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

NO. 03-03-00770- CV

El Paso County Hospital District d/b/a R. E. T hom ason Gener al Hosp ital; Conroe Hospital Co r por at ion d/b/a Co nr oe Re gio nal M e dic al C e nt e r ; B ayAr e a He alt hc ar e G r oup, Lt d. d/b/a Co r pus C hr ist i M e dic al C e nt e r ; S unbe ltRe gio nal M e dic al C e nt e r , I nc . d/ b/a Eas t Houston Regional Medical Ce nter; El Paso Healthcar e System , Ltd. d/ b/a L as P alm as Medical Ce nter and Del Sol Medical Cente r; M ethodist Healthcare System of S an Ant oni o, Lt d. d/ b/a M e th odi stSpe c ial ty& T r ans pla nt Hos pit al; No r th e as t M e th odi st Hospi tal; Southw est Texas M ethodist Hospi tal; Colum bia/S t. David’s Healthcare Sys te m , L. P . d/ b/a No r th Aus ti n M e dic al C e nt e r ; H CAHe alt h Se r vic e of Te xa s, Inc . d/ b/a Ri o G r ande Re gio nal Hos pit al; St . D av id’ s M e dic al C e nt e r and Round Rock Me dical Center ; Browns ville-Valley Re gional Medical Center ,

Inc. d/b /a Valley Regional Medical Cente r, Appellants

v. Te xa s He alt h and H um an Se r vic e s C om m iss ion and Don Gilbert , Com m ission er, A ppellees

F ROM THE DISTRICT CO URT OF TRAVIS COUNTY , 201ST JUDICI AL DISTRICT NO. GN203154 , HO NORAB LE PETER M. LOW RY , JUDGE PRESIDI NG

O P I N I O N Appellants (t he Hospitals) sued the Hea lth and Human Servic es Commissi on (the Com mis sio n) se e kin g a de c laratio n (1 ) that th e Com mis sio n’ s c ut- of f d a te fo r t he su bmi ssi on of pa id claims to determine r eimbursement r ates for inpatient Medica id service s is invalid under the Administrative Procedur e Act (APA) and (2) that the Commiss ion failed to follow its administrative appea ls rule applica

ble to the Hospitals’ cla ims. See Te x. Go v’ t Co de Ann. § 2 00 1. 03 8( a ) ( Wes t 20 0 0 )

. T h e C o m m i s s i o ni s s t a tu t o r i l y r e qu i r e d t o a d o p tr

u l e s t h a ta s s u r e t h a tp ay m e n tra te s,2

deter mined on a prospe ctive basis, ar e re asonable and ade quate to m ee t t he costs incur red by hospitals render ing Me dicaid ser vices. See Tex. Hum. Res. Code Ann. § 32.028(d) (1) ( West S upp. 20 04 -0 5) . T he c ut -o ff

date a t is su e c ome s f

ro m th e Com mis sio n’ s in te rp re ta tio n o f i ts o wn ru le descr ibing how to pr ospectively calc ulate M ed icaid re imbursement rates. We ag ree with the trial court that imposition of the cut-off date wa s not a rule, a

nd that the Commiss ion properly applied its administ rative a

ppeals rule to the Hospitals’ claims.

BACK GR OUND The dispute in th is case r equire s us to determine whe ther the c ut-off date the Commi ssion used to facilitate the calc ulation of Medica id reimburseme nt rates is a r ule under the APA . We wi ll b e g in wit

h a b ri e f e xplanatio n o f h owho sp ita ls a re re imb ur se d f

or inp a tie nt M e dic a id

se rv ic e s in

Te xas. Me dic a id i s a

fe de ra l- state a ssi sta

nc e pr og ra

m, r un by state g ov e rnme nts wi thi n fede ral guidelines. See 42 U.S.C.A. §§ 1396-1396v (West 2003). I t fun d s h ea l t h ca re se rvice s pr ov ide d to e lig ibl e re c ipi e nts , low -i nc ome pe op le of any a g e , fr om fe de ra l, s ta te , a nd loc a l ta xes. Id . To qualify

fo r fe dera l assistance, a

state must submit and have approve d a “pla n for medic al assistance .” See id . § 1396a(a ). The pla n must establish a scheme f o r re i m b u rsi ng health ca re providers f

or medica l service s provided to Medica id rec ipients. I ndividual states enjoy broad discretion in devising their re imbursement plans. W est Virginia Univ. Hosp. v. Casey , 885 F.2d 11, 26 (3d Cir. 1989).

