Case Name: Northwestern Ohio Building & Construction Trades Council et al., Appellees, v. Conrad, Admr., Bureau of Workers' Compensation et al., Appellants
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 2001-07-18
Citations: 92 Ohio St. 3d 282
Docket Number: No. 00-216
Parties: Northwestern Ohio Building & Construction Trades Council et al., Appellees, v. Conrad, Admr., Bureau of Workers’ Compensation et al., Appellants.
Judges: Moyer, C.J., Pfeifer and Lundberg Stratton, JJ., concur.
Reporter: Ohio State Reports, Third Service
Volume: 92
Pages: 282–303

Head Matter:
Northwestern Ohio Building & Construction Trades Council et al., Appellees, v. Conrad, Admr., Bureau of Workers’ Compensation et al., Appellants.
[Cite as Northwestern Ohio Bldg. & Constr. Trades Council v. Conrad (2001), 92 Ohio St.3d 282.]
(No. 00-216
Submitted January 10, 2001
Decided July 18, 2001.)

Opinion:
Cook, J.
In 1993, the General Assembly amended Ohio's workers' compensation scheme to create the Health Partnership Program ("HPP"), a comprehensive managed care program administered by appellant, the Bureau of Workers' Compensation ("BWC"), to provide medical services to employees for thencompensable injuries or occupational diseases. See 145 Ohio Laws, Part II, 2990, 3088-3093; R.C. 4121.44 and 4121.441. We have already determined that the managed care organizations ("MCOs") certified to perform these services under the HPP do not unconstitutionally usurp the state's power and authority to administer the State Insurance Fund ("SIF") and determine the terms and conditions of payments to injured claimants. State ex rel. Haylett v. Ohio Bur. of Workers' Comp. (1999), 87 Ohio St.3d 325, 331, 720 N.E.2d 901, 906.
Now we are asked to decide whether the BWC's use of SIF proceeds to pay administrative and performance-incentive fees to certified MCOs under the HPP violates either the Revised Code or Section 35, Article II of the Ohio Constitution. The court of appeals determined that the BWC's use of fund proceeds for administrative and performance incentive payments is neither legislatively authorized nor constitutional. For the following reasons, however, we disagree.
I. MCOs and the HPP
As we noted in Haylett, supra, MCOs are an integral part of the HPP established by the General Assembly. Id., 87 Ohio St.3d at 326, 720 N.E.2d at 903. The MCOs certified by the BWC under Ohio Adm.Code Chapter 4123-6 are private entities that perform medical-management and cost-containment services under contract with the BWC. Id. Employers covered by the SIF select an MCO from a list of BWC-certified MCOs, or the BWC will assign an MCO to employers who fail to make a selection. Ohio Adm.Code 4123-6-051(A); 4123-6-052(A). Each MCO is associated with a network of health-care providers that can offer a full range of medical services to injured workers. Id.
Once certified by the BWC and selected by or assigned to an employer, MCOs manage the medical aspect of each workers' compensation claim. Ohio Adm. Code 4123-6-043(B) and (F); Haylett, 87 Ohio St.3d at 329, 720 N.E.2d at 905. An MCO is the entity responsible for initially authorizing medical care to an injured party. Ohio Adm.Code 4123-6-043(F); 4123-6-045(D). "The MCO must promptly notify the BWC of an employee's industrial injury. While the BWC determines the compensability of a claim, the MCO works 'in conjunction with the employer, employee, attending physician, and the [BWC to] seek a course of medical or rehabilitative treatment that promotes a safe return to work.' " Haylett, 87 Ohio St.3d at 329, 720 N.E.2d at 905, citing Ohio Adm.Code 4123-6-043(B). "During the life of a medical claim, the MCO performs utilization reviews . Utilization reviews ensure that only medical services and supplies that are medically necessary for the diagnosis and treatment of allowed conditions and that are causally related to those conditions will be considered for payment. The MCO must submit all medical bills to the BWC. The BWC then authorizes payment and sends it to the MCO for reimbursement to the individual provider." (Citation omitted.) Id.
The HPP also contains a mandatory dispute resolution program available to employees, employers, and providers. Id., citing Ohio Adm.Code 4123-6-16. "Any decision by an MCO regarding treatment or payment is nonbinding and subject to multiple levels of review. The final decision as to any aspect of the claim lies with the Industrial Commission." Id. at 330, 720 N.E.2d at 905. In addition to these procedural safeguards, the HPP requires the BWC to supervise the certified MCOs and to monitor their performance continually. Id.
