Court Allows Hospital to Recover “200% of Medicare” in Outpatient Guideline Dispute

The Austin Court of Appeals has affirmed an award that permitted a hospital to recover a 200% payment adjustment factor of billed outpatient hospital charges over a number of carriers’ objections. The decision in Facility Ins. Co. et al. v. Vista Hospital of Dallas, et al., No. 03-18-00663-CV was published December 5, 2019.

The appeal resulted from a long-running dispute over how hospitals were entitled to receive reimbursement for outpatient services beginning in 2002 and extending through the Agency’s 2008 adoption of the Outpatient Hospital Facility Fee Guidelines (Rule 134.403).

Vista Hospitals billed various workers’ comp carriers for selected outpatient services performed between 2002 and 2008 and, following the reduction of those billed charges, Vista asked the Carriers to reconsider and to reimburse it at 100% of the billed charges. When the Carriers refused, Vista requested Medical Dispute Resolution before the Division.

Before the Division, Vista contended that “fair and reasonable” reimbursement required compensation at no less than 70% of its billed charges in each dispute. Ultimately, the Division determined that Vista was not entitled to any reimbursement beyond what the Carriers had already paid. So, from 2004 to 2009, Vista sought de novo contested case hearings before SOAH for a number of disputes, again contending that reimbursement at 70%–100% of its billed charges was “fair and reasonable.”

In response to the Division’s adoption of the 2008 Fee Guidelines and to outcomes in several different appellate decisions, Vista then changed its methodology for calculating “fair and reasonable” reimbursement in the disputes. Even though Vista’s underlying claims preceded the 2008 Fee Guideline change, Vista recalculated their reimbursement requests from their initial 70%–100% of billed charges to the Medicare-prescribed reimbursement amounts for those same procedure codes, added any applicable outlier amounts, and applied the 200% reimbursement methodology. Vista represented that those new methodologies resulted in lower overall amounts requested for reimbursement than its original calculations did.

Ultimately, a panel of three judges at the State Office of Administrative Hearings concluded that the Carriers should reimburse Vista at the 200% of Medicare rate, less amounts that the Carriers had already paid. The carriers sought judicial review of that decision. The trial court affirmed the Decision and Order and rendered judgment against the Carriers for the amounts that SOAH had ordered to be paid. The Carriers appealed that judgment to the Third Court of Appeals.

On appeal, the Carriers raised a number of issues, which the Court grouped into three categories (1) alleged procedural problems with Vista’s presentation of its case before SOAH, (2) the evidence supporting SOAH’s findings and conclusions that the Carriers’ reimbursement calculations did not result in “fair and reasonable” reimbursement to Vista (and that Vista’s competing calculations did), and (3) SOAH’s award of interest to Vista.

The Court of Appeals rejected each challenge. Many of the Carriers’ procedural challenges depended upon whether Vista’s revised reimbursement calculations at SOAH constituted new “claims for payment” or new “medical bills.” The court held that they were not.

Health Care providers submit claims for payment as a billed charge, and payors may re-price the charges when reimbursing. A provider need not submit a new bill when it challenges the reimbursement amount determined by a carrier, even if the alleged underpayment changes during a regulatory proceeding.

Accordingly, the Court concluded that the rules governing the time limits for and manner of filing new claims for payment or new medical bills under the statute did not apply.

The court also concluded that Vista’s calculations of 200% of the Medicare rate was a “fair and reasonable” rate of reimbursement and that the SOAH order of reimbursement at that rate was supported by substantial evidence.

The Carriers argue that [Vista’s expert witness] provided no basis, or an insufficient basis, for her opinion that the 2008 Fee Guideline’s 200% PAF could be applied to services provided from 2002 to 2008 though the Division’s order promulgating the guideline said that it would apply from March 1, 2008, onward. But the Preamble, entered into evidence by Vista, did provide [Vista’s expert] with a sufficient basis for her opinion. The Preamble’s explanation of the Division’s and its consultants’ research from the years preceding 2008 provided a sufficient basis. Her opinions therefore were not conclusory.

Finally, the Court affirmed the trial court’s order that reimbursements to the hospitals include the payment of interest.

Because the new fee guideline was promulgated during the pendency of the dispute, Vista changed its reimbursement calculations to come into line with the new guideline. Because the reimbursement produced by the new guideline was “fair and reasonable” under both Labor Code section 413.011 and Rule 134.1, it was also “‘consistent with the fee guidelines’ such that Vista is entitled to prejudgment interest beginning 60 days after Vista billed [the carrier] for each claim” under Labor Code section 413.019.

Accordingly, the Court of Appeals affirmed the judgment of the trial court.