold a designation to:
(1) a podiatrist described by Section 1301.0521; or
(2) an optometrist, therapeutic optometrist, or ophthalmologist
described by Section 1301.0522.

Tex. Ins. Code §1301.051.

As the evidence proved, ETMC has never been afforded a fair, reasonable

and equivalent opportunity to be designated as a preferred institutional provider.

(RR1 177 ll 3-11). Additionally, ETMC has not been given any reason in at least
5 

the past ten years, much less a written one, why this designation has been withheld.

(RR1 65 ll 4-13; 178 ll 4-5). Judge Skeen himself questioned BCBS’ representative

in an attempt to understand its actions in excluding ETMC Tyler, which as the

evidence showed was the only full-service, acute care hospital in the entire state

that is involuntarily out of network. (RR2 Pl Ex. 1). Judge Skeen asked: “I mean,

how does that distinction come about that all of these other 270 – it’s in evidence –

that are in Blue Cross – are in the network, but Medical Center – East Texas

Medical Center is not, which is clearly rated as one of the top hospitals in the state?

That’s what I’m having trouble with.” (RR1 276 ll 15-21). Reading the entire

dialogue between the judge and this witness establishes that Judge Skeen acted

well within his discretion in deciding that that BCBS had no reasonable

explanation for excluding ETMC. (RR1 270-284).

2. The trial court acted within it discretion in granting this injunction, and
ETMC, by introducing extensive evidence, more than met its burden to
prove it was entitled to injunctive relief.

While ETMC initially filed suit seeking money damages, it amended its

petition to seek injunctive relief after it became clear that ETMC’s survival and

continued ability to provide vital services in the community and region were at

stake. (A copy of ETMC’s amended petition is included at Tab 3 of the Appendix).

At the hearing on ETMC’s application for temporary injunction, the evidence

established that although ETMC had tried to make cuts and save money to fight

6 

diminishing revenue, the financial impact of being out of network with BCBS had

reached a point that ETMC could no longer fulfill its mission and was going to

have to begin cutting vital services. (RR1 72-73).

In its motion, BCBS tells this Court that ETMC failed to point to any

authority that BCBS had a legal obligation to enter into a PPO contract. To the

contrary, ETMC cited to the Insurance Code in its petition as constituting the legal

obligation with which BCBS repeatedly failed to comply. And moreover, ETMC

offered extensive proof of this and BCBS’ negligence as well.

Also contrary to BCBS’ argument (Mtn at 5), ETMC offered extensive

evidence that barring this injunction, it would suffer probable, imminent and

irreparable injuries. As noted above, Byron Hale, ETMC’s CFO, testified at length

about ETMC’s current critical financial situation. He explained that without the

injunction, ETMC could not continue to fulfill its mission and could not continue

the many services it offered. (RR1 72 ll 7-9). He explained that he saw the Level 1

Trauma Center at risk, as well as potential reductions in the ground and air

ambulance programs and the renal transplant program. (RR1 72-73).

Four doctors who practice at ETMC testified as well. Dr. Stephen Gale, a

trauma surgeon testified that he believed the Level 1 trauma designation was at

risk. (RR1 118 ll 13-25). The next closest Level 1 trauma center is in Dallas. (RR1

7 

110 ll 11-18). Dr. Gale also testified that the lack of in-network status hurt the

continuity of care and the doctor/patient relationship. (RR1 117 ll 7-22).

Dr. Steve Potter, the program director for ETMC’s renal transplant program,

testified that other cuts would affect his program and could also result in the renal

program being closed. (RR1 134 ll 9-20). Dr. Potter also testified that when

patients did have a kidney transplant, their care was fragmented afterward due to

ETMC being out-of-network, so like Dr. Gale, he believed the continuity of care

and doctor-patient relationship were negatively impacted. (RR1 133 ll 18-33). Dr.

Potter also testified that if these cuts were to happen, then a large segment of the

East Texas population currently served by ETMC’s renal transplant program

would go without care due to the patient’s and their family’s financial inability to

afford to travel and stay in Dallas for their surgery and approximately six weeks of

follow-up care. (RR1 135 ll 3-17). Dr. Ken Kaminski, an orthopedic surgeon, also

testified that it didn’t make any sense to him that ETMC was not included in

BCBS’ network and said that he also found ETMC’s exclusion to be an intrusion

into the doctor-patient relationship. (RR1 145 ll 12-19).

