The nature of the questionable conduct includes: HHSC"S "$600/dollar a month premium for coverage....

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Notably, HHSC never even contested in the court of appeals that the February 28 cutoff
meets this element of an agency rule. See HHSC’s Brief of Appellee 16-25.
C. The February 28 Cutoff Effectively Amends HHSC’s Formally
Promulgated Rule.
The APA’s definition of rule “includes the amendment or repeal of a prior rule.”
TEX. GOV’T CODE § 2001.003(6)(B). As discussed above, the February 28 cutoff
effectively amends HHSC’s formal rule requiring HHSC to base prospective rates on 12
consecutive months of claims data. 11-12, supra. The February 28 cutoff is thus
properly included within the APA’s definition of a “rule.” See Rodriguez v. Service
Lloyds Ins. Co., 997 S.W.2d 248, 254-56 (Tex. 1999) (holding that a formally
promulgated rule may be amended only through the rulemaking process—not through ad
hoc administrative determinations).
D. The February 28 Cutoff Is Not a Statement Regarding Only the
Internal Management or Organization of HHSC.
The evidence conclusively establishes that the February 28 cutoff systematically
lowers the Hospitals’ standard dollar amounts by excluding a disproportionate number of
Medicaid claims with above-average costs. 11-12, supra. Because the February 28
cutoff affects the Hospitals’ pecuniary interests, it is not a statement regarding only the
internal management or organization of HHSC that does not affect private rights. See,
e.g., State Bd. of Ins. v. Deffebach, 631 S.W.2d 794, 797 (Tex. App.—Austin 1982, writ
ref’d n.r.e.) (holding that an agency rule that potentially reduced the plaintiff’s insurance
commissions “would clearly ‘affect’ [the plaintiff]” and therefore vested the plaintiff with
standing to challenge the rule); see also Wilder v. Virginia Hosp. Ass’n, 496 U.S. 498,
(i) implements, interprets, or prescribes law or policy; or
(ii) describes the procedure or practice requirements of a state
agency;
(B) includes the amendment or repeal of a prior rule; and
(C) does not include a statement regarding only the internal management
or organization of a state agency and not affecting private rights or
procedures.
TEX. GOV’T CODE § 2001.003(6). The February 28 cutoff meets this definition as a
matter of law.
A. The February 28 Cutoff Has “General Applicability.”
It is undisputed that HHSC applies the February 28 cutoff on a statewide basis to
all hospitals providing inpatient Medicaid services. RR1:223-24. Moreover, the
February 28 cutoff directly affects the Texas Medicaid program. 8-10, supra. Thus,
there can be no serious dispute that the February 28 cutoff is a policy of “general
applicability.”
B. The February 28 Cutoff Implements Law or Policy and Describes
HHSC’s Procedure or Practice Requirements.
The February 28 cutoff is an integral part of the procedure used by HHSC to
calculate prospective reimbursement rates. 4-5, supra. Moreover, it effectively modifies
HHSC’s formally promulgated rule requiring HHSC to use 12 consecutive months of
claims data in calculating rates. 11-12, supra. Under these circumstances, the February
28 cutoff prescribes law or policy, and/or describes HHSC’s practices and procedures.
See, e.g., Texas Alcoholic Beverage Comm’n v. Amusement and Music Operators of
Texas, Inc., 997 S.W.2d 651, 657-58 (Tex. App.—Austin 1999, pet. dism’d w.o.j.).