Wilson v. Cmty. Health Choice Tex., Inc.

• Decision Date: 14 August 2020
• Docket Number: NO. 03-20-00153-CV,03-20-00153-CV
• Parties: Phil WILSON, in His Official Capacity as Acting Executive Commissioner of Texas Health & Human Services Commission, Appellant v. COMMUNITY HEALTH CHOICE TEXAS, INC., Appellee
• Court: Texas Court of Appeals

607 S.W.3d 843

Phil WILSON, in His Official Capacity as Acting Executive Commissioner of Texas Health & Human Services Commission,¹ Appellant

v.COMMUNITY HEALTH CHOICE TEXAS, INC., Appellee

NO. 03-20-00153-CV

Court of Appeals of Texas, Austin.

Filed: August 14, 2020

Clark Richards, Daniel R. Richards, Austin, for Community First Health Plans, Inc.

Nancy S. Elmilady, Houston, Joshua Eames-Cepero, for Appellant.

Carlos R. Soltero, Kurt H. Kuhn, Austin, for Appellee.

Before Chief Justice Rose, Justices Baker and Triana

OPINION

Gisela D. Triana, Justice

Phil Wilson, in his official capacity as the acting executive commissioner of the Texas Health and Human Services Commission (HHSC), appeals the denial of pleas to the jurisdiction.² See Tex. Civ. Prac. & Rem. Code § 51.014(a)(8). For the reasons that follow, we affirm the district court's decision on the pleas to the jurisdiction.

BACKGROUND

Medicaid is a cooperative federal-state health benefit program for certain low-income and disabled individuals. See generally 42 U.S.C. §§ 1396 - 1396w (Grants to States for Medical Assistance Programs). Although federal law establishes Medicaid's basic parameters, each state decides the nature and scope of its Medicaid program. See id. § 1396a(a), (b); 42 C.F.R. § 430.10. In Texas, HHSC is the agency designated to administer Medicaid. See Tex. Hum. Res. Code § 32.021(a) ; Tex. Gov't Code § 531.021(a). One vehicle through which the State delivers services to Medicaid recipients is the State of Texas Access Reform (STAR)+PLUS managed care program. Certain Texas Medicaid recipients must enroll in STAR+PLUS, which provides services for recipients with disabilities or who are age 65 or older. See 1 Tex. Admin. Code § 353.603 (Tex. Health & Human Servs. Comm'n, Member Participation). HHSC contracts with managed care organizations (MCOs) to provide services to STAR+PLUS enrollees. See id. §§ 353.407 (Requirements of Managed Care Plans), .601(c) (General Provisions). MCOs are health maintenance organizations, dental indemnity insurance providers, or dental health maintenance organizations licensed or approved by the Texas Department of Insurance. Id. § 353.2(26), (50), (61) (Definitions).

When purchasing or contracting for goods and services, state agencies, including HHSC, must comply with statutory requirements such as those found in chapter 2155 of the Government Code, which addresses "General Rules and Procedures" for purchasing. See Tex. Gov't Code §§ 2155.144 ("Procurements by Health and Human Services Agencies"), .074 ("Best Value Standard for Purchase of Goods or Services"), .075 ("Requirement to Specify Value Factors in Request for Bids or Proposals"); see also id. §§ 2151.001-2176.202 ("State Purchasing and General Services"). In addition to adhering to those general requirements, HHSC must implement the Medicaid managed care program by contracting with MCOs in a manner consistent with chapter 533 of the Government Code, see Tex. Gov't Code §§ 533.001 -.084 ("Medicaid Managed Care Program"), including section 533.004, which addresses "Mandatory Contracts" and specifies, as relevant here:

(a) In providing health care services through Medicaid managed care to recipients in a health care service region, the commission shall contract with a managed care organization in that region that is licensed under Chapter 843, Insurance Code, to provide health care in that region and that is:

(1) wholly owned and operated by a hospital district in that region;

(2) created by a nonprofit corporation that:

(A) has a contract, agreement, or other arrangement with a hospital district in that region or with a municipality in that region that owns a hospital licensed under Chapter 241, Health and Safety Code, and has an obligation to provide health care to indigent patients; and

(B) under the contract, agreement, or other arrangement, assumes the obligation to provide health care to indigent patients and leases, manages, or operates a hospital facility owned by the hospital district or municipality; or

(3) created by a nonprofit corporation that has a contract, agreement, or other arrangement with a hospital district in that region under which the nonprofit corporation acts as an agent of the district and assumes the district's obligation to arrange for services under the Medicaid expansion for children as authorized by Chapter 444, Acts of the 74th Legislature, Regular Session, 1995.

