1 When their interests diverge, we will refer to the appellants individually.



### TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-03-00436-CV

Texas Medical Association; Texas AFL-CIO; Patient Advocates of Texas; Allen J.

Meril, M.D.; and L. E. Richey, Appellants

v.

Texas Workers Compensation Commission; Richard F. Reynolds, Executive Director;

and Texas Association of Business, Appellees

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 126TH JUDICIAL DISTRICT

NO. GN202203, HONORABLE JOHN K. DIETZ, JUDGE PRESIDING

O P I N I O N

This case concerns allegations by the Texas Medical Association, the Texas AFLCIO, Patient Advocates of Texas, a nd Doctors Allen J. Meril and L.E. Richey (collectively, the

appellants), 1 that the 2002 medical fee guidelines promulgated by the Texas Workers Compensation

Commission are invalid. S ee 28 Tex. Admin. Code § 134.202 (2003). Appellants assert substantive

and procedural challenges to the Commission’s rule establishing the 2002 fee guidelines. For the

reasons that follow, we affirm the judgment of the district court declaring the 2002 fee guidelines

valid and denying a permanent injunction to restrain the guidelines’ implementation.2 The CMS was previously known as the Health Care Financing Administration (HCFA).

We will use the current title throughout this opinion.

3 That formula reads:

Payment

= [RVU work × GPCI work] 

## % [RVU practice expense × GPCI practice

expense] 

## % [RVU malpractice × GPCI malpractice] × conversion factor.

66 Fed. Reg. 55,248 (Nov. 1, 2001) (codified at 42 C.F.R. §§ 414.2, .20, .26).

The terms used in the formula stand for the following values: RVU is the relative value unit, which

is a nationally uniform relative value assigned by the CMS to each service. There are three relevant

RVUs: (1) an RVU for physician work, (2) an RVU for practice expenses, and (3) an RVU for

malpractice expenses. GPCI is the geographic practice cost index. When multiplied by the RVUs,

2 BACKGROUND

In 2001, the Texas Legislature amended section 413.011 of the labor code to require

the Commission to revamp its medical reimbursement polic ies and guidelines relating to the

workers’ compensation program. S ee Act of May 25, 2001, 77th Leg., R.S., ch. 1456, § 6.02, sec.

413.011, 2001 Tex. Gen. Laws 5167, 5184 (codified at Tex. Lab. Code Ann. § 413.011 (West Supp.

2004)). The new statute imposed upon the Commission the duty to adopt entirely new guidelines

for reimbursement to be paid to medical-care providers participating in the workers’ compensation

program. Tex. Lab. Code Ann. § 413.011 (West Supp. 2004). The statute directed the Commission

to use the “most current reimbursement methodologies, models, and values or weights” used by the

federal Centers for Medicare and Medicaid Services (CMS) 2 in an effort to achieve standardization

among various health-care delivery systems, with “minimal modifications

. . . as necessary to meet

occupational injury requirements.” I d. As its reimbursement “methodology,” the CMS employs a

mathematical formula that assigns relative values to specific medical services, adjusts those values

based upon geographic differences, and converts the relative values into dollar amounts—using the

so-called “conversion factor”—to arrive at the reimbursement payment. 3the GPCIs reflect the relative costs of practice expenses, malpractice insurance, and physician work

in a particular area compare d to the national average for each component. The conversion factor

converts the relative values into payment amounts. See id.

4 The Medical Advisory Committee is composed of numerous members, all appointed by

the Commission, representing various interest groups ( i.e.

, health care facilities, doctors, medicalequipment suppliers, employers, employees, insurance ca rriers, and the general public). S ee Tex.

Lab. Code Ann. § 413.005(b) (West Supp. 2004).

3 After notice and com ments, the Commission adopted rule 134.202, which directs that

workers’ c ompensation participants “shall apply the Medicare program reimbursement

methodologies, models, values or weights .

. . in effect on the date a service is provided.” 27 Tex.

Reg. 4048 (May 10, 2002) (codified at 28 Tex. Admin. Code § 134.202). Additionally, the rule

provides that to determine the maximum allowable reimbursements for professional services, system

participants shall apply the Medicare payment policies with the following modification: for certain

service categories ( i.e.

, evaluation and management, general medicine, physical medicine and

rehabilitation, surgery, radiology, and pathology), the conversion factor will be the “eff ective

conversion factor adopted by CMS multiplied by 125%.” 28 Tex. Admin. Code § 134.202(c).