II. Administrative and Performance Incentive Payments to MCOs
To compensate the MCOs for their medical-management and cost-containment services, the administrator promulgated a rule providing for certain payments to be made to the MCOs. The source of the payments made to MCOs by the BWC under this administrative rule is the focus of the instant dispute.
Ohio Adm.Code 4123-6-13 provides:
"(B) The bureau shall pay an MCO an administrative fee for its medical management and administrative services in a manner determined by the administrator. The administrative fee may be subject to a disincentive penalty based upon the failure of the MCO to meet predetermined performance criteria set forth in the MCO contract. The bureau may pay an MCO a performance payment and may pay an incentive payment.
"(C) In establishing performance measures, the bureau shall evaluate an MCO's performance based upon but not limited to:
"(1) Quality performance measures that may include return to work rates and reinjury rates.
"(2) Total cost measures that may include average total paid cost, average incurred cost, and lost-time claims to total claims ratio.
"(3) Change in cost measures that may include change in average total paid cost, change in average incurred cost, and change in lost-time to total claims ratio.
"(4) Customer satisfaction that may include in-network utilization rate and employee, employer, and provider satisfaction surveys."
The parties here stipulate that both the administrative and performance-incentive payments authorized by Ohio Adm.Code 4123-6-13 are paid out of employer premium contributions, "with the total remuneration available to each [MCO] being a fixed percentage of the premiums paid by the employers which have selected or been assigned to it." The parties further stipulate that "[t]he total percentage of premium allocated for payment of fees and performance incentive payments is not fixed by rule, but is established by the BWC or the Administrator and may be periodically adjusted."
Douglas Maser, the BWC's Chief Medical Management and Cost Containment Officer in 1997, testified at a deposition about how the administrative and performance-incentive fees provided under Ohio Adm.Code 4123-6-13 are calculated. Maser testified that at the time of his deposition, the "base administrative fee" was set at three percent. Accordingly, a hypothetical MCO with one hundred employers enrolled in it would receive a base administrative fee from the SIF equal to three percent of the premiums paid by those one hundred employers. As of January 1,1998, the phase-in of the HPP was complete and the base administrative fee for each participating MCO was increased to five percent of premium.
The performance-incentive payments, Maser testified, are payable to an MCO "over and above its administrative fee" and calculated on an "MCO-by-MCO" basis. At the time of Maser's deposition, a total of an additional three percent of premium — over and above the three percent administrative fee — was potentially available to MCOs in incentive payments keyed to specific quality-control objectives. Of this additional three percent of premium, one percent would be paid to those MCOs that achieved a certain level of data accuracy and "reduee[d] the lag time" between claimants' injuries and the MCO's report of those claims to the BWC. One percent of premium would be paid to those MCOs that participated in Phase 2 of the HPP implementation program by picking up additional claims. Finally, one percent of premium would be paid to those MCOs participating in Phase 3 of the implementation program. As of January 1, 1998, when the base administrative fee was increased to five percent, each MCO could qualify for only an additional one percent of premium in performance-incentive payments.
As a result, an MCO that participated in all phases of the HPP implementation program and successfully achieved all of the BWC's quality-control objectives could earn administrative fees and performance-incentive payments totalling six percent of premium, to be paid from the SIF. The parties here do not dispute how the administrative fees and performance incentive payments are calculated in practice; rather, their appeal here centers on whether the use of SIF monies for these purposes is permissible at all.
III. This Declaratory Judgment Action
Appellees, Northwestern Ohio Building & Construction Trades Council and International Brotherhood of Electrical Workers, Local Union No. 8 (collectively, "Northwestern"), filed the instant action in June 1997, challenging several aspects of the HPP. In its complaint, Northwestern sought two declarations from the trial court. First, Northwestern sought a declaration that the HPP statutes and rules unconstitutionally delegate essential aspects of the administration of the SIF to private entities — including the determination of the terms and conditions upon which payments shall be made from the SIF. Second, Northwestern sought a declaration that Ohio Adm.Code 4123-6-13, to the extent that it authorizes the use of the SIF for administrative and performance-incentive payments, was promulgated without statutory authority and violates Section 35, Article II of the Ohio Constitution and R.C. 4123.30.