The Commi ssion a dminist ers the Medica id pr og ram in Texas. See Te x. Hum. R e s. Cod e Ann. §§ 32 .0 28 (a )- (d ), 32 .0 28 1( a ) (We st Sup p. 20 04 -0 5) (g ra nti ng Com mis sio n a

uth or ity toPr e v io u s ly , T e xa s h o s p it a ls w e r e r e im b u r s e d u n d e r a r e tr o s p e c ti v e s y s te m i nw hich 1 pa y me nts we re ba se d o n th e a c tua l c os ts i nc ur re d in the pr ov isi on

of me dic a l se rv ic e s. 3 adopt rules and standards g overningdeter mination of rates pa id for medica l assistance a nd requiring that proce dures for adopting rules be g overne d by APA). I n 1986, the Commiss ion implemented a pr os pe c tiv e sy stem for rei mbu rs ingTe xas h os pit a ls f

or inp a tie nt M e dic a id s e rv ic e s. See id. 1 § 3 2. 02 8( d) ; se e als o 1 Tex. Admin. C ode § 355.8063 (2004). Under this sy stem, hospitals know the rate a t w hic h th e y

wi ll b e re imb urs ed for spec if ic se rv ic e s b e fo re pr ov idi ngtho se se rv ic e s to individual patients. S co t t R easonove r, mana g er of the Hospital Rate Ana ly sis Divisi on of the Com mis sio n, e xpla ine d th a t th e Te xas p lan w a s p a tte rn e d a ft e r t he fe de ral Med ic are sy ste m, i n

w h ic h p ay

me n ts to h o s p it a ls ar e b a s e d o n d ia g n o s e s o f in d iv id u a l p a ti e n ts
. T h e p u r

p o s e of the pr os pe c tiv e sy ste m w a s to pr ov ide ho sp ita ls w ithan in c e nti ve to c on tr ol c os ts.

The specific amount of reimbursement for a particular hospit al inpatient admission is d ete rm ined

by mul tip lyingthe Stand ard Do lla r A mou nt b y the re la tiv e we ig ht o f t

he Di a g no sis Related Gr oup (DRG) assig ned based on the patient’s principal diag nosis. Id. Reasonover stated that th e DR G m e tho d c a te g or ize s ind ivi du a l dis e a se s, dis or de rs , a nd ill ne sse s b a se d o n c omp le xity and cost of tr eatment a

nd that the DRG re lative weig ht i s “a m ea s u re of the ave rag e medica l complexit y

and cost incur

red by all hospitals for one particular D RG relative to the a vera g e medica l complexit y

and cost for

all DRGs.” S

ee also id. § 3 55.8063(b)( 1). He further explained that the Standard Dollar

Amount is essentially

a hospital’s ave rag e pay

ment for pr o v id in g

M e d ic a id inpatient service s during a twelve -month base pe riod. See also id. § 355.8063(b)( 4).

