Dentistry of Brownsville, PC KS2 TX, PC Summit Dental Center, LP And Harlingen Family Dentistry// Texas Health and Human Services Commission Charles Smith, Executive Commissioner And Gina Marie Muiz v. Texas Health and Human Services Commission Charles Smith, Executive Commissioner And Gina Marie Muiz// Cross-Appellee, Harlingen Family Dentistry

Citation: Not availableDocket: 03-17-00552-CV

Court: Court of Appeals of Texas; December 12, 2017; Texas; State Appellate Court

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In the case before the Third Court of Appeals in Austin, Texas (Case No. 03-17-00552-CV), the appellants are Dentistry of Brownsville, PC, KS2 TX, PC, Summit Dental Center, LP, and Harlingen Family Dentistry. They are appealing a decision from the 250th Judicial District Court of Travis County, presided over by Judge Karin Crump (Trial Court No. D-1-GN-16-005358). The appellees include the Texas Health and Human Services Commission, Charles Smith (Executive Director), and Annick Barton. Legal representation for the appellants is provided by Jason Ray from Riggs. Ray, P.C., while the appellees are represented by Kara Holsinger from the Office of the Attorney General of Texas. The appellants have not requested oral argument for the appeal. All parties and counsel are identified with their respective contact information and professional designations.

The document outlines the structure of a legal brief, including sections on the identity of parties, a table of authorities, and a detailed statement of the case. It presents the core issues for appeal, primarily focusing on the trial court's alleged misapplication of the standard of review regarding Pleas to the Jurisdiction and its jurisdiction over the Providers' rule challenge and ultra vires claims.

Key points include:

1. The trial court incorrectly applied the standard for Pleas to the Jurisdiction.
2. Jurisdiction was present for the Providers' challenge against rules 356.202 and 354.1450, which allegedly violate federal regulations by lacking due process and additional appeal rights.
3. The rules were claimed to be improperly promulgated under Human Resources Code section 32.070, which should not apply to the EHR grant program.
4. The rules impose new restrictions on appeals that are inconsistent with the existing statute.
5. The court had jurisdiction over ultra vires claims, asserting that relevant sections of the Human Resources Code and federal regulations necessitate a contested case hearing.
6. Actions taken by HHSC staff, including reliance on non-final agency decisions and deviations from established procedures, were described as ultra vires acts violating due process.
7. The trial court's summary judgment in favor of HHSC was deemed erroneous for lacking evidentiary support, and errors were noted in the final judgment.

The document concludes with a prayer for relief, compliance certification, and an appendix.

Appellants, including Dentistry of Brownsville PC, KS2 TX, PC, Summit Dental Center LP, and Harlingen Family Dentistry, filed a lawsuit against the Texas Health and Human Services Commission (HHSC) and its employees, alleging ultra vires acts and due process violations related to an administrative action taken against them. The trial court, presided over by Judge Karin Crump of the 250th District Court in Travis County, Texas, dismissed all claims from the Appellants for lack of jurisdiction on June 15, 2017, and granted a Motion for Summary Judgment against Harlingen Family Dentistry’s claims. On August 15, 2017, the trial court issued Findings of Fact and Conclusions of Law concerning its jurisdiction ruling. Key references include terminology such as "Providers" for the Appellants, "Kool Smiles" for specific entities, and "HHSC" for the Commission and its leadership. The Appellants raise several issues on appeal, including misapplication of the standard of review for Pleas to the Jurisdiction, jurisdictional authority to hear challenges to rules and ultra vires claims, reversible error in granting summary judgment without evidence, and errors in the trial court’s Final Judgment.

In 2009, the American Recovery and Reinvestment Act was enacted to stimulate the economy, providing financial incentives for the adoption of electronic health records (EHR) through the U.S. Department of Health and Human Services. By 2011, Providers participated in the EHR incentive program, receiving over $3 million in federal grant funds to transition to certified EHR technology. The Texas Medicaid Healthcare Partnership (TMHP) facilitated the grant applications, ensuring compliance with federal eligibility criteria. Individual dentists applied for the funds despite the collective use of EHR systems in multi-location practices, and TMHP conducted pre-payment reviews to verify compliance with requirements, approving all reviewed applications.