The parties eventually filed competing motions for summary judgment. In a Decision and Entry filed September 9, 1998, the Franklin County Common Pleas Court sustained the BWC's motion for summary judgment. The trial court determined that "the HPP statutory provisions do not unconstitutionally delegate authority and responsibility over the SIF," and that "the use of the SIF for HPP purposes is constitutional."
Northwestern appealed to the Tenth District Court of Appeals, assigning as error the trial court's resolution of the same two claims raised in its complaint. The court of appeals overruled Northwestern's first assignment of error on the authority of this court's decision in Haylett, 87 Ohio St.3d 325, 720 N.E.2d 901, noting that we had already determined that the HPP "does not constitute an improper delegation of authority to a private entity."
In its second assignment of error, Northwestern contended that the use of SIF proceeds for the payment of administrative and performance-incentive fees under Ohio Adm.Code 4123-6-13 would contravene this court's holdings in Corrugated Container Co. v. Dickerson (1960), 171 Ohio St. 289, 13 O.O.2d 337, 170 N.E.2d 255, and Thompson v. Indus. Comm. (1982), 1 Ohio St.3d 244, 1 OBR 265, 438 N.E.2d 1167. The court of appeals agreed, reversed the trial court's decision, and remanded the cause for an entry of summary judgment in favor of Northwestern. Construing Corrugated Container and Thompson, the court of appeals determined that the payment of SIF proceeds to MCOs as administrative fees and performance incentives violated Section 35, Article II of the Ohio Constitution, and that the Bureau lacked legislative authority to authorize these payments from the SIF in the first place. The bureau appealed, and the cause is now before this court upon the allowance of a discretionary appeal.
IV. Analysis
We shall address the BWC's propositions of law in reverse order because we should determine the validity of the administrative rule, as well as the BWC's interpretation of that rule, before we address any constitutional arguments related to the payments that the BWC has elected to make under the rule. If we were to agree with the court of appeals that the BWC lacked legislative authority to make these payments from the fund in the first instance, then we should decline to pass on any constitutional question implicated by those payments. See Norandex, Inc. v. Limbach (1994), 69 Ohio St.3d 26, 28, 630 N.E.2d 329, 331; Hal Artz Lincoln-Mercury, Inc. v. Ford Motor Co. (1986), 28 Ohio St.3d 20, 28, 28 OBR 83, 90, 502 N.E.2d 590, 597, fn. 17.
A. The Promulgation of Ohio Adm.Code 4123-6-13
The General Assembly has delegated broad rulemaking authority to the administrator of workers' compensation. See, e.g., R.C. 4121.121 and 4121.441. R.C. 4121.121 expressly permits the administrator to "[establish the overall administrative policy of the bureau," R.C. 4121.121(B)(1), to "[ejnsure, by rules, the impartial and prompt treatment of all claims," R.C. 4121.121(B)(13), and to "[p]repare and submit recommendations, in the form of administrative rules, for the health partnership program," R.C. 4121.121(B)(21).
When the General Assembly enacted the HPP, it vested additional rulemaking authority in the administrator of workers' compensation tailored to the specific goals of that comprehensive program. See R.C. 4121.441(A). R.C. 4121.441(A) directs the administrator to "adopt rules for the [HPP] administered by the [BWC] to provide medical, surgical, nursing, drug, hospital, and rehabilitation services and supplies to an employee."
To guide the administrator's efforts in promulgating rules for administering the HPP, the General Assembly enumerated twelve nonexhaustive categories of rules that it deemed necessary for the effective implementation of the program. See R.C. 4121.441(A)(1) to (A)(12). One of these twelve subdivisions directs the administrator to adopt rules providing for "[appropriate financial incentives to reduce service cost and insure propep system utilization without sacrificing the quality of service." (Emphasis added.) R.C. 4121.441(A)(4). Another directs the administrator to adopt rules ensuring "[a]dequate methods of peer review, utilization review, quality assurance, and dispute resolution." (Emphasis added.) R.C. 4121.441(A)(5).
