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Click here for the full text of this decision FACTS:The Texas Department of Insurance’s Division of Workers’ Compensation (the division) administers the Texas Workers’ Compensation Act. Under the act, an injured worker may become entitled to receive impairment income benefits, which are based on an impairment rating assigned by a physician. Also, if an injured worker is assigned an impairment rating of 15 percent or higher, she may become eligible for supplemental income benefits after the expiration of impairment income benefits. The division is required to use the guides published by the American Medical Association (AMA) in determining the existence and degree of an injured worker’s permanent impairment. The Legislature granted the division discretion to adopt the fourth edition of the guides, which it did on June 7, 2000, after public notice and comment. The principal methodology found in the fourth edition of the guides is its injury model, which uses objectively verifiable evidence to place patients into one of eight diagnosis-related estimate (DRE) categories. The dispute in this case concerns the proper standard for assessing the DRE IV category for the lumbosacral spine in the context of spinal fusion surgeries. The guides requires either loss of motion segment integrity or a structural inclusion for a patient to be given a rating of DRE IV for the lumbosacral spine. For a patient to be diagnosed with loss of motion segment integrity for the lumbosacral spine, the guides requires that flexion and extension roentgenograms (X-rays) taken before the spinal fusion surgery establish translation of at least 5 millimeters of one vertebra on another or angular motion at a motion segment that is 11 degrees more than at an adjacent motion segment. The division’s medical adviser Dr. William Nemeth testified that instances where doctors performed spinal fusion surgeries but did not take preoperative flexion and extension X-rays created “a big hole in the system,” because confusion existed in the medical community regarding how to rate those patients. Because of this confusion, Nemeth drafted Advisory 2003-10, which was issued by the division’s executive director Richard Reynolds on July 22, 2003. Nemeth also drafted Advisory 2003-10B, which the executive director issued on Feb. 24, 2004. The second advisory added an additional section to the first. The advisories provide an alternative standard for assessing a DRE IV category when there are no preoperative X-rays. The carriers argued that the advisories allow doctors to place injured workers in categories DRE IV and DRE V when the guides would require them to be placed in DRE II or DRE III, resulting in increased impairment income benefits. Also, because category DRE III for the lumbosacral spine translates to a 10 percent impairment rating while DRE IV translates to a 20 percent impairment rating, the advisories allow some injured workers to become eligible for supplemental income benefits when they would not be eligible under the guides. Lumbermens Mutual Casualty Company filed suit against the division seeking judicial review of a division decision in a contested case hearing applying the advisories and a declaratory judgment under the Administrative Procedure Act (APA) that the advisories are inconsistent with the division’s Rule 130.1 and that their issuance and application is outside the division’s statutory authority. The trial court severed the suit for judicial review of the contested case hearing and the other insurance carriers then intervened in the declaratory judgment action. After a trial, the district court entered judgment declaring that the issuance of the advisories was an invalid attempt at ad hoc rulemaking and that the application of the advisories is an ultra vires act and enjoining the division from applying the advisories. The division appealed from the declaratory judgment, arguing that the trial court lacked subject matter jurisdiction under both the APA and the Uniform Declaratory Judgments Act (UDJA) and that the division is immune from suit because of sovereign immunity. The division contended that even if the court had jurisdiction, its decision was improper because the advisories are not rules and applying them is within the division’s statutory authority because the advisories are consistent with the guides. HOLDING:Affirmed. Because the carriers challenged the issuance of the advisories as outside the division’s authority, the court rejected the division’s argument that the availability of judicial review of contested case hearings under Texas Labor Code �410.251 barred the carriers’ UDJA action. A UDJA action to interpret the scope of an agency’s statutory authority is sufficient to invoke the trial court’s jurisdiction and to waive sovereign immunity, the court stated. The trial court did not err by declaring that the advisories are ad hoc rules, the court stated. Ad hoc rules are agency statements that interpret, implement or prescribe agency law or policy but are not the product of formal rulemaking procedures under the APA. The court held that because the advisories contradict the fourth edition of the guides, and thus contradict Texas Labor Code �408.124 and the division’s Rule 130.1, the trial court did not err by declaring that their issuance was invalid and that their application is an ultra vires act, and enjoining their continued use. OPINION:Smith, J.; Smith, Pemberton and Waldrop, J.J.

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