And finally, Dr. Stephen Rydzak, Chairman of the Department of Medicine

and also a board member at ETMC, testified. (RR1 153-185). When asked if it

made sense that ETMC was not in the BCBS network, Dr. Rydzak explained that:

“It makes no sense at all. In fact, it really degrades our ability to fulfill our mission

8 

and the whole concept of having a tertiary referral center where these outlying

hospitals are able to send their sickest patients to the hospital that's best positioned

to care for them, that has the most expertise. It completely obliterates that as far as

the feasibility of being able to do it for these Blue Cross Blue Shield patients.”

(RR1 157 ll 7-18).

Dr. Rydzak further explained ETMC’s financial policy when treating out-of-

network patients. He testified that, by way of example, when an out-of-network

patient has a procedure at ETMC, BCBS only pays for 50% of the procedure,

while it pays 80% for an in-network patient. Under ETMC’s policy, ETMC

essentially absorbs the 50% that isn’t paid by BCBS for the out-of-network patient.

(RR 160-162). The evidence also established that ETMC already has a contract

with BCBS that sets forth for the payment rates for ETMC as an out-of-network

provider. (RR1 227 ll 4-10). The injunction actually ordered these same rates be

paid, stating that the rates should be “identical to those in force in the Hospital

Agreement for Traditional Indemnity Business in effect between ETMC and Blue

Cross. . . .” (Appx Ex. 1).

Dr. Rydzak was also asked about BCBS’ request at the hearing that the trial

court let it try to work something out with ETMC. Dr. Rydzak responded: “No, sir.

I think that that was a declaration for the benefit of the Court. I've been on the

hospital board for 15 years, and we haven't heard anything from Blue Cross Blue

9 

Shield in that period of time that even remotely suggested an interest in having

talks, despite our best efforts to encourage them.” (RR1 165 ll 19-24; 176 ll 2-7).

While BCBS contends that ETMC offered little evidence of its financial

crisis, that was not the case. (Mtn at 5). BCBS wants this Court to only consider its

side, when the fact is ETMC offered extensive evidence of its dire financial

situation. As noted above, CFO Byron Hale testified about possible cuts that would

have to be made if the injunction was not granted. He explained the continuing

downward trend for cash on hand, and also explained that ETMC bonds had been

downgraded by both Moodys and Fitch bond rating agencies. (RR1 75-77). Mr.

Hale also testified that the reason given by Moody’s for the downgrade was

“ETMC’s long standing out-of-network status for the Tyler facility.” (RR1 76 ll

25; 77 ll 1-9). Mr. Hale testified that ETMC was losing over one million dollars a

month. (RR1 76 ll 23-24). And while Byron Hale admitted that the system had

$300,000,000 on hand, Dr. Rydzak explained that it owed $400,000,000 to the

bond-holders and others. (RR1 176 ll 15-25).

ETMC presented ample evidence of its financial troubles, the impact of

BCBS’ unreasonable refusal to grant it in-network status and the likelihood that the

change in that status to in-network would greatly benefit ETMC’s current financial

situation. BCBS takes issue with ETMC’s evidence that its continuing to be an out-

of-network provider will result in any substantial cuts or decrease in services. (Mtn

10 

at 7). BCBS writes, “Beyond the testimony of its CFO, ETMC offered only the

testimony of four physicians who testified that they and their patients would be

harmed if ETMC went out of business or was forced to cut services.” (Mtn at 7).In

the first place, the testimony of ETMC’s CFO alone was more than sufficient. And

in the second, as seen above, these four doctors testified that they believed their

programs were at a serious risk.

3. The trial court made extensive findings which were supported by the
evidence.

BCBS admits that the district court made the requisite findings in the

injunction on each element for issuing a temporary injunction, but complains there

was no evidence supporting what BCBS calls the court’s “purported findings.”

(Mtn at 7). As seen above, there was ample evidence to support these findings.

And the trial court made the exact findings it was required to make in support of

the injunction, namely that ETMC had proved the three specific elements it was

required to prove: (1) a cause of action against the defendant; (2) a probable right

to the relief sought; and (3) a probable, imminent, and irreparable injury in the

interim. See Butnaru, 84 S.W.3d at 204.

