Texas Health and Human Services Commission and Office of Inspector General v. Antoine Dental Center

ACCEPTED

06-15-00076-CV

SIXTH COURT OF APPEALS

TEXARKANA, TEXAS

11/9/2015 4:47:09 PM

DEBBIE AUTREY

CLERK

No. 06-15-00076-CV

FILED IN

In the Court of Appeals for the 6th COURT OF APPEALS

Sixth Judicial District TEXARKANA, TEXAS

11/10/2015 8:06:00 AM

Texarkana, Texas

DEBBIE AUTREY

Clerk

Texas Health and Human Services Commission, AND

Office of Inspector General,

Appellants,

v.

Antoine Dental Center,

Appellee.

th

On Appeal from the 200 Judicial District Court of Travis County, Texas

Cause No. D-1-GN-14-002229

Hon. Amy Clark Meachum, Presiding

BRIEF OF APPELLANTS

Respectfully submitted, RAYMOND CHARLES WINTER

State Bar No. 21791950

Office of the Attorney General Chief, Civil Medicaid Fraud Division

CHARLES E. ROY REYNOLDS B. BRISSENDEN

First Assistant Attorney General State Bar No. 24056969

JAMES E. DAVIS NOAH REINSTEIN

Deputy Attorney General for Civil State Bar No. 24089769

Litigation

Assistant Attorneys General

Office of the Texas Attorney General

P.O. Box 12548, Capitol Station MC 056-1

Austin, Texas 78711-2548

Telephone: (512) 936-1709

Facsimile: (512) 370-9477

Raymond.Winter@texasattorneygeneral.gov

Attorneys for Texas Health and Human

Services Commission and Office of Inspector

General

Submitted: November 9, 2015 ORAL ARGUMENT REQUESTED

IDENTITY OF PARTIES AND COUNSEL

Pursuant to Tex. R. App. P. 38.1(a), appellant presents the following list of all

parties and names and addresses of counsel:

Appellant/Defendant at District Court: Texas Health and Human Services

Commission and Office of Inspector

General

Counsel:

Raymond C. Winter

Reynolds B. Brissenden

Noah Reinstein

Office of the Texas Attorney General

P.O. Box 12548

Austin, Texas 78711-2548

Telephone: (512) 936-1709

Facsimile: (512) 370-9477

Appellee/Plaintiff at District Court: Antoine Dental Center

Counsel: Jason Ray

Riggs & Ray, PC

506 W. 14th Street, Suite A

Austin, Texas 78701

Telephone: (512) 457-9812

Facsimile: (512) 457-9066

ii

TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL ...................................................... ii

TABLE OF CONTENTS ..................................................................................... iii

INDEX OF AUTHORITIES ............................................................................... vi

STATEMENT OF THE CASE .............................................................................2

STATEMENT REGARDING ORAL ARGUMENT .........................................3

ISSUES PRESENTED ...........................................................................................3

STATEMENT OF FACTS ....................................................................................4

I. The Texas Medicaid program provides health care for the indigent,

including limited orthodontia services..................................................4

A. Medicaid provides a limited benefit for orthodontics. ........................4

B. Providers must obtain prior authorization by accurately and

honestly representing that their patient has a severe handicapping

malocclusion before they may request reimbursement for

orthodontic services. ...............................................................................6

1. Providers are required to rely on their education and

training in making diagnoses, requesting prior authorization,

and making claims for Medicaid reimbursement. ...................7

2. “Ectopic eruption” is an exceedingly rare condition, and in

the TMPPM the term is afforded the meaning generally

understood in the practice of dentistry. ....................................8

II. HHSC-OIG is responsible for protecting Medicaid from waste,

fraud and abuse. OIG is required by law to impose a payment hold

based on a credible allegation that a provider has committed

Medicaid fraud. .....................................................................................10

III. Antoine billed Texas Medicaid for more than $8 million in

orthodontia services over a three-year period, and OIG placed

Antoine on payment hold. ....................................................................14

IV. Antoine requested a hearing on the payment hold, and, after the

iii

hearing and the ALJs’ recommendation that HHSC order OIG to

lift the hold, the EC reversed the PFD and ordered the hold to

remain in place. .....................................................................................19

STANDARD OF REVIEW .................................................................................21

SUMMARY OF THE ARGUMENT ..................................................................24

ARGUMENT ........................................................................................................25

I. The EC acted within his discretion to correct misapplications of

Medicaid law and policy by the SOAH ALJs. ...................................25

A. The proper interpretation of Texas Medicaid policy is a

question of law to be determined by the EC. The EC

properly interpreted Medicaid policy in harmony with the

governing statutes and regulations, and Antoine has shown

no basis for the Court to deviate from the EC’s correct

interpretation. ............................................................................27

B. The EC’s corrections of the ALJs’ errors in interpreting

Medicaid policy are entitled to respect from the Court. .......29

II. The EC did not exceed his authority in entering the AFO and

Antoine cannot establish otherwise.....................................................32

A. The ALJs misunderstood and misapplied Texas Medicaid

law and policy and the EC corrected the misunderstanding

with a proper construction of law and policy. ........................33

1. The rules of statutory construction govern questions of

agency policy and administrative rules. ..............................37

2. The ALJs ignored statutes, rules, and evidence and made

fundamental errors in interpreting and applying Texas

Medicaid policy. The misapplications were properly

corrected by the EC. .............................................................38

B. Substantial evidence exists to show that Antoine committed

fraud or made willful misrepresentations necessary to

maintain the payment hold. The EC properly corrected the

ALJs’ errors, and Antoine cannot establish that the EC

exceeded his authority. .............................................................43

1. Providers have a duty to know and follow law and policy.

iv

.................................................................................................44

2. Dr. Kanaan’s scoring pattern shows, at a minimum, he

acted with conscious disregard or reckless indifference to

the truth or falsity of his representations of patient

conditions. ..............................................................................45

3. The ALJs compounded their errors by relying on

“experts” who misunderstood and misapplied Texas

Medicaid policy......................................................................47

III. Every modification made in the EC’s AFO is supported by

substantial evidence and Antoine cannot establish otherwise..........49

A. Finding of Fact No. 45...............................................................49

B. Finding of Fact No. 46...............................................................51

C. Finding of Fact No. 47...............................................................52

D. Finding of Fact No. 48...............................................................54

E. Finding of Fact No. 49...............................................................56

F. Finding of Fact No. 50...............................................................57

G. Conclusion of Law No. 13. ........................................................58

CERTIFICATE OF COMPLIANCE .................................................................61

CERTIFICATE OF SERVICE ...........................................................................61

INDEX OF APPENDIX .......................................................................................62

v

INDEX OF AUTHORITIES

Cases

Akin v. Tex. State Bd. of Dental Exam’rs, No. 03-14-00390-CV, 2015 WL1611803,

(Tex. App.—Austin Apr. 9, 2015, no pet.hist.).........................24, 25, 26, 28, 43, 59

Atascosa Cnty. v. Atascosa Cnty. Appraisal Dist., 990 S.W. 2d 255 (Tex.1999)...29

Bd. of Law Exam’rs v. Stevens, 868 S.W.2d 773 (Tex. 1994), cert. denied, Stevens

v. Bd. of Law Exam’rs, 512 U.S. 1206, 114 S.Ct. 2676 (1994)…………...............22

Bd. of Trs. of the Emps. Ret. Sys. v. Benge, 942 S.W.2d 742 (Tex. App.—Austin

1997, writ denied)....................................................................................................22

Boswell v. Brazos Electric Power, 910 S.W.2d 593 (Tex. App.—Fort Worth 1995,

writ denied)........................................................................................................37, 42

Bridgestone/Firestone, Inc. v. Glyn-Jones, 878 S.W.2d 132 (Tex.1994)…….38, 40

City of El Paso v. Pub. Util. Comm’n, 883 S.W.2d 179 (Tex. 1994)..........22, 23, 32

City of Waco v. Tex. Comm’n Envtl. Quality, 346 S.W.3d 781(Tex. App. —Austin

2011, rev’d on other grounds 413 S.W.3d 409 (Tex. 2013))…..............................32

Cont’l Cas. Ins. Co. v. Functional Restoration Assocs.,19 S.W.3d 393 (Tex.

2000)........................................................................................................................37

Employees Ret. Sys. of Texas v. Garcia, 454 S.W.3d 121 (Tex. App.—Austin

2014), pet. denied (Sept. 4, 2015)………………...…….......…………………21, 32

Exxon Corp. v. R.R. Comm'n, 993 S.W.2d 704 (Tex. App.—Austin 1999, no

pet.)..........................................................................................................................27

Fitzgerald v. Advanced Spine Fixation Sys., Inc.,996 S.W.2d 864 (Tex. 1999).....37

Flores v. Emps. Ret. Sys. of Tex., 74 S.W.3d 532 (Tex. App.—Austin 2002, pet.

denied).....................................................................................................................49

Froemming v. Tex. State Bd. of Dental Exam’rs, 380 S.W.3d 787 (Tex. App.—

Austin 2012, no pet.)...................................................................................24, 26, 28

vi

Gomez v. Tex. Educ. Agency, 354 S.W.3d 905 (Tex. App.—Austin 2011, pet.

denied).....................................................................................................................29

Graff Chevrolet Co. v. Tex. Motor Vehicle Bd., 60 S.W.3d 154 (Tex. App.—Austin

2001, pet. denied).........................................................................................22-23, 24

Granek v. Texas State Bd. of Med. Exam'rs, 172 S.W.3d 761 (Tex. App.—Austin

2005, no pet.)...........................................................................................................59

Gulf States Utils. Co. v. Pub. Util. Comm’n,841 S.W.2d 459 (Tex. App.—Austin

1992, writ denied)....................................................................................................22

Harlingen Family Dentistry v. Tex. Health & Human Servs. Comm’n, 452 S.W.3d

479 (Tex. App.—Austin 2014, pet. filed)................................................................18

Heckler v. Community Health Servs., 467 U.S. 51(1984)..................................43-44

Heritage on the San Gabriel v. Tex. Comm’n on Envt’l Quality, 393S.W.3d

417(Tex. App.—Austin 2012, pet. denied).......................................................32, 49

In re: E.I. DuPont de Nemours & Co., 136 S.W.3d 218 (Tex. 2004).....................13

Levy v. Tex. State Bd. of Medical Exam’rs, 966 S.W.2d 813 (Tex. App.–Austin

1998, no pet.)...........................................................................................................49

Lewis v. Southmore Savings Ass’n, 480 S.W.2d 180 (Tex. 1972)...........................23

Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482

(Tex. 1998)……...……………………………………………………………...... 37

Locklear v. Tex. Dep’t of Ins., 30 S.W.3d 595 (Tex. App.—Austin 2000, no

pet.)………………………………………………………………………………..23

N. Mem’l Med. Ctr. v. Gomez, 59 F. 3d 735 (8th Cir. 1995)...................................45

Personal Care Products, Inc. v. Hawkins, 635 F. 3d 155 (5th Cir. 2001)..............44

Pierce v. Tex. Racing Comm’n, 212 S.W.3d 745 (Tex. App.—Austin 2006, pet.

denied)…………………………....... …………………………...……………49, 59

R.R. Comm’n of Tex. v. Tex. Citizens for a Safe Future & Clean Water, 336 S.W.

3d 619 (Tex. 2011)…..…................................................................28, 29, 32, 37, 38

vii

Rehak Creative Servs. v. Witt, 404 S.W.3d 716 (Tex. App.—Houston [l4th Dist.]

2013, pet. denied)....................................................................................................55

Sanchez v. Tex. State Bd. of Med. Exam’rs, 229 S.W.3d 498 (Tex. App.—Austin

2007, no pet.)...............................................................................................24, 27, 50

Smith v. Montemayor, 03-02-00466-CV, 2003 WL 21401591 (Tex. App.—Austin

June 19, 2003, no pet.)...........................................................................26, 27, 28, 50

State v. Pub. Util. Comm’n, 883 S.W.2d 190(Tex. 1994)...........................21, 22, 32

State v. Terrell, 588 S.W.2d 784 (Tex.1979).....................................................37-38

State v. Mid-South Pavers, Inc., 246 S.W.3d 711(Tex. App.–Austin 2007, pet.

denied).....................................................................................................................49

Sw. Pharm. Solutions, Inc., v. Tex. Health & Human Servs. Comm’n, 408 S.W.3d

549 (Tex. App.—Austin 2013, pet. denied).........................28, 29, 30-31, 32, 42, 48

Tex. Ass’n of Psychological Assocs. v. Tex. State Bd. of Exam’rs of Psychologists,

439 S.W.3d 597602 (Tex. App.—Austin 2014, no pet.).........................................23

Tex. Emp’t Comm’n v. Hays, 360 S.W.2d 525 (Tex. 1962)...............................21-22

Tex. Health Facilities Comm’n. v. Charter Med.-Dallas, Inc., 665 S.W.2d 446

(Tex.1984)...............................................................................................................21

Tex. State Bd. of Med. Exam’rs v. Birenbaum, 891 S.W.2d 333 (Tex. App.—Austin

1995, writ denied)....................................................................................................22

Tex. State Bd. of Med. Exam’rs v. Dunn, 03-03-00180-CV, 2003 WL 22721659

(Tex. App.—Austin Nov. 20, 2003, no pet.)..........................................26-27, 49, 50

Tex. State Bd. of Dental Exam’rs v. Sizemore, 759 S.W.2d 114 (Tex. 1988).........22

Tex. Tech Univ. Health Scis. Ctr. v. Apodaca, 876 S.W.2d 402 (Tex. App.—El

Paso 1994, writ denied)...........................................................................................13

TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432 (Tex. 2011)…............40

United States v. Carbajal, 290 F.3d 277 (5th Cir. 2002)........................................12

viii

United States v. Floyd, 343 F.3d 363 (3d Cir. 2003)...............................................12

Wood v. Tex. Comm’n Envtl. Quality, No. 13-13-00189-CV, 2015 WL 1089492

(Tex. App.—Corpus Christi, Mar. 5, 2015, no pet.).........................................26, 48

