Via Christi Hosps. Wichita, Inc. v. Kan-Pak LLC
| Decision Date | 25 August 2017 |
| Docket Number | No. 116,692.,116,692. |
| Citation | 402 P.3d 602 |
| Parties | VIA CHRISTI HOSPITALS WICHITA, INC., Appellant, v. KAN–PAK LLC, et al., Appellees. |
| Court | Kansas Court of Appeals |
Edward D. Heath, Jr., of Law Office of Edward D. Heath, Jr., of Wichita, for appellant.
Douglas C. Hobbs and Ryan D. Weltz, of Wallace, Saunders, Austin, Brown & Enochs, Chartered, of Wichita, for appellees.
Before Hill, P.J., McAnany and Atcheson, JJ.
This case illustrates why we have courts of law. There are times when rules created haphazardly must not be enforced because the consequences flowing from their enforcement nullify the good policy promoted by other, properly created rules. This is especially true here, where the rule enforced by the Workers Compensation Hearing Officer and then the Kansas Workers Compensation Appeals Board was unintended in its creation—an accident at birth. Administrative agencies, for many reasons, must follow established procedures in creating rules, and any enforcement of a rule not so created is arbitrary and capricious and must be struck down.
The facts here are uncontested. In 2011, Darin Pinion received horrible burns while he was working for Kan–Pak, LLC. Via Christi Hospitals Wichita, Inc. treated Pinion for his burns. Kan–Pak's workers compensation insurance carrier was Travelers Indemnity Company of America. Travelers contracted with Paradigm Management, LLC to assume the claim. In turn, Via Christi billed Paradigm over a million dollars for Pinion's medical treatment. Relying on the published 2011 Kansas Workers Compensation Schedule of Medical Fees, Paradigm paid Via Christi just $136,451.60. Via Christi contends the payment was short by almost $600,000.
This dispute concerns a single sentence in the 2011 Kansas Department of Labor Workers Compensation Schedule of Medical Fees. The year before, the 2010 fee schedule introduced an independent methodology called the "stop-loss method" to reimburse hospitals for "unusually costly services rendered during treatment to an injured worker." The stop-loss method provided that if the total charges of an inpatient hospital stay equaled or exceeded $60,000, the total charges were multiplied by 70 percent to determine the allowed reimbursement. If charges did not reach the $60,000 stop-loss threshold, then hospitals were reimbursed using the traditional Medicare Severity-Diagnosis Related Group (MS-DRG) method.
This stop-loss methodology was again included in the 2011 fee schedule. But unbeknownst to the Workers Compensation Division's manager of medical services and the appointed medical administrator, who were in charge of shepherding the revisions through the regulatory process, the published 2011 fee schedule also included this statement: "If the MS-DRG level of reimbursement exceeds the $60,000 stop-loss threshold, the facility shall be paid billed charges multiplied by seventy percent (70%) or the MS-DRG level whichever is least ; all other rules apply to making this determination." (Emphasis added.) This small addition changed everything.
It appears that a small flaw was woven into the weft of a 232-page regulation. A brief clause, tucked into a mountain of words, changed the meaning of a carefully composed and thoroughly studied rule. It changed policy when no one in authority intended the policy to be changed.
No one in this record can say how this rule was changed or why this rule was changed, but they can say the rule was changed. It was promptly amended the next year, eliminating the "whichever is least" language, preserving the stop-loss provision as it originally was. Insurance companies that inquired about the "whichever is least" provision were told by the Division's manager of medical services that it was an error and to ignore it. The insurance companies followed the advice and ignored the provision. Apparently, no one told Paradigm to ignore it.
Paradigm, a workers compensation catastrophic case management utility that manages and facilitates care coordination for injured workers, insists that it was only required to reimburse Via Christi at the MS-DRG level and not the stop-loss level, resulting in a $600,000 difference. In Paradigm's view, this was a properly published regulation that must be enforced. It had no notice of any claims from the Workers Compensation Division that the clause was accidentally inserted into the published rules and, thus, was meaningless.
Seeking the protection of the stop-loss, Via Christi sought a formal review of this dispute under 2010 Supp. K.S.A. 44-510j. After a careful and very thorough review of all the testimony, the hearing officer concluded that the addition of the "whichever is least" provision in the 2011 fee schedule was unknowing, inadvertent, and unintentional. The hearing officer would have declared the provision void and unenforceable but instead, found he lacked authority to rule an administrative regulation void. The Kansas Workers Compensation Appeals Board, after carefully reviewing the record, ruled that the hearing officer was correct. In the end, it too is powerless to change the rules.
Without a doubt, both the hearing officer and the Board are correct; both are powerless to change the rules. It is their task to enforce rules, not create them. The hearing officers find facts and apply the rules to the facts and interpret the rules as the circumstances of each case require. For its part, the Board will review the work of the hearing officer and make whatever corrections are required. But indeed, they are powerless to say, "This rule we will not enforce because it is wrong." To permit that would reduce rulemaking to the whim, no matter how reasonable, of the hearing officer or the Board. Nonetheless, rulemaking is one of the fundamental tasks assigned to our administrative agencies. This process of rule creation is elaborate and painstaking. Many views are taken into account before the final rule is published. We now focus on rulemaking by this agency.
Since 1990, the Kansas Legislature has required the director of the Division of Workers Compensation to adopt rules and regulations which establish a schedule of maximum fees for medical, surgical, hospital, dental, nursing, vocational rehabilitation, or any other treatment or services provided to employees under the Workers Compensation Act. See K.S.A. 1990 Supp. 44-510(a)(1) ; K.S.A. 2016 Supp. 44-510i(c). The fee schedule must satisfy certain statutory directives of reasonableness and scope. It:
The law calls on the director to appoint a specialist in health care services delivery to assist in preparing the fee schedule. That person is referred to as the medical administrator. See K.S.A. 2016 Supp. 44-510i(a) - (b). For this case, the medical administrator was Dr. Terry A. Tracy. The statute also creates an advisory panel to assist the director in establishing the fee schedule. K.S.A. 2016 Supp. 44-510i(d).
The director utilizes the Division's manager of medical services to shepherd revisions to the fee schedule through the regulatory process. Here, that person was Anne Haught. Haught practiced as a registered nurse for 12 years and is a licensed attorney. Haught also served as...
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Via Christi Hosps. Wichita, Inc. v. Kan-Pak, LLC
...provision had been accidentally created. So Paradigm owed Via Christi considerably more money. Via Christi Hospitals Wichita, Inc. v. Kan-Pak LLC , 54 Kan. App. 2d 624, 630, 402 P.3d 602 (2017). Now Paradigm has appealed via K.S.A. 20-3018(b).We conclude we have subject matter jurisdiction ......