Opinion ID: 894529
Heading Depth: 1
Heading Rank: 3

Heading: The Medical Fee Guideline

Text: PAT argues that the version of the Medical Fee Guideline that TWCC adopted is invalid because TWCC did not substantially comply with the rulemaking procedures set forth under certain provisions of the Administrative Procedure Act (APA). Tex. Gov't Code § 2001.002 (1996). [3] Specifically, PAT alleges that TWCC (1) failed to comply with section 2001.033(1) of the APA by not including a reasoned justification for the Guideline; (2) failed to comply with section 2001.023(a) by not republishing the Guideline after amending it; (3) failed to comply with section 2002.014 by not making a copy of the proposed rule available to the public; and (4) failed to comply with section 2001.030 by not providing a statement of reasons for or against adopting the Guideline. For the reasons stated below, we affirm the court of appeals' judgment overruling PAT's procedural challenges to TWCC's enactment of the Guideline. See 80 S.W.3d at 75.
The APA requires an administrative agency to provide a reasoned justification for a rule it promulgates in the order adopting it. Tex. Gov't Code § 2001.033(1). That is, the order must include how and why the agency reached the conclusions it did for adopting the rule, and the conclusions must be presented in a relatively clear, precise, and logical fashion. Nat'l Ass'n of Indep. Insurers v. Tex. Dep't of Ins., 925 S.W.2d 667, 669 (Tex. 1996). The order also must provide (1) a summary of the comments received from interested parties; (2) a restatement of the factual basis for the rule; and (3) the reasons why the agency disagrees with the comments. Tex. Gov't Code § 2001.033(1)(A)-(C); Nat'l Ass'n of Indep. Insurers, 925 S.W.2d at 669. If an order fails to substantially comply with these requirements, the rule is invalid. Tex. Gov't Code § 2001.035(a); Nat'l Ass'n of Indep. Insurers, 925 S.W.2d at 669. Requiring an agency to demonstrate a rational connection between the facts before it and the agency's rules promotes public accountability and facilitates judicial review. Nat'l Ass'n of Indep. Insurers, 925 S.W.2d at 669. In the order adopting Rule 134.201, TWCC provided its reasons for enacting the Guideline. 21 Tex. Reg. 2361-92 (1996). Among other things, TWCC explained that based on an extensive national study by the Workers' Compensation Research Institute comparing fee reimbursement systems of twenty-seven states, Texas's workers' compensation system's reimbursements for specified procedures significantly exceeded the national median. 21 Tex. Reg. at 2362. TWCC's own analysis confirmed this conclusion. Id. TWCC enacted the Guideline to move Texas towards a median cost position in comparison with other states and towards a market based system which reimburses based on values set by the market for [medical] procedures.... Id. TWCC also explained its rationale for adopting statewide rates instead of utilizing regional MARs. Id. The agency's analysis found that the minimal overall variance in reimbursements among the various regions of the state did not justify developing a medical fee guideline with regional MARs. Id. Throughout the adoption order, TWCC provided factual evidence, policy objectives, and legal rationale for its decisions. See id. at 2361-92. The order included a summary of the written comments from interested parties and TWCC's responses to them. Id. at 2367-91. TWCC provided an extensive explanation of its reasoning for adopting the Guideline. Thus, TWCC substantially complied with the reasoned justification requirement of the APA.
