FILED:  February 17, 2005
IN THE SUPREME COURT OF THE STATE OF OREGON
MANAGED HEALTHCARE NORTHWEST, INC.,
and PROVIDENCE HEALTH PLAN, INC.,
Petitioners on Review,
v.
DEPARTMENT OF CONSUMER AND BUSINESS SERVICES,
Respondent on Review.
(Agency No. 02053; CA A117587; SC S51006)
En Banc
Argued and submitted September 13, 2004.
On review from the Court of Appeals.*
Jerald P. Keene, Reinisch, Mackenzie, Healey, Wilson &
Clark, Portland, argued the cause and filed the brief for
petitioners on review.
Judy C. Lucas, Assistant Attorney General, Salem, argued the
cause and filed the brief for respondent on review.  With her on
the brief were Hardy Myers, Attorney General, and Mary H.
Williams, Solicitor General.
RIGGS, J.
The decision of the Court of Appeals is affirmed, and former
OAR 436-015-0070(2) (2002) is upheld.
*Judicial review of Department of Consumer and Business
Services administrative rule. 
189 Or App 444, 75 P3d 912 (2003).
RIGGS, J.
Petitioners on review are two managed health care
organizations (MCOs), Managed Healthcare Northwest, Inc. and
Providence Health Plan, Inc. (collectively "Managed Healthcare"). 
They challenge a Department of Consumer and Business Services
(DCBS) administrative rule that prohibits MCOs from using "past
practices" as a basis for denying authorization of nonmember
primary care physicians (PCPs) to treat subject workers. (1) 
Managed Healthcare argues only that DCBS exceeded or contravened
ORS 656.260 (set out below) in adopting the rule.  See ORS
183.400(4)(b) (court shall invalidate rule that "[e]xceeds the
statutory authority of the agency").  The Court of Appeals
rejected Managed Healthcare's argument.  Managed Healthcare
Northwest v. DCBS, 189 Or App 444, 75 P3d 912 (2003).  We allowed
review and now affirm.
This court recently described MCOs as follows:

"An MCO is a health care group organized and
certified as provided in ORS 656.260(1) to (5) 'to
provide managed care to injured workers for injuries
and diseases compensable under [the workers'
compensation statutes].'  ORS 656.260(1).  The director
of the Department of Consumer and Business Services
certifies MCOs to provide managed care under a plan. 
Before certifying a[ prospective] MCO's plan, the
director must find that certain requirements pertaining
to quality of care, nondiscrimination, service costs
and utilization, methods of review, and other criteria
are met.  ORS 656.260(4)."

Kahn v. Providence Health Plan, 335 Or 460, 462 n 1, 71 P3d 63
(2003) (brackets in original).  When a self-insured employer or
the insurer of an employer contracts with a certified MCO to
provide medical services under the workers' compensation
statutes, workers receive medical services consistent with the
terms of that contract.  See ORS 656.245(4)(a) (so stating).
As noted above, to qualify for DCBS certification, a
prospective MCO must submit a plan that satisfies various
statutory criteria, one of which is that the plan

"[a]uthorizes workers to receive compensable
medical treatment from a primary care physician who is
not a member of the managed care organization, but who
maintains the worker's medical records and with whom
the worker has a documented history of treatment, if
that primary care physician agrees to refer the worker
to the managed care organization for any specialized
treatment, including physical therapy, to be furnished
by another provider that the worker may require and if
that primary care physician agrees to comply with all
the rules, terms and conditions regarding services
performed by the managed care organization. * * *."

ORS 656.260(4)(g).  The rule at issue, which DCBS adopted in 2002
and which pertains to ORS 656.260(4)(g), provides that "[t]he MCO
cannot deny authorization of a [nonmember PCP] based on past
practices."  Former OAR 436-015-0070(2) (2002). (2)
Managed Healthcare does not challenge DCBS's general
authority to adopt the rule at issue.  See ORS 656.726(4)(a)
(providing that DCBS director may "[m]ake and declare all rules
and issue orders which are reasonably required in the performance
of the director's duties").  Neither does Managed Healthcare
contend that DCBS adopted the rule without complying with the
applicable rulemaking procedures.  Instead, and as noted above,
Managed Healthcare argues only that DCBS exceeded its statutory
authority by adopting an otherwise valid rule that conflicts with
clearly stated statutory policy.  See, e.g., Planned Parenthood
Assn. v. Dept. of Human Res., 297 Or 562, 573, 687 P2d 785 (1984)
(recognizing that basis for challenging administrative rule under
ORS 183.400(4)(b)).
Managed Healthcare relies on several statutory sources
as support for its argument that DCBS may not prevent MCOs from
declining to authorize treatment by a worker's nonmember PCP
based on that PCP's past practices.  The first source is the text
of ORS 656.260(4)(g) itself, which we quoted above.  Managed
Healthcare argues that

"the statutory text explicitly signals an intent [that]
the worker['s] 'choice' [of PCP] be respected subject
to the legislative mandate that such providers agree to
comply 'with all terms and conditions regarding
services governed by the MCO.'  Moreover, if one of an
MCO's 'terms and conditions' regarding services
precludes approval of care by a PCP who has previously
demonstrated a lack of such compliance, then ORS
656.260(4)(g) specifically sanctions an MCO[']s refusal
to authorize care by that provider.  (In such cases,
the provider would be deemed to have 'agreed' he was
disqualified.)"