In Butnaru, the court also noted that: “An injury is irreparable if the injured

party cannot be adequately compensated in damages or if the damages cannot be

measured by any certain pecuniary standard.” Id. The trial court made these

findings as well. And the trial court did not just make cursory findings, but instead
11 

made detailed, express findings, including that: “ETMC has proved that, absent the

requested relief, it will suffer a probable, imminent and irreparable injury in the

interim before trial.” (Appx. Ex.1 at 2). The court also found that: “Unless

admitted immediately to the Blue Cross PPO’s, ETMC will not be financially able

to maintain its current level of comprehensive medical care to the community

pending trial on the merits.” Id. As the injunction itself reflects, the trial court

carefully considered and weighed the evidence and made findings supporting the

injunctive relief.

BCBS complains that the trial court “conclusorily stated that ETMC’s

injuries are not compensable by money damages and that BCBSTX ‘will suffer no

harm of any significance if the requested relief is granted’.” (Appx. Ex. 1 at 3). The

fact is, BCBS own representative, Mr. Towsley, had testified at a deposition one

week before this hearing that he didn’t know of any harm BCBS would suffer by

the injunction. (RR1 206 ll 19-25). At the hearing, Mr. Towsley attempted to

explain his prior answer, but he still did not testify that BCBS would be harmed by

including ETMC in its network. Instead, he said, “What we don’t know is what

would happen.” (RR1 207 ll 2-3).

Finally, contrary to BCBS’ representation that the injunction required it to

contract with BCBS, it did not. The injunction simply ordered that ETMC be

allowed to participate in BCBS’ PPO networks at rates already in force “until new

12 

PPO agreements are negotiated and signed.” There is no requirement that this be

done prior to trial. Instead, the injunction orders that ETMC be allowed to be an in-

network provider at rates already set by BCBS until the trial finally resolves the

matter.

SUMMARY OF THE ARGUMENT

As noted above,

Whether to grant or deny a temporary injunction is within the
trial court's sound discretion. Walling, 863 S.W.2d at 58; State v.
Walker, 679 S.W.2d 484, 485 (Tex. 1984). A reviewing court should
reverse an order granting injunctive relief only if the trial court abused
that discretion. Walling, 863 S.W.2d at 58; Walker, 679 S.W.2d at
485. The reviewing court must not substitute its judgment for the trial
court's judgment unless the trial court's action was so arbitrary that it
exceeded the bounds of reasonable discretion. Johnson v. Fourth Ct.
of Appeals, 700 S.W.2d 916, 918 (Tex. 1985); Davis v. Huey, 571
S.W.2d 859, 861-62 (Tex. 1978).

Butnaru, 84 S.W.3d at 204. BCBS makes much of its argument that this was a

mandatory injunction. However, since the standard of review is the same whether

the injunction is prohibitive or mandatory, that determination is not critical to this

appeal. See LaFaucheur v. Williams, 807 S.W.2d 20, 22 (Tex.App.—Austin 1991,

no writ.).

BCBS argues that a stay is warranted “to avoid irreparable injury to

BCBSTX and the public, and to preserve BCBSTX’s appeal rights.” (Mtn at 9).

Yet, BCBS could never explain to the trial court what harm it would suffer.

13 

Moreover, it placed ETMC in-network apparently without much difficulty shortly

after the order was entered. BCBS cannot show that this trial court abused its

discretion in granting this injunction.

A trial court does not abuse its discretion with respect to a decision on a

temporary injunction when it bases its decision on conflicting evidence and the

record reflects that the evidence reasonably supports the court’s conclusion. See

Davis v. Huey, 571 S.W.2d 859, 562 (Tex. 1978). Additionally, it was the trial

court that was able to observe the witnesses and determine their credibility. In

Love v. Travelhost, Inc., 156 S.W.3d 615, 620 (Tex.App.—Dallas 2004, no pet.)

the court wrote: “We are mindful that the trial judge was able to observe the

witnesses and make a determination as to their credibility. Because there is some

evidence that Love and Little Bit Productions were competing with Travelhost, we

cannot conclude that the trial judge abused his discretion.” Here, the record

establishes that there was ample evidence supporting the trial court’s conclusion.

