Texas Mutual Ins. Co. v. Vista Community Medical Center

275 S.W.3d 538 (Tex. App.–Austin 2008, pet. denied)

As counsel for Zenith Insurance Company, we helped to obtain a declaratory judgment that the stop-loss exception to the Division’s former inpatient hospital fee guideline requires a hospital to demonstrate not only that its charges exceed $40,000 but also that the services provided were unusually costly and unusually extensive. Ruling in favor of the carriers and the Division, the Austin Court of Appeals reversed the trial court’s judgment holding that the stop-loss exception only requires the hospital to demonstrate that its charges exceed $40,000. The court of appeals also reversed the trial court’s judgment that the Division’s 2005 Staff Report is an invalid rule and that the phrases “unusually costly” and “unusually extensive” are so vague and uncertain that their use by the Division in determining whether the Stop-Loss Exception applies would be arbitrary. The effect of this decision is that the stop-loss exception, which requires reimbursement at 75% of the hospital’s charges, will not apply to all admissions with billed charges over $40,000 but only those cases in which the hospital can demonstrate that it actually provided unusually costly and extensive services.