OSU-AJ HOMESTEAD MEDICAL CLINIC, PLC, and MOORE PRIMARY CARE, INC., Petitioners/Appellants,
THE OKLAHOMA HEALTH AUTHORITY, THE OKLAHOMA HEALTH CARE AUTHORITY BOARD, REBECCA PASTERNIK-IKARD, ADMINISTRATOR OF THE OKLAHOMA HEALTH CARE AUTHORITY, Respondents/Appellees.
Mandate Issued: 04/11/2018
FROM THE DISTRICT COURT OF CLEVELAND COUNTY, OKLAHOMA,
HONORABLE LORI M. WALKLEY, TRIAL JUDGE.
Robert Johnson, Carrie L. Palmer, RESOLUTION LEGAL GROUP,
Oklahoma City, Oklahoma, for Petitioner/Appellant,
Maule, Joseph H. Young, OKLAHOMA HEALTH CARE AUTHORITY,
Oklahoma City, Oklahoma, for Respondents/Appellees.
JACK GOREE, VICE-CHIEF JUDGE.
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.
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.
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).
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.
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.
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
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
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.
Providers also alleged that Agency imposed internal
unpromulgated rules defining "personally rendered
services" by a Provider under OAC 317-30-3-1(b)
and OAC 317:30-3-2  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.
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.
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.
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.
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.
Standard of Review
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 ...