Judge Skeen weighed the evidence, to the extent he even questioned BCBS’

witness to attempt to understand BCBS’ position.

Further, the court’s temporary injunction was necessary to preserve the

status quo. “A temporary injunctions purpose is to preserve the status quo of the

litigation’s subject matter pending a trial on the merits.” Butnaru, 84 S.W.3d at

204. The litigation’s subject matter was BCBS’ unreasonable refusal to put ETMC

14 

in-network. The status quo at the time of the hearing was that ETMC offered a

myriad of unique and vital services to the residents of East Texas and that many of

those very services and patient relationships would be jeopardized if ETMC could

not operate as a BCBS in-network provider pending trial. In contrast, BCBS could

not articulate any harm placing ETMC in-network would cause, and in fact almost

immediately put ETMC in-network as reflected by BCBS’ own website. ETMC

also advised the trial court and BCBS that it would willingly go to trial in April,

rather than November 2016, if that was what BCBS wanted and the trial court

confirmed it had availability at that time and was willing to set the trial for then as

well. (RR1 24 ll 21-25, 25 ll 1-4; 258 ll 20-21; 336).

BCBS maintains that it has complied with the law and made a good faith

effort to negotiate with ETMC (Mtn at 11), but as reviewed above, the evidence

showed otherwise. BCBS contends that “Even though the parties’ failure to arrive

at an agreement through negotiations with ETMC is neither a Code violation nor a

tort, ETMC filed this lawsuit presumably to get the trial court to mandate the

contract terms ETMC wants and exert leverage on BCBSTX.” (Mtn at 11). To the

contrary, the evidence as summarized above, confirms that in the past ten years

BCBS never provided ETMC with any reason ETMC Tyler was excluded from the

network and it also confirms that there were never any real good faith negotiations.

15 

A reading of Section 1301.51 of the Insurance Code confirms that BCBS was not

in compliance.

The evidence ETMC presented to the trial court more than supported its

request for this injunction. Contrary to BCBS’ protestations in its motion, ETMC

proved (1) a cause of action against the defendant; (2) a probable right to the relief

sought; and (3) a probable, imminent, and irreparable injury in the interim.

ARGUMENT AND AUTHORITIES

1. This injunction should remain in place pending this appeal and the trial.

BCBS first argues that “courts should stay mandatory injunctions pending

appeal.” This case has yet to be tried and there is no appeal on the merits, only this

accelerated appeal asking this Court to stay the injunction pending trial. ETMC

showed it was entitled to this relief and can show that there was no abuse of

discretion, so the injunction should remain in effect pending this appeal and the

trial on the merits.

Further, there is nothing in this injunction that will either moot this or any

ultimate appeal, or significantly undermine any relief to which BCBS may show

itself entitled at trial. (Mtn at 12-13). As mentioned above, BCBS has already put

ETMC in its network, patients have been seen and procedures scheduled. While

ETMC is confident it will ultimately prevail, it is unclear how leaving ETMC in

16 

the network pending a trial will render this or any ultimate appeal on the merits

moot or undermine any relief BCBS may be awarded.

BCBS argues this is a mandatory injunction and that “a stay is particularly

appropriate” in this case. (Mtn at 13). However, this particular injunction actually

preserved the status quo in that it allowed ETMC to continue offering vital and

unique services to the residents of East Texas pending the trial. BCBS cites to

RP&R, Inc. v. Territo, 32 S.W.3d 396, 401 (Tex. App.—Houston [14th Dist.] 2000,

no pet.) as support for the proposition that “A temporary mandatory injunction

changes the status quo and should be granted only in a case of extreme hardship.”

(Mtn at 13). While this statement may be true as to mandatory injunctions,

nonetheless ETMC proved that it would suffer an extreme hardship. Additionally,

the court in RP&R only found an abuse of discretion since Territo failed to appear

at the hearing and there was no evidence at all in the record that he would suffer

any extreme hardship or irreparable injury were he not to receive the relief. Id.

(“Accordingly, we hold the trial court abused its discretion in granting a temporary

mandatory injunction providing for such unsupported relief.”).