In July 2002, the Texas AFL-CIO and the Texas Medical Association filed a suit

seeking to declare the 2002 fee guidelines invalid because the Commission (1) had improperly

delegated its duty t o develop the conversion factor to the CMS; (2) had not provided a reasoned

justification for the rule as required by the administrative procedure act (APA); (3) had not consulted

the Medical Advis ory Committee 4 in developing the conversion factor; and (4) had violated the

statute by ado pting the CMS’s conversion factor without considering whether it met the statutory

mandates to ensure fair and reasonable rates, quality care, and effective cost control. The appellants

also sought a temporary inju nction restraining the Commission from enforcing the 2002 fee5 The court’s order remanded the rule to the Commission, pursuant to government code

section 2001.040, so that “it may either revise or readopt the rule through established procedure.”

See Tex. Gov’t Code Ann. § 2001.040 (West Supp. 2004). The court’s order also noted: “based on

the evidence adduced at the hearing, the Court is unable to conclude that the facts and data necessary

to provide a reasoned justification for the rule are now in existence.”

4 guidelines. The district court held a hearing on the request for a temporary injunction in August

2002. The court issued a temporary injunction and remanded the rule to allow the Commission to

revise its preamble to make it substantially comply with the reasoned-justification requirement. 5

The Commission adopted a “Supplemental Preamble” on December 12, 2002. See

27 Tex. Reg. 12,304-12,349 (Dec. 27, 2002) (hereinafter Supp. Preamble). On that date, the

Co mmission also readopted the 2002 fee guidelines, with no textual changes to the rule. S ee id.

12,349. The Supplemental Preamble exceeded over forty dual-column pages in the Texas Register.

In it, the Commission labored to “connect the dots,” as the district court had instructed it, to explain

how it arrived at the 125% conversion factor.

In April 2 003, the district court held another hearing, this time on the appellants’

request for a permanent injunction and on the merits of the rule’s validity. After hearing evidence

and argument, the court determined that the Commission ’s Supplemental Preamble substantially

complied with the reasoned-justification requirement and issued an order declaring the 2002 fee

guidelines valid in all respects, effective August 1, 2003. The appellants filed a motion for

rehearing, which the district court denied. The appellants then brought this appeal, reasserting their

arguments urged to the district court.5 DISCUSSION

Substantive challenges

A. Delegation of power

In issues one and two, appellants assert that the Commission unlawfully and

unconstitutionally delegated to a federal agency (the CMS) its responsibility to develop the

conversion factor. S ee Tex. Lab. Code Ann. § 402.068 (West 1996) (“Except as expressly provided

by this subchapter, the [C]ommission may not delegate rights and duties imposed on it by this

subchapter.”), § 413.011 (West Supp. 2004) (“[T]he [C]ommission shall also develop conversion

factors or other payment adjustment factors taking into account economic indicators in health care

and the requirements of Subsection (d).

. . . This section does not adopt the Medicare fee schedule,

and the [C]ommission shall not adopt conversion factors or other payment adjustment factors based

solely on those factors as developed by the federal [CMS].”).

Next, appellants argue that the delegation violates article III, section 1 of the Texas

Constitution. S ee Tex. Const. art. III, § 1 (legislative power is vested solely in Texas Senate and

House of Representativ e s); Proctor v. Andrews

, 972 S.W.2d 729, 733 (Tex. 1998) (constitution

generally prohibits delegation of legislative power to private entities); Ex parte Elliott

, 973 S.W.2d

737, 741 (Tex. App.—Austin 1998, pet. ref’d) (if federal agency has authority to change Texas law

without intervention of legislature, constitutionality of statute would be in doubt).

We must first determine whether the Commission has delegated its duty to develop

the conversion factor to the CMS. T he 2002 fee guidelines provide that fees for certain services are

to be calculated by

using the “effective conversion factor adopted by CMS multiplied by 125%.”

