Texas Health and Human Services Commission v. El Paso County Hospital District

Fourteen Texas hospitals initiated proceedings challenging the methodology used by the Health and Human Services Commission in determining the rates under which the agency reimburses Texas hospitals for inpatient services provided to Medicaid insureds. The Texas Supreme Court declared invalid part of HHSC's rate-setting methodology, enjoined its enforcement, and declared that the hospitals were entitled under HHSC's rules to a contested-case hearing regarding the agency's calculation of the reimbursement rates. It remanded the cause to the district court for further proceedings. During the intervening years, HHSC had implemented Medicaid reimbursement rates derived from the methodology the supreme court later held invalid and paid the hospitals' Medicaid reimbursement claims in accordance with those rates. On remand, the hospitals sought remedies that had the ultimate goal of recovering any "underpayments" of Medicaid reimbursement caused by HHSC's application of the now-invalidated rate methodology. At the hospitals' urging, the district court rendered a judgment that granted injunctive relief contemplating that HHSC would recalculate, without applying the invalidated part of its rate methodology, the reimbursement rates that would have applied beginning in state fiscal year 2002 and each year thereafter. On appeal, HHSC challenges this injunctive relief to the extent it applies to time periods before the date of the Texas Supreme Court's mandate. To the extent the district court's injunction applies to the calculation of the reimbursement rates applicable during state fiscal year 2008 or later, the relief merely tracks the legal effect of the supreme court's judgment. To the extent the injunction extends to recalculations of the rates that applied during prior years, it goes beyond the relief awarded in the supreme court's judgment and was error. The district court's injunction is affirmed in part, and reversed and vacated in part. Austin Court of Appeals, No. 03-09-00318-CV, 08-04-2011.