TWCC published proposed Rule 134.201 in the October 20, 1995 issue of the Texas Register to notify persons of the agency's intent to adopt the Medical Fee Guideline and to allow interested parties to comment on the rule. 20 Tex. Reg. 8573-75 (1995). The proposed Guideline included a section on durable medical equipment. Id. at 8573-74. After receiving comments from over one hundred seventy individuals and businesses, TWCC made changes to the Guideline, including modifications to the durable medical equipment section, and then adopted the Guideline. 21 Tex. Reg. at 2361, 2365-66. TWCC explained in the order adopting Rule 134.201 that these changes were in response to public comment. Id. at 2365. In the proposed rule, TWCC stated that reimbursement for durable medical equipment would be based on documentation of procedure rather than on the MARs. 20 Tex. Reg. at 8574. The final rule adopted by TWCC, however, set reimbursement for durable medical equipment at the amount pre-negotiated between the provider and carrier, or if there was no pre-negotiated rate, at the fair and reasonable amount. 21 Tex. Reg. at 2363, 2365. PAT argues that the changes to the durable medical equipment section expanded the coverage of Rule 134.201 to include categories of persons not previously affected by the proposed rule, and therefore, TWCC was required to republish Rule 134.201 and provide a new period for public comment before the agency could legally adopt the Guideline. The APA requires a state agency to give at least thirty days' notice of its intention to adopt a rule before adopting the rule. Tex. Gov't Code § 2001.023(a). The agency must file notice of the proposed rule with the secretary of state for publication in the Texas Register. Id. § 2001.023(b). Notice of a proposed rule consists of, among other things, a brief explanation of the proposed rule, the text of the proposed rule, and a request for comments on the proposed rule from any interested person. Id. § 2001.024(a)(1)-(2), (7). The court of appeals, following the standard espoused in State Board of Insurance v. Deffebach, 631 S.W.2d 794, 801 (Tex. App.-Austin 1982, writ ref'd n.r.e.), held that TWCC did not violate the notice requirement of the APA by not republishing the modified Guideline. 80 S.W.3d at 74-75. In Deffebach, the sole published opinion of a Texas court on this issue, the court indicated that if a proposed rule is changed to incorporate public comments and no new subjects of regulation or persons besides those previously given notice are affected, then no further purpose would be served by requiring republication of the proposed rule. 631 S.W.2d at 801. The notice requirements of the federal Administrative Procedure Act are similar. See 5 U.S.C. § 553. An agency's notice of proposed rulemaking must include either the terms or substance of the proposed rule or a description of the subjects and issues involved. Id. § 553(b)(3). A majority of federal courts of appeals have held that under the federal APA the original notice is adequate if the modified final rule is a logical outgrowth of the published provisions. Am. Med. Ass'n v. United States, 887 F.2d 760, 767 (7th Cir.1989); Brazos Elec. Power Coop. v. Southwestern Power Admin., 819 F.2d 537, 543 (5th Cir.1987); Nat'l Black Media Coalition v. FCC, 791 F.2d 1016, 1022 (2d Cir.1986); AFL-CIO v. Donovan, 757 F.2d 330, 338 (D.C.Cir.1985); Chocolate Mfrs. Ass'n v. Block, 755 F.2d 1098, 1105 (4th Cir.1985); BASF Wyandotte Corp. v. Costle, 598 F.2d 637, 642 (1st Cir.1979). Stated differently, if the final rule does not materially alter the issues addressed in the proposed rule, then notice will be deemed sufficient. Chocolate Mfrs., 755 F.2d at 1105; see also Chrysler Corp. v. Dep't of Transp., 515 F.2d 1053, 1061 (6th Cir.1975) (a final rule is valid if it does not embrace any major subjects that were not described in the proposed rule). The standard for proper notice announced in Deffebach and the logical outgrowth test employed by the federal courts are not inconsistent. A final rule that significantly changes the issues involved in the rulemaking process raises new subjects and likely affects different persons than those previously given notice. The relevant inquiry under both standards is whether the agency's notice fairly apprises affected parties of the pertinent issues to allow them to comment and participate in the rulemaking process in a meaningful and informed manner. See Deffebach, 631 S.W.2d at 800-801; see also Am. Med. Ass'n, 887 F.2d at 767; Brazos, 819 F.2d at 543; Nat'l Black Media, 791 F.2d at 1022; Chocolate Mfrs., 755 F.2d