The S ta n d ar d D o ll ar A mo u n t a

n d th e D RG r e lati v e w e ig h ts ar e r e c a lc u late d e v e ry three y ear s to acc ount for inflation and c hang es in medica l proce dures a nd technolog y

that impactTh e Com mis sio n h a s d e fi ne d a ba se -y e ar as “ a

12 -c on se c uti ve -m on th p e ri od of c la ims data 2 se le c te d b y

the [the Com mis sio n] or

its de sig ne e a s the ba sis fo r e sta bli sh ingthe pa

y me nt d ivi sio ns , standard dollar

amounts, and re lative weig hts.” 1 Tex. Admin. C ode § 355.8063(b) (5). The Commi ssion has decide d that the base -y ear will corre spond to the state fisca l y ear , which runs f rom Se pte mbe r 1 of

on e y e ar t o A ugus t 31 of the ne xt. For ease of re fer ence , we will refer to claims that meet this criterion a s “base -y ear claims.” 3 Fur thermore , the Februa

ry 28th deadline f

or submitting paid cla ims to be included in the base- y ear claims databa se is the cut-of f at issue in this case

. Hospitals ma

y reque st both formal and infor mal revie ws of cla ims ex cluded or included 4 in the base- y ear

claims data if th ey

believe that a mecha

nical, mathematical, or data entry err or exis ts. 1 Tex. Admi n. Code § 355.8063(k)( 1)(A)

. 4 the cost of medic al servic es. Se e id

. § 3 5 5

. 8 0 6 3 (b )( 5 ). T h e f i rs ts t ep i nt h i s p ro ce s s i s s el ec t i n g a ba se -y e ar. At the c los e of the ba se -y e ar, the Com mis sio n s e le c ts a ll c la ims wi th a n a dmi ssi on

date 2 in the base- y ear

that have be en paid e ither in the base -y ear or by Fe bruary 28th of the following y ear . I n an ef

fort to obtain the lar g est sample of b as e- y ear claims, the Commissi on extended the 3 time to rece ive pay

ment s i x m o n t h s bey ond Aug ust 31 in order to ac count for a dmissions that

occur red toward the end of the base-y ear and for complex cases that g ener ally take long er to g et paid. After Fe bruar y 28th of the y ear following the base- y ear , no new claims are added to the sa mple of ba se -y e ar c la ims us e d to c a lc ulate the ne w St and ard Do llar A mo un ts and

DR G r e la tiv e we ig hts

. 4 Be tween F ebrua

ry 28 and August 31, the Commission recalc ulates the Standar d Dollar Amounts and DRG rela ti v e w e ig h ts , in f o r ms h o s p it a ls o f th e p r o p o s e d n e w r a te s , h e ar s a p p e a ls r e g ar d in g the proce ss, and finalizes the new rates. The new rate s g o into eff ect on the first day

of the following state fisc a l y e ar . T h e e n ti r e p r o c e s s f r o m th e b e g inn in g o f th e b a s e - y e ar to th e e n d of the

rec alculation per iod takes two y ear s to complete.The Commission concedes that if the cut-of f is deter mined to be a rule under the APA, the 5 H o s p i t a l s h a v e s t an d i n g t o c o n t e s ti t s v a l i d i t y. 5

The Hospitals complaine d that the Fe bruar y 28th cut-off

does not provide suff

icient tim e be y on d the e nd of the ba se -y e ar, e sp e c ia lly fo r c omp le x p ro c e dure s that of te n r e qu ir e mor e tim e to be paid. T h e y

in s is te d th a t s u c h a

d e a d li n e , a

p art f r o m a r u le , is ar b it r ar y an d c a p r ic io u s . The Ho sp ita ls s ou g ht a de c laratio n tha t the F e br ua ry 28 th cut- of

f w a s in va lid

be c a us e it o pe rate d a s a

ru le under the APA, but was im plemented without following APA proce dures a nd that the Commiss ion failed to follow an applicable appeals rule. See Te x. Go v’ t Cod e Ann. § 20 01 .0 38 (a ). Th e Ho sp ita ls argued fur

ther that their leg al right to be reimbursed reasonably and ade quately was impaire d by

the application of the Fe bruar y 28th c ut-off be cause it sy stematically excluded high dollar

claims from the base-y ear claims databa se, t here by undere stimating the Hospitals’ c osts. The trial cour t rejec ted the Hospitals’ cla ims, and this appeal followe d.