We disagree.  The statutory condition upon which
Managed Healthcare relies requires only that the nonmember PCP
"agrees to comply with all the rules, terms and conditions
regarding services performed by the [MCO]."  ORS 656.260(4)(g)
(emphasis added).  The legislature used the present tense in
describing the PCP's agreement to comply.  That choice refutes
Managed Healthcare's argument that MCOs may rely upon a PCP's
past practices –- a retrospective consideration -- in making an
authorization decision.  Managed Healthcare attempts to avoid
that conclusion by arguing that previously noncompliant PCPs are
"deemed to have agreed" that they are disqualified if one of the
MCO's terms and conditions is past compliance.  That argument is
not a plausible reading of the text, because it would nullify the
legislature's use of the present tense in the sentence analyzed
above.
In addressing Managed Healthcare's challenge to former
OAR 436-015-0070(2), we also must examine the applicable
statutory wording in its context to determine the legislature's
intent.  See Planned Parenthood Assn., 297 Or at 573 ("The
question [in determining if a rule exceeds statutory authority]
is whether [the rule] corresponds to the statutory policy as we
understand it."); PGE v. Bureau of Labor and Industries, 317 Or
606, 610-11, 859 P2d 1143 (1993) (court discerns legislative
intent first by examining text and context of statute).  In that
respect, Managed Healthcare contends that the rule contravenes
the statutory directive in ORS 656.260(4)(d) that an MCO's plan
must 

"[p]rovide[] adequate methods of peer review,
service utilization review, quality assurance, contract
review and dispute resolution to ensure appropriate
treatment or to prevent inappropriate or excessive
treatment, to exclude from participation in the plan
those individuals who violate these treatment standards
and to provide for the resolution of such medical
disputes as the director considers appropriate."

(Emphasis added.)  Focusing on the emphasized wording, Managed
Healthcare argues that MCOs cannot comply with ORS 656.260(4)(d)
without violating former OAR 436-015-0070(2).  Again, we
disagree.
As the Court of Appeals noted, ORS 656.260(4)(d)
governs those who "participate in the plan," i.e., providers who
have entered into contracts with an MCO to provide services under
the managed care plan.  Managed Healthcare Northwest, 189 Or App
at 452-54.  The authorization of treatment by nonmember PCPs
under ORS 656.260(4)(g), however, constitutes an express
exception to the requirement that subject workers receive
services only from participating providers.  See id. (referring
to "primary care physician who is not a member of the managed
care organization") (emphasis added).  In other words, ORS
656.260(4)(d) refers to a different healthcare provider
population than does ORS 656.260(4)(g) and former OAR 436-015-0070(2).  Therefore, the rule does not conflict with the
statutory directive of ORS 656.260(4)(d). 
Finally, Managed Healthcare argues that former OAR 436-015-0070(2) contravenes the policy set out in ORS 656.260(4)(c),
which requires that a prospective MCO's plan must "[p]rovide[]
appropriate financial incentives to reduce service costs and
utilization without sacrificing the quality of service."  Managed
Healthcare contends that the rule is at odds with both statutory
considerations (i.e., cost reduction and maintenance of quality
of service), first by providing a disincentive for physicians to
join MCOs and second by prohibiting MCOs

"from refusing to authorize PCP status for a provider
whose past practices might well include patient abuse,
disciplinary sanctions short of de-licensing, past
malpractice judgments or just plain bad medical
practices."

With respect to financial incentives, we see nothing
about the administrative determination that MCOs may not consider
a nonmember PCP's past practices that would provide a
disincentive for practitioners to join MCOs.  The legislature has
decided to require MCOs to compensate treatment provided to 
workers by nonmember PCPs subject to the conditions set out in
ORS 656.260(4)(g).  Managed Healthcare's disagreement in that
respect is with the policy choice that the Legislative Assembly
has made, not with DCBS.
For similar reasons, we disagree that former OAR 436-015-0070(2) conflicts with the requirement that an MCO's plan
ensure the quality of care that a worker receives.  We must
examine that requirement in ORS 656.260(4)(c) in its context. 
That context includes paragraph (4)(g), which we have determined
expresses a clear legislative determination that a worker is
permitted to continue receiving care from a nonmember PCP if that
physician agrees to follow the MCO's rules, terms, and
conditions.  Reading those two statutory provisions together, as
we must, it is clear that an MCO cannot use the general
requirement in paragraph (4)(c), to provide "appropriate"
financial incentives and ensure quality of care, to undermine the
legislature's specific determination in paragraph (4)(g) that
allows a worker to receive compensable treatment from a nonmember
PCP.
The decision of the Court of Appeals is affirmed, and
former OAR 436-015-0070(2) (2002) is upheld.


1. "Past practices" is an administrative, not a statutory, term for which the rule at issue
provides no definition.  DCBS argues that "'past practices' is probably broad enough to cover all
aspects of the nonmember PCP's medical practice."  Managed Healthcare, in contrast,  at least
implicitly reads "past practices" more broadly to include any prior conduct of a nonmember PCP
that would have breached an agreement between the PCP and MCO, had an agreement been in
place.  Because our resolution of this facial rule challenge would be the same under either a
narrow or a broad construction of "past practices," we do not address that matter further.
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2. DCBS since has renumbered and amended the rule to include authorized nurse
practitioners.  That amendment does not affect our analysis, and, for purposes of this opinion, we
will cite to the prior version.
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