28 Tex. Admin. Code § 134.202(c)(1). The rule also provides that “[w]henever a component of the6

Medicare program is revised and effective, use of the revised component shall be required for

compliance with [C]ommission rules . . . for services rendered on or after the effective date of the

revise d component.” S ee id. § 134.202(a)(5). The initial preamble to the rule noted that the

requirement to use revised Medicare components “include[s] Medicare revisions to the conversion

factor.” S ee 27 Tex. Reg. 4048-4121 (May 10, 2002) (hereinafter Preamble). Thus, appellants assert

that because the Texas conversion factor differs by a mere percentage from the current CMS factor,

the Texas conversion factor will “automatically” change whenever the CMS factor changes. Such

an automatic adjustment to the Texas conversion factor will happen solely at the behest of the CMS,

independently of the Commission. They cite this as evidence that the Commission has delegated its

duty to develop a conversion factor, ignoring the statutorily mandated factors. We disagree.

The new statute commands the C ommission to first “adopt the most current

reimbursement methodologies, models, and values or wei ghts used by the federal [CMS].” Tex.

Lab. Code Ann. § 413.011(a). In other words, the Commission must begin its task of developing

fee guidelines with the mathematical formula used by the CMS. S ee 66 Fed. Reg. 55,248 (Nov. 1,

2001). Then, the statute commands the Commission to adjust that formula to accomplish fair and

reasonable guidelines: “[the Commission shall] develop conversion factors or other payment

adjustment factors taking into account economic indicators in health care and the requirements of

Subsection (d) [guidelines are to be fair and reasonable and designed to ensure quality of medical

care and achieve effective medical cost control].” S ee Tex. Lab. Code Ann. § 413. 011(a). In

developing such conversion factors, “the [C]ommission shall not adopt conversion factors or other

payment adjustment factors based solely on those factors as developed by the federal [CMS],” and

the statute “does not adopt the Medicare fee schedule.” Id. Thus, the statute merely prohibits the7

Commission from adopting a Texas conversion factor based on nothing other than the Medicare

factor. The Supplemental Preamble alone is replete with evidence of the Commission’s

consideration of other factors, such as workers’ access to care, effective cost control, quality care,

and fairness.

The Supplemental P r eamble notes the importance of using the effective Medicare

conversion factor:

To achieve standardizat i on, it is necessary to use the Medicare billing and

reimbu rsement policies as they are modified by the CMS. Adoption of policies in

effect on a particular date would require participants in the Te xas workers’

co mpensation system to bill and reimburse in a manner different from the current

Medicare system and other he althcare reimbursement systems. That would

undermine or eliminate the posi tive impact of the standardization required by the

statute, including reduced administrative costs as discu ssed in the April 2002

preamble and the Supplemental Preamble. Therefore, the rule, in compliance with

the statute, requires the use of the Medicare policies in effect on the day that a service

is provided. [28 Tex. Admin. Code] § 134.202(a)(5).

Supp. Preamble 12,311. We cannot conclude that because the Texas conversion factor

“automatically” self-adj usts with every change in the federal CMS conversion factor, the

Commission has delegated its duty to develop a conversion factor to the CMS. As indicated in the

initial and supplemental preambles, the Commission’s decision to set the Texas conversion factor

at a particular percentage of the effective Medicare factor was based on the balancing of several

interests and factors: reducing medical costs, achieving standardization among different healthcarereimbursement

systems, taking into account specific requirements of the workers’ compensation

system and its administration, and addressing the other statutorily mandated factors in section

413.011. S ee generally Supp. Preamble. The Commission considered studies, reports, facts, and8

other evidence to conclude that se tting the conversion factor at 125% of the Medicare factor

accomplishes all of its sometimes conflicting duties. The Commission did not omit consideration

of these factors or delegate consideration to the CMS.

Furthermore, the Supplemental Preamble to the fee-guidelines rule states,

The Commission will monitor any future changes in Medicare fee levels and effects

on access to medical care closely. In response to any future Medicare fee changes,

the Commission will promptly make appropriate changes, up or down, in the

premium above Medicare that it sets for Texas workers’ compensation fee levels if

it determinates this is needed under the Texas statutory standards.

Id. 12,335. Changes to the Medicare conversion factor are historically announced several months

before they become effective

. See, e.g.

, 42 C.F.R. § 414.4 (2003) (CMS announces proposed

changes in Federal Register and provides opportunity for public comments prior to publication of

final changes); 67 Fed. Reg. 79,966 (Dec. 31, 2002) (2003 conversion factor published on December

31, 2002, to be effective on March 1, 2003). Thus, the Commission will have an opportunity to

make any necessary changes to the Texas multiplier prior to the date the Medicare conversion factor

becomes effective. Indeed, the Commission has already adjusted the Texas conversion factor to

125%, up from 120%, after the Medicare conversion factor for 2002 was reduced. Supp. Preamble

12,335; see also 66 Fed. Reg. 55,320 (Nov. 1, 2001). Even without the Commission’s statement in

the Supplemental Preamble, the Commission has the ongoing statutory duty to review and revise the

fee guidelines to ensure they are in compliance with the statutory factors. S ee Tex. Lab. Code Ann.