STA ND AR

D O F RE VI EW A rule is voidable unle ss a state a g ency adopts it in the manner

set forth by

the APA. Tex. Gov’t Code Ann. § 2001.035 (West 2000). The va lidity or applica

bi l i t y o f a rul e may

be deter mined in an ac tion for dec laratory judgme nt if it is allege d that t h e ru l e o r i t s threate ned application interf

ere s with or impairs, or threa tens to interfe re wi t h o r i mpair, a le g al rig ht or privileg e of the plaintiff. Id. No standar d of re view is pr escr ibed and judicial revie w of rules is thus 5 larg ely unlimit ed in time and scope

. Railroad Comm’n of Texas v. W BD Oil & Gas Co. , 104 S.W .3d 69, 75 (Tex. 2003).6 DI SCU SSIO N Rul es under the APA

I n th e ir fi rs t is su e , th e Ho sp ita ls c on te nd th at th e F e br ua ry 28 th c ut- of

f i s in va lid be c a us e it c on sti tut e s a

ru le that w a s imp ro pe rl y pr omu lg a te d un de r the APA . Aru le un de r t he APA is: (A ) a

state a g e nc y

state me nt o f g e ne ra l a

pp lic a bil ity that: (i) implements, interprets, or pr escr ibes law or policy ; or ( i i ) d e s c r i b e s t h e p r o c e d

u r e o r p r a c t i c e r e qu i r e m e n t s o f

a s t a t e a g e n c y; (B ) includes the amendment or re peal of a prior r ule; and ( C) d o e s n o t in c lu d e a s tate me n t r e g ar d in g o n ly th e in te r n a l ma n a g ement or or g anizatio n o f a

state a g e nc y

and no t a ff e c tin g pr ivate ri g hts or

pr oc e dure s.
Tex. Gov’t Code Ann

. § 2 0 0 1.003(6) ( West 2000). Administ rative r ules are ordinarily

construed in the same wa

y as st atutes and an age ncy ’s i nterpre tation of i ts own rule is entitled to defe renc e by the courts unless it is pl ainly err oneous. See Lewis v. Jack sonville Bldg. & Loan Ass’n , 540 S.W .2d 30 7, 31 0 ( Te x. 19 76 ); Public Util. Comm’n v. Gulf States Utils. Co. , 809 S. W. 2 d 2 0 1 , 2 0 7 ( T e x. 19 91 ); Medic al Sys., L.L.C . v. State of Tex., 108 S.W .3d 333, 337 (Tex. App.—Austin 2003, no pet.). When there is va gu en es s , ambig uity , or room for policy deter minations in a rule, we de fer to an ag ency ’s interpre tation unless it is plainly inconsistent with the lang uag e of the rule. BF I W as te Sy s. of N. Am. v. Martinez Environme ntal Group , 9 3 S. W.3 d 5 70 , 575 -7 6 ( Te x. Ap p. —A us tin 20 02 , p e t. denied)

. “Gr eate r defere nce is g iven t o an age ncy ’s interpre tation that is longstanding and applied

u n i fo rm l y .” Te n n e

s s e e Gas Pipeline Co. v . Rylander , 80 S.W .3d 200, 203 (Tex. App.—Austin 2002,7

pet. denied) . Fur

thermore , beca

use it repr esents the view of the re g ulat o ry b o d y t hat dra fted a nd administers the rule, the ag ency interpre tation a ctually become s part of the rule. BFI , 93 S.W .3d at 575-76. The Commission has statutory authority to adopt re asonable rules g overningthe de te rm inatio n o f rate s pa id f or inp a tie nt h os pit a l se rv ic e s o n a pr os pe c tiv e ba sis . T e x. Hum. R e s. Code Ann. § 32.028(d) . I n addition, the Commi ssion is require d to de scribe by rule the pr ocess use d to de termine pay