Ohio Adm.Code 4123-6-13(B) provides that MCOs shall be compensated for their "medical management and administrative services" based on "performance criteria" keyed to proper system utilization. Accordingly, it represents exactly the sort of administrative rule contemplated by the enabling language in R.C. 4121.441. In order to implement the HPP effectively, which it is statutorily required to do under R.C. 4121.441(B), the BWC must have the ability to promulgate, interpret, and enforce rules providing for performance-based compensation of those "integral" entities that perform the medical-management services called for under the program — the MCOs. See Haylett, 87 Ohio St.3d at 326, 720 N.E.2d at 903.
B. The BWC's Reasonable Interpretation of Ohio Adm.Code 4123-6-13 and the Workers' Compensation Statutory Scheme
As Northwestern correctly notes, neither R.C. 4121.441 nor Ohio Adm.Code 4123-6-13 specifies the source of the administrative and performance-incentive payments to be made under the rule. For the following reasons, however, we conclude that the BWC reasonably interpreted the statutory scheme when it decided to utilize SIF proceeds for these purposes.
It is axiomatic that if a statute provides the authority for an administrative agency to perform a specified act, but does not provide the details by which the act should be performed, the agency is to perform the act in a reasonable manner based upon a reasonable construction of the statutory scheme. See Swallow v. Indus. Comm. (1988), 36 Ohio St.3d 55, 57, 521 N.E.2d 778, 779. A court must give due deference to the agency's reasonable interpretation of the legislative scheme. Id. See, also, Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. (1984), 467 U.S. 837, 843, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694, 703 ("if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute").
In Swallow, a workers' compensation claimant awarded permanent partial and permanent total disability benefits for the loss of use of both arms and legs requested that his permanent partial benefits be paid concurrently rather than consecutively. The statute at issue did not specify whether payments were to be made concurrently or consecutively. Even so, this court unanimously concluded that "the commission had a reasonable basis upon which to formulate a policy premised on the rationale that claimants are generally placed in a better position by receiving payments consecutively rather than concurrently. It was within the administrative purview of the commission to determine that appellant would be put in a better position by receiving eight hundred-fifty weeks of payments consecutively rather than two two-hundred weeks of payments for loss of each leg and two two-hundred twenty-five weeks of payments for loss of each arm concurrently." Id. at 57, 521 N.E.2d at 780.
We recognize that an agency can, at times, overstep the bounds of its statutorily delegated authority when interpreting and enforcing its administrative rules. In a recent case, the United States Supreme Court decided that the Army Corps of Engineers could not interpret and enforce its own "Migratory Bird Rule" so broadly as to provide the Corps with regulatory jurisdiction over ponds in abandoned gravel pits used as habitats by migratory birds, when the Clean Water Act authorized the Corps to regulate discharges only into "navigable waters." Solid Waste Agency of N. Cook Cty. v. United States Army Corps of Engineers (2001), 531 U.S. 159, 121 S.Ct. 675, 148 L.Ed.2d 576. In Cook Cty., the majority decided that, in order to accept the Corps's broad interpretation of its own jurisdiction, the court would have to pretend that the word "navigable" contained in the enabling statute had "no effect whatever." Id. at 172, 121 S.Ct. at 683, 148 L.Ed.2d at 587-589. See, also, Riley Family Trust v. Hood (Colo.App.1994), 874 P.2d 503 (deciding that Department of Labor and Employment rule could not be interpreted to preclude payment for massage therapy prescribed by treating physician, when enabling statute authorized director to establish a fee schedule but did not grant authority to restrict treatment so long as the treatment was reasonable and necessary).
In the present case, the General Assembly has not specified the source from which the BWC is to draw the funds necessary for the administrative and performance-incentive payments to be made to MCOs. The court of appeals found this legislative "gap" to be fatal, writing, "R.C. 4121.441(A)(4) is ambiguous in that it does not specifically authorize that these payments be made from SIF. Lacking any clear legislative authorization, appellees were without the authority to authorize these payments from, SIF." (Emphasis added.)
Unlike the court of appeals, we do not find the legislative gap equivalent to a lack of authority for the agency to act. As the United States Supreme Court has noted, "[t]he power of an administrative agency to administer a program necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly," by the legislature. (Emphasis added.) Morton v. Ruiz (1974), 415 U.S. 199, 231, 94 S.Ct. 1055, 1072, 39 L.Ed.2d 270, 292. Our own Swallow case implicitly recognized that no set of statutes and administrative rules will answer each and every administrative concern. Id., 36 Ohio St.3d 55, 521 N.E.2d 778. When agencies promulgate and interpret rules to fill these gaps, as they must often do in order to function, "courts must give due deference to an administrative interpretation formulated by an agency that has accumulated substantial expertise, and to which the General Assembly has delegated the responsibility of implementing the legislative command." Id. at 57, 521 N.E.2d at 779. We accord due deference to the BWC's interpretation, so long as it is reasonable. See State ex rel. McLean v. Indus. Comm. (1986), 25 Ohio St.3d 90, 92, 25 OBR 141, 143, 495 N.E.2d 370, 372 (holding that commission did not abuse discretion in awarding compensation for loss of foot even though claimant suffered amputation five inches below the knee).