§ 413.012 (Commission is to review and rev ise guidelines a t least every two years). Appellants’

contention that the adjustment to the Texas conversion factor is “automatic” is thus overstated. The9

Commission will hav e the ultimate authority, and the ongoing duty, to make adjustments to the

Texas conversion factor to keep it reflective of the mandatory statutory factors.

This case is analogous to other delegation cases where this Court has determined that

no unconstitutional delegation h as occurred. S ee Ray v. Texas State Bd. of Pub. Accountancy

, 4

S.W.3d 429, 431-33 (Tex. App.—Austin 1999, no pet.) (comptroller’s rule incorporati ng, when

applicable, “generally accepted auditing standards” of American Institute of Certif ied Public

Accountants not delegation because comptroller retained discretion to interpret and apply standards

on case-by-case basis); Central Power & Light Co. v. Sharp

, 919 S.W.2d 485 , 492-94 (Tex.

App. —Austin 1996) (comptroller’s rule defining “generally accepted accounting principles” to mean

those principles adopted by American Institute of Certified Public Accountants was not delegation

of power to private entity bec ause Institute lacked direct authority over Texans, and there were

safeguards to ensure that no wholesale delegation had occurred), writ denied

, 960 S.W.2d 617 (Tex.

1997) (per curiam); but see Elliott

, 973 S.W.2d at 741 (constructi on of statute that would mean

Texas definition o f hazardous waste changes each time federal Environmental Protection Agency

[EPA] changes its definition would “place in doubt” constitutiona l ity of statute, but court did not

reach delegation question, instead construing statute to adopt EPA’s definition at fixed point in

time). In C entral Power & Light

, for example, we considered whether the incorporation of “future

pronouncements” of definitions by a private entity bestowed legislative authority on that body. We

concluded that in light of the comptroller’s ongoing oversight of the application of those standards,

there was no basis to conclude that the entity wielded any legislative power. 919 S.W.2d at 493.

Similarly, here the Comm ission has the authority to revise its conversion factor upon each CMS

adjustm ent and, indeed, it must revise the factor on a continuing basis to ensure that it is fair and10

reasonable. We note also that the CMS has “no direct power or authority over Texans.” S ee id. at

492. We hold that the Commission has not delegated its duty to develop the Texas conversion factor

to the federal CMS. Because there has been no delegation, we need not reach appellants’ arguments

that the delegation was prohibited by statute or was unconstitutional. We overrule appellants’ first

and second issues.

B. Arbitrary and capricious

Appell ants’ next substantive challenge is that the 2002 fee guidelines are arbitrary

and capricious because they lack a legitimate factual or legal basis. S ee Bullock v. Hewlett-Packard

Co.

, 628 S.W.2d 754, 757 (Tex. 1982); McCarty v. Texas Parks & Wildlife Dep’t

, 919 S.W.2d 853,

854-55 (Tex. App.—Austin 1996, no writ). An agency acts arbitrarily if in making a decision it (1)

omits from its consideration a factor that the legislature intended the agency to consider in the

circumstan ces, (2) includes in its consideration an irrelevant factor, or (3) reaches a completely

unreasonable result after weighing only relevant factors. R eliant Energy, Inc. v. Publ ic Util.

Comm’n , 62 S.W.3d 833, 841 (Tex. 2001); McCarty , 919 S.W.2d at 854.

Appellants correctly note the fact ors the Commission was statutorily required to

consider in promulgating its fee guidelines: whether they are fair and reasonable, ensure the quality

of medical care, and achieve effective medical cost control. Tex. Lab. Code Ann. § 413.011(d).

Appellants assert that by tying the conversion factor to the current CMS conversion factor, the

Commission’s rule violates the first and second Reliant tests—in annually adjusting its conversion

factor, the CMS does not take into account the three mandatory Texas requirements, while the CMS11

does consider federal-budget neutrality, an irrelevant requirement under the statute. S ee Reliant

, 62

S.W.3d at 841.