BCBS again tells this Court that without a stay, the public and BCBS’s

appeal will be mooted. (Mtn at 13). However, as it failed to articulate the harm it

would suffer to the trial court, it fails to explain any harm to this Court as well.

While the injunction required BCBS to put ETMC in-network, it also preserved the

17 

status quo of the subject of the litigation by allowing ETMC to continue to provide

the many vital services it provides to doctors and patients in the community. As

stated at the outset, this is truly an exceptional case.

While BCBS sets out one of the usual definitions of “status quo” in its

motion, namely “the last, actual, peaceable, non-contested status which preceded

the pending controversy,” (Mtn at 14), in Butnaru, the Texas Supreme Court

stated: “A temporary injunctions purpose is to preserve the status quo of the

litigation’s subject matter pending a trial on the merits.” Butnaru, 84 S.W.3d at

204. Here, the status quo encompasses more than just the immediate relationship of

the parties at the time of the hearing, and this has been held to also be within the

trial court’s discretion. Tri Star Petroleum Co. v. Tipperary Corp.101 S.W.3d 583,

588 (Tex. App. – El Paso 2003, no pet.).

In Tri Star, the trial court had actually found the status quo to be something

other than the relationship between the parties at the time of the hearing, and

despite that being altered by the injunction, the appellate court found the injunction

within the court’s discretion and actually a prohibitive, rather than mandatory

injunction. The court wrote,

Tri Star contends that the trial court in effect granted a mandatory
injunction, which altered the status quo without a showing of extreme
hardship or other special circumstance to justify this remedy. The
temporary injunction order prohibits Tri Star from interfering with
Tipperary's assumption of control and operation of the Project as the
successor Operator. The order also requires Tri Star to relinquish
18 

operations and cease acting as Operator of the Project. We find that
the trial court's injunction is prohibitive in nature. While the order
requires Tri Star to take some affirmative action in allowing Tipperary
to assume operation of the Project, the action required on Tri-Star's
part is incidental to its non-interference with the successor Operator's
assumption of control in the interim. We overrule Issue Seven.”

Id., at 592-93.

2. BCBS’ continued unreasonable refusal to permit ETMC to be an in-
network institutional provider without any explanation was negligent
and in violation of the Insurance Code.

BCBS contends that the Insurance Code does not require it to “contract with

and designate a provider as a preferred provider in the PPO network.” (Mtn at 15).

But the Insurance Code does require BCBS “to afford a fair, reasonable, and

equivalent opportunity to apply to be and to be designated as a preferred provider

to practitioners and institutional providers.” Tex. Ins. Code §1301.051(a). It also

requires BCBS to “not unreasonably withhold a designation as a preferred

provider.” §1301.051(b). And it requires BCBS “to give a physician or health care

provider who, on the person’s initial application, is not designated as a preferred

provider written reasons for denial of the designation.” §1301.051(c). The evidence

presented to the trial court established that BCBS had failed to do all three.

BCBS relies upon subsection 1301.51(d) as the provision that gives it carte

blanche to ignore the rest of the section. Subsection (d) provides that “Unless

otherwise limited by this code, this section does not prohibit an insurer from

rejecting a physician’s or health care provider’s application for designation based
19 

on a determination that the preferred provider benefit plan has sufficient qualified

providers.” Tex. Ins. Code §1301.51(d). However subsection “d” would be limited

by sections “a, b and c” and BCBS would still have the obligation to give ETMC a

fair, reasonable and equivalent opportunity to apply, to not unreasonably withhold

this status from ETMC and to give ETMC a reasonable reason in writing should it

deny its request.4

So contrary to BCBS’ argument, the status quo with respect to the existing

relationship between ETMC and BCBS was unlawful. Moreover, as discussed

above, the trial court could have interpreted the status quo much more broadly than

just that relationship at that point in time.

