### TEXA S C OU R T OF A PPEAL S, THIR D DIST R ICT , AT AU STIN

NO. 03-03-00704- CV
App e lla nt , Te xa s M ut ualIns ur anc e Co m pany//C r os s- App e lla nt s, Ec ke r d Co r por at ion ; H.E. Bu tt G roce ry Com pany; Th ird P arty Solutions, In c.; Wal-M art Stor es, Inc.;

Apo llo Ent e r pr ise s, Inc .; and W alg r e e n Co m pany
v. Appellees, Eckerd Corporat ion; H.E. B utt G roce ry Com pany; Th ird P arty Solutions, In c.; Wa l- M ar t S to r e s, Inc .; Apo llo Ent e r pr ise s, Inc .; and W alg r e e n Co m pany//

Cr os s- App e lle e , Te xa s M ut ualIns ur anc e Co m pany

F ROM THE DISTRICT CO URT OF TRAVIS COUNTY , 261ST JUDICI AL DISTRICT NO. GN-1036 41, H ONO RAB LE DARLENE B Y RNE, JUDGE P RESIDING

O P I N I O N
T h i s ca s e i n v o l v es cr o s s ap p ea l s b y th e pl ai n t i ff s an d d ef en d an t s b el o w. Bo thh i n ge
on whether an ins uranc e company , when it alleg es t hat a health ca re pr ovider ha s overc harg ed it for pr e sc ri pti on

dr ug s d isp e ns e d und e r t

he Te xas Wo rk e rs ’ C omp e ns a tio n A c t ( the Ac t) , mu st f ir st
e xha us t r e me die s p ro vid e d in

the Ac t be fo re br ing ingsu it i n c ourt
. Appellant and pla intiff below, Te x as Mutual Insuranc e Comp any (Texas Mutual),
a pp e a ls the dis tr ic t c ourt ’s g ra nt o f p art ia l summa

ry jud g me nt in fa

vo r o f a pp e lle e s and

de fe nd ants below, Ec kerd Corp., H .E. Butt Gr ocer y Co., Third Party

Soluti ons, I nc., W al -M ar t Stores, I nc.,Pla int if f is a wo rk e rs ’ c omp e ns a tio n in sura nc e c a rr ie r. De fe nd ants a

re fo ur re ta il c ha in 1 stores that oper ate pha

rmac ies t h ro u gh o u t Texas and two third-par ty billing companie s that pr oc e sse d a

nd su bmi tte d b ill s to Te xas M utu a l on be ha lf of so me of the de fe nd ant p ha

rm a c ie s. 2 Apollo Enterprises, Inc., and Walgre en C o . (collec tively , Def endants). The pa

rtial summary 1 judgme nt dismissed Texas Mutua l’s claims for neg lige nt misre prese ntation a nd for money

had and
re c e i v e d r e g ar d i n g am o un t s i t a l l e g e s D e f e n d an t s o v e r - b i l l e d f

o r p r e s c r i p t i o n dr

u g s d i s p e n s e d to worke rs’ c ompensation claimants. Th e pa rt ie s f ile d a joi nt m oti on to d ism iss a ll r e ma ini ngc la ims to o bta in a

fi na l, a pp e a la ble jud g me nt. Def endants a ppeal the district c ourt’s denia l of th eir mot ion to dism iss Tex as Mutual’s claims for l ack of subject matter jurisdiction. Def

endants a rgue that the Ac t gr ants the Texas Workers’ Compensation Commiss ion (the Commissi on) e xclu siv e jur isd ic tio n o ve r w or ke rs ’ compensation medical fe e cla ims. Theref ore, D efe ndants argue, the c o u rt s lack jurisdiction over such cla ims unti l the ag g rieve d part y exhausts the administ rative r emedies e stablished by the Commi ssion. For the r easons state d below, we will rever se and r ender judgme nt that the trial court la c ke d ju ri sd ic tio n. Ac c or din g ly , w e ne e d n ot a dd re ss T e xas Mutua l’ s a