Zimmer US, Inc. v. Combs, 368 S.W.3d 579 (Tex. App.—Austin 2012, no pet)....30

Federal Regulations/Statutes

42 C.F.R. § 455.2...............................................................................................12, 46

42 C.F.R. § 455.23.............................................................................2, 11, 12, 18, 58

42 C.F.R. § 455.23(a)(1)....................................................................................11-12

42 U.S.C. §1395........................................................................................................4

42 U.S.C. §1396..................................................................................................4, 11

State Regulations

1 Tex. Admin. Code § 155.507(c)(1)......................................................................19

1 Tex. Admin. Code § 357.483(a)(1)-(2)................................................................20

1 Tex. Admin. Code § 357.488(b)...........................................................................20

1 Tex. Admin. Code § 357.497...............................................................................19

1 Tex. Admin. Code § 357.497(e)...........................................................................20

1 Tex. Admin. Code § 371.1...................................................................................10

1 Tex. Admin. Code § 371.1605.............................................................................11

1 Tex. Admin. Code § 371.1617(a)(1)(A)-(C)........................................................58

1 Tex. Admin. Code § 371.1617(a)(3)....................................................................20

1 Tex. Admin. Code § 371.1617(5)(B)...................................................................11

1 Tex. Admin. Code § 371.1617(1)(A)...................................................................18

1 Tex. Admin. Code § 371.1617(1)(B)...................................................................18

1 Tex. Admin. Code § 371.1617(1)(I).....................................................................18

1 Tex. Admin. Code § 371.1617(1)(K)...................................................................18

1 Tex. Admin. Code § 371.1617(2)(A)...................................................................18

1 Tex. Admin. Code § 371.1703(b)(3)....................................................................58

25 Tex. Admin. Code § 33.71....................................................4-5, 6, 34, 36, 39, 41

State Statutes

Tex. Gov’t Code § 311.002(4).................................................................................37

Tex. Gov’t Code § 311.011(a)...........................................................................38, 39

Tex. Gov’t Code § 311.011(b)...........................................................................38, 41

Tex. Gov’t Code § 311.021(2) ......................................................................... 38, 41

ix

Tex. Gov’t Code § 311.021(3)...........................................................................38, 41

Tex. Gov’t Code § 311.021(4)...........................................................................38, 41

Tex. Gov’t Code § 311.021(5)...........................................................................38, 41

Tex. Gov’t Code § 311.023(1)...........................................................................38, 41

Tex. Gov’t Code § 311.023(5)...........................................................................38, 41

Tex. Gov’t Code § 311.023(6).....................................................................29, 38, 41

Tex. Gov’t Code § 312.005.....................................................................................37

Tex. Gov’t Code § 531.001................................................................................10-11

Tex. Gov’t Code § 531.0055(b)(1)............................................................................4

Tex. Gov’t Code § 531.1011(1)...............................................................................12

Tex. Gov’t Code § 531.102.....................................................................................10

Tex. Gov’t Code § 531.102(a).................................................................................18

Tex. Gov’t Code § 531.102(g).................................................................................58

Tex. Gov’t Code § 531.102(g)(2)............................................................2, 11, 18, 47

Tex. Gov’t Code § 2001.058(e)...................................................................26, 27, 59

Tex. Gov’t Code § 2001.058(e)(1)....................................................................24, 26

Tex. Gov’t Code § 2001.062(b)...............................................................................19

Tex. Gov’t Code § 2001.174...................................................................................21

Tex. Gov’t Code § 2001.174(1)...............................................................................21

Tex. Gov’t Code § 2001.174(2)...............................................................................23

Tex. Gov’t Code § 2001.175(e)...............................................................................21

Tex. Hum. Res. Code § 32.0291(b).............................................................13, 18, 19

Tex. Hum. Res. Code § 32.0291(c).....................................................................2, 13

Tex. Hum. Res. Code § 32.032(b)(1)......................................................................10

Tex. Hum. Res. Code § 32.091(c)...........................................................................58

Tex. Hum. Res. Code § 36.0011(a).......................................................11, 53, 55, 56

Tex. Hum. Res. Code § 36.0011(b)...................................................................53, 56

Secondary Sources

F. Scott McCown & Monica Leo, When Can an Agency Change the Findings of

Conclusions of an ALJ?: Part Two, 51 Baylor L. Rev. 63, 69-70

(1999)………………………………………………...……….……….26, 27, 50

x

No. 06-15-00076-CV

In the Court of Appeals for the Sixth Judicial District

Texarkana, Texas

Texas Health and Human Services Commission, AND

Office of Inspector General,

Appellants,

v.

Antoine Dental Center,

Appellee.

th

On Appeal from the 200 Judicial District Court of Travis County, Texas

Cause No. D-1-GN-14-002229

Hon. Amy Clark Meachum, Presiding

TO THE HONORABLE SIXTH COURT OF APPEALS:

The Texas Health and Human Services Commission (“HHSC”), and the Office

of Inspector General (“OIG”) (collectively “State”) respectfully request that this

Court reverse the district court’s decision, which reversed HHSC’s entry of an

Amended Final Order (“AFO”) sustaining a payment hold against Antoine Dental

Center (“Antoine”) for violations of Texas law and regulations related to the

Medicaid program.

HHSC Executive Commissioner Dr. Kyle Janek (“EC”) acted within his

authority in entering the AFO, which is supported by substantial evidence. The

district court erred in reaching its decision that the AFO should be reversed because

the AFO is reasonably supported by substantial evidence and because the EC acted

1

within its statutory authority in entering the AFO. At the district court, Antoine

failed to meet its burden to show otherwise. Therefore, the AFO should be affirmed

by this Court.

STATEMENT OF THE CASE

The EC, on behalf of HHSC, issued the AFO, affirming a payment hold

imposed by HHSC-OIG on Antoine. Tex Hum. Res. Code § 32.0291(c); Tex.

Gov’t Code § 531.102(g)(2); 42 C.F.R. § 455.23. See Appendix A, HHSC’s

AFO, dated May 2, 2014 (copy also at A.R. 1743-85).1 Antoine filed a suit for

judicial review appealing the AFO. The district court reversed the AFO without

giving any explanation for its reversal. Aggrieved by the district court order, the

State timely filed this appeal.

1

The pleadings and copies of the hearing transcript, contained within HHSC’s

Administrative Record (“A.R.”), are labeled with the Bates prefix “00001” through “2795.” The

A.R. was admitted as Exhibits 1 and 2 in the district court and is part of the clerk’s record.

2

STATEMENT REGARDING ORAL ARGUMENT

Pursuant to Tex. R. App. P. 38.1(e), the State respectfully requests oral

argument. Antoine’s position, if accepted, would severely undermine the State’s

efforts to punish and deter fraud in the Medicaid program, which comprises a quarter

of the State’s budget. An adverse decision would likely impede the State’s efforts

to enforce numerous other public-welfare statutes that expressly authorize the State

to sue wrongdoers in the health and medical fields. The State believes that oral

argument will assist the Court’s decisional process; and the importance of the matter

and the intricacies of the relevant statutes and Medicaid policies warrant oral

argument.

ISSUES PRESENTED

I. The EC acted within his discretion to correct misapplications of Medicaid

law and policy by the SOAH ALJs.

II. The EC did not exceed his authority in entering the AFO and Antoine

cannot establish otherwise.

III. Every modification made in the EC’s AFO is supported by substantial

evidence and Antoine cannot establish otherwise.

3

STATEMENT OF FACTS

I. The Texas Medicaid program provides health care for the

indigent, including limited orthodontia services.

The federal government enacted the Medicaid program in 1965 to help the

states provide healthcare for the indigent. Medicaid is funded jointly by federal and

state government, as mandated by federal law. 42 U.S.C. § 1396. In Texas, the

agency responsible for administering Medicaid is HHSC. Tex. Gov’t Code §

531.0055(b)(1).2

A. Medicaid provides a limited benefit for orthodontics.

Texas Medicaid provides coverage for orthodontic services to qualifying

children on a very limited basis. 3 The law restricts when Texas Medicaid will pay

for orthodontic services:

Orthodontic services for cosmetic reasons only are not a

covered Medicaid service. Orthodontic services must be prior

authorized and are limited to treatment of severe

handicapping malocclusion and other related conditions as

described and measured by the procedures and standards

published in the TMPPM [(“Texas Medicaid Provider

Procedures Manual”)].

2

Currently more than 4.5 million Texans are enrolled in Medicaid. See

http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-State/texas.html, Appendix

B. In 2013, Medicaid comprised about 26.2 percent of the Texas state budget, amounting to

approximately $25.6 billion dollars. See Pink Book, 1-1, Appendix C.

3

HHSC administers the Medicaid program pursuant to Texas’s “Medicaid state plan.” The state

plan, is reviewed and approved by the federal Centers for Medicare & Medicaid Services. Tex.

Gov’t Code § 531.097.

4

25 Tex. Admin. Code § 33.71 (emphasis added). Since 2003, the Texas Medicaid

orthodontia benefit policy has covered orthodontic services under limited scenarios.

Relevant to this matter is coverage for children between the ages of 12 and 20 who

have dysfunction and a severe handicapping malocclusion which is defined by an

accurate and honest Handicapping Labio-lingual Deviation (“HLD”) score of 26

points or greater. Texas Medicaid does not pay, nor has it ever paid, for cosmetic

orthodontics. See, e.g., TMPPM (2011) (Ex. R-17), Vol. 2, § 4.2.24, copy at

Appendix D; TMPPM (2010) (Ex. R-16),Vol. 2, § 5.3.24 (same), copy at

Appendix E; TMPPM (2009), Vol. 2, § 19.19 (Ex. R-15) (same), copy at

Appendix F; 4 TMPPM (2008), Vol. 2 § 19.18 (Ex. R-14), copy at Appendix G.

See also 25 Tex. Admin. Code § 33.71 (same). In all qualifying cases,

comprehensive orthodontic treatment (i.e. “full banding” or “full braces,”) is only

available for children twelve years of age to twenty (at the time of prior

authorization) who have lost their baby teeth. See Ex. R-15 at § 19.19.6; App. F.

4

The TMPPM states:

19.19 Orthodontic Services (THSteps): Orthodontic services for cosmetic purposes only are not

a benefit of Texas Medicaid. Orthodontic services are limited to the treatment of children who

are 12 years of age and older with severe handicapping malocclusion…

19.19.1 Benefits and Limitations: Orthodontic services include the following: Correction of

severe handicapping malocclusion as measured on the Handicapping Labiolingual Deviation

(HLD) Index…A minimum score of 26 points is required for full banding approval (only

permanent dentition cases are considered)…

Orthodontic services for cosmetic purposes only are not a benefit of Texas Medicaid or THSteps.

5

B. Providers must obtain prior authorization by accurately and

honestly representing that their patient has a severe

handicapping malocclusion before they may request

reimbursement for orthodontic services.

Providers must submit a prior authorization request, and receive approval,

before seeking reimbursement for orthodontic services. See 25 Tex. Admin. Code §

33.71; see also Ex. R-15 at § 19.19.2; App. F. “Prior authorization is a condition for

reimbursement; it is not a guarantee of payment.” Id. Providers are required to

submit truthful and complete information when seeking prior authorization.5

The prior authorization application includes the provider’s certification that a

child has a severe handicapping malocclusion and the treatment is necessary to

correct it. To support a finding that a child has a severe handicapping malocclusion,

a provider must, inter alia, submit an HLD scoresheet accurately evaluating the

patient. See Ex. R-15 at § 19.19.2 (2009); App. F. A prior authorization request is

generally approved if the child has a severe handicapping malocclusion, as indicated

by an honest score of 26 or more on the HLD. See id. 6

5

Specifically, providers are required to submit:

• An orthodontic treatment plan, which “should incorporate only the minimal number of

appliances required to properly treat the case”;

• “[c]ephalometric radiograph with tracing models”;

• “[c]ompleted and scored HLD score sheet with diagnosis of Angle class (26 points

required for approval of non-cleft palate cases.”);

• Facial photographs;

• Full series of radiographs or a panoramic radiograph; diagnostic films are required.

Id., at App. F.

6

For a patient for whom the provider scores less than 26, the provider may submit a written

narrative to qualify for benefits. This did not occur with the patients in this case

6

1. Providers are required to rely on their education and

training in making diagnoses, requesting prior

authorization, and making claims for Medicaid

reimbursement.

The HLD allows providers to score nine specific dental conditions in a

patient’s mouth. The conditions identified on the HLD scoresheet are conditions that

are generally recognized in dentistry, including but not limited to: ectopic eruption,

cleft palate, overjet, overbite, and mandibular protrusion (“underbite”). The

condition most relevant in this case is ectopic eruption.

The TMPPM instructs providers how to score using the HLD scoresheet. The

instructions include a description of ectopic eruption. See, e.g., Ex. R-15 at § 19.21

(2009), at App. F. The TMPPM does not define ectopic eruption for the purposes

Texas Medicaid. HHSC’s policy expert Dr. Altenhoff testified that the terms in the

ectopic eruption instruction are not defined, but, rather, are accorded their plain and

ordinary meaning in the English language. Vol. 1 at 103:8-12, A.R. at 1914; see also

R-88, Proffer of Rebuttal Testimony from Dr. Linda Altenhoff (Medicaid did not

intend, at any time, for the term “‘ectopic eruption’ to have a different meaning when

used in the evaluation of Medicaid patients than is generally understood in the

practice of dentistry” and “dentists [were] expected to employ the training and

education they received as dentists in applying the terms used in the Provider

Manual”), Appendix J; and Vol. 3 at 241:5-11 (where Deputy Inspector General for

Enforcement testified to the same proposition), A.R. at 2528.

7

2. “Ectopic eruption” is an exceedingly rare condition, and

in the TMPPM the term is afforded the meaning

generally understood in the practice of dentistry.