Because the Commission did not delegate its duty to set the Texas conversion factor

to the CMS, we conclude that its adoption of the 125% multiplier to the CMS conversion factor was

not arbitrary and capricious. The initial and supplemental preambles contain ample evidence of the

Commission’s consideration of the mandatory statutory factors in setting the conversion factor at a

particular percentage of the Medicare factor. Also, we have found nothing in the record indicating

that the Commission included f ederal-budget neutrality considerations in deciding to set the

conversion factor as it did. Although the Medicare conversion factor may be periodically adjusted

based partly on federal -budgetary constraints, the Commission retains the power to make its own

adjustments to the federal factor, as necessary to meet the Texas statutory requirements. Indeed, it

must make revisions to the conversion factor at least every two years to reflect fair and reasonable

fees. S ee Tex. Lab. Code Ann. § 413.012. Although the CMS may change the Medicare conversion

factor in part to compl y with budgetary constraints, the Commission can and must adjust its

conversion fac tor so that it continues to fulfill the statutory mandates. S ee id. ; Supp. Preamble

12,335. We conclude that the Commission’s 2002 fee guidelines are not arbitrary and capricious

because in promulgating them, the Commission ably considered the legislatively mandated factors

and did not consider the “irrelevant” factor of federal budgetary constraints.

At oral argument a nd in a post-submission brief, the appellants asserted that their

third issue also challenges the substantive validity of the 2002 fee guideline s on constitutional6 The only reference in appellants’ briefs about the constitutionality of the 2002 fee

guidelines appears in a citation to a legal standard relating to arbitrariness and capriciousness: “A

rule that lacks a legitimate factual basis and/or legal basis is arbitrary and capricious and a denial of

due process

. B ullock v. Hewlett-Packard Co.

, 628 S.W.2d 754, 757 (Tex. 1982); McCarty v. Texas

Parks & Wildlife Dep’t

, 919 S.W.2d 853, 854-55 (Tex. App.—Austin 1996, no writ).” (Emphasis

added.) Appellants have failed to adequately brief this complaint, and it is therefore waived.

Wilkinson v. Dallas/Ft. Worth Int’l Airport Bd.

, 54 S.W.3d 1, 18 (Tex. App.—Dallas 2001, pet.

denied), cert. denied , 534 U.S. 1128 (2002).

12 grounds. However, they did not present this argument in their pre-submission briefs. 6 All waivable

errors not included in the original appellate brief are waived and present nothing for review. H inkle

v. Adams

, 74 S.W. 3d 189, 195 (Tex. App.—Texarkana 2002, no pet.) (citing P at Baker Co. v.

Wilson

, 971 S.W.2d 447, 450 (Tex. 1998)); see Tex. R. App. P. 38.1(e). Because the appellants

failed to raise this argument in their pre-submission briefs, the argument is waived. See City of

Houston Precast Structures, Inc.

, 60 S.W.3d 331, 340 n.4 (Tex. App.—Houston [14th Dist.] 2001,

pet. denied). We overrule appellants’ third issue.

C. Statutory authority

Dr. Richey alone brings the following issue: “The trial court’s determination that the

[2002 fee guidelines are] valid is erroneous because the [Commission ] did not have statutory

authority to adopt the [2002 fee guidelines] in [their] current form.” To support this argument, Dr.

Richey rehashes the appellants’ argument that the Commission merely adopted the Medicare

conversion factor without taking into consideration the mandatory statutory factors. S ee Tex. Lab.

Code Ann. § 413.011(b). Dr. Richey specifically contends that the Commission neither took into

account “economic indicators in health care” nor provided for “reasonable fees for the evaluation

and management of care.” S ee id. § 413.011(b). Yet, the studies, data, and reports discussed in the

initial and supplemental preambles indicate that the Commission did consider “economic indicators.”13

See Preamble 4053-54; Supp. Preamble 12,307-310; 12,314-315; 12,319-320; 12,323-325; 12,334-

336. Also, the Preamble notes that fees for the evaluation and management of care were increased

under the 2002 fee guidelines because they had historically been reimbursed below the Medicare

amounts. S ee Preamble 4062. For the reasons already discussed, we conclude that the Commission

adequately took into account the statutory factors. We overrule Dr. Richey’s issue.