We find that the BWC acted reasonably when it authorized the use of fund proceeds for the payments to MCOs provided under Ohio Adm.Code 4123-6-13. No provision of the workers' compensation scheme expressly prohibits this use, at least one provision of the scheme impliedly permits it, and both the General Assembly and this court have expressly permitted fund proceeds to be used for similar purposes in the past.
Northwestern contends that the BWC's interpretation of its administrative rule cannot be a reasonable one because, in its view, R.C. 4123.30 "expressly prohibits the expenditure of premiums contributed to the state insurance fund for purposes other than the payment of compensation and benefits for loss sustained on account of injury, disease or death compensable under the workers' compensation act." The court of appeals likewise determined that though R.C. 4123.30 lists various permissible uses of SIF proceeds, no provision of that statute expressly authorizes the use of fund proceeds as the BWC seeks to apply them under Ohio Adm.Code 4123-6-13. The appellate panel concluded that R.C. 4123.30 ensures that fund proceeds are "limited to compensating injured workers and their dependents for injuries and illness arising out of their employment." As we have done before, we decline to adopt these narrow interpretations of the fund's permitted applications. See Thompson, 1 Ohio St.3d at 248, 1 OBR at 268-269, 438 N.E.2d at 1170 (expressly declining to adopt a "narrow" or "cramped" interpretation of the fund's constitutionally permissible uses).
R.C. 4123.30 provides that money from the SIF may be applied to "the payment of compensation, medical services, examinations, recommendations and determinations, nursing and hospital services, medicine, rehabilitation, death benefits, funeral expenses, and like benefits for loss sustained on account of injury, disease, or death provided for by this chapter, and for no other purpose." (Emphasis added.) In dicta, this court has previously stated that "[t]here is no provision for payment of administrative costs" from the fund under this statute. Corrugated Container, 171 Ohio St. at 291, 13 O.O.2d at 338, 170 N.E.2d at 256.
Northwestern seizes on Corrugated Container's dicta, the restrictive statutory language italicized above, and Ohio Adm.Code 4123-6-13's characterization of some of the payments to be made thereunder as "administrative" to contend that R.C. 4123.30 prohibits the BWC from making the rule's payments from the SIF. Superficially, Northwestern's position has merit. As Northwestern correctly notes, "the workers' compensation statutes have historically provided for a separate and distinct assessment for administrative costs." See R.C. 4123.341. Moreover, R.C. 4123.30 expressly enumerates a list of permissible uses of the SIF, this court has previously stated (in Corrugated Container) that administrative costs are not among those enumerated uses, and R.C. 4123.30 expressly provides that the SIF is to be used for "no other purpose." Despite these valid observations, several factors suggest that the BWC has reasonably interpreted Ohio Adm.Code 4123-6-13 to allow the rule's payments to be made from the SIF.
First, though Ohio Adm.Code 4123-6-13(B) provides for payment of an "administrative fee," this fee is expressly intended to compensate the MCOs for the "medical management services" that they provide. (Emphasis added.) Id. The medical-management and cost-containment services performed by MCOs under the HPP differ from "the duties and activities of the bureau" for which an administrative cost and expense assessment is made under R.C. 4123.341. Compare R.C. 4121.44 and 4121.441 (outlining duties of MCOs under the HPP) with R.C. 4121.121 (outlining duties of the bureau and administrator).
Further, R.C. 4123.30 expressly permits the SIF to be applied to "medical services, examinations, recommendations and determinations." As the BWC notes in its merit brief, "HPP administrative and performance and incentive payments are provided to MCOs for [their] medical recommendations. Each MCO has developed treatment guidelines. These guidelines guide MCOs and their providers in developing treatment plans for individual injured workers and constitute medical recommendations." See Ohio Adm.Code 4123-6-032(E)(5). Because the payments provided to the MCOs under Ohio Adm.Code 4123-6-13 compensate those entities for "recommendations and determinations," they are not prohibited by R.C. 4123.30. In fact, a reasonable interpretation of R.C. 4123.30 would deem the payments to the MCOs from the fund as expressly permitted under that provision.