4
  Essentially, BCBS contends that its denial of ETMC’s application was justified under
subsection (d) because the Texas Department of Insurance (“TDI”) found its networks to be
“adequate.” But this argument misconstrues the statutory language and would render Section
1301.051 superfluous. Subsection (d) simply states that the section “does not prohibit” an
insurer from denying an application based upon the sufficiency (not adequacy) of its providers. It
does not state that the TDI’s determination of network adequacy is, by itself, always a reasonable
basis for denying a provider’s application, nor does it state that, in any and all circumstances, an
insurer may deny an application by a provider based upon the purported sufficiency of its
existing network providers. According to Section 1301.051, an insurer must always afford “a
fair, reasonable, and equivalent opportunity to apply to be and to be designated as a preferred
provider” and must always have a reasonable basis for denying an application. That the statute
“does not prohibit” an insurer from rejecting an application for a certain reason does not mean
that its rejection of an application for that reason is always reasonable. The critical question
under Section 1301.051 remains whether the insurer afforded a reasonable, fair and equivalent
opportunity to be designated as a preferred provider and whether the insurer has a reasonable
basis for denying an application. Under BCBS’ interpretation of Section 1301.051, an insurer
could always deny a provider’s application – regardless of the reasonableness of the
opportunities afforded to the provider – as long as the TDI certifies that its provider network is
“adequate.” But such certification is a prerequisite for any PPO network in the State of Texas.
Thus, under BCBS’ interpretation of subsection (d), the requirements of subsections (a) and (b)
would be superfluous.
20 

3. BCBS is not being “coerced” into a contract with ETMC, but was
simply ordered to cease and desist from excluding ETMC from its PPO
network pending trial at rates dictated by BCBS. BCBS has already
done this, so any harm BCBS alleges will be caused by implementing the
injunction should not be a factor.

BCBS also argues that the implementation of the injunction will harm BCBS

if not stayed pending this appeal. But again, this appeal actually involves a request

to stay the injunction pending trial. And contrary to BCBS’s argument, the

injunction does not coerce BCBS to “enter into a more permanent PPO contract”

with ETMC. Instead, the injunction simply ordered that BCBS cease and desist

from excluding ETMC from BCBS PPO’s pending the trial, expressly noting that

the case was set for trial in November, but that ETMC and the trial court had

advised BCBS that it can be tried in April 2016 if the parties agree. (Appx Ex. 1 at

4). The injunction requires that BCBS: “Cease and desist from excluding ETMC

from the Blue Cross PPOs by allowing ETMC’s immediate and full participation

in Blue Cross’s Blue Options and Blue Choice PPO networks at rates identical to

those in force in the Hospital Agreement for Traditional Indemnity Business in

effect between ETMC and Blue Cross (effective August 15, 2012, as amended

effective September 15, 2015), attached as Exhibit A to this Order, until new PPO

agreements are negotiated and signed.” This provision has no requirement that new

agreements be negotiated and signed before the trial.

21 

BCBS also argues that “the injunction will create confusion and cause

hardship for the public, the very doctors and patients the injunction purports to

protect.” (Mtn at 17). Yet, BCBS has already implemented the injunction; ETMC

Tyler is already listed as being in-network and BCBS’s website even states that

“[t]he cost of inpatient and outpatient care provided by this acute care hospital is

somewhat more affordable compared to peers.” (RR Supp. Motion Ex. 1). BCBS

argues that “If BCBSTX prevails on appeal (or in the underlying litigation) and is

not required to contract with ETMC as an in-network provider, courses of

treatment that began in reliance on the injunction’s grant of in-network status

might be disrupted. This is not an idle concern.” (Mtn at 18). If this had truly been

such a grave concern to BCBS, then BCBS would have sought this emergency

relief before it put ETMC in-network, instead of waiting until the last day to file

the notice of appeal and request a stay. Since the date of the injunction, at least 886

patients have already been treated and 156 more are scheduled, so BCBS’

argument regarding disrupting scheduled treatments should carry little, if any,

weight.5

As already discussed, enforcing the injunction does not risk mooting this

existing accelerated appeal or any future appeal. Contrary to BCBS’ argument, the

injunction does not “effectively coerce BCBSTX to enter into longer term

5
  These numbers change almost daily, and ETMC is happy to provide this Court with the current
numbers at the time of the argument as well.
22 

contracts with ETMC” before trial. (Mtn at 19). BCBS is under no obligation to

contract with ETMC by virtue of this injunction. Additionally, while it may appear

that BCBS has made all of its arguments in this motion that it will make in this

accelerated appeal, it can certainly make more if it so chooses. And having ETMC

remain in-network per the terms of the injunction will not moot those arguments.