“Ectopic eruption” is a rare dental condition – occurring in only 1.5 to 9

percent of the population 7 – primarily affecting the first molars, upper and lower

canines.8 Scientific literature describes the low frequency of ectopic eruption

occurring even once per patient. See R-51, (ectopic eruption only occurring in 1.5-

1.6% of a sample population), at App. H. The frequency of the same rare condition

occurring multiple times and/or bilaterally in the same patient is “infinitesimally

smaller.” 9 The chance of 100% of the patients in a sample having not only one

instance of a rare condition, but always at least 6 instances, and always two or more

bilateral instances, is “zero. It’s not possible.” 10

OIG’s orthodontic expert, Dr. Larry Tadlock, described that ectopic eruption,

as explained in Dr. William Proffit’s textbook Contemporary Orthodontics, means

a tooth that erupts in the wrong place.11 The Proffit textbook, a leading orthodontic

textbook, explains that ectopic eruption is caused by malposition of a permanent

7

Vol. 1 at 173:3-6, A.R. at 1984; see also R-51 at 8 (Thilander article describing ectopic eruption

as an “anomaly” occurring in only 1.5-1.6% of a sample population of 4724 patients), Appendix

H.

8

Vol. 1 at 153:22-24, A.R. at 1964.

9

Vol. 1 at 174:16-17, A.R. at 1985.

10

Id. at 174:1, A.R. at 1985; R-49, Tadlock summary, at A.R. 1097-98, Appendix I.

11

Id.at 114:18-23, A.R. at 1925.

8

tooth bud and most commonly occurs in the maxillary first molars. 12 “Ectopic

eruption of other teeth is rare, but can result in transposition.” 13 The following

photographs provide examples of ectopic eruption:

R-31A (showing upper and lower ectopically-erupted canines (images of non-

Antoine patients provided by Dr. Tadlock)), at A.R. 1031.14

See R-31L (showing an ectopically-erupted upper left central incisor (image of non-

Antoine patient provided by Dr. Tadlock)). 15 All of the scientific literature surveyed

by Dr. Tadlock describe ectopically erupted teeth as teeth that erupt “in the wrong

12

Id. at 143:17-18, 144:13-15, A.R. at 1954.

13

Id. at 145:8-10, A.R. at 1956.

14

See Vol. 1 at 149 for Dr. Tadlock’s description of this non-Antoine patient’s condition, at

A.R. 1960. Compare photos of Antoine patients, included infra at p. 18.

15

Id. at 150 for Dr. Tadlock’s description of this image, at A.R. 1961. Compare photos of

Antoine patients, included infra at p. 18.

9

place.”16 Teeth can ectopically erupt in sinus cavities, or through the side of the

face. 17 Based upon the well-known dental term, the vast majority of teeth that

Antoine represented to Medicaid as being ectopic eruptions were not ectopic

eruptions.

II. HHSC-OIG is responsible for protecting Medicaid from waste,

fraud and abuse. OIG is required by law to impose a payment

hold based on a credible allegation that a provider has

committed Medicaid fraud.

OIG is an independent oversight agency, administratively attached to HHSC.

OIG is responsible for investigating instances of waste, fraud and abuse in health

care services provided by HHSC, including Medicaid, and for enforcing state laws

relating to the provision of those services. Tex. Gov’t Code § 531.102; see also 1

Tex. Admin. Code § 371.1. Chapter 32 of the Human Resources Code authorizes

the OIG to recover damages and penalties from a person who presents or causes to

be presented to the department a claim that “contains a statement or representation

the person knows or should know to be false.” Tex. Hum. Res. Code § 32.032(b)(1).

The statutory authority for the rules governing OIG includes both chapters 32

and 36 of the Human Resources Code, and OIG may take administrative

enforcement measures against a person based upon a violation of either chapter. See

16

Id. at 153, at A.R. 1964.

17

Id. at 146:3-8, at A.R. 1957.

10

Tex. Gov’t Code § 531.001 et seq.; 1 Tex. Admin. Code § 371.1605 (2005); 1 Tex.

Admin. Code § 371.1617(5)(B) (2005) (which references and incorporates the Texas

Medicaid Fraud Prevention Act (“TMFPA”)). Therefore, the standard in the TMFPA

for determining whether a person acts with the requisite scienter to commit an

unlawful act is applicable in an enforcement action brought by the OIG, including a

payment hold proceeding. See Tex. Hum. Res. Code § 36.0011(a) (defining Culpable

Mental State).18

OIG is required by law to impose a payment hold “on receipt of reliable

evidence that the circumstances giving rise to the hold on payment involve fraud or

willful misrepresentation under the state Medicaid program in accordance with 42

C.F.R. Section 455.23.”19 Tex. Gov’t Code § 531.102(g)(2) (2011). “The State

Medicaid agency must suspend all Medicaid payments to a provider after the agency

determines there is a credible allegation of fraud for which an investigation is

pending under the Medicaid program against an individual or entity.” 42 C.F.R. §

18

For purposes of this chapter, a person acts “knowingly” with respect to information if

the person: (1)has knowledge of the information; (2) acts with conscious indifference to the

truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the

information. Proof of the person's specific intent to commit an unlawful act under Section

36.002 is not required in a civil or administrative proceeding to show that a person acted

“knowingly” with respect to information under this chapter. Id.

19

The mandatory payment-hold framework was introduced through provisions of the Affordable

Care Act, which amended the Social Security Act. Section 1862(o) broadly requires suspension

of payments pending an investigation of credible allegations of fraud. 42 U.S.C. § 1396b(i)(2)(c).

Section 1903(2)(c) provides for withholding of federal funds where the State fails to implement

section 1862(o). 42 U.S.C. § 1395y(o)

11

455.23(a)(1) (emphasis added).

Fraud is defined in the Government Code as “an intentional deception or

misrepresentation made by a person with the knowledge that the deception could

result in some unauthorized benefit to the person or to another person, and includes

any act that constitutes fraud under applicable federal or state law.” Tex. Gov’t

Code § 531.1011(1)20 (emphasis added). The definition incorporates unlawful acts

under the TMFPA.

A credible allegation of fraud “may be an allegation, which has been

verified by the State, from any source, including but not limited to the following:

. . . claims data mining [,] . . . patterns identified through provider audits [or] law

enforcement investigations.” 42 C.F.R. § 455.2. An allegation is credible if it has

“indicia of reliability and the State Medicaid agency has reviewed all allegations,

facts, and evidence carefully and acts judicially on a case-by-case basis.” Id.

Evidence is presumed to have indicia of reliability and may be adopted by

a court “without further inquiry if the defendant fails to demonstrate by competent

rebuttal evidence that the information is materially untrue, inaccurate or

unreliable.” United States v. Floyd, 343 F.3d 363, 372-73 (3rd Cir. 2003) (citing

United States v. Carbajal, 290 F.3d 277, 287 (5th Cir. 2002)).

20

In 2015, the legislative amended this statute to delete the italicized language. The amendment

did not take effect until September 2015; therefore, it is not applicable to this case.

12

OIG has additional authority to impose a payment hold if there is “reliable

evidence” a provider “committed fraud or willful misrepresentation regarding a

claim for reimbursement.” Tex. Hum. Res. Code § 32.0291(b) (2003).21 The

authority in Human Resources Code chapter 32 is duplicative of the authority in

Government Code chapter 531. However, § 32.0291(c) includes the standard for

maintaining the payment hold: “The department shall discontinue the hold unless

the department makes a prima facie showing at the hearing that the evidence relied

on by the department in imposing the hold is relevant, credible and material to the

issue of fraud or willful misrepresentation.” Tex. Hum. Res. Code § 32.0291(c)

(emphasis added).22

This means in a payment hold hearing, the OIG must present prima facie

evidence that is relevant, credible and material, that the provider acted with: (1)

knowledge of the truth or falsity of its representations; (2) conscious indifference

to the truth or falsity of its representations; or (3) reckless disregard of the truth or

falsity of its representations. Tex. Hum. Res. Code §§ 32.0291(c), 36.011.

(emphasis added).

21

Effective September 1, 2013 section 32.0291(b) of the Human Resources Code was amended.

A new subsection (c) was added to the statute. The changes are prospective and do not apply to

this case, which was heard in May 2013.

22

See In re E.I. DuPont de Nemours & Co., 136 S.W.3d 218, 223 (Tex. 2004) (“The prima facie

standard requires only the ‘minimum quantum of evidence necessary to support a rational inference

that the allegation of fact is true.’ Tex. Tech Univ. Health Scis. Ctr. v. Apodaca, 876 S.W.2d 402,

407 (Tex. App.—El Paso 1994, writ denied). ”).

13

III. Antoine billed Texas Medicaid for more than $8 million in

orthodontia services over a three-year period, and OIG placed

Antoine on payment hold.

Between November 1, 2008 and August 1, 2011, Medicaid paid Antoine

over $8,104,875.00, FoF 3, App. A at p. 3, at A.R. 1748. OIG initiated an

investigation of Antoine in 2011. Vol. 3, 195:1, A.R. at 2482. During the time

period of the investigation, Antoine treated approximately 6,550 Medicaid

patients. Vol. 3 at 200:12, A.R. at 2487. During its investigation, OIG collected a

statistically valid random sample 23 of 63 of Antoine’s Medicaid patient files. Vol.

3 at 200:20-208:7, A.R. at 2787.

The 63 patient files, which included diagnostic materials (x-rays, color

photographs, three-dimensional models, etc.) were independently reviewed by two

orthodontic experts: Dr. Charles Evans and Dr. Larry Tadlock. Based on the expert

review of the 63-patient sample, OIG instituted a 100% payment hold on Antoine’s

claims for reimbursement. 24 FoF 32, App. A at p. 13, at A.R.1756.

Both orthodontic experts relied upon their education and training in

23

OIG’s statistically valid sampling methodology was not at issue in the payment hold hearing.

The only evidence regarding the validity of OIG’s sampling and extrapolation procedure is

uncontroverted. See testimony of Deputy Inspector General for Enforcement, Vol 3, at 201-209,

A.R. at 2488-96.

24

Dr. Tadlock reviewed the sample after the payment hold was instituted, for purposes of testifying

at the payment hold hearing regarding the patient files.

14

reviewing the patient files to evaluate the patients’ conditions, and each expert

individually followed the TMPPM criteria for the corresponding years of service

(2008-2011). Both experts independently concluded Antoine inflated HLD scores

submitted to Medicaid. Vol. 3 at 289:23-290:3, 295:22-296:2, A.R. at 2576-77,

2582-83. OIG presented the following evidence, based on the experts’ review of

the 63 patients:

• Of the 63 patients, Antoine scored 61 (96.8%) as having severe handicapping

malocclusions, i.e., extreme deviations from the norm. See R-49, at A.R.

1097-98, App. I.

• Antoine certified that 61 patients had six or more ectopically-erupted teeth.

Ex. P-64.01 through P-64.63; R-49, at A.R. 1097-98, App. I.

• Antoine scored at least 50% of the allowable teeth as ectopic on each and

every HLD scoresheet Antoine submitted for authorization. See R-49, at A.R.

1097-98, App. I.

• No patient in the sample was eligible for Medicaid-covered comprehensive

orthodontics without Antoine’s scoring for ectopic eruption; further, Antoine

did not submit any narratives for any of the 61 patients, even if services could

be justified on other bases. Ex. P- 64.01 through P-64.63; Vol. 4 at 70:13-19,

A.R. at 2698.

• Dr. Kanaan scored 27 of the 63 patients’ HLDs. Of those 27 patients, he

scored 23 (85%) with the same eight teeth ectopic. Vol. 3 at 43-70, A.R. at

2330-57. Ex. P-64.01 through P- 64.63; R-49, at A.R. 1097-98, App. I.

• Antoine submitted prior authorization requests for comprehensive

orthodontics under the code D8080 for 61 of the 63 patients. Ex. P- 64.01

through P-64.63; Vol. 1, 176:14-20, 177:1-16, A.R. at 1987-88.

Dr. Larry Tadlock, D.D.S., 25testified:

25

Dr. Tadlock is a board-certified orthodontist. He is an Assistant Clinical Professor of

15

• Antoine’s HLD scoresheets were false and misrepresented the condition of

the patient’s teeth. Vol. 1 at 176:14- 20, 177:1-16, A.R. at 1987-88.

• 61 of 63 HLD scoresheets were incomprehensible because ectopic eruption is

a rare condition. Only 1.5-9% of the population has even one ectopic tooth.

Vol. 1 at 173:3-6, A.R. at 1984; see also R-51 at 8 (Thilander article describing

ectopic eruption as an “anomaly” that occurs in only 1.5-1.6% of a sample

population of 4724 patients), App. H.

• For ectopic eruption to occur more than once in the same patient is

“infinitesimally smaller.” Vol. 1 at 174:16-18, A.R. at 1985. See also R-31L,

supra, at p. 9.

• Because ectopic eruption is rare, occurring in between 1.5-9% of the

population, the chances of 61 patients in the 63-patient sample having 6 or

more ectopic anterior teeth is “not possible.” Vol. 1 at 173:3-6, 175:1, A.R. at

1984, 1986.

• The chance of 100% of patients in a sample having always at least six

instances of ectopic eruption, and always two or more bilateral instances, is

“zero. It’s not possible.” Vol. 1 at 175:1, 176:23, A.R. at 1986-87; R-49,

Tadlock summary, at A.R. 1097-98, App. I.

The following shows Antoine’s scoring of patients in the 63-patient sample:

Patient 1:

Pre-treatment intra-oral photos of Antoine Patient 1, P-01-0001:26

Orthodontics at Baylor College of Dentistry, responsible for supervising patient care, teaching

orthodontic residents, and performing research on orthodontics. He is one of only eight directors

of the American Board of Orthodontics (“ABO”) in the United States. As an ABO Director, Dr.

Tadlock is responsible for creating, writing, and administering board certification exam for

orthodontists. Specific to his experience with Medicaid, Dr. Tadlock has treated Medicaid patients

who were accepted and treated at Baylor. He estimates he has assessed “several hundred” HLD

scoresheets for potential Medicaid patients while at Baylor. Vol. 1 at 146-48, A.R. at 1957-59.

26

Dr. Tadlock concluded “[t]his patient’s occlusion is near perfect. . . . it might qualify as

passing the certification process from the American Board of Orthodonti[cs]. Vol. 1 at 158:18-

23. Compare photos of true ectopic eruptions, included supra at p. 9.

16

Antoine’s HLD scoresheet representing that Patient 1 has 8 ectopic teeth. P 01-

0013:

Patient 6:

Pre-treatment intra-oral photos of Antoine Patient 6. P-06-0003:27

06-0001

27

This patient does not have a single ectopic tooth according to Dr. Tadlock, and does not have a

severe handicapping malocclusion. Vol. 1 at 160:14-24, A.R.at 1971.