By 2012, Providers had received significant funding for EHR adoption. However, during a 2013 audit, a different qualification standard was retroactively applied by the auditor, which was not disclosed to them or based on TMHP's prior instructions. As a result, all applications from Providers' dentists were disqualified, including those who had previously passed the pre-payment audit.

HHSC implemented Rule 356.202, which eliminated the usual contested case hearings for providers and subjected EHR grant disputes to an audit process similar to that for cost-reporting providers. In 2014 and 2015, HHSC notified certain group practice dentists that they did not qualify for EHR grant funds due to improper application instructions from TMHP, leading to recommendations for repayment of millions. Providers appealed, but HHSC maintained that disputes would follow Rule 356.202's process, which included review by a panel selected by HHSC and a final decision by HHSC staff. Kool Smiles was the first to appeal, requesting the opportunity to present its case and evidence, but was denied and only allowed to submit a brief memorandum. HHSC did not disclose panel member identities or meeting details, allegedly withholding information similarly to prior audits. In September 2016, HHSC informed Kool Smiles that the panel recommended upholding the audit results, and HHSC agreed, initiating a nearly $1 million recoupment. This notification lacked the formalities of a final order. Kool Smiles repaid the funds under protest and, alongside other providers, filed a lawsuit challenging HHSC's authority and actions. Following this, HHSC also targeted Summit, which faced similar consequences, with an announcement of over $807,000 in recoupment. In court, HHSC filed a combined plea to the jurisdiction and motion for summary judgment, which the trial court partially addressed, allowing HHSC to amend its evidence despite objections from the Providers. Ultimately, the court granted HHSC's plea against Kool Smiles and Summit, and its motion for summary judgment against Harlingen, despite all Providers making similar claims.

The trial court incorrectly applied the legal standard for jurisdictional pleas by requiring the Providers to prove their factual assertions to overcome HHSC's jurisdictional plea. The court concluded that Kool Smiles and Summit did not demonstrate a waiver of sovereign immunity for a rule challenge, despite the fact that such a challenge inherently waives immunity. Consequently, HHSC was obligated to present competent evidence to counter the Providers' jurisdictional claims, which it failed to do. Additionally, the trial court should have allowed ultra vires claims, as these inherently concern illegal or unauthorized actions, which sovereign immunity does not protect. The summary judgment for Harlingen Family Dentistry was also erroneous because HHSC's motion lacked evidentiary support. The brief outlines the Providers' claims and argues that the trial court misapplied the standard of review for pleas to the jurisdiction, which should favor jurisdiction unless HHSC's evidence conclusively refuted the Providers' claims. The court's determination should have been de novo, and it improperly shifted the burden to the Providers to prove their jurisdictional facts. Lastly, the trial court's finding regarding Kool Smiles and Summit's failure to demonstrate a waiver of sovereign immunity is confusing, as it mischaracterizes the relevant legal standard pertaining to rule challenges.

HHSC contended that the trial court’s authority was limited to determining the applicability of rules, claiming Kool Smiles and Summit’s challenge constituted a collateral attack on a finalized agency decision. However, the court recognized that their challenge was indeed a rule challenge, despite the existence of ultra vires claims regarding HHSC’s actions. Kool Smiles and Summit remain active in the EHR grant program and are subject to the relevant rules, which renders the challenge justiciable and prevents mootness, as their ultra vires claims are intertwined with the rule challenge.

The Providers challenged the validity of HHSC rules at 1 TEX. ADMIN CODE. 356.202 and 1 TEX. ADMIN CODE. 354.1450, arguing that the rules were improperly promulgated and deprived them of due process rights. The trial court ruled that the Providers failed to demonstrate a waiver of sovereign immunity necessary for a cause of action under section 2001.038. This ruling incorrectly placed the burden on the Providers to prove jurisdictional facts, when it was HHSC's responsibility to provide competent evidence to refute the Providers’ claims. The Providers asserted seven grounds for their rule challenge, notably that the rules did not comply with state administrative procedures and violated federal regulations by failing to provide adequate appeal rights. HHSC's arguments lacked substantive evidence to counter the Providers' claims, focusing mainly on rhetoric rather than legal or factual support.