Moreover, as this court has previously noted, SIF proceeds have historically been used for purposes other than the payment of direct disability compensation to claimants. Thompson, 1 Ohio St.3d at 248, 1 OBR at 268-269, 438 N.E.2d at 1170. Simply put, not every dollar of the fund has been applied directly to the compensation of injured workers and their dependents, R.C. 4123.30 notwithstanding. In Thompson, we noted the past practice of SIF proceeds being applied to, inter alia, the creation of a surplus fund, set-asides for actuarial audits, costs for depositions and copies, and payments to medical specialists in certain occupational disease cases. Id. at 248, 1 OBR at 269, 438 N.E.2d at 1170, fn. 4. In other workers' compensation statutes, the General Assembly has expressly permitted fund proceeds to be used for some of the same types of compensation provided by Ohio Adm.Code 4123-6-13. By the time the General Assembly promulgated the HPP, it had previously authorized "reasonable compensation" from the fund to private entities who performed services comparable to those performed by MCOs under the HPP. See, e.g., R.C. 4123.68(V), (W), and (Y) (permitting fund proceeds to be used as compensation for specialists who make examinations and recommendations before an award of benefits for berylliosis, certain diseases incurred by firefighters/police, and pneumoconiosis).
As the MCO League notes in its amicus curiae brief supporting the appellants, the "medical management" services performed by MCOs under the HPP are simply a "generalized development of earlier instances of utilization review provided by external entities for the BWC." The BWC was entitled to rely on this historical practice when interpreting and applying the rules that it was delegated the authority to adopt under the HPP. It was reasonable for the BWC to conclude that the General Assembly provided it with the same authority to compensate MCOs for medical-utilization services under the HPP as the BWC had historically exercised to compensate outside vendors for similar services.
This is not a case, such as Cook Cty., supra, in which an agency ignored express terms contained in its enabling statute in order to expand broadly its own jurisdiction. See id., 531 U.S. at 171-172, 121 S.Ct. at 683, 148 L.Ed.2d at 587-589. In that case, the Corps's interpretation of its Migratory Bird Rule rendered specific language in the Clean Water Act with "no effect whatever." Id. Here, on the other hand, as in Swallow, 36 Ohio St.3d 55, 521 N.E.2d 778, and Chevron, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694, the agency's interpretation of Ohio Adm.Code 4123-6-13 has furthered the intent of the General Assembly in enacting the HPP and does not conflict with R.C. 4123.30. To the extent that the BWC's interpretation may conflict with this court's dicta in Corrugated Container, we disapprove of that dicta today.
C. . Constitutionality of the BWC's Interpretation
Having decided that the BWC reasonably interpreted Ohio Adm.Code 4123-6-13 and the workers' compensation statutes to authorize the use of SIF proceeds for the administrative and performance-incentive payments provided under the rule, we now turn to the constitutional question. Despite this court's broadly worded syllabus in Haylett, 87 Ohio St.3d 325, 720 N.E.2d 901, that "[t]he managed care organization program enacted in R.C. 4121.44 and 4121.441 does not violate Section 35, Article II of the Ohio Constitution," the court of appeals in this case decided that the bureau's chosen method of compensating MCOs for their services under the very same program violated the very same constitutional provision. Assuming, arguendo, that our holding in Haylett was not broad enough to encompass the specific constitutional claim asserted here, we now clarify that the use of SIF proceeds for these purposes does not violate Section 35, Article II of the Ohio Constitution and reverse the court of appeals' judgment to the contrary.
Section 35, Article II of the Ohio Constitution provides:
"For the purpose of providing compensation to workmen and their dependents, for death, injuries or occupational disease, occasioned in the course of such workmen's employment, laws may be passed establishing a state fund to be created by compulsory contribution thereto by employers, and administered by the state, determining the terms and conditions upon which payment shall be made therefrom."