17

Patient 59:

Pre-treatment intra-oral photos of Antoine Patient 59, P-59-0018:

Antoine’s HLD scoresheet representing that Patient 59 has 10 ectopic

teeth. P-59-0017:

OIG based its decision to impose the payment hold on prima facie

evidence that Antoine fraudulently or willfully misrepresented HLD scores in

prior authorization requests, in violation of Tex. Gov’t Code § 531.102(a), and

1 Tex. Admin. Code §§ 371.1617(1)(A), (B), (I). 28

28

OIG also found that Antoine billed for services not reimbursable, in violation of 1 Tex. Admin.

Code § 371.1617(1)(K); and failed to maintain and provide required records, in violation of 1 Tex.

Admin. Code § 371.1617(2)(A). As a result, Antoine failed to comply with Medicaid program

requirements, and a payment hold was authorized under the Inspector General’s discretionary

authority. However, the Inspector General’s authority to impose discretionary payment holds was

challenged and then struck in Harlingen Family Dentistry v. Tex. Health & Human Servs. Comm’n,

452 S.W.3d 479 (Tex. App.—Austin 2014, pet. filed). Therefore, the State confines its arguments

to the mandatory payment hold under the credible allegation of fraud standard as codified in 42

C.F.R. § 455.23, Tex. Gov’t Code § 531.102(g)(2) (2011), and Tex. Hum. Res. Code § 32.0291(b).

18

IV. Antoine requested a hearing on the payment hold, and, after the

hearing and the ALJs’ recommendation that HHSC order OIG

to lift the hold, the EC reversed the PFD and ordered the hold to

remain in place.

Antoine requested a hearing to appeal the payment hold. SOAH ALJs

Howard Seitzman and Catherine Egan conducted a hearing in May 2013. The issue

was whether OIG presented prima facie evidence that was relevant, credible and

material that Antoine committed fraud or willful misrepresentations. Tex. Hum.

Res. Code § 32.0291(b).

The burden was not on the OIG to actually prove fraud or willful

misrepresentations; rather, the question was only whether OIG brought forward

prima facie evidence sufficient to maintain the payment hold. 29

After the hearing, ALJs Seitzman and Egan issued a PFD recommending

that HHSC order OIG to lift the payment hold. PFD, dated Nov. 4, 2013, A.R. at

1193-1238. OIG timely filed Exceptions to the PFD. Tex. Gov’t Code §

2001.062(b); 1 Tex. Admin. Code §§ 155.507(c)(1), 357.497. See Exceptions,

dated Nov. 22, 2013, A.R. at 1257-1344. Antoine filed a Response to OIG’s

Exceptions, and the ALJs issued a letter recommending an insignificant

modification to their PFD. See Letter, dated Jan. 16, 2014, A.R. at 1375-76.

29

The substantive allegations of Medicaid fraud against Antoine are pending in a separate lawsuit

brought by the State against Antoine and five other groups of provider defendants. State of Texas

v. Nazari, Cause No. D-1-GN-14-005380 (53rd Dist. Ct., Travis County, Texas).

19

HHSC issued a Final Order, adopting the OIG’s Exceptions and maintaining the

payment hold. See Order, dated Feb. 27, 2013, A.R. at 1387-1422. HHSC’s Final

Order was issued by HHSC ALJ Rick Gilpin, who the EC designated to review

the PFD and issue the final agency decision. See 1 Tex. Admin Code §

371.1617(a)(3); 1 Tex. Admin Code § 357.483(a)(1)-(2). Subsequently, OIG filed

a motion for rehearing. Mot., dated Apr. 2, 2014, A.R. at 1552-1650.30 After

reviewing the record, the EC issued the AFO. See Am. Final Order, dated, May 2,

2014, at App. A, and A.R. at 1744-85.

Antoine filed a motion for rehearing, which HHSC overruled. A.R. at 1787-

1810. Antoine then filed for judicial review in district court. After briefing and

argument, but without the submission of any evidence other than the

administrative record, the district court entered a judgment stating that the EC’s

AFO is reversed. The district court gave no explanation for the reversal. This

appeal followed.

30

Antoine also filed a motion for rehearing, erroneously with SOAH instead of with HHSC

Appeals Division. Mot., dated Mar. 17, 2014, A.R. at 1423-65; see also Tex. Gov’t Code §

2001.146 (motions for rehearing procedures); 1 Tex. Admin. Code § 357.488(b) (Filing and

Serving of Documents (“Documents are considered filed only when received by the HHSC

Appeals Division. . .”); 1 Tex. Admin. Code § 357.497(e) (“When the judge issues a proposal for

decision, the referring agency’s rules govern final orders and motions for rehearing.”). Because

Antoine filed the motion for rehearing in the wrong forum, the motion was a nullity, and the EC

was free to disregard it.

20

STANDARD OF REVIEW

The test for review of an agency action is not whether the agency reached the

correct conclusion, but whether some reasonable basis for the agency’s action exists

in the record. State v. Pub. Util. Comm’n, 883 S.W.2d 190, 203 (Tex. 1994) (citing

R.R. Comm’n v. Pend Oreille Oil & Gas Co., 817 S.W.2d 36, 41 (Tex. 1991)).

The district court reviewed HHSC’s AFO under the substantial evidence rule.

Tex. Gov’t Code § 2001.174. The Administrative Procedure Act (“APA”) provides

that the district court “may not substitute its judgment for the judgment of the state

agency on the weight of the evidence on questions committed to agency discretion

but . . . may affirm the agency decision in whole or in part” if the order is supported

by substantial evidence. Tex. Gov’t Code § 2001.174(1). The district court’s review

was limited to the administrative record. Tex. Gov’t Code § 2001.175(e). This Court

also reviews the AFO under the substantial evidence rule, without deference to the

judgment of the district court. Tex. Dep’t. of Pub. Safety v. Alfred, 209 S.W.3d 101,

103 (Tex. 2006) (per curiam). Employees Ret. Sys. of Texas v. Garcia, 454 S.W.3d

121, 132 (Tex. App.—Austin 2014 pet. denied).

The Court may affirm the AFO on any grounds that would support the

decision, and is not “bound by the reasons given by an agency in its order, provided

there is a valid basis for the action taken by the agency.” Tex. Health Facilities

Comm’n. v. Charter Med.-Dallas, Inc., 665 S.W.2d 446, 452 (Tex. 1984); see also

21

Tex. Emp’t Comm’n v. Hays, 360 S.W.2d 525, 527 (Tex. 1962). The Court may

uphold the AFO based on any legal basis shown in the record. Bd. of Trs. of the

Emps. Ret. Sys. v. Benge, 942 S.W.2d 742, 744 (Tex. App.—Austin 1997, writ

denied). If reasonable minds could have reached the conclusion that the EC

reached on the record presented, the AFO must be upheld. Bd. of Law Exam’rs v.

Stevens, 868 S.W.2d 773, 777-788 (Tex. 1994), cert. denied, Stevens v. Bd. of Law

Exam’rs, 512 U.S. 1206, 114 S. Ct. 2676 (1994); Tex. State Bd. of Med. Exam’rs

v. Birenbaum, 891 S.W.2d 333, 337 (Tex. App.— Austin 1995, writ denied).

In applying the substantial evidence standard to the AFO, the Court may not

substitute its judgment for that of the EC as to the weight of the evidence on

questions committed to his discretion. Stevens, 868 S.W.2d at 778; Gulf States

Utils. Co. v. Pub. Util. Comm’n, 841 S.W.2d 459, 474 (Tex. App.—Austin 1992,

writ denied). Although substantial evidence is more than a mere scintilla, the

evidence may actually preponderate against the agency decision and yet still

amount to substantial evidence supporting the result reached by the agency. State

v. Pub. Util. Comm’n, 883 S.W.2d at 204; City of El Paso v. Pub. Util. Comm’n,

883 S.W.2d 179, 185 (Tex. 1994); see also Tex. State Bd. of Dental Exam’rs v.

Sizemore, 759 S.W.2d 114, 116 (Tex. 1988).

The Court presumes that substantial evidence supports the AFO, and the

burden is on Antoine to overcome this presumption. Graff Chevrolet Co. v. Tex.

22

Motor Vehicle Bd., 60 S.W.3d 154, 159 (Tex. App.—Austin 2001, pet. denied);

Lewis v. Southmore Savings Ass’n, 480 S.W.2d 180, 183 (Tex. 1972); see also City

of El Paso v. Pub. Util. Comm’n, 883 S.W.2d at 184.

The AFO should be reversed or remanded only if the absence of substantial

evidence has prejudiced Antoine’s substantial rights. Locklear v. Tex. Dep’t of Ins.,

30 S.W.3d 595, 597 (Tex. App.—Austin 2000, no pet.). The Court may only reverse

or remand a matter “for further proceedings”: if substantial rights of Antoine have

been prejudiced because the administrative findings, inferences, conclusions, or

decisions are:

(A) in violation of a constitutional or statutory provision;

(B) in excess of the agency’s statutory authority;

(C) made through unlawful procedure;

(D) affected by other error of law;

(E) not reasonably supported by substantial evidence considering the reliable and

probative evidence in the record as a whole; or

(F) arbitrary or capricious or characterized by abuse of discretion or clearly

unwarranted exercise of discretion.

Tex. Gov’t Code § 2001.174(2).

In the district court, Antoine argued that the EC exceeded his authority when

he reversed several of the ALJs’ findings of fact and conclusions of law. Whether

the EC exceeded his authority is a question of law to be decided de novo. See, e.g.,

Tex. Ass’n of Psychological Assocs.v. Tex. State Bd. of Exam’rs of Psychologists,

439 S.W.3d 597, 602 (Tex. App.— Austin 2014, no pet.) (court reviews exercise

of authority de novo).

23

SUMMARY OF THE ARGUMENT

This case presents the issue of whether the EC acted within his authority when

he issued the AFO to maintain the payment hold on Antoine. Because the EC was

fully authorized to correct the ALJs’ misapplications of Medicaid law and policy he

did not exceed his authority when he rejected their PFD and issued the AFO. See

Tex. Gov’t Code § 2001.058(e)(1); Froemming v. Tex. State Bd. of Dental Exam’rs,

380 S.W.3d 787, 793 (Tex. App.—Austin 2012, no pet.); Sanchez v. Tex. State Bd.

of Med. Exam’rs, 229 S.W.3d 498, 516 (Tex. App.—Austin 2007, no pet.); see also

Akin v. Tex. State Bd. of Dental Exam’rs, No. 03-14-00390-CV, 2015 WL 1611803,

at *4-5 (Tex. App.—Austin Apr. 9, 2015, no pet. hist.). Further, the AFO is

supported by substantial evidence in all respects.

In reviewing the decision to issue the AFO, the Court must assume that the

AFO is valid; and to overcome the presumption of validity, Antoine has the burden

to establish that the AFO is not supported by substantial evidence or that the EC

exceeded his statutory authority in issuing the AFO. See Graff Chevrolet, 60

S.W.3d at 159 (plaintiff has burden of proving that agency’s order is not supported

by substantial evidence). In the district court, Antoine did not even argue that the

AFO is not supported by substantial evidence. Instead, Antoine confined its

argument and briefing to the issue of whether the EC exceeded his authority in

changing the ALJs’ findings of fact. Because Antoine did not brief or argue

24

substantial evidence in the district court that issue has been waived. See Akin, 2015

WL 1611803, at *3 n.1 Nonetheless, the State will show that the AFO is fully

supported by substantial evidence in the administrative record that: (a) the ALJs

misinterpreted and misapplied Texas law and Medicaid policy, and (b) the OIG’s

determination to impose the payment hold was based on prima facie evidence that

was relevant, credible and material to the question of fraud or willful

misrepresentation.

The State urges the Court to reverse the district court—i.e. reinstate the

AFO—on the basis that Antoine cannot carry its burden to establish that the AFO

was not supported by substantial evidence, nor can Antoine establish that the EC

exceeded his statutory authority.

ARGUMENT

I. The EC acted within his discretion to correct misapplications of

Medicaid law and policy by the SOAH ALJs.

The APA governs contested proceedings before HHSC. The APA expressly

defines the EC’s discretion to change ALJs’ proposed findings of fact and

conclusions of law after contested case hearings. The APA provides, in pertinent

part:

(e) A state agency may change a finding of fact or conclusion of

law made by the administrative law judge, or may vacate or

modify an order issued by the administrative law judge, only

if the agency determines:

25

(1) that the administrative law judge did not properly apply

or interpret applicable law, agency rules, written

policies provided under Subsection (c), or prior

administrative decisions;

(2) that a prior administrative decision on which the

administrative law judge relied is incorrect or should be

changed; or

(3) that a technical error in a finding of fact should be

changed.

Tex. Gov’t Code § 2001.058(e) (emphasis added). Thus, the EC was authorized to

change the ALJs’ incorrect legal and policy determinations. See Tex. Gov’t Code

§ 2001.058(e)(1); see also Froemming, 380 S.W.3d at 793; Akin, 2015 WL

1611803, at *4-5, *5 n.6; Smith v. Montemayor, 2003 WL 21401591, at *8 (Tex.

App.—Austin June 19, 2003, no pet.); Wood v. Tex. Comm’n Envtl. Quality, No.

13-13-00189-CV, 2015 WL 1089492, at *11 (Tex. App.— Corpus Christi, Mar.

5, 2015, no pet. hist.)

Consistent with the concept that agencies determine the meaning of their

policies and the laws they are committed to enforce, agencies have broad

discretion to modify “legislative facts” in PFDs. 31 See Tex. State Bd. of Med.

Exam’rs v. Dunn, 03-03-00180-CV, 2003 WL 22721659, at *3 (Tex. App.—

31

A “legislative fact” is a mixed question of fact and law and defining terms is an agency function.

