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Osu-Aj Homestead Medical Clinic, PLC v. The Oklahoma Health Authority

Court of Appeals of Oklahoma

January 19, 2018


          Mandate Issued: 04/11/2018


          James Robert Johnson, Carrie L. Palmer, RESOLUTION LEGAL GROUP, Oklahoma City, Oklahoma, for Petitioner/Appellant,

          Maria Maule, Joseph H. Young, OKLAHOMA HEALTH CARE AUTHORITY, Oklahoma City, Oklahoma, for Respondents/Appellees.


         ¶1 Petitioners/Appellants, OSU-AJ Homestead Medical Clinic, PLC, and Moore Primary Care, Inc. (Providers), seek review of the trial court's order granting the motion to dismiss filed by Respondents/Appellees, Oklahoma Health Care Authority, Oklahoma Health Care Authority Board, and Rebecca Pasternik-Ikard, Administrator of the Oklahoma Health Care Authority (collectively Agency), on the grounds that the claims did not meet the standard for a writ of prohibition. We reverse, holding that the petition properly states a justiciable claim for declaratory relief under the Oklahoma Administrative Procedures Act (APA), 75 O.S. 2011 §306. [1]

         I. Background

         ¶2 Agency administers the Medicaid program in Oklahoma. Providers contracted with Agency to provide medical care to persons who receive Medicaid services. Agency audited Providers' billings and issued an audit report requiring that Providers refund substantial amounts of Medicaid payments that Providers had received from Agency.

         ¶3 Providers petitioned for a declaratory ruling and a writ of prohibition, asserting that Agency performed the audit by applying rules that had not been properly promulgated under the Administrative Procedures Act, 75 O.S. 2011 §§302-308.1. In particular, they alleged that 56 O.S. §1011.9 (A)(1) required Agency to "establish a method to deter abuse and reduce errors in Medicaid billing, payment, and eligibility through the use of technology and accountability measures for the Authority, providers, and consumers." They alleged Agency failed to promulgate rules in compliance with §1011.9(A)(1), but instead delegated authority to its Medicaid Director to create and implement standards on an ad hoc basis by issuing numbered memoranda. These memoranda included, among others, one numbered "OHCA 2014-37" establishing requirements for allergy testing services by providers. Providers allege that the numbered memoranda fit within the definition of an administrative rule under 75 O.S. 2011 §250.3 (17). [2]

         ¶4 Providers also alleged that Agency audited them, and they filed an administrative appeal of the audit report. They allege that they then discovered additional unpromulgated audit standards, including statistical analyses and guidelines for authorization, that Agency had applied to Providers. The administrative appeal remained pending at the time Providers filed the petition below.

         ¶5 Providers further alleged that Agency's promulgated rules, OAC 317:30-3-1 and OAC 317:30-3-2.1, fail to define enforceable standards for billing and audits. OAC 317:30-3-1(f) requires that services provided under the Medicaid Program must meet medical necessity criteria. [3] OAC 317:30-3-2.1 addresses "probability sample audits, " stating that the sample claims must be selected based on "recognized and generally accepted sampling methods." The rule does not specify the methods. Providers contend the audits applied numerous requirements and methodologies that were not contained within these promulgated rules, and that those requirements and methodologies were themselves rules within the meaning of the APA.

         ¶6 Providers also alleged that OAC 317:30-5-4, adopting the Health Care Financing Administration Common Procedure Coding System, including CPT (Current Procedural Terminology) codes, was an improper delegation to the American Medical Association of Agency's authority to establish billing standards. Providers alleged that Agency applied rules retroactively. In addition, they allege that the rule, OAC 317:1-1-9.1, which provides that Agency "may deny record requests in anticipation of litigation, " contradicts the Open Records Act, at 51 O.S. §24A.20, which provides,

Access to records which, under the Oklahoma Open Records Act, would otherwise be available for public inspection and copying, shall not be denied because a public body or public official is using or has taken possession of such records for investigatory purposes or has placed the records in a litigation or investigation file.

         ¶7 Providers also alleged that Agency imposed internal unpromulgated rules defining "personally rendered services" by a Provider under OAC 317-30-3-1(b) [4] and OAC 317:30-3-2 [5] as limited to those services performed by staff members who were direct employees of Provider rather than those who were contractors placed by a healthcare employment agency. Providers alleged that in each audit, Agency had no objection to services provided by employees while it did object to services provided by contractors, notwithstanding the identical nature of the services, qualifications, and supervision.

         ¶8 Providers sought a writ prohibiting Agency from enforcing unpromulgated rules, from applying any rule retroactively, and from interpreting its promulgated rules in any manner not in conformity with the express language. They sought a declaration that use or application of the specified unpromulgated rules was null, void, and unenforceable, and the audit reports predicated on the unpromulgated rules were null, void, and unenforceable.

         ¶9 Agency moved to dismiss the petition on the grounds that Providers' claims did "not meet the standard for a writ of prohibition." Agency attached to its motion a copy of its general provider agreement, an email relating to an open records request from Providers' attorney, Providers' grievance request, and a copy of an advertisement by Providers' attorney. Agency asserted that its attachment of the documents did not convert the motion to dismiss into one for summary judgment. However, its motion argued the merits of Providers' claims.

         ¶10 In response, Providers similarly argued the merits of their claims. In addition, they asserted that their petition supported a present and justiciable cause of action.

         ¶11 The trial court granted the motion to dismiss on the grounds it failed to state a claim upon which relief may be granted. Providers appeal from this order.

         II. Standard of Review

         ¶12 Although the motion to dismiss presented matters outside the pleadings, the attachments did not relate to issues of fact and the trial court did not convert the motion to one for summary judgment under 12 O.S. 2011 §2012 (B). Therefore, we will treat the ruling below as a disposition by dismissal. We review a disposition by dismissal under a de novo standard. May v. Mid-Century Ins. Co., 2006 OK 100, ¶10, 151 P.3d 132, 136. The purpose of a motion to dismiss is to test the law that governs the claims, not the underlying facts. Id. For the purposes of reviewing a ruling on a motion to dismiss, we take the allegations of the petition as true. Indiana Nat. Bank v. State Dept. of Human Services, 1994 OK 98, ¶3, 880 P.2d 371, 375. Motions to dismiss are viewed with disfavor, and the burden is on the movant of showing the legal insufficiency of the petition. Id. A plaintiff is required neither to identify a specific theory of recovery nor to set out the correct remedy or relief to which he may be entitled. Darrow v. Integris Health, Inc., 20 ...

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