OSU-AJ HOMESTEAD MEDICAL CLINIC v. THE OKLAHOMA HEALTH AUTHORITY

Citation: 416 P.3d 1082

Court: Court of Civil Appeals of Oklahoma; January 18, 2018; Oklahoma; State Appellate Court

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In OSU-AJ Homestead Medical Clinic v. The Oklahoma Health Authority, the Oklahoma Court of Civil Appeals reversed and remanded the trial court's decision to dismiss the petitioners' claims. The petitioners, OSU-AJ Homestead Medical Clinic, PLC, and Moore Primary Care, Inc., sought declaratory relief against the Oklahoma Health Care Authority and its administrator, asserting that the agency's audit of their Medicaid billings was conducted under rules that were not properly promulgated in accordance with the Oklahoma Administrative Procedures Act (APA). They claimed the agency failed to adhere to statutory requirements, particularly 56 O.S. 1011.9(A)(1), which mandates the establishment of methods to deter abuse and reduce errors in Medicaid dealings. Instead of applying formal rules, the agency allegedly delegated authority to the Medicaid Director to create standards through informal memoranda, such as OHCA 2014-37, which outlined requirements for allergy testing services. The petitioners contended these memoranda constituted administrative rules under the APA, and they discovered additional unpromulgated audit standards during an administrative appeal of the audit report, which was still pending when the petition was filed. They also argued that the existing promulgated rules, OAC 317:30-3-1 and OAC 317:30-3-2.1, lacked clear enforceable standards for billing and audits, failing to specify acceptable methodologies for audit sampling.

Providers argue that the audits imposed requirements and methodologies not included in the official rules, asserting these constitute rules under the Administrative Procedures Act (APA). They claim that the adoption of the Health Care Financing Administration Common Procedure Coding System, along with CPT codes, improperly delegates authority to the American Medical Association for establishing billing standards. Providers also allege that the Agency applied rules retroactively and that OAC 317:1-1-9.1, which allows the Agency to deny record requests in anticipation of litigation, contradicts the Open Records Act, which mandates access to public records regardless of their use in investigations. Additionally, Providers assert that the Agency enacted internal, unpromulgated rules that limit "personally rendered services" to those performed by direct employees rather than contractors, despite similar qualifications and supervision for both. They seek a writ to prevent the Agency from enforcing the unpromulgated rules and from applying any rules retroactively, declaring such rules null and void. 

The Agency moved to dismiss the petition, arguing that the Providers' claims did not meet the standard for a writ of prohibition. It attached various documents to its motion but contended that this did not convert the motion to one for summary judgment. Providers countered by asserting that their petition presented a justiciable cause of action. The trial court ultimately dismissed the motion for failure to state a claim. Providers appealed this dismissal, and the standard of review is de novo, meaning the court will evaluate the legal sufficiency of the claims without considering the underlying facts. The burden of proof lies with the Agency to demonstrate the legal insufficiency of the petition, while the Providers are not required to specify a theory of recovery or the correct remedy.

Oklahoma follows a notice pleading standard, requiring petitions to provide fair notice of claims and their grounds. Under Section 306 of the Administrative Procedures Act (APA), district courts can evaluate the validity of rules if a plaintiff claims such rules interfere with their legal rights. Plaintiffs do not need to exhaust administrative remedies before seeking declaratory relief. A rule, as defined by the APA, encompasses agency statements of general applicability that affect the public, excluding internal agency management statements. The broad definition of "rule" prevents agencies from evading procedural requirements by labeling rules differently. Courts assess rules based on their impact rather than their creation process. When challenging a rule, the burden of proof lies with the agency to demonstrate its authority, compliance with statutes, constitutionality, and adherence to procedural rules. If the agency fails, the petitioner is entitled to have the rule declared invalid.

In this case, Providers' petition sufficiently claims declaratory relief under §306, asserting that the Agency's statements qualify as rules under the APA but were not properly promulgated. They argue these rules infringe on their rights and that the Agency had not issued a final order regarding their rights. The petition establishes a justiciable controversy regarding the status of the Agency's statements and rules. Upon remand, Providers must prove the challenged statements are indeed rules, shifting the burden to the Agency to counter these claims or demonstrate proper promulgation. For the rules in the Oklahoma Administrative Code, the burden is already on the Agency to meet §306(C) requirements. The petition does not present any other claim for relief.

Prohibition, an extraordinary remedy, is only applicable when no other remedies exist, particularly to prevent an agency from unauthorized judicial actions. It requires that the injury cannot be remedied by alternative means. In this case, since Providers are seeking relief in district court alongside an appeal of the recoupment decision, prohibition is deemed inappropriate.

Relief from an administrative agency must generally be exhausted before seeking judicial intervention. In the case referenced, providers seeking to reverse a decision on recoupment can obtain relief through the stayed agency action, and they should not be allowed to seek the same relief through extraordinary remedies in district court. Consequently, the trial court's dismissal of the petition is reversed, and the case is remanded for further proceedings aligned with this opinion.

The excerpt also outlines relevant provisions from 75 O.S. 2011 §306 regarding the validity and applicability of agency rules. It specifies that a declaratory judgment can be sought in district court regarding a rule's impact on a plaintiff's legal rights, with the agency required to be a party in such actions. When appealing a rule, the agency must demonstrate its authority to issue the rule, ensure it aligns with statutory provisions, confirm it does not violate any laws or the Constitution, and prove compliance with adoption procedures. This section does not restrict the Attorney General's authority to review rules and offer advisory opinions.

Additionally, 75 O.S. 2011 §250.3(17) defines "rule" as an agency's general statement applicable in the future, excluding specific actions like licensing and internal management statements. Finally, it notes that medical necessity is determined based on established healthcare standards for preventing, diagnosing, or treating illnesses or disabilities.

Documentation for requesting or substantiating services must include adequate objective medical records that justify the client's need for the service. Treatment must be grounded in reasonable and predictable health outcomes, and services should be necessary to address a medical condition, not for convenience. Services must be provided in a cost-effective manner and in an appropriate setting, tailored to the client’s age and health status to promote functional capacity. According to OAC 317-30-3-1(b), Medicaid payments are only made for services clearly identified as personally rendered for a specific patient, with no exceptions unless specified in coverage guidelines. OAC 317:30-3-2 mandates that providers must have an approved Provider Agreement on file with OHCA to be eligible for payment. The excerpt references several cases that establish the burden of proof resting on the protestant to demonstrate the invalidity of a rule, citing cases from before 1987 without addressing the implications of statutory changes from that year.

Key cases and statutory provisions relevant to Oklahoma civil procedure and public records access are cited. The excerpt references several Oklahoma Supreme Court decisions, including GENS v. Casady School (2007), Umholtz v. City of Tulsa (1977), Grand River Dam Authority v. State (1982), and Kutch v. Cosner (1950). It highlights provisions from Title 12 concerning defenses and objections in civil procedures, Title 51 regarding public body records access for investigatory purposes, and Title 56 related to Medicaid abuse deterrence. Additionally, it discusses definitions and the presumption of validity of rules as outlined in Title 75, including standards for appealing rules and the burden of proof in declaratory judgments. Contact information for the Oklahoma Judicial Center and details about various court programs and services are also provided.