(b) A managed care organization described by Subsection (a) is subject to all terms and conditions to which other managed care organizations are subject, including all contractual, regulatory, and statutory provisions relating to participation in the Medicaid managed care program.

Appellee Community Health Choice Texas, Inc., is without question an MCO described by section 533.004(a). Community Health is a nonprofit MCO wholly owned and operated by the Harris County Hospital District. The commissioner does not dispute that Community Health is the only hospital-owned and -operated MCO in its service area, which encompasses the greater Houston area east to the Louisiana border, including the Harris and Jefferson service areas. In early 2018, HHSC issued a Request for Proposal (RFP) to procure services for STAR+PLUS enrollees in several service areas, including the Harris and Jefferson service areas. In response, Community Health submitted a bid to provide service in those two areas. HHSC withdrew that first RFP, then issued a second one, for which Community Health also submitted a bid. Once again, HHSC withdrew the RFP. In October 2018, HHSC issued a third RFP. Community Health was the only entity described by section 533.004(a) that responded to that request for proposal with a bid for services. The RFP stated that "HHSC intends to award contracts to at least two MCOs for each SA [service area] to provide Covered services required of this RFP to STAR+PLUS eligible Members in these SAs." It also provided for an "anticipated" effective date of June 28, 2019, with an operational start date of June 1, 2020. The RFP expressly allowed HHSC to modify these dates at any time upon posting notice to the Electronic State Business Daily. In October 2019, HHSC announced its intention to award three contracts in the Harris service area and two contracts in the Jefferson service area. These five contracts were to be awarded to out-of-state, for-profit companies. Community Health asserts that until this STAR+PLUS procurement, HHSC had consistently followed section 533.004's requirement to award at least one contract to a nonprofit or hospital-district-owned entity in the particular service area.

In November 2019, in response to the commissioner's decision to award contracts without awarding them any to an entity described by section 533.004, Community Health sued the commissioner, asserting an ultra vires claim and seeking "injunctive, mandamus, and declaratory relief." Community Health specifically sought a declaration that the commissioner "failed to comply with the Texas Government Code," an injunction prohibiting the commissioner from violating section 533.004 by contracting solely with for-profit entities, and an order that the commissioner sign a contract with Community Health as the only entity that satisfies the criteria of section 533.004 for the Harris and Jefferson service areas. The commissioner answered with a general denial and alleged sovereign immunity as an affirmative defense. Community Health moved for summary judgment on its claim based on the undisputed facts. On December 5, 2019, the commissioner filed a plea to the jurisdiction asserting he was protected from suit by sovereign immunity. The following week, the commissioner filed a "supplemental plea to the jurisdiction" asserting that Community Health's claims, which sought to prevent the commissioner from awarding the contracts in violation of section 533.004, had become moot because the commissioner had, as of December 9 and 10, executed and officially awarded the contracts to the for-profit entities as planned. After conducting a hearing on both the summary judgment motion and the pleas to the jurisdiction, the district court granted Community Health's summary judgment and denied the pleas to the jurisdiction in an order signed February 7, 2020.³ The commissioner filed a notice of appeal. On March 24, Community Health filed an emergency motion in this Court seeking to require the commissioner to comply with the district court's February 7 order while this appeal was pending so that Community Health would not be excluded from preparing to participate in the STAR+PLUS Program. The RFP had indicated that entities selected to provide STAR+PLUS services are required to participate in preparatory work before they begin providing services. The day after Community Health's emergency motion was filed, HHSC cancelled "all contracts associated with" the third RFP because "it is in the best interest of the State of Texas," and this Court determined that the motion was therefore moot. On appeal, the commissioner asserts that (1) HHSC's cancellation of the contracts moots this cause such that this Court should vacate the district court's order and dismiss the entire case as moot; and (2) if this cause is not moot, the district court lacks subject matter jurisdiction over Community Health's claims because there is no justiciable controversy between the parties, section 533.004(a) does not impose a ministerial duty on the commissioner and so Community Health has not pled an ultra vires claim against the commissioner, and Community Health seeks impermissible retrospective relief.

ANALYSIS

Mootness and Justiciability

The commissioner first asserts that his cancellation of the contracts has mooted this cause. He similarly urges as part of his second issue that the district court lacks subject matter jurisdiction because cancellation of the contracts extinguished any live controversy that might have existed. In both of these arguments,...