Rules were established under Human Resources Code section 32.070, which is inapplicable to the EHR grant program. Providers emphasize that the statute does not pertain to disputes regarding EHR incentive funds, and HHSC's insistence on its applicability is fundamentally flawed. Rule 354.1450, created before EHR funds were available, focuses on protocols relevant to CORFs/ORFs, making it irrelevant to EHR grants. HHSC failed to address Providers' arguments against the rule, leading the trial court to err in ruling that HHSC had met its burden of proof.

Additionally, the rules impose restrictions on appeals that are not found in section 32.070, which could suggest HHSC has exceeded its authority. Providers claim that Rule 356.202(b) unnecessarily limits appeal rights, contradicting the statute. HHSC's responses do not contest this point.

The rules also exceed HHSC’s authority by limiting the evidence Providers can present and denying them the right to a contested case hearing. Furthermore, the rules lack adequate due process protections, characterized by a lack of opportunity for Providers to present their case or evidence. Although HHSC claims Providers had a desk review and could brief a panel, this creates a factual dispute regarding due process adequacy.

Finally, the rules bypass due process protections established in the Administrative Procedure Act, which typically apply to such matters. Providers argue that judicial review should be permitted based on precedent, and since the rules prohibit such hearings, they are subject to legal challenge. HHSC has not adequately responded to these challenges in its pleadings.

The agency is prohibited from initiating a vendor hold to recover Electronic Health Record (EHR) funds without first conducting a contested case hearing for the Providers. The Providers contend that the only applicable rules for the agency's self-help recoupments are those in 1 Tex. Admin Code ch. 357, which pertain to actions post-hearing—something denied by HHSC in this instance. HHSC's pleas did not adequately address the Providers' challenges to this rule. Consequently, the trial court erred in dismissing the rule challenges jurisdictionally, as HHSC failed to provide competent evidence to counter the Providers' claims. 

Regarding the Providers' ultra vires claims—asserting that government officers acted outside their legal authority—courts maintain that such claims are not barred by governmental immunity. For these claims to succeed, the suit must allege that the officer acted without authority or neglected a purely ministerial duty, rather than merely disputing the exercise of discretion. HHSC incorrectly shifted the burden to the Providers to prove their claims to withstand the jurisdictional challenge. The Providers cited specific Human Resources and Government Code sections, as well as federal regulations, asserting that all necessitate a contested case hearing for the EHR grant program. They claimed that failing to apply the proper statutes constitutes an ultra vires act. HHSC’s defense relied on legal arguments without providing evidence to refute the Providers' assertions, rendering it unable to challenge their jurisdictional claims effectively.

HHSC staff letters were not final agency decisions, rendering any actions based on them ultra vires, as only the HHSC Commissioner can make final decisions under Texas Government Code section 2001.141. The Commissioner did not decide the EHR disputes involving Kool Smiles and Summit, making HHSC's million-dollar recoupments ultra vires. HHSC argued that the Commissioner delegated decision-making authority regarding EHR matters to a staffer through an "action memo," but the Providers contended that this memo lacked explicit delegation of authority. This discrepancy creates a factual dispute regarding whether the actions were authorized by the Commissioner or merely by staff.

The "action memo" outlined ministerial procedures for EHR disputes, which HHSC did not follow, constituting another ultra vires act. The Providers claimed that HHSC staff prevented them from submitting evidence to the Ad Hoc Panel, contrary to the memo's stipulations that such evidence would be considered. The parties' differing interpretations of the memo present a factual issue for the trial court, which does not negate the Providers' jurisdictional claims.

Additionally, it was an ultra vires act for HHSC to withhold information from auditors and Ad Hoc members about the Providers' pre-payment audit results. HHSC also improperly applied a new qualification standard, differing from previous requirements set by TMHP, to disqualify the Providers’ grant applications. This misapplication of standards misled auditors and Ad Hoc members regarding the qualifications for EHR incentive funds. The Providers supported their claims with evidence, particularly through an affidavit from April Lowry, while HHSC provided no evidence to counter these assertions, merely dismissing the claims as not categorically ultra vires.