ment rate s for medic al assistance

. Id

. § 32.0281(a) . As requir ed, the Commission adopted r ules that descr ibed the prospe ctive pay ment sy st em used to reimburse hospitals for the provision of inpatient Medic ai d service s. See 1 Tex. Admin. C ode Ann. § 355.8063. The Commi ssion insists that the Fe bruar y 28th cut-off

is not a new rule , but is an internal interpr etation of the ru le de fi nin g a

ba se -y e ar. Th e Ho sp ita ls argue that the c ut- of f fu nc tio ns a s a ru le be c a

us e it (1) is an a g ency

statement of g ener al applicability that either implements, interprets, or pr escr ibes law o r p o licy

or desc ribes the pr ocedur e or pr actice require ments of the Commissi on; (2) ame nds the def initio n o f b as e-y ear

beca use its application re sults in t he exclusion of claims that occ urre d during the base -y ear ; and (3) a ffe cts their private rig hts. See Tex. Gov’t Code Ann. § 2001.003(6).

Assuming, without dec iding, that the Fe bruar y 28th cut-off

is a statement of g ener al applicability

that either implements, interpr ets, or prescribe s law or policy or desc ribes the pr ocedur e

or prac tice require ments of a state ag ency , it is a statement reg ardingthe interna l manag ement of the Commi ssion that neither (1) amends or repe als a prior rule, (2) nor affec ts the private rig hts of the Hospitals. There fore , it is not a rule under the A PA. Id .; see W BD Oil & Gas Co. , 104 S.W .3d at 79 (explaining that not all ag ency statements ar e rule s under APA)

.8 Th e Ho sp ita ls c on te nd

that the ph ra se “ a

12 -c on se c uti ve -m on th p e ri od of c la ims data selec ted by

the depa rtment” in the definition of base -y ear prec ludes the Commissi on from excluding

any c la ims fo r tr e a tme nt re c e ive d dur ing the ba se -y e ar. Ac c or din g to the Ho sp ita ls, the ru le g ra nts the Com mis sio n th e ri g ht t o s e le c t th e 12 -c on se c uti ve -m on th pe ri od , bu t no t the ri g ht to s e le c t so me

and e xclu de oth e r c la ims data
. Ho we ve r, the Com mis sio n ha s int e rp re te d the ph ra se in the ru le to g ive it discretion to limit the leng th of t ime afte r a 12-conse cutive-month period ends for admitting claims that will be used in the rate-setting proce ss. I t has set that limit at s i x m o n t h s . The Commi ssion’s inter

pretation of the rule has bee n consistently applied since the implementation of the pr os pe c tiv e pa

y me nt s y ste m in 19 86 ; fu

rt he rm or e , the Com mis sio n ha s n e ve r i nte rp re te d th e ru le to r equire that the selec ted claims data include eve ry single claim from the ba se-y ear . See Tenne ssee Gas Pipeline Co. v. Ry lander , 8 0 S. W. 3 d 2 0 0 , 2 0 3 ( T e x. A p p . — A u s ti n 2 0 0 2 , pet. denied)

. The F e br ua ry 28 th c ut- of

f, e na c te d to fu

rt he r int e rn a l ma

na g e me nt o f t

he c la ims in a

tim e ly fa sh ion , is g rounded in this interpre tation.

Th e Com mis sio n’ s p ro sp e c tiv e pa y me nt m e tho do log y

wa s n ot d e sig ne d t o r e i m

b u rs e ho sp ita ls f

or a c tua l c os ts o f i n- patie nt Me dic a id se rv ic e s. Th e g oa l, a s e xpla ine d b y Re a so no ve r, is to c a lc ulate an ave ra g e c os t f or sp e c if ic se rv ic e s th a t ma

y pa y so me ho sp ita ls m or e and so me le ss than their a ctual costs. The Commi ssion’s interpretation is neither pla in ly e r roneous nor