Procedural challenges

A. Medical Advisory Committee

Appellants assert that the fee guidelines are invalid because the Commission failed

to consult the Medical Advisory Committee as the labor code requires. S ee Tex. Lab. Code Ann.

§ 413.005(a) (West Supp. 2004). That statute provides,

The medical ad visory committee advises the division [of Medical Review] in

d eveloping and administering the medical policies, fee guidelines, and utiliza tion

guidelines established under Section 413.011. The committee s hall advise the

[C]ommission or professional organization in the review and revision of medical

policies and fee guidelines required under Section 413.012.

Id. (emphasis added). Section 413.012 provides that “the medical policies and fee guidelines shall

be reviewed and rev ised at least every two years to reflect fair and reasonable fees and to reflect

medical treatment or ranges of treatment that are reasonable or necessary at the time the review and

revision is conducted.” Id. § 413.012 (West 1996). Thus, the statute commands the committee to

advise the Commission in the mandatory biennial reviews of fee guidelines; t he statute does not

make the same command with respect to the Commission’s initial formulation of the fee guidelines

under section 413.011. S ee id. § 413.005(a). The Commission, therefore, was not statutorily14

required to consult the Medical Advisory Committee in promulgating the initial 2002 fee guidelines.

We hold that the rule is not invalid based on the Commission’s failur e to consult the Medical

Advisory Committee.

B. Reasoned justification

The appellants assert that, despite the Supplemental Preamble, the Commission’s

attempt to provide a reasoned justification for the 2002 fee guidelines still falls short. Appellants’

main complaint is that the Supplemental Preamble does not explain why the information used by the

Commission justi fies reducing reimbursement to certain health-care providers, resulting in the 125%

figure. They assert that the Commission has provided no “factual basis” for the fee guidelines. S ee

Tex. Gov’t Code Ann. § 2001.033(a)(1)(B) (West 2000).

An agency rule is voidable unless the agency adopts it in substantial compliance with

the requirements of the APA, including the requirement of a reasoned justification. I d.

§ 2001.033(a)(1), § 2001.035(a) (West 20 00). A reasoned justification must include “a summary

of the factual basis for the rule as adopted which demonstrates a rational connection between the

factual basis for the rule and the rule as adopted.” Id. § 2001.033(a)(1).

To substantially comply with the reasoned-justification requirement, the four corners

of the agency’s final notice must present the agency’s justification in a relatively clear, precise, and

logical fashion. R eliant

, 62 S.W.3d at 840. This Court has held that an agency’s order substantially

complies with the reasoned-justification requirement if it accomplishes the legislative objectives

underlying the requirement and comes fairly within the character and scope of each of the statute’s

requirements in conci se, specific, and unambiguous terms. P atient Advocates of Tex. v. Texas15

Workers Comp. Comm’n

, 80 S.W.3d 66, 73 (Tex. App.—Austin 2002, pet. granted) (citing

Methodist Hosps. v . Industrial Accident Bd. , 798 S.W.2d 651, 657-59 (Tex. App.—Austin 1990, writ

dism’d w.o.j.)). The APA was designed to compel an administrative agency to articulate its

reasoning and, in the process, more thoroughly analyze its rules. I d. (citing National Ass’n of Indep.

Insurers v. Texas Dep’t of Ins.

, 925 S.W.2d 667, 671-72 (Tex. 1996) ( NAII )). Requiring an agency

to demonstrate a rational con nection between the facts before it and the agency’s rule promotes

public accountability and facilitates judicial review. Id.

We review a challenge to the reasoned-justification requirement under an “arbitrary

and capricious” standard, with no presumption that facts exist to support an agency’s order. R eliant

,

62 S.W.3d at 840; Texas Hosp. Ass’n v. Texas Workers’ Comp. Comm’n

, 911 S.W.2d 884, 887 (Tex.

App.—Austin 1995, writ denied). In applying an “arbitrary and capricious” test to agency

rulemaking, we exami ne whether the agency’s explanation of the facts and policy concerns relied

on in adopting the rule demonstrates that the agency considered al l the factors relevant to the

objectives of the agency’s delegated rulemaking authority and engaged in reasoned decision making.

Reliant

, 62 S.W.3d at 842 (citing Railroad Comm’n v. ARCO Oil & Gas Co.

, 876 S.W.2d 473, 491

(Tex. App.—Austin 1994, writ denied)).