BCBS is not being forced to enter into a longer term contract with ETMC – it can

continue on at rates that were already in place before the injunction.

4. The injunction as entered was more than supported by the record, and
the trial court acted well within its discretion granting ETMC this relief.

  Here, BCBS cites cases that say to grant a mandatory temporary injunction

requires a showing of extreme hardship with substantial and probative evidence.

(Mtn at 20).  BCBS argues this is a mandatory injunction and that “a stay is

particularly appropriate” in this case. (Mtn at 13). ETMC believes the question as

to whether this is a prohibitive or mandatory injunction is a red herring. The

standard of review is the same whether the injunction is prohibitive or mandatory.

See LaFaucheur, 807 S.W.2d at 22. And as discussed above in the Summary of the

Argument, this particular injunction actually preserved the status quo in that it

allows ETMC to continue offering vital and unique services to the residents of East

Texas pending the trial. BCBS argues that a trial court abuses its discretion unless

it is clearly established by the facts that one seeking such relief is threatened with

an actual irreparable injury without the injunction. Id. ETMC presented the court
23 

with substantial evidence that it would suffer an actual irreparable injury and

extreme hardship without the injunction.  

ETMC also established that it had a viable cause of action and proved a

probable right to relief. BCBS argues that ETMC had no private cause of action

under the Insurance Code, but granting ETMC’s application for injunctive relief

did not turn on this answer. ETMC’s suit and application were also based in part

on its claim that Blue Cross was negligent in unreasonably refusing to designate

ETMC as an in-network provider. Further, contrary to BCBS’ argument, the

evidence showed that ETMC had not been provided a fair and reasonable

opportunity to be granted this status and that BCBS had acted negligently and

unreasonably in its dealings with ETMC over the years.

As set forth in the factual summary, ETMC proved that it would suffer

probable, imminent and irreparable injury and that the trial court was well within

its discretion to so find, considering the testimony and evidence presented. The

trial court made the required findings on all of the elements supporting the

injunction in his order and had the evidence in the record to support each one.

5. While BCBS styled its motion as also being one to review the denial of
supersedeas under Rule 29.2, BCBS never asked the trial court for a
supersedeas bond.

On the last page of its motion, BCBS advises that while this Court has the

authority to make any temporary orders necessary to preserve the parties’ rights

24 

until the disposition of the appeal, and while BCBS is prepared to post an

appropriate bond, “no security is necessary in the circumstances presented here.”

(Mtn at 25). In connection with this argument, BCBS states that: “This accelerated

appeal likely will be decided within four to five months.” BCBS contends that:

“[i]n that short period of time, ETMC will not have obtained any significant

monetary benefit from enforcement of the injunction. Because it takes time for

patients to switch to a different provider (here, BCBSTX members switching to

ETMC), it is unlikely that ETMC would see increased revenues in the short time it

will take to decide this accelerated appeal. Therefore, no security is necessary to

protect ETMC from the consequences of non-enforcement pending appeal.” (Mtn

at 25).

BCBS’ very arguments why it believes no supersedeas bond is needed,

support ETMC’s argument that the injunction should remain in force. BCBS failed

to show the trial court that it would suffer any harm, and likewise has failed to

show or even allege that it will suffer any real harm should the injunction continue.

This is in stark contrast to ETMC’s showing that it will likely suffer immediate and

irreparable harm without the injunctive relief.

BCBS relies upon Rule 29.3 as support for its request for a stay by this

Court. That rule reads:

25 

When an appeal from an interlocutory order is perfected, the appellate
court may make any temporary orders necessary to preserve the
parties’ rights until disposition of the appeal and may require
appropriate security. But the appellate court must not suspend the
trial court’s order if the appellant’s rights would be adequately
protected by supersedeas or another order made under Rule 24.

Tex.R.App.P. 29.3. As seen above, no orders are necessary to preserve the parties’

rights until the disposition of this appeal. BCBS never sought nor received a

supersedeas bond in connection with its request for a stay. BCBS never asked the

trial court for a supersedeas bond or suggested what amount of supersedeas, if any,

would be appropriate. BCBS simply asked the trial court to stay the order and now

simply argues that the trial court’s injunction should be set aside.