inconsistent with the lang uag e defining a base- y ear , and it doe s not unde rmine the g oal of the pr ospective sy stem b ecause the c laims data is used to approximate aver ag e costs, not ac tual costs. See L e wis , 540 S.W. 2d a t 31 0; Gulf States , 80 9 S.W. 2d a t 2 07 ; Me dic al S y s. , L. L.C. , 108 S.W .3d at 337. The Commi ssion wrote the r u l e d ef i n ing ba se-y ear ; theref

ore, its interpre tation is entitl ed to g reat9

defe renc e. Id . Both the H ospitals and the Commiss ion ag ree that the Fe bruar y 28th cut-off had bee n consistently

used and a

pplied for se ventee n y ear s b efor e this challeng e. The application of the Fe bruar y 28th cut-off

does not amend the rule de fining base- y ear beca use its application is consistent with the Commi ssion’s long- standing interpre tation of the rule.

F ur the rm or e , th e Com mis sio n’ s inte rp re ta tio n d oe s n ot a ff e c t th e Ho sp ita ls’ pr ivate ri g hts or pr oc e dure s. Se c tio n 32. 02 8( d) (1 ) of the human r e so ur c e s c od e pr ov ide s th e Ho sp ita ls w ith a leg al rig ht to be reimburse d for Medica id se rvice s at rate s that are rea sonable and ade quate to mee t their costs. See Te x. Hum. Re s. Co de Ann. § 3 2. 02 8( d) (1 ). Th e Ho sp ita ls d o n ot h a ve a ri g ht t o compel the Com mission to include all cla ims for Medica id service s provided duringthe base -y ear in the c la ims data
. Th e Ho sp ita ls co nte nd that th e a pp lic a tio n o f t

he F e br ua ry 28 th c ut- of

f a ff e c ts their rig ht to be reimburse d rea sonably and ade quately

beca use it excludes hig h dollar cla ims from the base -y ear

claims data, the reby

understatingthe Hospitals’ costs. Essentially , the Hospitals argue that if the exclusion of some claims could decr ease their re imbursement rates then their r ight to be

rea sonably

and ade quately

compensated is aff

ecte d. We disag ree . The Commission concedes that the Fe bruar y 28th cut-off

may potentially

aff ect the Ho sp ita ls’ re imb ur se me nt r a te s. Ho we ve r, e ve n if the e xclu sio n o f c la ims do e s le a d to a de c re a se in reimburseme nt rates, it d o es not nec essar ily follow that the Hospitals’ right to reasona ble and

a de qu a te re imb ur se me nt r a te s h a s bee n af fe c te d. Th e Ho sp ita ls’ the or y that any po te nti a l de c re a se in reimburseme nt rates a ffe cts their rig ht to be reasonably and ade quately

compensated is based on the fa lse a ssumpt ion that a ho sp ita l’ s re imb ur se me nt rate mus t a c tua lly e qu a l th a t ho sp ita l’ s c os ts.The Hospit a ls a ls o a s s e rte d th a t t h e c u t- o f f w a s inv a li d

b e c a u s e it c o n f li c te d w it h the 6 Commi ssion’s statutory duty to assure that reimburse ment rate s are rea sonable and adequate to meet the costs of hospitals that provide inpatient Medica id service s, and that the c ut-off c annot be justified on the ba sis of

a dmi nis tr a tiv e ne c e ssi ty . B e c a us e we ho ld t

hat th e F e br

ua ry 28 th c ut- of

f is n ot a ru le un de r t he APA , w e ne e d n ot r e a c h th e se iss ue s. 10 The a ssumption would be true in a re t ro spective sy stem; however , it makes littl e sense under a prospec tive sy stem where reimburse ment rate s are set in advanc e base d on estimated costs.