at 1104; California v. Block, 690 F.2d 753, 772 (9th Cir.1982); BASF Wyandotte, 598 F.2d at 642; Am. Iron & Steel Inst. v. EPA, 568 F.2d 284, 293 (3d Cir.1977). We hold that a rule adopted by an administrative agency is a logical outgrowth of the proposed rule if the final rule does not materially alter the issues raised in the proposed rule. If an agency adopts a rule that comports with this standard, then the notice requirement of section 2001.023(a) is satisfied. This approach supports the rationale of the notice and comment requirement which is the expectation that the final rules will be somewhat different and improved from the rules originally proposed by the agency. Trans-Pacific Freight Conf. v. Fed. Mar. Comm'n, 650 F.2d 1235, 1249 (D.C.Cir. 1980). In the instant case, both the proposed rule and the final rule adopting the Guideline addressed durable medical equipment. 20 Tex. Reg. at 8573-74; 21 Tex. Reg. at 2361, 2363-65. The proposed rule apprised affected parties of TWCC's intention to change the method for determining durable medical equipment reimbursements and indicated the method the agency was contemplating. 20 Tex. Reg. at 8573-74. In response to comments TWCC received from affected parties, the final rule modified the approach for calculating reimbursements for durable medical equipment. 21 Tex. Reg. at 2365. This change, however, did not materially alter the issues raised in the proposed rule or affect persons other than those previously on notice. We are therefore persuaded that Rule 134.201 was a logical outgrowth of the published provisions.
PAT argues that copies of the proposed Guideline were not available to the public after the Guideline was adopted in its final form to allow a side-by-side analysis of changes to the rule. This, however, is not an APA requirement. The APA permits the secretary of state to omit information otherwise required to be published in the Texas Register if publication of the information would be cumbersome, expensive, or otherwise inexpedient, provided that copies of the omitted material are made available at a specified location by the adopting agency. Tex. Gov't Code § 2002.014. The purpose of section 2002.014 is to allow interested parties to obtain a copy of the material omitted from the Texas Register, prior to a rule's adoption, so that they may participate in the rulemaking process. This purpose was served in the present case. The Guideline, which is over 400 pages in length, was published in the Texas Register by reference on October 20, 1995. 20 Tex. Reg. at 8573-75. In the rule proposal, TWCC stated that interested parties could obtain copies of the Guideline at the agency's place of business. 20 Tex. Reg. at 8574-75. Evidenced by the numerous comments that TWCC received and subsequently addressed in the adoption order for Rule 134.201, see 21 Tex. Reg. at 2366-91, copies of the proposed Guideline were available, and many persons took the opportunity to offer meaningful and timely comments for TWCC's consideration. TWCC complied with the procedures specified under section 2002.014 of the Government Code.
PAT's last procedural challenge is that TWCC failed to provide a concise statement of the principal reasons for the agency's adoption of the Guideline when PAT requested it. The APA requires a person desiring a statement of reasons for or against adoption of a rule to submit a request either before adoption or not later than the 30th day after the date of adoption. Tex. Gov't Code § 2001.030. TWCC voted to adopt Rule 134.201 on February 15, 1996. PAT argues that on May 30, 1996 they requested from TWCC a statement of reasons for overruling the considerations urged against adoption of the Guideline. This request was made over one hundred days after the Guideline was adopted and well beyond the APA's thirty-day requirement. PAT argues that the date of adoption under section 2001.030 means the effective date, which in this case was April 1, 1996. However, we enforce the clear and unambiguous language of section 2001.030. See Albertson's, Inc. v. Sinclair, 984 S.W.2d 958, 960 (Tex.1999). Section 2001.030 refers to the actual date a rule is adopted and does not include a reference to a rule's effective date. Even if we were to agree with PAT that the date of adoption under section 2001.030 is the date a rule takes effect, PAT's request for a statement of reasons still would fall outside the thirty-day deadline in section 2001.030. TWCC's refusal to provide PAT with a statement of reasons for overruling the considerations urged against adopting Rule 134.201 did not violate section 2001.030.