pp e a l that its c la ims sh ou ld be re instated.
BACK GR OUND

Un d er th e w o rk er s ’ c o mp en s at i o ns y s t em , p h arm ac i es fi l l p re s cr i p t i o n s at n o ch ar ge to the i njured wor

ker. 28 Te x . Admin. Code § 134.502(d)(3) (2003). The pha rmac ies then bill theIn 1989, the Texas le g islature ena cted a new wor kers’ compensation act, cr eate d the Texas 2 Wor ke rs ’ C omp e ns a tio n Co mm i s s i o n and g ra nte d it br oa d p ow e rs to i mpl e me nt a nd e nf or c e the Ac t. Texas W orkers’ Comp. Comm’n v. Patient Advoc ates of Tex. , 136 S.W .3d 643, 646-47 (Te x . 2004); seeTex. L ab. Code Ann. § 402.061 (W est 1996). B y leg islative mandate, the Commi ssion promulg ated the T exas W orker s’ Compensation Commi ssion Medical F ee Guideline 1996, which inc lud e d s tand ard s to a sse ss t he ma ximuma llo wa

ble re imb ur se me nt ( MA R) fo r p re sc ri pti on dr ug s. Ac c or din g to t

he Pha rm a c e uti c a l F e e Gu ide lin e , th e MA R sh a ll b e the le sse r o f: (1) the provider ’s usual and c ustomary char g e for

same or similar se rvice ; or (2 ) a fo rm ula ba se d o n th e “ Av e ra g e Who le sa le Pr ic e ” fo r t he ph arm a c e uti c a ls. See28 Tex. Admin. C ode § 134.201 (2003) ( adopting the g uideline). The Commi ssion has since revised the fee g uideline, addinga third fac tor to the MAR, a “neg otiated or contra ct amount,” that is not at issue here. See id . § 134.503. Def endants a rgue that the phrase “same or similar servic e” disting uishes the standar d from 3 their “usua l and customary char g e,” beca

use providingdrug s to injured worke rs and then billing the insurance company

involves a diffe rent ser

vice with hig her c osts tha n simply filling pre scriptions fo r r e ta il c us tom e rs . 3 wo rk er s’ compensation insurance c arr ier, whic h reimburse s the pharma cy acc ording to a Pharmac eutical F ee Guideline promulg ated by the Commiss ion. 2 Ac c or din g to t he Pha

rm a c e uti c a l F e e Gu ide lin e , th e ma ximuma llo wa ble reimburse ment is ge nera lly the provider’s “usual and customary char g e for

same or similar se rvice .” The pa rties di s p u t e t h e meaningof this standard. Te x as Mutual interpre ts “usual and c ustomary char g e for same or similar se rvice ” to mean that pharma cies may not c harg e wor kers’ compensation insurers more for drug s dispensed to injured wor kers than the amount char g ed to customers outside the wo rk e rs ’ c omp e ns a tio n s y ste m. Te xas M utu a l a lle g e s th a t D e fe nd ants 3 have r outinely submitt ed bills t o Texas Mutua l that grossly exceed the price s char g ed to the pharma cies’ r etail customers f orTe xas M utu a l a lle g e s th a t D e fe nd ants bil le d u p to fo ur tim e s the amou

nt the y c ha

rg e d r e ta il 4 c a shc us tom e rs . Al tho ug h T e xas M utu a l c la ims that it ne e ds dis c ov e ry to q

ua nti fy the tot a l ov e rp ay

me nts , 5 it believes that the total over pay ments exceed $1 million. Texas Mutual r equeste d an injunction to preve nt Defe ndants from submitting cla ims for 6 reimburse ment that exceede d the maxim um all o we d by the Pharmac eutical F ee Guideline and a decla ration that the maxi mum reimbursement amount was the lesser of a pha rmac y ’s “c ash price ” that a pharma cy

char g es customer s not covere d by worke rs’ c ompensation insuranc e or the amount derive d from the f

ormula established in the TWCC Medical F ee Guideline (1996). 4 the same pr e sc ri pti on