F. Scott McCown & Monica Leo, When Can an Agency Change the Findings of Conclusions of an

ALJ?: Part Two, 51 Baylor L. Rev. 63, 69-70 (1999) (hereinafter “McCown & Leo”). A finding

of fact is a “legislative fact” where the finding affects not just one specific case, but is actually an

explication of agency policy and therefore may be applied to other cases or implicates agency

policy. Id.

26

Austin Nov. 20, 2003, no pet.) (“agencies are ‘relatively’ free to review and correct

an ALJ’s ‘legislative facts,’ which ‘provide a foundation for developing law, rules,

or policies and, consequently, affect the outcome of many cases.’”) (quoting

McCown & Leo, at 68-69); see also Sanchez, 229 S.W.3d at 515-16; Exxon Corp.

v. Railroad Comm'n, 993 S.W.2d 704, 710 (Tex. App.—Austin 1999, no pet.);

Montemayor, 2003 WL 2140151, *8.

The ALJs misconstrued Medicaid policy, ignored evidence, disregarded

competent testimony proffered by OIG, and created “expert” testimony not offered

by Antoine. The EC, acting with sound discretion, corrected the ALJs’ erroneous

interpretations, and their flawed findings and conclusions that flowed from their

initial errors. The EC fully explained each modification, as required by the APA,

demonstrating the substantial evidence necessary to support his modifications. See

Tex. Gov’t. Code § 2001.058(e).

A. The proper interpretation of Texas Medicaid policy is a

question of law to be determined by the EC. The EC properly

interpreted Medicaid policy in harmony with the governing

statutes and regulations, and Antoine has shown no basis for

the Court to deviate from the EC’s correct interpretation.

The proper interpretation and application of regulatory/statutory provisions

governing Medicaid and Medicaid policy are questions of law committed to the

discretion of the EC - not the ALJs. Thus, the EC was not bound to accept the

ALJs’ erroneous determinations regarding Medicaid policy concerning “ectopic

27

eruption.” See, e.g., R.R. Comm’n of Tex. v. Tex. Citizens for a Safe Future &

Clean Water, 336 S.W.3d 619, 629 (Tex. 2011) (“We must uphold the enforcing

agency’s construction if it is reasonable and in harmony with the statute.”); Sw.

Pharm. Solutions, Inc., v. Tex. Health & Human Servs. Comm’n, 408 S.W.3d 549,

557-58 (Tex. App.—Austin 2013, pet. denied); Froemming, 380 S.W.3d at 793;

Akin, 2015 WL 1611803, at *4-5.

The Akin court approved the board’s modifications of the ALJ’s proposed

finding and conclusion because the ALJ failed to properly interpret or apply the

statute to facts in evidence. Id. While the ALJ in Akin found Akin did not commit

a dishonest act, the board provided examples of evidence that showed the dentist

was dishonest or practicing dentistry illegally, and the district court upheld the

board’s order reversing the ALJ’s PFD. Id. Akin court also quoted with approval

Montemayor, 2003 WL 21401591, at *8. Akin, 2015 WL 1611803, at *5 n.6

In the instant case, in reversing the AFO (without explanation), the district

court implicitly determined the EC’s interpretation of Medicaid rules—especially

those related to ectopic eruption—was unreasonable and not in harmony with the

statutes he interpreted. The State presented substantial evidence at the district

court, discussed infra, through the admission of the administrative record,32 that

the EC’s interpretation of the Medicaid rules is reasonable and followed long-held

32

No additional evidence was presented at the district court.

28

principles of statutory construction. Antoine presented nothing to counter the EC’s

reasonable interpretation; therefore, the district court should not have disturbed the

EC’s decision.

B. The EC’s corrections of the ALJs’ errors in interpreting

Medicaid policy are entitled to respect from the Court.

The EC’s interpretation of the proper scope and limitations of Texas

Medicaid orthodontia policy is entitled to respect from the Court. See Texas

Citizens, 336 S.W.3d at 624; see also Atascosa Cnty. v. Atascosa Cnty. Appraisal

Dist., 990 S.W. 2d 255, 258 (Tex. 1999); Gomez v. Tex. Educ. Agency, 354 S.W.3d

905, 913-17 (Tex. App.—Austin 2011, pet. denied); Sw. Pharm., 408 S.W.3d at

562; Tex. Gov’t Code § 311.023(6).

Where a statute is ambiguous, the Court must give serious consideration to

the interpretation of an agency charged with its enforcement. Texas Citizens, 336

S.W.3d at 625. In Texas Citizens, the Supreme Court held:

We have never expressly adopted the Chevron or

Skidmore doctrines for our consideration of a state

agency’s construction of a statute, but we agree with the

Commission that the analysis in which we engage is

similar. In our “serious consideration” inquiry, we will

generally uphold an agency’s interpretation of a statute it

is charged by the Legislature with enforcing, “‘so long as

the construction is reasonable and does not contradict the

plain language of the statute.’”

Id. (citations omitted). Deference to the agency’s interpretation is particularly

important where, as here, the policies, rules and statutes in question concern a

29

matter within the core expertise of the agency. See Zimmer US, Inc. v. Combs, 368

S.W.3d 579, 586 (Tex. App.—Austin 2012, no pet.)

Southwest Pharmacy is also instructive. The plaintiff pharmacy providers

challenged HHSC rules pertaining to Medicaid pharmacy reimbursements. The

outcome of the dispute turned, in part, on construction of the phrase “medical

assistance” as defined in Government Code chapter 531, Human Resources Code

chapter 32, and the rules adopted thereunder. Sw. Pharm., 408 S.W.3d at 560-61.

In siding with HHSC, the court noted that the disputed statutory language must not

be read in isolation, but rather, must be analyzed “in the context of the statutes as

a whole.” Id. “We must consider the role of the provisions in the full Medicaid

statutory scheme and in . . . context. . . And we must construe the provisions in a

way that is consistent with their underlying purpose and the policies they are

intended to promote.” Id. at 561. The court further noted:

Even if we were to conclude that there is vagueness,

ambiguity, or room for policy determinations in these

statute and rules, we would conclude that HHSC's

interpretation of the relevant code provisions and agency

rules is reasonable, in harmony with the statutes and rules,

and entitled to deference. We defer to the agency's

interpretation unless it is plainly erroneous or inconsistent

with the language of the statute or rule.. As the agency

designated to administer Medicaid, HHSC is charged

with overseeing a complex regulatory scheme, and

deference to its construction is particularly important.

An agency's construction does not have to be “the only--

or the best-- interpretation in order to warrant . . .

deference.” Considering the entire statutory scheme, the

30

goals and policies behind it, and the legislative history and

intent, we would conclude that HHSC's interpretation is

reasonable, does not conflict with the provisions'

language, and is entitled to deference.

Id. at 561-62 (emphasis added) (internal citations omitted). Here, the EC’s

interpretation of the meaning of ectopic eruption is reasonable, and is consistent

with Medicaid policy and applicable laws.

As explained in the AFO, the EC determined that “ectopic eruption” is a term

of art in the dental profession and should be interpreted for Medicaid just as it is

generally recognized in the field of dentistry, and consistent with the expert

opinions of Dr. Tadlock, Dr. Altenhoff and the Dr. Proffit textbook. The EC’s

interpretation of ectopic eruption is narrow, objective not subjective, and consistent

with Medicaid’s orthodontic policy of providing benefits to children with

dysfunctional severe handicapping malocclusions rather than providing benefits to

children who have solely cosmetic needs. If the EC did not correct the ALJ’s

erroneous interpretation of ectopic eruption, dental providers would be able to

apply a broad, subjective standard and use that subjective standard to qualify nearly

any patient regardless of need or Medicaid’s other limitations solely on the basis of

“ectopic eruption.” Such a scenario would fly in the face of Medicaid’s clear policy

of providing limited orthodontic benefits only for severe handicapping conditions

and not providing benefits for cosmetic reasons only.

The EC’s policy interpretation is also squarely within his core area of

31

expertise as the chief executive of the agency in charge of Texas Medicaid.

Therefore, it is entitled to deference from the Court. Texas Citizens, 336 S.W. at

629; Sw. Pharm., 408 S.W.3d at 561-62; Garcia, 454 S.W.3d at 137. This proper

interpretation by the EC is the lynchpin of the modifications to the ALJs’ PFD, as

discussed infra.

II. The EC did not exceed his authority in entering the AFO and

Antoine cannot establish otherwise.

Antoine cannot establish that the EC exceeded his authority in entering the

AFO. The standard of review for an abuse of discretion by a state agency is whether

the agency’s final decision: (1) ignores the factual record; (2) relies on facts not in

evidence; or (3) is not rationally connected to the factual record. City of El Paso, 883

S.W.2d at 184; State v. Pub. Util. Comm’n, 883 S.W.2d at 201; Heritage on the San

Gabriel v. Tex. Comm’n on Envt’l Quality, 393 S.W.3d 417, 423 (Tex. App.—Austin

2012, pet. denied), (quoting City of Waco v. Tex. Comm’n Envtl. Quality, 346

S.W.3d 781, 819-20 (Tex. App.—Austin 2011, pet. denied)).

The AFO is squarely based on the factual record from the SOAH hearing.

The AFO is 42 pages long and is replete with references to uncontested evidence.

App. A. Further, no reasonable argument can be made that the AFO relies on facts

not in evidence or that it is rationally unrelated to the evidence. In short, there is

no credible argument that the EC abused his discretion in rendering the AFO.

32

All of the EC’s modifications in the AFO were made to correct

misunderstandings and misapplications of Medicaid law and policy by the ALJs.

Substantial evidence exists to show the EC correctly maintained the payment hold,

and Antoine cannot present evidence to the contrary; therefore, the Court should

uphold the AFO.

A. The ALJs misunderstood and misapplied Texas Medicaid law

and policy and the EC corrected the misunderstanding with a

proper construction of law and policy.

The ALJs incorrectly concluded that OIG failed to present prima facie

evidence that is “credible, reliable, or verifiable, or that has indicia of reliability”

that Antoine engaged in fraud or willful misrepresentation in filing its requests for

prior authorization and claims for payment with Texas Medicaid. Consequently

the ALJs recommended that the EC order the OIG to lift the payment hold in its

entirety. See PFD proposed FoF Nos. 48-50, at pp. 40-41, A.R. at 1234- 35.

The ALJs’ incorrect findings, conclusions, and ultimate recommendation

rested on their erroneous determination that Texas Medicaid adopted a “special”

definition of the term “ectopic eruption” that is subjective and broader than the

meaning of the phrase in the general practice of dentistry. This is clearly at odds

with the EC’s interpretation that ectopic eruption means the same thing in Texas

Medicaid as it does in the general practice of dentistry. In making this

determination, the ALJs ignored the plain language of the policy and the testimony

33

of the only witnesses qualified to testify what Texas Medicaid policy means. The

ALJs’ mistaken construction of ectopic eruption effectively destroys the

limitations of Texas law and Medicaid policy which restrict orthodontia to

children who suffer from a “severe handicapping malocclusion.” 25 Tex. Admin.

Code § 33.71.

Rather than concluding that the definition of ectopic eruption is subjective,

the ALJs should have adopted the agency’s own construction, as presented by

agency staff witnesses and by the State’s testifying expert.33 The record presented

by the State shows that the TMPPM’s instruction regarding ectopic eruption is not

vague and is consistent with the widely recognized understanding of ectopic

eruption. See Vol.1, 236:3-15, A.R. at 2047 (Dr. Tadlock testifying that the

definition of ectopic eruption is learned at every dental school and in every

orthodontic program in the country); 34 see also Vol. 2 at 84:23-24, A.R. at 2135

33

Dr. Tadlock is the only board-certified orthodontist who testified in this case. He is one of only

eight directors nationally on the American Board of Orthodontists and is the incoming Chair of the

ABO clinical committee, which administers the clinical exam to orthodontic residents nationally.

Vol. 1, at 133:10-134:20, A.R. at 1944-45.

34

Dr. Tadlock reviewed nearly 1,300 articles discussing “ectopic eruption.” Vol. 1, at 152:1-

154:11, A.R. at 1963-65. As Dr. Tadlock noted, “The bottom line is this, there are no references to

teeth that are rotated or tipped. There are -- ectopic eruption in every article is a tooth that is away

from, it is out of place, it is in the wrong place. Not most of them, many of -- not most of them, all

of them.” Id. at 153:1-6 (emphasis added), A.R. at 1864; see also 154:4-11, A.R. at 1965 (“But in

every case, they are teeth that are out of the position, they are not here in turn; they are out, they

are somewhere else. That's the definition of ectopic eruption that existed that started in 1938 or

somewhere before then. It has existed in its same form since then, up to '87 when Dr. Proffit wrote

its eruption in the wrong place, and that definition has not changed.”) (emphasis added).

34

(where Antoine’s expert Dr. Orr acknowledged that “ectopic” means “out of

place,” and that this meaning is found “in medicine all over.”).

The administrative record reflects HHSC’s long-standing requirement that

medical and dental terms be interpreted for Medicaid purposes just as those terms

are construed for non-Medicaid patients. Ex. R-14, (2008 TMPPM) at § 1.2.5, at

App. G; Ex. R-15 (2009 TMPPM), at § 1.4.5, at App. F; Vol. 1, 93:2-9, 94:16-

23, 111:11-14, A.R. at 1904-05; Vol. 3, 193:5-194:1, 241:5-11, 249:11-250:19,

A.R. at 2480-81, 2528, 2536-37.

Dr. Tadlock’s testimony that ectopic eruption is generally understood

within the dental/orthodontic profession as a “tooth that is out of place,” is not

only supported by the medical literature and the testimony of the State’s Medicaid

policy witness, Dr. Altenhoff, it is also the only competent expert testimony of

record. See generally Dr. Tadlock’s testimony at Vol. 1, at 152:1-154:11, A.R. at

1963-65; see also Vol. 3, 240:22-241:4, A.R. at 2527-28 (testimony that Dr.

