Harlingen Family Dentistry, P.C. v. Texas Health & Human Services Commission
452 S.W.3d 479
Tex. App.2014Background
- Harlingen Family Dentistry, P.C. and Trueblood Dental Associates, P.A. (the Dental Groups) sued HHSC challenging agency rules that allow pre-notice payment holds on Medicaid provider reimbursements and retention of funds after a hold ends.
- The rules at issue: former 1 Tex. Admin. Code § 371.1703(b)(5)–(6) and current 1 Tex. Admin. Code § 371.1709(a)(2), (3), (4) and § 371.1709(e)(2).
- Statutory framework: Gov’t Code § 531.102(g)(2) (as amended) and Hum. Res. Code § 32.0291 set narrow, specific bases for pre-notice holds (compel records, request by Medicaid Fraud Control Unit, credible evidence/credible allegation of fraud).
- HHSC’s rules authorized pre-notice holds for broader “program violations,” affiliation with violators, or any reason provided by statute/regulation, and allowed OIG to retain funds after a hold ended.
- Trial court upheld the rules; the court of appeals reversed, holding the challenged rule provisions exceed HHSC’s statutory authority and that retention-after-termination provision is invalid when the statutory basis for the hold no longer exists.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HHSC may adopt rules authorizing pre-notice payment holds for non-fraud "program violations" or affiliation | Rules exceed statutory authority because pre-notice holds are limited to narrow fraud/records-request circumstances | HHSC argued its rulemaking for efficient Medicaid operation implies authority to impose holds for program enforcement | Held: Invalid — rules exceed statute; pre-notice holds must be limited to statutorily enumerated serious circumstances involving fraud/records requests |
| Whether HHSC may impose pre-notice holds without providing SOAH expedited hearing/other protections when not based on fraud | Providers lack statutory protections under HHSC rule; disparate due-process treatment undermines statutory scheme | HHSC contended implied enforcement mechanisms are necessary and reasonable for program operation | Held: Invalid — permitting pre-notice holds without required procedural protections departs from legislative intent |
| Whether HHSC may retain funds accumulated during a payment hold after the hold terminates | OIG may not continue possession once the statutory basis for a temporary hold ends | HHSC argued it may retain funds to offset overpayments or criminal restitution pending investigation/resolution | Held: Invalid as applied to holds lacking statutory basis; for holds under §531.102(g)(2) OIG cannot retain funds once the statutory justification for temporary possession ceases |
| Whether HHSC’s grant of general rulemaking authority permits the contested rules | Dental Groups: general authority does not imply power to create new, burdensome pre-notice seizure powers inconsistent with statutes | HHSC: broad rulemaking for program efficiency supports implied enforcement powers | Held: Limited — implied authority exists only when necessary and reasonable; not enough to justify challenged pre-notice holds or post-termination retention beyond statutory limits |
Key Cases Cited
- Public Util. Comm’n v. City Pub. Serv. Bd., 53 S.W.3d 310 (Tex. 2001) (agencies possess only statutory or necessarily implied powers)
- Public Util. Comm’n of Tex. v. GTE-Southwest, Inc., 901 S.W.2d 401 (Tex. 1995) (agency cannot exercise new powers merely because they are expedient)
- City of Rockwall v. Hughes, 246 S.W.3d 621 (Tex. 2008) (plain statutory text is primary evidence of legislative intent)
- Railroad Comm’n of Tex. v. Lone Star Gas Co., 844 S.W.2d 679 (Tex. 1992) (rules must be in harmony with legislative objectives)
- Christian Care Ctrs., Inc. v. Texas Dep’t of Human Servs., 826 S.W.2d 715 (Tex. App.—Austin 1992) (limits on implying authority; agency may not depart from statute’s intent)
- Bullock v. Hewlett-Packard Co., 628 S.W.2d 754 (Tex. 1982) (implied authority limited to what is necessary and reasonable)