dr ug s. 4 On No ve mbe r 1 , 2 00 1, Te xas M utu a l br ou g ht s uit in d ist ri c t c ourt to
rec over amounts it a lleg edly overpa id D efe ndants, plus inter est, attorney ’s fee s, and other damag es and penalties allowed by law. Texas Mutua l reque sted dec laratory and injunctive re lief 5 and asse rted two common-law c auses of action: money

had and r ece ived, and ne g lige nt misreprese ntation. 6 Def endants mov ed to dismi ss on gr ounds that the Commis sion has exclusive jurisdiction over all medica l fee disputes betwee n worke rs’ compensation insurers a nd health ca

re pr ov ide rs and

that T e xas M utu a l mu st e xhaus t its a dmi nis tr a tiv e re me die s b e fo re br ing ingsu it. Additionally , Def

endants moved f

or par tial summary

j u d gm en t on Texas Mutual’s neg lige nt mis re pr e se ntatio n a

nd mon e y ha d a nd re c e ive d c la ims . T he dis tr ic t c ourt de nied th e mot ion

to dismiss but gr anted De fenda nts’ motion for partial summary judgme nt w ithout stating the g rounds for its ruling . The parties ag ree d to dismi ss their rema ining c laims to obtain a final judg ment for the purp os e s o f a

pp e a l.
DI SCU SSIO N B e c a us e su bj ect matte r j ur isd ic tio n is a thr e sh old iss ue a ff e c tin g the po we r o f t

his court to re ach the merits of Texas Mutual’s appe al, we f irst addre ss Defe ndants’ ple a to t heThe trial c ourt did not have the be nefit of our ruling in Ho we ll

wh e n it de nie d D e fe nd ants ’ 7 motion to di smiss for lack of jur isdiction. 5 jurisdiction. See Tex as Ass’n of Bus. v. Texas Air Control Bd. , 852 S.W
. 2 d 440, 443 (Tex. 1993) (subject- matter jurisdiction is essential to court’s a uthority to decide c ase)
. We must decide whe ther the Texas Workers’ Compensation Ac t vests the Co m m i ssion with ex clusive jurisdiction over pay ment disputes arising under the Act. I f it does, a claimant must first exhaust it s administrative
reme dies befor e a trial court ha s subject matter jurisdiction. Su ba ru of A m. , I nc . v . D av id M

c Da v id Nissan, Inc. , 84 S.W. 3d 21 2, 22 1 (T e x. 20 02 ) (o p. on re h’ g ). De te rm ini ng wh e the r a statut e g ra

nts exclusive jurisdiction t o an administrative a g ency require s statutory

const ruction and r aises jurisdictional issues. Id . at 222. An administrative a g ency has exclusive jurisdiction when the leg islature g ives the ag ency sole authority to make the initial deter mination in a dispute. Id . at 221 (c i t i n g Cas h Am. In t’ l, In c . v . B e nn e tt , 3 5 S. W.3 d 1 2, 15 (T e x. 20 00 )) . T he iss ue of jur isd ic tio n is a question of law

that we r eview de novo
. Id . at 222. Our Court re cently held that the Commissi on has exclusive jurisdiction over medica l fe e dis pute s b e tw e e n p ro vid e rs and ins ur e rs and

that a pa rt y to s uc h a dis pute mus t f

ir st e xha us t it s administrative reme dies befor e bring ing suit in court. Howell v. Texas W orkers’ Comp. Comm’n , 143 S. W. 3 d

4 1 6 , 4 3 7
- 3 8 ( T e x. Ap p . — A u s ti n2 0 0 4 , n o p e t. h
. )
. I ns o h o ld in g , w e r e li e d o nthe 7 standard e stablished in Su ba ru : an ag ency has exclusive jurisdiction “when a perva sive regulatory scheme indicates that the leg islature int ended for the regulatory proce ss to be the ex clusive mea ns of re medying the problem to which the r egulation is addressed.” Id
. at4 3 5 (q u o t i n g Su ba ru , 84Texas Mutual argu es t h at the leg islature g ave the Commi ssion primary , not exclusi ve, 8 jurisdiction over provider fee disputes. The judicially cre ated pr imary