Altenhoff is the person most knowledgeable about Medicaid policy), and Vol. 3,

174:19-175:7 (Antoine’s dentist Dr. Kanaan acknowledging that Dr. Altenhoff is

the expert on what Medicaid covers and does not cover), A.R. at 2461-62.35

The ALJs’ error in disregarding the testimony of Drs. Tadlock and

35

When asked by the ALJ if conditions would qualify as ectopic eruption after the January 2012

clarifying amendment, Dr. Kanaan answered: “You would need to ask Dr. Altenhoff.” Vol. 3,

174:19-175:4, A.R. at 2461-62.

35

Altenhoff was magnified because they misconstrued what Antoine’s orthodontist,

Dr. Kanaan actually said. The ALJs incorrectly asserted that Dr. Kanaan

concluded that Patients 36, 37, 42, 43, and 47 each presented a “severe

handicapping malocclusion.” See PFD at 26-27, A.R. at 1220-21. This statement

is not supported by the evidentiary record. Of these patients, the only ones for

which Dr. Kanaan made such statement were Patients 36 and 47. Vol. 3, at 149:3-

4, A.R. at 2436 (describing Patient 36 as a “100 percent dysfunctional

handicapping case”); Vol. 3, at 161:23-162:6, A.R. at 2448-49 (opining that

Patient 47 presented “dental necessity, medical necessity, hundred -- hundred

percent handicap malocclusion”). For the other patients, Dr. Kanaan merely stated

that the patient, in his opinion, needed orthodontic treatment. Vol. 3, at 156:16-19

(Patient 37) (answering “100 percent, 120 percent” when asked patient had a “true

orthodontic need”), A.R. at 2443; Vol. 3, at 155:1-6 (Patient 42) (answering

“correct, hundred percent” when asked if case was an example of “true orthodontic

need”), A.R. at 2442; Vol. 3, at 159:12-16 (Patient 43) (agreeing that the patient

had a “true orthodontic need for braces”), A.R. at 2446. This distinction is more

than a semantic one, as the standard for Medicaid coverage is “severe

handicapping malocclusion” and not merely “true orthodontic need.” See 25 Tex.

Admin. Code § 33.71.

Taken together, testimony and evidence presented at the administrative

36

hearing, coupled with deference that should be given to the EC’s interpretation of

Texas Medicaid policy, 36 illustrate that: (a) the ALJ’s incorrectly interpreted and

applied Medicaid policy; (b) the EC was authorized to correct misapplications of

law and policy; and (c) the EC did not exceeded his authority in correcting the ALJs.

As a result, the Court should affirm the AFO.

1. The rules of statutory construction govern questions of

agency policy and administrative rules.

In determining the proper scope and limitations of Medicaid policy, and the

administrative rules of HHSC implementing Medicaid policy, the Court is guided

by the rules governing statutory construction. See Boswell v. Brazos Electric

Power, 910 S.W.2d 593, 599-600 (Tex. App.—Fort Worth 1995, writ denied);

Tex. Gov’t Code § 311.002(4).

In construing a statute, the primary objective is to ascertain and give effect

to the intent of the legislature. Cont’l Cas. Ins. Co. v. Functional Restoration

Assocs., 19 S.W.3d 393, 402 (Tex. 2000) (citing Liberty Mut. Ins. Co. v. Garrison

Contractors, Inc., 966 S.W.2d 482, 484 (Tex.1998)); Texas Citizens, 336 S.W.3d

at 624; Tex. Gov’t Code § 312.005. In so doing, courts look first to the plain and

common meaning of the statute's words. See Tex. Gov’t Code § 311.005;

Fitzgerald v. Advanced Spine Fixation Sys., Inc., 996 S.W.2d 864, 865 (Tex.1999).

36

Discussed infra.

37

Courts will consider the entire statute, not simply the disputed portions. State v.

Terrell, 588 S.W.2d 784, 786 (Tex.1979). Each provision must be construed in the

context of the entire statute of which it is a part. Bridgestone/Firestone, Inc. v.

Glyn-Jones, 878 S.W.2d 132, 133 (Tex.1994)

The Code Construction Act, Government Code chapter 311, provides

additional guidelines for statutory interpretation. For instance, words and phrases

should be read in context, not in isolation. Tex. Gov’t Code § 311.011(a). Words

and phrases that have acquired a technical or particular meaning shall be construed

accordingly. Tex. Gov’t Code § 311.011(b). The entire statute is intended to be

effective. Tex. Gov’t Code § 311.021(2). A just and reasonable result is intended;

one that is feasible of execution. Tex. Gov’t Code §§ 311.021(3), (4). The public

interest is favored over any private interest. Tex. Gov’t Code § 311.021(5).

In construing a statute a court may consider: (1) the object sought to be

obtained; (2) the consequences of a particular construction; and (3) an agency’s

construction of a statute that is committed to the agency for enforcement. Tex.

Gov’t Code §§ 311.023(1), (5), (6).

2. The ALJs ignored statutes, rules, and evidence and made

fundamental errors in interpreting and applying Texas

Medicaid policy. The misapplications were properly

corrected by the EC.

The EC acted within his authority and sound discretion when he applied

principles of statutory construction and declined to adopt the ALJs’

38

misconstruction of Texas Medicaid policy. The EC corrected fundamental errors

in the ALJs’ interpretation of Texas Medicaid Policy.

First, the ALJs erroneously determined that the TMPPM includes a special

definition of ectopic eruption that is capable of different interpretations in different

circumstances. Under this interpretation, the ALJs found that Antoine’s scoring of

twisted and rotated teeth as ectopic was acceptable. However twisted and rotated

teeth are normal and do not impair function. See, e.g., note 34, supra. Therefore,

the ALJs’ misinterpretation runs afoul of the plain language of Texas Medicaid

policy, as set forth in the TMPPM and in HHSC rules, which clearly states the

Medicaid orthodontia benefit is limited to cases where the patient presents a

“severe handicapping malocclusion.” 25 Tex. Admin. Code § 33.71; Ex. R-15 at

§ 19.19, at App. F. Furthermore, the ALJs’ erroneous interpretation violates a

fundamental requirement that law and agency policy should be construed

consistently with their plain language. Texas Citizens, 336 S.W.3d at 624. It was

therefore proper for the EC to correct these misinterpretations.

Second, the specific instruction regarding “ectopic eruption” should have

been construed by the ALJs in the overall context of Medicaid’s limited

orthodontia benefit policy. Tex. Gov’t Code § 311.011(a). Instead, the ALJs

examined the ectopic eruption discussion in the TMPPM in isolation, and without

regard to the remainder of the TMPPM or overall objectives of Texas Medicaid

39

policy. In fact, the ALJs applied an interpretation of the meaning of ectopic

eruption that was not only contrary to plain language of Medicaid law and policy,

it was also fundamentally at odds with the overall objective of the policy. The

ALJs’ liberal interpretation of the meaning of ectopic eruption 37 was erroneous

because it violated the TMPPM’s clear direction that providers should be

conservative in scoring the HLD. See, e.g., Ex. R-15 at § 19.21, at App. F.

(“Providers should be conservative in scoring. Liberal scoring will not be helpful

in the evaluation and approval of the case.”). 38 Moreover, the ALJs’ construction

of “ectopic eruption” in isolation from the overall context of Medicaid’s policy

also violated the requirement to consider the disputed portions of the policy within

the policy as a whole. Bridgestone/Firestone, Inc. v. Glyn-Jones, 878 S.W.2d 132,

133 (Tex. 1994).

The ALJs’ construction of Medicaid policy violated several additional

37

The absurdity of the ALJs’ construction is illustrated by Antoine’s expert, Dr. Orr, who

testified that in his broad reading of the Manual’s instruction “. . . to me, semantically it has a

limitless interpretation as far as the recognition by competent dentists of teeth out of position.”

Vol. 2, 148:23-149:2, A.R. at 2199-2200. The ALJs’ interpretation of the instruction renders the

word “unusual” in the instruction meaningless, a result that violates canons of statutory

construction. See, e.g., TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432, 439 (Tex.

2011). As Dr. Tadlock testified, based on medical literature, nearly 80 percent of the population

has teeth that are crooked to some degree, and therefore there is nothing “unusual” for teeth to

erupt in a manner that is not straight or ideal. Vol. 1, at 157, A.R. at 1968.

38

The idea that HHSC would eviscerate Medicaid orthodontic policy and benefit limitations by

promulgating a new and more liberal definition of a widely understood term –– is, at best

counterintuitive.

40

tenets of statutory construction in the Code Construction Act:

• The ALJs ignored the meaning of ectopic eruption generally understood in the

dental profession, in violation of Tex. Gov’t Code § 311.011(b) (terms that

have acquired technical or particular meanings shall be construed accordingly);

• The ALJs’ broad interpretation of ectopic eruption rendered the limiting

language in State regulations (e.g., 25 Tex. Admin. Code § 33.71) and in

Medicaid policy (e.g., Ex. R-15, at § 19.19, at App. F) ineffective, in violation

of Tex. Gov’t Code § 311.021(2) (the entire statute is presumed to be effective);

• The ALJs’ interpretation leads to an “ectopic eruption in the eye of the

beholder” standard, which is absurd given scarce Medicaid resources and

HHSC statements regarding the limited nature of the orthodontic benefit.

Opening the definition to the subjective interpretation of providers (“if the

provider says its ectopic eruption, then it’s ectopic eruption”) also deprives

Medicaid policy makers of their statutory and regulatory responsibility for

defining the scope of the benefit. Thus the ALJs’ interpretation violates Tex.

Gov’t Code § 311.021(3) (a just and reasonable result is intended), and Tex.

Gov’t Code § 311.021(4) (a result feasible of execution is intended);

• The ALJs’ construction favors only the private pecuniary interests of

unscrupulous providers, at the expense of taxpayers and truly eligible Medicaid

recipients. Thus, the ALJs’ interpretation violates Tex. Gov’t Code §

311.021(5) (public interest is favored over any private interest);

• The ALJs failed to consider the purposes of Medicaid policy: their construction

does not advance the goal of preserving scarce Medicaid dollars by limiting

orthodontic reimbursements to cases of severe handicapping malocclusion.

Thus, the ALJs’ interpretation violates Tex. Gov’t Code § 311.023(1) (a court

considers the object sought to be obtained by the statute); and

• The ALJs failed to consider the consequences of their interpretation. Under

their interpretation, any provider’s prior authorization request for

comprehensive orthodontia will be approved, so long as the provider scores the

HLD with a 26 or greater – without regard to the true condition of the patient.

This has far reaching implications for the Medicaid program, particularly in

light of the ALJs’ acknowledgement (proposed FoF No. 25) that HHSC’s

Medicaid claims processing contractor, TMHP, abrogated its responsibility to

review clinical data submitted with prior authorization requests. The ALJs’

interpretation violates Tex. Gov’t Code § 311.023(5) (a court considers the

consequence of a particular construction).

41

It was therefore proper for the EC to correct these misinterpretations.

Finally, the ALJs’ interpretation of the Medicaid meaning of ectopic

eruption was contrary to HHSC’s long-held and consistent construction of the

phrase. OIG presented evidence during the hearing that a January 2012

amendment to the TMPPM language addressing ectopic eruption was intended to

clarify the Medicaid program’s long-standing interpretation, not to implement a

substantive change in policy. See testimony of Dr. Linda Altenhoff, Vol, 1 at 93:2-

9, 94:16-23, A.R. at 1904-05; and testimony of Deputy Inspector General for

Enforcement, Vol. 3 at 193:5-194:1, 294:21-23, A.R. at 2480-81, 2581. This

testimony from Medicaid program officials was uncontroverted.

Nevertheless, the ALJs erroneously concluded that the January 2012

language was intended to effect a substantive change to the “definition” of ectopic

eruption. In the district court, Antoine characterized the ALJs’ determinations

regarding the effect of the January 2012 language change as a finding of

adjudicative fact that the EC was not allowed to alter. Antoine is wrong. Whether

the language change in the TMPPM was intended to be substantive or clarifying

is a question of law, committed to the discretion of the EC. Sw. Pharm. Solutions,

408 S.W.3d at 561-62; Boswell, 910 S.W.2d at 599-600. It was therefore proper

for the EC to correct these misinterpretations.

42

B. Substantial evidence exists to show that Antoine committed

fraud or made willful misrepresentations necessary to

maintain the payment hold. The EC properly corrected the

ALJs’ errors, and Antoine cannot establish that the EC

exceeded his authority.

The ALJs erroneously determined that there exists a special definition for

ectopic eruption under the Medicaid Program—a definition that, as described

supra, is inconsistent with Medicaid’s limited orthodontic benefit. As a result, they

found that none of the HLD scoresheets Antoine submitted included false

statements or misrepresentations. Consequently, they wrongly concluded that

Antoine’s conduct was neither fraudulent nor willfully misrepresentative.

In reaching this conclusion, the ALJs ignored substantial evidence of

Antoine’s conduct, disregarded the testimony of the OIG’s expert, and

impermissibly created “expert” opinions from the testimony of Antoine’s Drs.

Nazari and Kanaan.

Antoine did not address the issue of substantial evidence in its district court

brief. Accordingly, Antoine waived any argument that the AFO is not supported

by substantial evidence. See Akin, 2015 WL 1611803, at *3 n.1. This alone should

be enough to affirm the AFO. Nevertheless, the State will show that the AFO is

fully supported by substantial evidence, and in so showing will establish that the

district court erred in reversing the AFO.

43

1. Providers have a duty to know and follow law and

policy.

In reaching their flawed interpretation of Medicaid policy, the ALJs ignored

Antoine’s duty, as a matter of law, to understand and comply with Medicaid

requirements, standards, and procedures. See Heckler v. Community Health Servs.,

467 U.S. 51, 63-65 (1984). Heckler involved the Government’s recovery of

payments incorrectly made to a Medicare provider, who contended the

Government was estopped from recovering because the provider relied on

authorization by a fiscal intermediary. Id. at 53, 60. The Heckler Court rejected

the availability of estoppel. Heckler found that the provider had lost no legal right

because it was never entitled to the money in the first place. Id. at 61-62.39 Heckler

also found that the provider had a duty to know the provisions under which it

received government funds. Id. at 64. The Court noted:

Justice Holmes wrote: “Men must turn square corners when they deal

with the Government” (citing Rock Island, A. & L.R. Co. v. United

States, 254 U.S. 141, 143 (1920)). This observation has its greatest

force when a private party seeks to spend the Government’s money.

