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Via Christi Hospitals Wichita, Inc. v. Kan-Pak LLC

Court of Appeals of Kansas

August 25, 2017

Via Christi Hospitals Wichita, Inc., Appellant,
v.
Kan-Pak LLC, et al., Appellees.

         SYLLABUS BY THE COURT

         1. A rule or regulation adopted by an administrative agency may only be given binding legal effect if the agency has complied with the requirements of the Rules and Regulations Filing Act when it creates or amends the rule.

         2. The Filing Act requires the preparation and filing of an economic impact statement assessing the economic effect of any amendment to an administrative rule or regulation.

         3. The failure by an administrative agency to assess the economic impact of an amendment of an administrative regulation renders the amendment void and unenforceable.

         4. The Judicial Review Act permits a court to grant relief if the agency action is unreasonable, arbitrary, or capricious.

          5. The enforcement of an accidentally amended rule, adopted in noncompliance with the Filing Act, is an arbitrary or capricious action.

         Appeal from Workers Compensation Board.

          Edward D. Heath, Jr., of Law Office of Edward D. Heath, Jr., of Wichita, for appellant.

          Douglas C. Hobbs and Ryan D. Weltz, of Wallace, Saunders, Austin, Brown & Enochs, Chartered, of Wichita, for appellees.

          Before Hill, P.J., McAnany and Atcheson, JJ.

          HILL, J.

         This case illustrates why we have courts of law. There are times when rules created haphazardly must not be enforced because the consequences flowing from their enforcement nullify the good policy promoted by other, properly created rules. This is especially true here, where the rule enforced by the Workers Compensation Hearing Officer and then the Kansas Workers Compensation Appeals Board was unintended in its creation-an accident at birth. Administrative agencies, for many reasons, must follow established procedures in creating rules, and any enforcement of a rule not so created is arbitrary and capricious and must be struck down.

         The facts here are uncontested. In 2011, Darin Pinion received horrible burns while he was working for Kan-Pak, LLC. Via Christi Hospitals Wichita, Inc. treated Pinion for his burns. Kan-Pak's workers compensation insurance carrier was Travelers Indemnity Company of America. Travelers contracted with Paradigm Management, LLC to assume the claim. In turn, Via Christi billed Paradigm over a million dollars for Pinion's medical treatment. Relying on the published 2011 Kansas Workers Compensation Schedule of Medical Fees, Paradigm paid Via Christi just $136, 451.60. Via Christi contends the payment was short by almost $600, 000.

         This dispute concerns a single sentence in the 2011 Kansas Department of Labor Workers Compensation Schedule of Medical Fees. The year before, the 2010 fee schedule introduced an independent methodology called the "stop-loss method" to reimburse hospitals for "unusually costly services rendered during treatment to an injured worker." The stop-loss method provided that if the total charges of an inpatient hospital stay equaled or exceeded $60, 000, the total charges were multiplied by 70 percent to determine the allowed reimbursement. If charges did not reach the ...


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