jurisdiction doctrine a llocates p o w e r b e tw e e nc o urts an d

a g e n c ie s w h e nb o th

h av e a u th o r it y to ma k e in it ia l d e te rminations in a dispute. Howell v. Texas W orkers’ Comp. Comm’n , 143 S.W .3d 416, 435 (Tex. App.—Austin 2004, no pe t. h. ). Te xas M utu a l argue s th a t Su ba ru sta nd s f or the pr op os iti on

tha t th e le g isl a tur e on ly confe rs exclusive jurisdiction on an ag ency to ha ndle disputes a

rising under the statute if it evinces this int ent throug h express lang uag e. See Subaru of Am., I nc. v. David McDav id Niss an, Inc. , 84 S.W .3d 212, 220 (Tex. 2002) (op. on re h’g ) (a dminist rative a g encie s may exercise only

those power s confe rre d upon them by

clea r and e x press statutory

languag e). B eca

use t h e Ac t d oes not use the words “e x clusive jurisdiction” in de scribing the Commi ssion’s a djudicatory power over me dical fe e disputes, Texas Mutual argues that the leg islature did not intend to gr ant sole authority over suc h disputes in the Comm ission. W e note, howe ver, that Texas Mutual’s readingof Su ba ru has bee n f o r e c l o s e d b y Ho we ll , which dete rmined that leg islative intent to vest sole au t h o ri t y i n the Commi ssion was clea

r fr om the “per

vasive sche me” e stablished by the Act. 6 S.W .3d at 221). The supre me cour t indicated that this determin ati on depends on statutory 8 interpre tation. Subaru, 84 S.W .3d at 221

. In construinga statute to dete rmine the leg islature’s intent, we conside r “the languag e of t h e s t atute alongwith the statute’s history , purposes a nd the conseque nces of

alternate construc tions.” Cash Am. Int’l , 35 S.W .3d at 16. I n Ho we ll , w e loo ke d at th e his tor y , pur po se and statut or

y langua g e of

the Wor ke rs ’ Compensation Act and held that the Act constitutes a “ perva sive regulatory scheme ” that demonstrates the leg islature’s intent to g rant the Commission ex clusive jurisdiction over pr ovider fee disputes. Ho we ll , 143 S
. W
. 3 d at 437. We noted that the leg islature, in ena cting the new worke rs’ c ompensation sy stem, intended to “stre ng then the enf orce ment and adjud icatory power s of the Commission.” Id
. at4 3 6 (q u o t i n g Te x as W or k e rs’ Comp. Co mm’n v . G arc ia , 893 S.W .2d 504, 514 (Tex. 1995)). We considere d the ex press langua g e of the Act, which e stablished mandatory reimburse ment proce dures a nd a sy stem implemented by the Commiss ion to review a nd resolve medical f ee disputes. Id
. at 436-37; Tex. L ab. Code Ann. § 413.031( c) ( West 1996) (“In resolvingPharmac euticals a re a mong the health ca

re se rvice s regulated by

fee g ui d el ines that 9 calc ulate pay

ments due hea lth care providers. SeeTex. Admin. C ode §§ 134.201 (g overningmedical fee g uidelines as applied to pha rmac euticals), 134.500 et seq. (“ Gu ide lin e s f or Medi c a l Se rv ic e s, Charg es, and Pay

ments, Subchapter F. Pharmac eutical Be nefits”) (2004). The administrative code a lso re pe a te dly

re fe rs to p ha

rm a c ist s a s h e a lthc are pr ov ide rs and dis tin g uis he s th e m f ro m do c tor s. See id. §§ 134.501(a) (“[I ]f, pr ior to pr oviding the pharma ceutica l se rvice s, the hea lth care provider (H CP) ob ta ins
. . .” ), (a )( 3) (“ [E]ve n if the HC P pr ov ide d p ha

rm a c e uti c a l se rv ic e s b e y on d th e fi rs t seven da y s. . . ,”), ( d) (“[T]he H CP may dispense pre scription or nonpre scription medications in the amount order ed by

