Howell v. Texas Workers' Compensation Com'n

• Decision Date: 12 August 2004
• Docket Number: No. 03-03-00381-CV.,03-03-00381-CV.
• Citation: 143 S.W.3d 416
• Parties: Robert S. HOWELL, D.C.; First Rio Valley Medical, P.A.; Keith Gilbert; William Maxwell; and Gilbert & Maxwell, P.L.L.C., Appellants, v. TEXAS WORKERS' COMPENSATION COMMISSION; Envoy Medical Systems, L.L.C.; Texas Mutual Insurance Company; State Office of Risk Management; and Continental Casualty Insurance Company, Appellees.
• Court: Texas Court of Appeals

143 S.W.3d 416

Robert S. HOWELL, D.C.; First Rio Valley Medical, P.A.; Keith Gilbert; William Maxwell; and Gilbert & Maxwell, P.L.L.C., Appellants, v. TEXAS WORKERS' COMPENSATION COMMISSION; Envoy Medical Systems, L.L.C.; Texas Mutual Insurance Company; State Office of Risk Management; and Continental Casualty Insurance Company, Appellees.

No. 03-03-00381-CV.

Court of Appeals of Texas, Austin.

August 12, 2004.

Appeal from the 201st Judicial District, Travis County, W. Jeanne Meurer, J William Maxwell, Keith T. Gilbert, Gilbert & Maxwell, P.L.L.C., Houston, for Appellants.

Bradley D. McClellan, Asst. Atty. Gen., Austin, for State Office of Risk Management.

P.M. Schenkkan, William Christian, Thomas B. Hudson, Jr., Graves, Dougherty, Hearon & Moody, P.C., Mary Barrow Nichols, Gen. Counsel, Austin, for Texas Mutual Insurance Company.

Brenda E. Brockner, Asst. Atty. Gen., Austin, for Texas Workers' Compensation Commission.

Jane Lipscomb Stone, Stone, Loughlin & Swanson, L.L.P., Austin, for Continental Casualty Insurance Company.

Daniel Y.S. Chin, Chin & Associates, L.L.P., Austin, for Envoy Medical Systems, L.L.C.

Before Chief Justice LAW, Justices PATTERSON and PURYEAR.

OPINION

JAN P. PATTERSON, Justice.

In this case, we must decide whether, when a health care provider provides medical treatment to a workers' compensation claimant and subsequently disputes the adequacy of payment by a workers' compensation insurance carrier, the health care provider must first exhaust administrative remedies within the workers' compensation system before seeking to resolve the dispute in a court. We must also determine whether, after one party files a declaratory judgment action in a Travis County district court, that court obtains jurisdiction to grant a counterclaimant's request for an anti-suit injunction prohibiting the original party from pursuing related suits in the courts of another Texas county.

Appellants Robert S. Howell, D.C. and First Rio Valley Medical, P.A. (collectively, "First Rio") appeal a judgment rendered in favor of appellees Texas Workers' Compensation Commission; Envoy Medical Systems, L.L.C.; Texas Mutual Insurance Company; State Office of Risk Management; and Continental Casualty Insurance Company. The district court rendered judgment that First Rio must first exhaust administrative remedies before seeking judicial review of a dispute with a carrier and that the independent review organization ("IRO") fees for medical necessity reviews are constitutional. Pursuant to the declaratory action, the district court awarded attorney's fees to the Commission, Texas Mutual, and Continental Casualty.¹ The district court further enjoined First Rio from prosecuting the approximately 723 billing dispute lawsuits that it had filed in Cameron County and from filing a new lawsuit until it has received a final, non-appealable decision in its favor through the administrative process and the carrier has refused to pay.

In nine issues, First Rio asserts that (i) the district court was without jurisdiction to enter the anti-suit injunction; (ii) the district court erred in finding that First Rio, when disputing adequacy of payment, must exhaust administrative remedies within the workers' compensation system before seeking review in a court; (iii) the district court abused its discretion in denying First Rio's demand for a jury trial; (iv) the district court erred in granting declaratory relief because the declaratory action was an improper vehicle for attorney's fees; (v) the district court erred in granting declaratory relief because it was an improper advisory opinion; (vi) the district court erred in finding that Dr. Howell is a proper party to appellees' counterclaims; (vii) some of the district court's rulings violated the United States and Texas Constitutions; (viii) the district court erred in finding that First Rio and Dr. Howell are vexatious litigants; and (ix) the district court erred in finding that the IRO fee is constitutional. We do not find any error pertaining to these issues.