BCBS has not proved it is entitled to any relief under Rule 29.3. It could

never articulate to the trial court the harm it would suffer if the injunction were

entered and it has not articulated that harm here. In contrast, ETMC established

that it would suffer an irreparable and extreme hardship, and thus proved itself

entitled to this relief.

CONCLUSION AND PRAYER FOR RELIEF

The trial court acted well within its discretion in granting the injunctive

relief sought by ETMC. The court was careful in considering the evidence and

testimony and even went so far as to ask several questions in an attempt to

understand BCBS’ actions and arguments. ETMC established that it would suffer

irreparable and catastrophic harm if the injunction were not granted. In contrast, to
26 

this day, BCBS has never really been able to explain how the injunction will cause

it any harm. And as noted above, BCBS has already complied with the injunction.

It would seem had BCBS really been concerned that it would be harmed by the

injunction it would have sought emergency relief before implementing the changes

mandated by the injunction.

For all of the reasons stated herein, ETMC respectfully prays that this Court

deny BCBS’ motion to stay the injunction pending its accelerated appeal and trial.

Additionally, ETMC asks for any and all relief to which it may be entitled in law

or equity.

Date: December 11, 2015 Respectfully submitted,

/s/ Deborah Race
DEBORAH RACE
OF COUNSEL: STATE BAR NO. 16448700
OTIS CARROLL
DAVID C. FREDERICK STATE BAR NO. 03895700
EDUARDO F. BRUERA COLLIN MALONEY
KELLOG HUBER HANSEN, STATE BAR NO. 00794219
TODD, EVANS & FIGLE, PLLC IRELAND, CARROLL & KELLEY, PC
1615 M STREET, N.W. STE 400 6101 S. BROADWAY, SUITE 500
WASHINGTON, D.C. 20036 TYLER, TEXAS 75703
(202) 326-7900 TEL: (903) 561-1600
dfrederick@khhte.com FAX: (903) 581-1071
ebruera@khhte.com drace@icklaw.com
otiscarroll@icklaw.com
cmaloney@icklaw.com

27 

T. JOHN WARD
STATE BAR NO. 20848000
CLAIRE ABERNATHY HENRY
STATE BAR NO. 24053063
WARD, SMITH, & HILL PLLC
1127 JUDSON ROAD, SUITE 220
LONGVIEW, TX 75601
(903) 757.6400
TJW@WSFIRM.COM
CLAIRE@WSFIRM.COM

MICHAEL C. COKER
ADAMS & COKER, P.C.
STATE BAR. NO. 04527100
4540 KINSEY DRIVE
TYLER, TX 75703
(903) 581.1196
MIKECOKER@ADAMS-COKER.COM

SCOTT STEVENS
STATE BAR NO. 00792024
DAVID P. HENRY
STATE BAR NO. 24027015
STEVENS HENRY, PLLC
P. O. BOX 3427
LONGVIEW, TX 75606
TEL: (903) 753-67670
FAX: (903) 753-6761
SCOTT@STEVENSHENRY.COM
DAVID@STEVENSHENRY.COM

ATTORNEYS FOR EAST TEXAS MEDICAL CENTER

28 

CERTIFICATE OF SERVICE

The undersigned hereby certifies that all counsel of record who are deemed

to have consented to electronic service are being served with a copy of this

document via the Court=s CM/ECF system. Any other counsel of record will be

served by facsimile transmission and/or first class mail this 11th day of December,

2015.

/s/ Deborah Race
Deborah Race

29 

 NO. 12-15-00287-CV

IN THE COURT OF APPEALS
TWELFTH COURT OF APPEALS
TYLER, TEXAS

HEALTH CARE SERVICE CORPORATION, AN UNINCORPORATED
DIVISION OF WHICH IS BLUE CROSS AND BLUE SHIELD OF TEXAS,

Appellant,

vs.

EAST TEXAS MEDICAL CENTER,

Appellee

On Appeal from the
st
241 Judicial District Court of
Smith County, Texas
The Honorable Jack Skeen, Presiding Judge

APPENDIX
 VERIFICATION

The documents attached as Tab 1 -3 are true and correct copies of

documents which have already been filed or received by this Court in connection

with this matter.

/s/ Deborah Race
Deborah Race
TAB 1
TAB 2
TAB 3