Appellants primarily insist that the “reasoned justification” does not indicate how or

why the Commission arrived at the 125% figure to create the Texas conversion factor. Our review

of the Supplemental Preamble, however, indicates a mple reasoning to support the Commission’s

decision. In the Supplemental Preamble, the Commission explained that its staff determined that

the conversion factor needed to be somewhere between 100 and 140% of the Medicare factor, as the

1996 fee guidelines pr oduced reimbursements that were equivalent to 140% of the then-current7 For example, an estimated 5% increment was added as an incentive to provide for the

availability of quality care to injured workers, while an estimated 5% increment was subtracted due

to the security of payment afforded by the workers’ compensation commission. See 27 Tex. Reg.

12,316 (Dec. 27, 2002).

16 Medicare factor, and the legislature had directed the Commission to lower costs. S ee Supp.

Preamble 12,312-314; 12,316. Thus, the Commission found that a legitimate means to achieve the

statutory mandate of effective cost control was to lower the premium as far as would be consistent

with the s afety margin needed to cover the extra administrative expenses of the workers’

compensation program and to provide access to care. S ee id. 12,337. The Commission’s staff then

prepared spreadsheets comparing the impact of various conversion factors between 100 and 140%

of the Medicare factor on total medical costs and on different service categories. S ee id. 12,313. The

Commission’s Executive Director, Ric hard F. Reynolds, testified that his staff had allotted estimated

5% increments as important components of the Texas workers’ compensation program, adding and

subtracting these increments from a conversion factor of 100% of Medicare as was appropriate. 7

The Supplemental Preamble explains why a single conversion factor, as opposed to

multiple conversion factors, works best—the single factor will help prevent over-utilization of some

services and under-utilization of others. S ee id. 12,327. With respect to meeting the statutory

requirements that the fee schedule achieve quality of care and be fair a nd reasonable, the

Commission cites studies and reports noting the extra administrative cos ts associated with a workers’

compensation program to support its conclusion that 125% is an appropriate conversion factor. An

independent study conducted by a physician, Dr. Mark Brinker, indicates that the extra expenses and

burdens of a workers’ compensation program would be adequately covered by a 125% conversion

factor. S ee id. 12,328-329. A consulting firm, Pershing Yoakley & Associates, P.C., prepared a17

repo rt that also indicated that a payment of 125% of Medicare would be more than sufficient to

offset the additional administrative expenses. See id. 12,324.

The Commission cites surveys indicating that patients have generally not had accessto-care problems under the Medicare system; thus, reasons the Commission, patients will similarly

have min imal problems under the workers’ compensation program, which pays physicians more than

Medicare. S ee id. 12,323; 12,335. A consulting company performed a study that concluded that at

109% of Medicare, there is no access-to-care problem. I d. 12,335-336. Also, the Commission cites

reports and studies indicating that effective care is not necessarily equivalent to expensive care and

states that no study has been found showing that paying higher fees provides higher quality care once

access to care is obtained. I d. 12,314-315; 12,331-332. Thus, concluded the Commission, the 2002

fee guidelines adequately address the statutory ma ndates to ensure the quality of care yet achieve

effective medical cost control.

Lastly, we note that the Commission was not required to demonstrate that 125% is

the only reasonable or factually defensible policy alternative. Rather, it needed only to demonstrate

that there is a rational connection between its conversion fac tor and the factual material it has

received or otherwise considered, and that 125% is a legitimate and factually defensible choice that

complies with the multiple statutory requirements of the labor code. S ee NAII

, 925 S.W.2d at 669.

The legislative objective of the reasoned-justification requirement is to give notice of the factual,

policy, and legal bases for the rule, in light of all the evidence gathered by the agency and submitted

by interested parties during the comment period. Patient Advocates , 80 S.W.3d at 74. The

Commission’s initial preamble, bolstered by its Supple mental Preamble, clearly and exhaustively

explains the Commission’s reasons for choosing a conversion factor that is a 125% multiplier of the18

Medicare conversion factor. Under the “arbitrary and capricious” standard, we conclude that the

Commission substantially complied with the reasoned-justification requirement of the APA.

C. Public notice and comment

Appellants contend that after the district court remanded the 2002 fee guidelines to

the Commission to comply with the reasoned-justification requirement, the Commission was

required to provide public notice and a comment period upon publishing the Supplemental Preamble.