We have previously described this constitutional provision as "a broad grant of power to establish and to administer the fund without limitation." (Emphasis added.) State ex rel. Michaels v. Morse (1956), 165 Ohio St. 599, 603, 60 O.O. 531, 533, 138 N.E.2d 660, 663. Here, though, the court of appeals took a more limited approach to the constitutional provision and determined that "[a]s the Supreme Court held in Corrugated and reaffirmed in Thompson, funds from SIF can only be spent for the purposes enumerated in Section 35, Article II of the Ohio Constitution which, as noted above, is limited to compensating injured workers and their dependents for injuries and illness arising out of their employment." (Emphasis added.) We find that the court of appeals read Section 35, Article II too narrowly and misconstrued the relationship between our decisions in Corrugated Container and Thompson.
In Corrugated Container, the precise issue before the court was "whether the state can take money which has been set aside for the payment of awards to injured workmen and transfer it to the money comprising the General Revenue Fund of the state." Id., 171 Ohio St. at 290, 13 O.O.2d at 337, 170 N.E.2d at 256. We held that the state could not constitutionally effect this diversion of fund proceeds. Id. at 291, 13 O.O.2d at 338, 170 N.E.2d at 256-257. As we later recognized in Thompson, transferring SIF proceeds to the state's general revenue fund creates a risk that the proceeds will be applied to purposes wholly unrelated to the workers' compensation system. See id., 1 Ohio St.3d at 246-247, 1 OBR at 267, 438 N.E.2d at 1169-1170. Moreover, in Corrugated Container, this court struck down an Industrial Commission resolution requiring the SIF to reimburse the general revenue fund for all amounts appropriated for the commission's administrative costs, when that resolution conflicted with express provisions of the Revised Code requiring the SIF to reimburse only two-thirds of those costs. Id., 171 Ohio St. 289, 13 O.O.2d 337, 170 N.E.2d 255.
In Thompson, however, this court distinguished Corrugated Container, rejected the court of appeals' "cramped" reading of Section 35, Article II, and held that the transfer of SIF investment income to the Disabled Workers' Relief Fund ("DWRF") did not violate the constitutional provision. Id., 1 Ohio St.3d at 246-248, 1 OBR at 267, 438 N.E.2d at 1169-1170. Writing for the majority, Justice A.W. Sweeney noted that "[t]he General Assembly is afforded substantial discretion to implement a comprehensive workers' compensation program and it is not the function of the judiciary to question the wisdom of the General Assembly's exercise of its permissive powers. [T]o hold otherwise and declare the DWRF program as presently funded and administered unconstitutional makes a cruel mockery of the laudable purpose that the constitutional provision was designed to serve." Id. at 249,1 OBR at 269, 438 N.E.2d at 1170.
The same logic and the Thompson court's careful distinction of Corrugated Container inform our decision here. In Thompson, this court noted that "the transfer of SIF investment funds to the DWRF is qualitatively different from the diversion of SIF funds proscribed in Corrugated Container. The DWRF is an integral component of Ohio's comprehensive workers' compensation program and, therefore, the use of SIF investment income to fund the DWRF does not contravene the principle enunciated in Corrugated Container." (Emphasis added.) Id. at 247, 1 OBR at 267, 438 N.E.2d at 1169. In Thompson, this court expressly approved the use of SIF proceeds to fund an integral component of the workers' compensation scheme. With its interpretation of Ohio Adm.Code 4123-6-13, the BWC simply seeks to apply SIF proceeds to fund what this court has already described as an "integral part" of the HPP — the medical-management services performed by the MCOs. Haylett, 87 Ohio St.3d at 326, 720 N.E.2d at 903. As the trial court noted in this case, "it is uncontroverted that the SIF funds at issue are being used in the HPP for purposes which relate to or are incidental to workers' compensation."
For the foregoing reasons, we conclude that the court of appeals erroneously relied on Corrugated Container to reverse the trial court's grant of summary judgment in favor of the appellants. We hold that the use of premium contributions from the State Insurance Fund for the payment of administrative and performance-incentive fees under Ohio Adm.Code 4123-6-13 to managed care organizations certified by the Bureau of Workers' Compensation under the Health Partnership Program does not violate Section 35, Article II of the Ohio Constitution. We thus reverse the court of appeals' decision and reinstate the decision of the trial court.
Judgment reversed.
Moyer, C.J., Pfeifer and Lundberg Stratton, JJ., concur.
Douglas, Resnick and F.E. Sweeney, JJ., dissent.