Protections of the public fisc requires that those who seek public

funds act with scrupulous regard for the requirements of law;

respondent could expect no less than to be held to the most

demanding standards in its quest for public funds. This is consistent

with the general rule that those who deal with the Government are

expected to know the law and may not rely on the conduct of

Government agents contrary to law.

39

See also Personal Care Products, Inc. v. Hawkins, 635 F. 3d 155 (5th Cir. 2001) (noting that

providers have no property interest in Medicaid reimbursement receivables).

44

Id. at 63; see also N. Mem’l Med. Ctr. v. Gomez, 59 F. 3d 735, 739 (8th Cir. 1995)

(participants in the Medicaid program have a “duty to familiarize themselves with

the legal requirements” of Medicaid procedures). Providers may not claim after

getting caught in a lie that they interpreted a term in a manner that contradicts

Medicaid policy, federal and state law, and the industry-wide understanding of the

term. Likewise, Antoine’s misrepresentations were not excused and should not

have been given credit by the ALJs. The EC was well within his authority to

correct the ALJs misapplication and misinterpretations of Medicaid policy.

Therefore, the Court should affirm the AFO.

2. Dr. Kanaan’s scoring pattern shows, at a minimum,

he acted with conscious disregard or reckless

indifference to the truth or falsity of his

representations of patient conditions.

Dr. Kanaan’s scoring pattern shows substantial and reliable evidence of

fraud: he scored 27 of the 63 patients in the sample, and of those 27 patients, Dr.

Kanaan scored 23 (85%) as having the same eight teeth ectopic. Vol. 3 at 43-70,

A.R. at 2330-57. Ex. P-64.01 through P-64.63; R-49, Tadlock summary, at A.R.

1097-98, App. I. The rate of occurrence of ectopic eruption in the cases scored by

Dr. Kanaan flies in the face of expert testimony from disinterested

orthodontists that, according to the scientific literature, ectopic eruption is rare

and the incidence of even one tooth ectopic occurs only in between 1.5 and 9

45

percent of the population. 40 The chances that 85% of Dr. Kanaan’s patients would

each have the same eight ectopic teeth, when less than 10% percent of the

population has even one ectopic tooth, is infinitesimal. See Dr. Tadlock’s

testimony, Vol. 1 at 174-175, A.R. at 1985-86. Although the ALJs made passing

note of Dr. Kanaan’s scoring pattern, they failed to draw any inferences from this

conduct, nor did they explain how this evidence relates to the OIG’s burden to

continue the payment hold.41See 42 C.F.R. § 455.2 (a Medicaid agency may

receive credible allegations of fraud from any source, including “patterns

identified through provider audits.”).42

Additionally, OIG presented reliable evidence that Antoine submitted

fraudulently scored HLD scoresheets for 61 of the 63 patients by falsely

40

Dr. Kanaan testified the ectopic eruption is so rare that he has never treated a private-pay patient

for a single ectopically-erupted tooth. Vol. 3 at 96:6-9, A.R. at 2383. Yet, he also testified that he

does not diagnose Medicaid and private-pay patients differently. Id. at 17:22-25, A.R. at 2304. Dr.

Kanaan even testified that the very same mouth that has ectopically-erupted teeth for Medicaid

purposes is a prime example – the very example he uses on his other practice’s website– of

crowding. Vol. 3 at 20:25-21:1, A.R. at 2307-08 (the photo on his website is an example of

crowding), 21:5-20, A.R. at 2308 (explaining that the photo is of ADC’s Medicaid patient), 25:5-

25:8, A.R. at 2312 (stating that he scored this patient as ectopic).

41

None of the patients in the sample were eligible for Medicaid-covered comprehensive

orthodontics without Antoine’s score for ectopic eruption: excluding those ectopic eruption

scores, Antoine’s sample HLD scores ranged from 0 to 19. See R-49, Tadlock summary, at A.R.

1097-98, App. I. Assuming arguendo that each of these patients had two instances of the rare

condition of anterior ectopic eruption, they still would not have been eligible for Medicaid-

covered comprehensive orthodontics, as they could not achieve the qualifying score of 26.

42

The evidentiary burden on OIG in this proceeding is very low. The evidence must have

“indicia of reliability.” In other words, it is reliable unless rebutted and shown to be immaterial,

untrue, inaccurate or unreliable

46

representing that each of these 61 patients had six or more ectopically-erupted teeth.

See R-49, Tadlock summary, at A.R. 1097-98, App. I. In light of the commonly

understood meaning of ectopic eruption as established by the testimony of Dr.

Tadlock and Dr. Altenhoff, the egregiousness of Antoine’s scoring pattern shows

reliable prima facie evidence of fraud or willful misrepresentations and satisfied

the OIG’s burden to maintain the payment hold. Tex. Gov’t Code § 531.102(g)(2).

3. The ALJs compounded their errors by relying on

“experts” who misunderstood and misapplied Texas

Medicaid policy.

The ALJs expressly declined to rely on Antoine’s proffered experts, Orr and

Ornish, for their determinations regarding ectopic eruption. PFD at 28, A.R. at

1222. Instead the ALJs attempted to refute Dr. Tadlock’s expert testimony by

citing to the testimony of Drs. Nazari and Kanaan. However, Antoine did not

proffer or qualify either Dr. Nazari or Dr. Kanaan as an expert, and the ALJs erred

in considering them experts.43 See also Petitioner’s Expert Designations (listing

43

The State objected to Dr. Kanaan being treated as an expert witness. Vol. 3 at 128:2-5, A.R. at

2415. The ALJs abused their discretion when they considered Dr. Kanaan’s testimony as an expert.

Vol. 3 at 128:6-16 (ALJ: “Well he [Dr. Kanaan] may not have been offered as an expert but he

certainly is qualified as an expert as much as any other.”). The ALJs, sua sponte designated Dr.

Kanaan as an expert. Vol. 3 at 129: 3-5, 19-22, A.R. at 2416 (allowing a treatise to be shown to

Dr. Kanaan to show “what the expert relied on” and “showing in part what Dr. Kanaan relied upon

in forming his expert opinions”). Nor did Antoine ever offer or qualify Dr. Kanaan as an expert

witness. Because of the ALJs’ abuse of discretion in designating a party opponent as an expert, the

EC acted well within his discretion in correcting any proposed findings or conclusions that were

predicated on the ALJs’ erroneous ruling.

As for Dr. Nazari, Antoine never offered him as an expert. Vol. 4, A.R. 2633-2794. The ALJs in

their PFD, again sua sponte, designated Dr. Nazari as an expert. See PFD at 28 (discussing Dr.

47

Dr. Orr and Dr. Ornish), A.R. at 356-74. The ALJs also failed to note Dr. Nazari’s

testimony that he learned to score the HLD index “for Medicaid” from Dr. Orr.

Vol. 4 at 137:17-25, A.R. at 2765.44 Thus, even though the ALJs putatively did not

rely on Orr and Ornish, their reliance on Dr. Nazari is misplaced because his

opinions are derivative of Dr. Orr, who incorrectly opined that Texas Medicaid

adopted a special liberal definition of ectopic eruption.45 The ALJs therefore erred

by relying on providers, for their interpretation of Medicaid policy; and by

disregarding the testimony of Medicaid policy witnesses and qualified experts. See

Sw. Pharm., 408 S.W.3d at 561-62; Wood v. Tex. Comm’n Envtl. Quality, 2015

WL 1089492, at *6.

Nazari’s testimony as an expert), A.R. at 1222. The EC correctly modified any findings or

conclusions relying on the ALJs’ erroneous designation of Dr. Nazari as an “expert.”

44

Dr. Nazari testified the methodology he applied for ectopic eruption was to include any teeth

that were "rotated, the slanted leaning teeth" based on what he learned from Dr. Orr a decade

prior. Vol. 4, at 102:22-103:4, 138:18-23, A.R. at 2730-31, 2766 (including "twisted or turned or

crooked" teeth). This description, comports with neither the generally-accepted scientific

understanding of the term "ectopic eruption" nor the instruction of the TMPPM which refers to

"an unusual pattern of eruption."

45

The ALJs summarily, and incorrectly, stated that the HLD scores of Dr. Orr and Dr. Ornish, ,

were “generally similar” to Antoine’s scores and that their testimony was “cumulative” of the

testimony of Drs. Nazari and Kanaan; the ALJs asserted that they did not rely upon the testimony

of either Dr. Orr or Dr. Ornish. PFD at 28, A.R. at 1222. OIG objected to this supposed cursory

treatment of Antoine’s experts for two reasons. First, the evidence shows Dr. Nazari’s

understanding of HLD scoresheets was directly based on training he received from Dr. Orr. Vol.

4, at 137-38, A.R. at 2765-66; See also Respondent’s Closing Brief at 13, 33-37, A.R. at 1001,

1021-22. Second, it is factually incorrect to conclude that Dr. Ornish’s scores were “generally

similar” to Antoine’s– in fact, Dr. Ornish, the only expert orthodontist retained by Antoine, scored

13 of the 63 Antoine patients as having an HLD score less than 26. Thus, Antoine’s own expert

opined that nearly 21 percent of the Antoine patients did not qualify for Medicaid based on the

HLD score.

48

III. Every modification made in the EC’s AFO is supported by

substantial evidence and Antoine cannot establish otherwise.

For each modification that he made to the ALJs’ PFD, the EC met the

requirements to support his changes to the PFD in his AFO. See e.g., Flores v.

Emps. Ret. Sys. of Tex., 74 S.W.3d 532, 540 (Tex. App.—Austin 2002, pet.

denied); Pierce v. Tex. Racing Comm’n, 212 S.W.3d 745, 755 (Tex. App.—Austin

2006, pet. denied); see also Dunn, 2003 WL 22721659, at *1. There must be a

rational connection between an underlying agency policy and the altered finding

of fact or conclusion of law. See, e.g., Heritage on the San Gabriel, 393 S.W.3d at

440-4; State v. Mid-South Pavers, Inc., 246 S.W.3d 711, 728 (Tex. App.–Austin

2007, pet. denied); Levy v. Tex. State Bd. of Medical Exam’rs, 966 S.W.2d 813,

816 (Tex. App.–Austin 1998, no pet.).

In the district court, Antoine specifically claimed that the EC erred in

changing Findings of Fact 45-50 and Conclusion of Law 13. Because Antoine

limited its arguments to those findings of fact and conclusion of law, it has waived

argument as to any other changes the EC made to the AFO. Each of the EC’s

modifications to the contested findings and conclusions was authorized by law and

fully supported by substantial evidence in the record.

A. Finding of Fact No. 45

Finding of Fact No. 45 reads:

In reviewing the 63 ADC patient files in the statistically valid

49

random sample, Dr. Tadlock applied the definition of ectopic

eruption that is generally recognized within the dental profession

and scored the patients as instructed by the Manuals. Dr.

Tadlock properly applied Medicaid policy.

As proposed by the ALJs, proposed FoF No. 45 read: “Dr. Tadlock did not

apply the Manual’s definition of ectopic eruption in scoring the HLD index for the

63 patients.” A.R. at 1234.

The EC was authorized to modify proposed FoF No. 45 because it addresses

a mixed question of fact and law, and is therefore a “legislative finding.” 46 See

Sanchez, 229 S.W.3d at 515-16; Dunn, 2003 WL 22721659, at *3 (quoting

McCown & Leo, at 68-69); Montemayor, 2003 WL 2140151, *8.

The ALJs’ proposed FoF No. 45 was a legislative finding because it was

expressly premised on the erroneous and impermissible interpretation that Texas

Medicaid policy incorporates a special definition for ectopic eruption. The ALJs’

proposed FoF No. 45 had two incorrect assumptions: (1) Medicaid had a special

definition for ectopic eruption; and (2) Dr. Tadlock failed to apply Medicaid

policy. Neither assumption is accurate.

The EC fully explained the reasons for his modification of FoF No. 45 in

his AFO. See App. A, at pp. 21-23, A.R. at 1764-66. This explanation provides

the substantial evidence needed to support the AFO. Antoine cannot establish a

46

See McCown & Leo, supra note 31.

50

lack of substantial evidence on the part of the EC, and consequently, the Court

should affirm the AFO.

B. Finding of Fact No. 46.

Finding of Fact No. 46 reads:

Despite the SOAH ALJs finding Dr. Nazari’s testimony to be credible,

Dr. Nazari did not properly follow Medicaid policy in his identification

of ectopic eruptions; the overwhelming evidence of the consistent

pattern of inflated HLD scores submitted by ADC establishes prima

facie evidence that is reliable, relevant and material that ADC‘s

misrepresentations of medical necessity constitute willful

misrepresentations.

As proposed by the ALJs FoF No. 46 stated: Dr. Nazari was a credible

witness and properly utilized the Manuals’ definition in scoring the HLD index.

Finding of Fact No. 46 is a legislative finding because it is founded on the

(erroneous) presumption that Texas Medicaid policy incorporates a special

definition for ectopic eruption. The ALJs’ proposed finding had two components:

(1) Medicaid had a special definition for ectopic eruption; and (2) Dr. Nazari

properly followed Medicaid policy in scoring his patients. Neither element is

accurate.

The EC modified the ALJs’ proposed FoF No. 46 because the ALJs relied

on the faulty proposition that Medicaid adopted a special definition for ectopic

eruption. Further, Dr. Nazari’s testimony reveals that he did not properly apply

Medicaid policy to the scoring of his patients. Vol. 4, at 103:13-16, 104:1-4, 145:9-

51

10, A.R. at 2731-32, 2773, where Dr. Nazari testified that orthodontics for

Medicaid patients is different than orthodontics for non- Medicaid patients.47

Further, Dr. Nazari was unable to define a “severe handicapping malocclusion.”

Id., at 144:17-145:6, A.R. at 2772-73. The EC fully explained his reasons for

modifying FoF No. 46. See App. A, at pp. 23-24, A.R. at 1766-67. This provides

the substantial evidence needed to support the AFO. Antoine cannot establish a

lack of substantial evidence on the part of the EC, and consequently, the Court

should affirm the AFO.