HHSC's review process is characterized as an ultra vires violation of Providers' due process rights, with allegations that HHSC staff function as the legislature, investigator, prosecutor, judge, and jury, creating an insular feedback loop that undermines objectivity and challengeability. Citing Rogers v. Texas Optometry Board, the text argues that conferring investigative and adjudicative powers on the same individuals risks bias and prejudgment, necessitating prohibition to uphold due process. HHSC's defense focused on merits rather than jurisdictional facts, disqualifying them from a jurisdictional victory.

Additionally, HHSC's application of the audit procedure under Human Resources Code section 32.070 to the EHR program is deemed ultra vires, as this section only applies to entities operating under cost reports, not EHR grant funds. HHSC cannot impose this audit process for administrative convenience or to evade contested case hearings. The trial court’s findings incorrectly stated that the Providers failed to demonstrate a lack of authority or due process denial, indicating a burden-shifting error that demands reversal.

The trial court also committed reversible error by granting HHSC’s Motion for Summary Judgment without referencing evidence. The Providers' objections to HHSC's amended summary judgment evidence were overruled, leading to an improper judgment. HHSC's amended evidence included an inadequate two-page pleading and eighty-five pages of exhibits, lacking proper citations or references to the exhibits, further undermining the validity of the summary judgment motion.

Providers argue that the Texas Health and Human Services Commission (HHSC) did not reference or cite amended summary judgment evidence in its motion, which they claim should prevent the trial court from granting HHSC a summary judgment. Legal precedent requires that parties identify specific supporting evidence for summary judgment, and a lack of direction in the evidence renders it insufficient to support such a judgment. The Providers contend that the absence of specificity in HHSC’s motion constituted reversible error, as it hindered their ability to evaluate disputed evidence related to their claims. 

Additionally, the trial court's judgment contains errors regarding jurisdiction. The court granted HHSC’s jurisdictional plea against Kool Smiles and Summit but dismissed their claims “with prejudice.” A dismissal for lack of jurisdiction should be without prejudice, as a dismissal with prejudice implies a final ruling on the merits. The court did not identify any deficiencies in the Providers’ pleadings, which included claims that are not subject to sovereign immunity, as well as challenges under the Administrative Procedure Act that waive immunity. The Providers sought findings of fact to understand the basis for the dismissal. 

The Providers request that the appellate court reverse the trial court’s judgment regarding HHSC's jurisdictional plea and summary judgment, allowing Kool Smiles’, Summit’s, and Harlingen’s claims to proceed.

In the case NO. 03-17-00552-CV before the Third Court of Appeals in Austin, Texas, involving Appellants Dentistry of Brownsville, PC, KS2 TX, PC, Summit Dental Center, LP, and Harlingen Family Dentistry against Appellees Texas Health and Human Services Commission and others, the court reviewed various motions related to jurisdiction. On May 24, 2017, the court granted the Defendants' First Amended Plea to the Jurisdiction, Supplemental Plea to the Jurisdiction, and Motion for Summary Judgment. Consequently, all claims by Appellants Dentistry of Brownsville, KS2 TX, and Summit Dental Center were dismissed with prejudice due to lack of subject matter jurisdiction. Similarly, all claims by Harlingen Family Dentistry were also dismissed with prejudice. The final judgment issued on June 15, 2017, confirmed that all claims and parties were resolved and the judgment was appealable.

Subsequent findings of fact and conclusions of law outlined that the Appellants failed to demonstrate that the Defendants acted without authority or were obligated to provide a contested case hearing before recouping federal incentive payments. The court found no due process violations and determined that the Appellants did not establish an inherent right to judicial review. Additionally, the court ruled that the Appellants did not plead a waiver of sovereign immunity regarding their claims against the use of a "vendor hold" or under Texas Government Code § 2001.038. Therefore, the court concluded it lacked subject matter jurisdiction over all claims presented by the Appellants.