In a separate issue, appellants Keith Gilbert, William Maxwell, and Gilbert & Maxwell, P.L.L.C. (collectively, "the law firm"), counsel for First Rio, assert that the district court abused its discretion by twice imposing sanctions on them. The district court first imposed $13,000 in sanctions pursuant to Texas Mutual's motion for sanctions and second sua sponte imposed $3,200 in sanctions after counsel for First Rio did not appear at the hearing on the motion for judgment. As to Texas Mutual's motion for sanctions, because we affirm the grounds for the sanctions only in part, we remand the issue for recalculation of attorney's fees sanctions in accordance with this opinion. As to the $3,200 award, although the district court did not afford the law firm an opportunity for notice and hearing before imposing those sanctions, the law firm failed to preserve error by not affording the district court an opportunity to correct its mistake.

Because only the Commission and the State Office of Risk Management sought permanent injunctive relief, and pursuant to Continental Casualty's request, we reform the judgment to delete the reference to Continental Casualty as one of the parties seeking a permanent injunction. We affirm the judgment in all other respects.

FACTUAL AND PROCEDURAL BACKGROUND

Changes to Commission's Administrative Review Process

First Rio's causes of action arise from the 2002 changes in the Commission's administrative review of an insurance carrier's denial or reduction in payment of a medical bill. To put the events giving rise to this case in context, we will begin with some background concerning the 2002 amendments.

When a health care provider seeks payment from an insurance carrier for treatment of a workers' compensation claimant, it must first submit the medical bill to the carrier. 28 Tex. Admin. Code § 134.801(a) (2004).² If the carrier denies or reduces the payment and the health care provider is dissatisfied with the carrier's action, the health care provider is entitled to a review of the medical service. Tex. Lab.Code Ann. § 413.031(a)(1) (West Supp.2004). Before pursuing further action, the health care provider must first send a request for reconsideration to the carrier. 28 Tex. Admin. Code § 133.304(k), (m) (2004). If still dissatisfied with the carrier's action, the health care provider may request medical dispute resolution. Id. § 133.304(m). The Commission shall by rule establish "a program for ... resolution of a dispute regarding health care treatments and services." Tex. Lab.Code Ann. § 413.013(1) (West 1996).

Until January 1, 2002, the Commission's medical review division handled all medical dispute resolution matters, falling into two categories: medical fee disputes and medical necessity disputes. See 25 Tex. Reg. 2128 (2000) (codified at 28 Tex. Admin. Code § 133.305) (adopted Mar. 10, 2000). After that date, pursuant to House Bill 2600 passed in the 2001 legislative session, IROs began to conduct medical necessity reviews of health care provided to workers' compensation claimants.³ The medical review division continued to handle medical fee disputes. See 28 Tex. Admin. Code § 133.307 (2004).

IROs were created in 1997 to perform reviews of medical necessity in disputes between medical insurance carriers and persons insured by employer-provided health benefit plans.⁴ The Texas Department of Insurance regulates IROs. Tex. Ins.Code Ann. art. 21.58C (West Supp.2004). Concerning the role of an IRO in the workers' compensation system, a health care provider seeking review of a medical necessity dispute involving denial or reduction of payment for medical services must file its request with the carrier and the medical review division of the Commission. 28 Tex. Admin. Code § 133.308(d) (2004). The review of the medical necessity of medical services already provided, which is the type of review at issue in this case, is called a "retrospective necessity dispute." Id. § 133.305(a)(4) (2004). The Commission forwards the request to an IRO. Id. § 133.308(j). The IRO then notifies the parties of the assignment and requests documentation. Id. § 133.308(k). The health care provider must submit the documents and at the same time submit the fee for the IRO review. Id. § 133.308(k), (r). The fee for review by a medical doctor is a "tier one" fee, $650, and the fee for review by other health care providers, including chiropractors, is a "tier two" fee, $460. Id. § 12.403 (2004) (setting out fee structure); § 133.308(r)(6) (stating that "independent review by a doctor of chiropractic shall be paid the tier two fee").⁵ If a health care provider prevails in a retrospective necessity dispute with a carrier, the carrier must reimburse the provider the IRO fee. Id. § 133.308(r)(2).

After review of either a medical fee or medical necessity dispute, the nonprevailing party may request a contested case hearing before the State Office of Administrative Hearings (SOAH). Id. § 133.307(p) (medical fee disputes), § 133.308(u) (medical necessity disputes). A party who has exhausted its administrative remedies and is aggrieved by a final SOAH decision concerning a medical fee or medical necessity dispute may seek judicial review of the decision in a Travis County district court as governed by chapter 2001 of the government code. Id. § 133.307(p)(4) (medical fee disputes), § 133.308(u)(7) (medical necessity disputes); see Tex. Gov't Code Ann. § 2001.176(b)(1) (West 2000) (requiring request for judicial review to be filed in Travis County unless otherwise provided by statute). We now turn to the events giving rise to First Rio's causes of action and the subsequent proceedings.

First Rio's Challenge to the IRO Fee Rules and Ensuing Counterclaims

Robert Howell, D.C., a chiropractor, is the clinic director and owner of First Rio Valley Medical clinic in Brownsville. The parties have stipulated that workers'...