Additionally , had the leg islatu re i n t en ded for section 32.028(d) (1) to re quire the Commi ssion to reimburse hospitals at rates equal to their costs, then it could have e x plicitly stated so as it did in sections 32.028(e) and (f). Com pa re id

. with id . §§ 32.028(e) , (f) (sec tions (e) a nd (f) expli citly state t hat C ommissi on is require d to reimburse fede rally qualified health cente rs and r ural h e a lt h c linics for 100 perce nt of re asonable costs incurre d in rende ring Medica id service s). Th e re fo re , w e ho ld that the me re po ssi bil ity that th e Ho sp ita ls’ re imb ur se me nt r a te s c ou ld d e c re a se

a s a re su lt o f t he e xclu sio n of so me c la ims fr om the ba se -y e ar c la ims data ba se do e s n ot s uf

fi c ie ntl y demonstrate that their rig ht to be rea sonably and ade quately

compensated has be en af fec ted. We h old that th e F e br

ua ry 28 th c ut- of

f f or the su bmi ssi on of pa id cl a ims is n ot a ru le under the APA but a st atement reg arding the i nterna l manag ement of the Commi ssion that neither (1) a mends or repe als a prior rule nor (2) aff ects the private rig hts of the Hospitals. Tex. Gov’t Code Ann. §§ 2001.003(5)( B) , (C). Thus, the Hospitals ar e not entitled to the decla ratory relief

provided by the APA. See Tex. Gov’ t Code Ann. § 2001.038(a) (stating that the validity or applica

bility of a rule m ay b e d e t e r

m i n e d i n a c t i o n f

o r d e c l ar a t o r

y j u d g m e n t )

. W e o v e r

r u l e t h e H o sp ita ls’ fi rs t 6 issue.11

Applicabili ty challenges under th e APA

I n th e ir se c on d is su e , th e Ho sp ita ls al lege that th e Com mis sio n f a ile d to pr op e rl y

a pp ly an a dmi nis tr a tiv e a

pp e a l r ule . T he Com mis sio n’ s a

pp e a l ru le s state that a

ho sp ita l ma

y re qu e st an informa l revie w of the data used to dete rmine the hospital’s re imbursement rates if the hospital believes that the Commi ssion made a m echanical, mathe matical, or data entry err or. See 1 T e x. Ad min . Co de § 3 55 .8 06 3( k) (1 )( A)

. I f the ho sp ita l is dis satis fi e d with the re vie w, it m ay re qu e st a formal he aring

. Id . In a dd iti on , a pa rt y may a pp e a l Commi ssi on ru le s re g ard ing pa y me nt r a te s in a conte sted ca se hea

ring

. See Te x. Hum. R e s. Cod e Ann. § 32. 08 21 (e ) (We st 200 1) . The Ho sp ita ls’ inf or ma l a pp e a ls r e g ard ingthe e xclu sio n o f c la ims pa id a ft e r t he Feb ru ary

28 th c ut- of

f w e re a ll denied. The Ho s p i t al s then reque sted a for mal hear ing be fore the State Off ice of Administrative Hea ring s. The Com mission did not act on the Hospitals’ re quests. The Hospitals conte nd that the Com mis si on was req

uir e d to re fe r t

he ir a pp e a ls f or fo rm a l he ari ng s a

nd that it s f a ilure to d o s o vio la te d it s o wn

ru le s. A par ty is entitled to declaratory relief reg ardingthe ap p l i cability of a r ule to a p ar t i cular fac t situation. See Te x. Go v’ t Co de Ann. § 2 00 1. 03 8( a ); C i t y o f A l v i n v . P u b lic Ut il. Comm’n of Tex. , 143 S.W .3d 872, 879 (Tex. App.—Austin 2004, no pet. h.). As we stated ear lier, admin is tr a ti v e r

u le s ar e o r d in ar il y

c o n s tr u e d in th e s a me w a

y a s s tatute s , an d

ana g e n cy ’s interpre tation of i ts own rule is entitled to defe renc e by the courts unless it is plainly err oneous. See

case s cited su

pra . Statutory construction is a question of law, which we r eview de novo

. Bragg v. Edwards Aquifer Auth. , 71 S.W .3d 729, 734 (Tex. 2002) . Our g oal is to ascer tain and g ive ef

fec t to the leg islature’s intent for the provision in question. Continental C as. Co. v. Downs , 81 S.W .3d12