the doctor. . . ” ). A dispute betwe en a he alth car e provider and a n insurance car rier r egar ding pr oper pa

y ment is a medica l fee dispute. See id. § 1 3 3
. 3 0 7 ( b ) ( 2 0 0 4 ) ( T e x. Workers’ Comp. Comm’n, Medical Dispute Resolution of a Me dical F ee D ispute). 7 disputes ove r the amount of pay ment . . . , the role of

the commission is t o ad

jud ic atethe pay

ment g iven th e r el ev an ts t at u t o ry p ro v i s i o n s an d

co m m i s s i o nru l es . ”) (e mp h as i s ad d ed ). T h es e p ro ce d u res expressly condition a party ’s access to the courts on first exhausting i ts administrative remedie s: “A p arty who has exhausted the party's administrati ve re medies under this subtitl e and who is ag g rieve d by a fina l decision of the State Of fi ce of Administrative He aring s may seek judicia l reviewof the decision.” Te x . L ab. Code Ann. § 413.031( k) (West 1996) (e mphasis added) . As in H o w e ll , this medical f ee dispute falls within the ex clusive j urisdiction of the Commission. Beca use the Ac t’s 9 pe rv a siv e sc he me ind ic a te s th at th e le g isl a tur e int e nd e d th e Co mmissi on to s e rv e a s th e so le
a uth or ity to a dju dic a te dis pute s ari sin g un de r the Ac t, the dis tr ic t c ourt did no t ha ve jur isd ic tio n to he ar T e xas M utu a l’ s c la ims un til Te xas M utu a l ha d e xha us te d it s a dmi nis tr a tiv e re me die s. I n addition to arguing that the lack of “cle ar a nd express” languag e does not e vince le g isl a tiv e int e nt t o v e st s ole a uth or ity in t he Commis sio n ov e r me dic a l fe e dis pute s, Te xas M utu a l, ci t i n g Cash America , ar g ue s that the le g isl a tur e did no t in te nd to a br og a te its c omm on

law c la ims when it authorized the Commission t o develop a dmi n i s t rative f ee dispute pr ocedur es. Se e Cas h America , 35 S.W .3d at 16 (leg islature did not intend to abolish claims exis ting at common law whenIn Cash America , a pledg or sued a pawnshop a lleg ing c ommon law claims for c onversion, 10 neg lige nce, a

nd g ross neg lige nce afte r the proper ty she had pledg ed wa s stolen. Cash Am. Int’l, Inc. v . B e nn e tt , 3 5 S. W.3 d 1 2, 14 -1 5 ( Te x. 20 00 ). Th e su pr e me c ourt

ru le d th a t th e Pawn sh op Ac t di d not supplant her common law rights, which exis ted prior to and inde pendent of the statute. Id
. at 16. See Bone v . Utica Nat’l Ins. Co. of T ex . , N o . 0 2

- 0 2

- 0 0 2 0 9

- C V , 2 0 0 3 T e x . Ap p . LE X IS 11 6833, at *14 (Te x .App.—For t Worth August 7, 2003, pet. denie d) (not designated for publication) (c i t i n g American Motorists Ins. Co. v. Fodge , 63 S.W .3d 801, 804 (Tex. 2001)) (he alth car e provide r could n o t pursue tort c laims ag ainst worker s’ compensation insurer without exhausting administrative re medies when claims require d adjudication of matters solely within Com mission’s jurisdiction). 8 it created administr at i v e re medy for disputes over

pledg ed prope rty

). We first note that Te x as Mutual’s position has been fore closed by ou r h o l d i n g i n Ho we ll . We further note that Texas Mutual’s relianc e on Ca s h America i s misplaced. Unlike the dispute in Cash America , Texas Mutual’s claims ar e “c ommon law” in na m e o n l y . Only throug h cre ative plea ding ha s Texas 10 Mutual transfor

med Def endants’ a lleg ed violations of the Workers’ C o m p ensation Act fee pr ov isi on s into c la ims so un din g in t or t and equ it y . Te xas M utu a l a lle g e s th a t D e fe nd ants
overc harg ed it a