See Tex. Gov’t Code Ann. § 2001.040 (West Supp. 2004) (“[T]he court may remand the rule, or a

portion of a rul e, to the agency and, if it does so remand, shall provide a reasonable time for the

agency to either revise or readopt the rule t hrough established procedure .” (emphasis added)).

Appellants assert that “established procedure” required the Commission to publish a new notice of

proposed rulemaking because the reasoning provided in the Supplemental Preamble was new and

thus has never been subject to public notice and comment.

Although the order adopting a rule must contain the reasoned justification or factual

basis for the rule, see id. § 2001.033, no statute requires the Commission to include that statement

of the factual basis for the rule in the public notice of proposed rulemaking. S ee id. § 2001.024

(West 2000) (providing contents of public notice when agency proposes rule). Thus, failure to

include in the notice of a proposed rule a statement of the factual basis that will support the rule as

a dopted cannot violate “established procedure,” simply because there is no such esta blished

procedure.

In some cases, a new notice of rulemaking will be required if after initial publication,

a proposed r ule is amended so that it affects persons other than those originally put on notice.19

Patient Advocates

, 80 S.W.3d at 75; State Bd. of Ins. v. Deffebach

, 631 S.W.2d 794, 801 (Tex.

App.—Austin 1982, writ ref’d n.r.e.). However, should the agency amend the proposed rule such

that no one other than those previously given notice would be affected, no further purpose would be

served by requiring republication of the proposed rule. P atient Advocates

, 80 S.W.3d at 75.

Because there was no change in the rule’s text after the Commission added the Supplemental

Preamble, the rule could not have affected any persons beyond those originally put on notice. The

publication of the initial preamble placed the same persons on notice regarding the same subject

matter as did the publication of the Supplemental Preamble. By drafting the Supplemental Preamble,

the Commission did not ignore or substantially alter the proposed rule to an extent that a new or

different group of persons was affected. S ee id. Therefore, we hold that a new period of notice and

comment was not required in this case. We overrule the appellants’ fourth issue.

TAB’s standing

Dr. Richey separately challenges the TAB’s standing in this matter for the first time

on appeal. The TAB counters that Dr. Richey waived any objection to TAB’s intervention in this

suit by not objecting below and obtaining a ruling. J ones v. Spring Ranch Co.

, 642 S.W.2d 551, 554

(Tex. App.—Amarillo 1982, no writ); see also Guaranty Fed. Sav. Bank v. Horseshoe Operating

Co.

, 793 S.W.2d 652, 657 (Tex. 1990). Dr. Richey rejoins that because standing is a component of

subject-matter jurisdiction, it cannot be waived and may be raised for the first time on appeal. S ee

Texas Ass’n of Bus. v. Texas Air Control Bd.

, 852 S.W.2d 440, 445 (Tex. 1993). Although we agree

with Dr. Richey that standing im p licates subject-matter jurisdiction and that subject-matter

jurisdiction may be raised at any time, s ee id.

, the cases he cites pertain to whether a plaintiff has20

standing to bring a cause of action. S e e, e.g.

, id. at 446-47. Here, we have a different issue

altogether: whether and under what circumstances a d efendant may intervene. Thus, the standing

analysis of Texas Association of Business is inapplicable, and we must determine whether the trial

court erred in allowing the TAB to intervene.

An intervenor is not required to secure the court’s permission to intervene in a cause

of action or prove that it has standing; rather, a party who opposes the intervention has the burden

to challenge it by a motion to strike. S ee Guaranty Fed.

, 793 S.W.2d at 657; see also Tex. R. Civ.

P. 60 (“Any party may intervene by filing a pleading, subject to being stricken out by the court for

sufficient cause on the motion of any part y.”); Tex. R. App. P. 33.1 (to preserve complaint for

appellate review, record must contain timely objection and ruling or refusal to rule). Because Dr.

Richey did not object to TAB’s intervention at the trial court, he has not preserved the issue for our

review. S ee Jones

, 642 S.W.2d at 554. We overrule Dr. Richey’s issue concerning TAB’s standing.

CONCLUSION

For the foregoing reasons, we affirm the judgment of the district court declaring the

2002 fee guidelines valid and denying appellants’ request for a permanent injunction against the

guidelines’ implementation.

__________________________________________

Bea Ann Smith, Justice

Before Chief Justice Law, Justices Kidd and B. A. Smith

Affirmed

Filed: May 20, 2004