C. Finding of Fact No. 47.

Finding of Fact No. 47 reads:

Despite the SOAH ALJs finding Dr. Kanaan’s testimony to be credible,

Dr. Kanaan did not properly follow Medicaid policy in his identification

of ectopic eruptions; the overwhelming evidence of the consistent

pattern of inflated HLD scores submitted by ADC establishes prima

facie evidence that is reliable, relevant and material that ADC‘s

misrepresentations of medical necessity constitute willful

misrepresentations.

As proposed by the ALJs FoF No. 23 stated: Wael Kanaan, D.D.S. an

orthodontist who worked with ADC was a credible witness and properly utilized

the Manuals’ definition of ectopic eruption in scoring the HLD index.

Finding of Fact No. 47 is a legislative finding because it is founded on the

47

In this regard, Dr. Nazari’s testimony differed from Dr. Kanaan’s. Dr. Kanaan testified that

Medicaid patients and non-Medicaid patients should be diagnosed and treated to the same

standard; yet, in practice he did not follow that guidance. See supra note 40.

52

(erroneous) presumption that Texas Medicaid policy incorporates a special

definition for ectopic eruption. The ALJs’ proposed finding had two components:

(1) Medicaid had a special definition for ectopic eruption; and (2) Dr. Kanaan

properly followed Medicaid policy in scoring his patients. Neither element is

accurate.

First, the EC corrected the ALJs’ error of law regarding Medicaid policy.

Then, he appropriately applied the law to the facts in the record. In their PFD, the

ALJs acknowledged that Dr. Kanaan scored 23 of 27 patients exactly the same

way—with the same eight teeth being scored as ectopic in all 23 patients. PFD at

p.25, A.R. at 1219. Although they recognized this pattern by Dr. Kanaan, the ALJs

failed to correctly apply the law to the facts. Dr. Kanaan’s approach to Medicaid

patients, at the very least, indicates that Dr. Kanaan was reckless in his scoring, or

indifferent to the actual standards for qualifying a Medicaid patient. Dr. Kanaan’s

scoring 23 out of 27 patients exactly the same way constitutes prima facie evidence

that he acted with the requisite scienter to commit fraud or willful

misrepresentations. See Tex. Hum. Res. Code § 36.0011(b), defining Culpable

Mental State:

A person acts knowingly with respect to information if the person:

(1) has knowledge of the information;

(2) acts with conscious indifference to the truth or falsity of the

information; or

(3) acts in reckless disregard of the truth or falsity of the

53

information. Tex. Hum. Res. Code § 36.0011(a).

In his AFO the EC fully explained the reasons for his changes to FoF No.

47. See App. A, at pp. 24-26, A.R. at 1767-69. This provides the substantial

evidence needed to support the AFO. Antoine cannot establish a lack of

substantial evidence on the part of the EC, and consequently, the Court should

affirm the AFO.

D. Finding of Fact No. 48.

Finding of Fact No. 48 reads:

HHSC-OIG presented evidence that is credible, reliable, and verified,

and that has indicia of reliability when analyzed consistently with Texas

law and Medicaid policy, that ADC knowingly incorrectly scored the

HLD index on orthodontic prior approval requests submitted to Texas

Medicaid.

As proposed by the ALJs, FoF No. 48 stated: There is no evidence that is

credible, reliable, or verifiable, or that has indicia of reliability, that ADC

incorrectly scored the HLD Index to obtain Texas Medicaid benefits for patients

or to obtain Texas Medicaid payments.

The EC was authorized to change FoF No. 48 because it is a mixed finding

of fact and law. The finding incorporates two components: (1) a statement

regarding whether Antoine properly scored the HLD index (“There is no evidence

. . . that ADC incorrectly scored the HLD . . .”); and (2) a statement regarding

Antoine’s intent (“. . . to obtain Texas Medicaid benefits for parents or to obtain

54

Texas Medicaid benefits.”). As to both components, the ALJs’ proposed finding

reflected a misunderstanding of: (a) Texas Medicaid policy; (b) the OIG’s burden

of proof in a payment hold proceeding; and (c) the standard for proving scienter

under the TMFPA.

In contravention of HHSC policy, the ALJs erroneously determined that

Texas Medicaid adopted a liberal interpretation of Medicaid policy with respect

to ascertaining whether a patient exhibits ectopic eruption. Upon accepting the

“anything goes” standard propounded by Drs. Orr, Nazari and Kanaan, the ALJs

then found no error, much less a willful error in Antoine’s scoring. The lynch-pin

to this finding was the ALJs’ misunderstanding, and misapplication, of the limits

of Texas Medicaid’s orthodontia policy. The ALJs compounded their error by

misapplying Texas law: specifically, the ALJs misapplied the OIG’s burden of

proof at the proceeding, and they ignored the TMFPA standard for scienter of

conscious indifference or reckless disregard. See Tex. Hum. Res. Code §

36.0011(a).

At the payment hold hearing, the OIG bore the burden of presenting prima

facie evidence of fraud or willful misconduct. Prima facie evidence is “evidence

that, until its effect is overcome by other evidence, will suffice as proof of a fact

in issue.” Rehak Creative Servs. v. Witt, 404 S.W.3d 716, 726 (Tex. App.—

Houston [l4th Dist.] 2013, pet. denied). The OIG satisfied its burden by presenting

55

evidence of Antoine’s scoring pattern for the HLD scoresheets. See R-49, Tadlock

summary, at A.R. 1097-98, App. I. Section 36.0011 of the TMFPA, as noted

supra, defines the culpable mental state the State must establish to prove unlawful

acts. The State must show the person acted with knowledge of the truth or falsity

of information; or with conscious indifference to the truth or falsity of the

information; or with reckless disregard of the truth or falsity. Tex. Gov’t Code §

36.0011(a). Importantly, the State is not required to show the person’s specific

intent to commit an unlawful act. Id., § 36.0011(b).

Therefore, in correctly applying Medicaid policy and Texas law to the

evidence, the EC was fully authorized to correct the ALJs’ erroneous finding: (1)

that there was not credible, reliable, verified evidence with indicia of reliability

that Antoine incorrectly scored HLD indices; (2) that there was no evidence

Antoine did so for the purpose of obtaining Medicaid benefits.

As required by law, the EC fully explained the rationale for his changes. See

App. A, at pp. 26-28, A.R. at 1769-71. This explanation provides the substantial

evidence needed to support the AFO. Antoine cannot establish a lack of

substantial evidence on the part of the EC, and consequently, the Court should

affirm the AFO.

E. Finding of Fact No. 49.

Finding of Fact No. 49 reads:

56

HHSC-OIG presented prima facie evidence that is credible, reliable,

and verified, and that has indicia of reliability when analyzed

consistently with Texas law and Medicaid policy, that [Antoine]

committed fraud or willful misrepresentations to Texas Medicaid.

As proposed by the ALJs, FoF No. 49 stated: There is no evidence that is credible,

reliable, or verifiable, or that has indicia of reliability, that [Antoine] committed

fraud or engaged in willful misrepresentation with respect to the 63 [Antoine]

patients in this case.

The EC was authorized to change FoF No. 49 because it is a mixed finding

of fact and law. The ALJs’ proposed finding incorporated their misunderstanding

of Medicaid policy, and misapplication of Texas law, to the evidence. The EC

explained the reasons for his changes to FoF No. 49. See App. A, at pp. 28-30,

A.R. at 1771-73. This explanation provides the substantial evidence needed to

support the AFO. Antoine cannot establish a lack of substantial evidence on the

part of the EC, and consequently, the Court should affirm the AFO.

F. Finding of Fact No. 50.

Finding of Fact No. 50 reads:

HHSC-OIG presented prima facie evidence that is credible, reliable, and

verified, and that has indicia of reliability when analyzed consistently

with Texas law and Medicaid policy, that ADC committed fraud or

wilful misrepresentations in filing requests for prior authorization with

TMHP for a substantial majority of patients in the OIG audit sample.

As proposed by the ALJs, FoF No. 50 stated: There is no evidence that is credible,

57

reliable, or verifiable, or that has indicia of reliability, that ADC committed fraud

or misrepresentation in filing requests for prior authorization with TMHP for the

63 patients at issue in this case.

The EC was authorized to change FoF No. 50 because it is a mixed finding

of fact and law. The ALJs’ proposed finding incorporated their misunderstanding

of Medicaid policy, and misapplication of Texas law, to the evidence. As with FoF

No. 49, the EC explained the rationale for his changes. See App. A, at pp. 30-31,

A.R. at 1773-74. This explanation provides the substantial evidence needed to

support the AFO. Antoine cannot establish a lack of substantial evidence on the

part of the EC, and consequently, t the Court should affirm the AFO.

G. Conclusion of Law No. 13.

Conclusion of Law No. 13 in the AFO reads:

HHSC-OIG should maintain the payment hold against ADC for

alleged fraud or willful misrepresentation, and program

violations. Tex. Gov’t Code § 531.102(g) (2011); 42 CFR § 455.23

(2011); Tex. Hum. Res. Code § 32.091(c) (2003); 1Tex. Admin.

Code §§ 371.1703(b)(3), and (b)(5), 371.1617(a)(1)(A)-(C), (I),

(K), (2)(A), (5)(A), (5)(G) (2005).

As proposed by the ALJs, CoL No. 13 stated: HHSC-OIG lacks authority to

maintain the payment hold against ADC for alleged fraud or misrepresentation.

Tex. Gov’t Code § 531.102(g) (2011); 42 CFR § 455.23 (2011); Tex. Hum. Res.

Code § 32.091(c) (2003); 1 Tex. Admin. Code §§371.1703(b)(3),

371.1617(a)(1)(A)-(C) (2005).)

58

The EC was authorized to change CoL No. 13 because it was a pure question

of law committed to the discretion of the agency. Further, to the extent that CoL

No. 13 was actually a recommendation from the ALJs, and not a true conclusion

of law, the EC was fully authorized to modify it. See Granek v. Texas State Bd. of

Med. Exam'rs, 172 S.W.3d 761, 781 (Tex. App.—Austin 2005, no pet.); Akin,

2015 WL 1611803, *5; see also Pierce v. Tex. Racing Comm’n, 212 S.W.3d at

754 n.7 (“We need not decide, however, whether the ALJ had authority to

recommend a penalty in a racing commission case because, regardless of whether

the ALJ's conclusion of law was authorized, the Commission was statutorily

authorized to modify or reject it.” (citing Tex. Gov't Code § 2001.058(e))).

As required by the APA and black letter Texas law, the EC fully

explained the reasons for his change to CoL No. 13. See App. A, at pp. 39-40, A.R.

at 1782-83. This explanation provides the substantial evidence needed to support

the AFO. Antoine cannot establish a lack of substantial evidence on the part of the

EC, and consequently, the Court should affirm the AFO.

PRAYER

WHEREFORE, the State prays that the Court find that the AFO is fully

supported by substantial evidence, and the EC did not exceed his authority in

entering the AFO. The State respectfully prays that this Court reverse the

honorable district court and affirm the EC’s AFO in all respects.

59

Respectfully submitted,

OFFICE OF THE ATTORNEY GENERAL

CHARLES E. ROY

First Assistant Attorney General

JAMES E. DAVIS

Deputy Attorney General for Civil Litigation

/s/ Raymond C. Winter

RAYMOND C. WINTER

Chief, Civil Medicaid Fraud

Division State Bar No. 21791950

Phone: (512) 936-1709

Fax: (512) 370-9477

raymond.winter@texasattorneygeneral.gov

REYNOLDS B. BRISSENDEN

State Bar No. 24056969

reynolds.brissenden@texasattorneygeneral.gov

Phone: (512) 936-2158

NOAH REINSTEIN

State Bar No. 24089769

noah.reinstein@texasattorneygeneral.gov

Phone: (512) 463-3457

Assistant Attorneys General

Office of the Attorney General of

Texas Civil Medicaid Fraud Division

P.O. Box 12548, Capitol Station

Austin, Texas 78711-2548

ATTORNEYS FOR TEXAS HEALTH

AND HUMAN SERVICES COMMISSION

AND OFFICE OF THE INSPECTOR

GENERAL

60

CERTIFICATE OF COMPLIANCE

I certify pursuant to Tex. R. App. P. 9.4(i) that this Brief, excluding the: caption,

identity of parties and counsel, statement regarding oral argument, table of

contents, index of authorities, statement of the case, statement of issues presented,

signature, proof of service, certification, certificate of compliance, and appendix

has 14,450 words. This Brief was prepared using Microsoft Word 2010 and I have

relied on the word count from that program.

/s/ Raymond C. Winter

Raymond C. Winter

CERTIFICATE OF SERVICE

I certify that I have on this the 9th day of November, 2015, served copies of

this Appellant’s Brief to the following:

Jason Ray J.A. “Tony” Canales

Riggs & Ray, PC Canales & Simonson, PC

506 W. 14th Street, Suite A 2601 Morgan Avenue

Austin, Texas 78701 P.O. Box 5624

jray@r-alaw.com Corpus Christi, Texas 78465

tonycanales@canalessimonson.com

/s/ Raymond C. Winter

Raymond C. Winter

61

INDEX OF APPENDIX

APPENDIX A Amended Final Order

APPENDIX B Medicaid.gov Website, Statistics

APPENDIX C Excerpts from Tex. Medicaid and CHIP in Perspective, 10th

Ed., Feb. 2015

APPENDIX D 2011 Tex. Medicaid Provider Procedures Manual - Excerpts

APPENDIX E 2010 Tex. Medicaid Provider Procedures Manual - Excerpts

APPENDIX F 2009 Tex. Medicaid Provider Procedures Manual - Excerpts

APPENDIX G 2008 Tex. Medicaid Provider Procedures Manual – Excerpts

APPENDIX H Exhibit R-51. Prevalence of malocclusion and orthodontic

treatment need in children and adolescents in Bogota,

Colombia. An epidemiological study related to different states

of dental development. Birgit Thilander, 2001, European J. of

Orthodontics.

APPENDIX I Spreadsheet of dental scores submitted by Antoine

APPENDIX J Exhibit R-88. HHSC-OIG’s Proffer of Rebuttal Testimony

from Dr. Linda Altenhoff

62

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