nd neg lige ntly

misrepre sented to Texas Mutual that they wer e cha rg ing the corr ect
amou nt. B oth of the se c la ims de ri ve fr om the statut or y pr ov isi on se tti ngthe ma ximuma llo wa ble reimburse ment for pha

rmac euticals. At c ommon law, there i s n o standard or duty to char g e a particula r amount for

pres cr i p t i o ndru gs ; o n l y

th e s t at u t e p ro v i d es a s t an d ar d fo r d et erm i n i n g wh et h er Def endants char g ed Texas Mutua l an excessive amount. There fore , the supreme court’s c oncer n 11 inCash America fo r p re se rv ingc on sume rs ’ c omm on law c la ims is i na pp os ite to t

he c on te xt of

thi s
case , wher e we have two c laims that cannot be a djudicated without also adjudicating the pr operTe xas M utu a l ask e d the c ourt to aw ard it mon e y and int e re st f ro m th e De fe nd ants and

to 12 pr ov ide inj un c tiv e and

de c larator

y re lie f. Th e Ac t g ive s th e Com mis sio n th e po we r t o g ra nt t he se reme dies. I t can or der p ro v iders to re fund pay ments that exceed amounts permitted by the Fe e Gu ide lin e and

pa y int e re st on mon e y re fu

nd e d, and c an e nf

or c e sa nc tio ns on

pr ov ide rs wh o c omm it administrative violations, including “ a re duction or denia l of fee s” or “ restric tion, suspension, or revoc ation of the rig ht to rece ive re imbursement.” SeeTex. L ab. Code Ann. §§ 413.016(a ), 413.019, 41 5. 02 3( b) (1 ), (4 ) ( Wes t 19 96 & Sup p. 20 04 ). Th e a bil ity of the Com mis sio n to fu lly

c omp e ns a te an injured pa

rty , to sanctio n p ar t i es that violate the Ac t, and to establish and enf orce the Act’ s provi s i o n s further demonstrate s the leg islature’s intent to g rant the Commission ex clusive jurisdiction over these c laims. C.f. Cas h America , 35 S.W .3d at 15 (o n l y administrative re medy available under Pawnshop Act wa s “like-kind re place ment” of lost prope rty ). 9 meaningof the “ maxi mum allowable r ei m b u rsement” provided in the Pharma ceutica l Fee Guideline. 12 Be cause the Commiss ion has exclusive jurisdiction over this statutory provision and the claims that ar ise from it, Texas Mutual must exhaust its administ rative r emedies be fore bring ing these c laims in court. See B urge ss v. Gallery

Model Hom es, Inc

. , 1 0 1 S. W. 3 d 5 5 0 , 5 5 8 ( T e x. Ap p . — Ho u s t o n[ 1 s tDi s tri ct ] 2 0 0 3 , p et
. d en i ed ) ( qu o t i n g Mingus v. W adley , 285 S.W .1084, 1087 (Tex. 1926)) (“ The g ener al rule is that where the cause of ac tion and reme dy for its enfor ceme nt are derive d not from the common law but from the statute, the statutory provisions are ma

ndatory and
e xclu siv e , and mus t be c omp lie d wi th in a ll re sp e c ts or the a c tio n is n ot m a int a ina ble .” ). We s us ta in the De fe nd ants ’ i ssu e on

a pp e a l.
CO NC LU SION Be cause the Texas Workers’ Compensation Ac t’s perva sive scheme indicates the leg islature’s intent to g rant t h e C o m m ission ex clusive jurisdiction over medic al fe e disputes, we
reve rse the district c ourt’s judg ment denying the Def endant’ s motion t o dismiss and re nder judg ment10

dismiss ing T exas Mutual’s claims for lac k of jurisdiction. Ha v i n g h el d that the trial cour t lacked jurisdiction, we nee d not addre ss Texas Mutual’s claims for mo n ey h ad and rece ived and f or neg lige nt misreprese ntation.

__________________________________________ David Pury ear , J ustice Be fore Chief J ustice L aw, Justi ces Patter son and Pury ear Reverse d and Rende red Filed: January

21, 2005