803, 805 (Tex. 2002). I n order to a scer tain leg islative intent, w e first look to the pla in and common

me anin g of

the wo rd s u se d b y

the le g isl a tur e . Te x. Go v’ t Cod e Ann. § 3 11 .0 11 (We st 1 99 8) . U nle ss a diffe rent c onstruction is ex pressly provided by

statute the word “ may ” cr eate s either discr etionary authority or g rants per

mission or a power. Id . § 311.016. Th e us e of the wo rd

“ may ” in t

he Com mis sio n’ s a dmi nis tr a tiv e a pp e a ls r ule g ra nts hospit al s p ermiss ion to request both informal a nd formal r eviews of

disputed calc ulations. See 1 Te x. Ad min . Co de § 3 55 .8 06 3( k) (1 )( A) . H ow e ve r, the re is n oth ingin the pla in l angua g e of the ru le that compels the Commissi o n t o gra n t t h e request. Id . In this case, the Commission gra nted the Hospitals’ reque sts for informal r eviews of ex cluded data and de nied most of them beca use they either f ailed to meet the F ebrua

ry 28th cut-off

or were not mecha

nical, mathematical, or data entry

err ors. The Commission’s refusa l to act on the Hospitals’ subseque nt r equests for f ormal re views d i d n o tv i o l a t e i t s a

p p e a l s r u l e b e c a u s e t h e g r an to r

d e n i a l o f r e qu e s t s f

o r r e v i e w i s d i s c r e t i o n a r

y. Id

. Th e Ho sp ita ls a rgue fu rt he r t hat th e Com mis sio n v iol a te d it s appea ls r ule wh e n it de n i e d t h e i n f or ma l r e vie ws be c a

us e ma the ma tic a l or

data e ntr y e rr or s e xiste d in

the ba se -y e ar c la ims data . T he Ho sp ita ls c la im that the F e br ua ry 28 th c ut- of

f s y ste ma tic a lly

e xclu de s h ig h- do lla

r c la ims from the ba se-y ear

claims data, which lowers the Standard Dollar A mount, thereby decr easingthe reimbursement rates. Esse ntially , the Hospitals contend that the Commission’s methodology for deter mining what constitutes a base-y ear claim create s mathematica l or data entry err ors in the base

y ear claims data be cause not all claims that occur re d i n the base -y ear are included. Howe ver, the Commi s s i o n has spec ifically denied hospitals the rig ht to appeal the pr ospective pa y ment13

metho dology

used to ca lculate r eimbursement r ates. Se e id . § 355.8063(k)( 2). B eca use the

ma the ma tic a l or data e ntr

y e rr or s a llu de d to by the Ho sp ita ls d id n ot p e rt a in t o in div idu a l c la ims bu t, rathe r, to how the c laims selection proc ess in the ag g reg ate c ould lead to mathematica l or data e ntry

err ors, we hold that the Commiss ion was not requir ed to ac t on the Hospitals’ reque sts for forma l revie ws and that it could prope rly deny reque sts for r eview that challeng e the pr ospective pa y ment methodology . We overrule the Hospitals’ sec ond issue.

CO NC LU SION B e c a us e we ho ld that the F e br

ua ry 28 th cut- of

f fo r t he su bmi ssi on of pa id c la ims to be inc lud e d in

the ba se -y e ar c la ims data is no t a ru le un de r the APAand that th e Com mis sio n d id not violate its own appea l rule by ref using to a ct on the Hospitals’ re quests for f ormal re views, we

a ff ir m th e tr ia l c ourt ’s jud g me nt.

__________________________________________ Be a Ann Smith, J ustice Be fore Chief J ustice L aw, Justi ces B . A. Smith and Pemberton Affir med Filed: January

21, 2005