Although an important component of the Texas workers' compensation system, ASC facility services account for a proportionally smaller portion of the medical benefits paid in the Texas workers' compensation system than hospital or doctor services. For example, based on a Deloitte Consulting, LLP (Deloitte) analysis of division data payments to ASCs for CY 2006 services totaled approximately $21.4 million. Based on this observation, the Division estimated ASC reimbursement at less than three percent of total medical payments. Data used in the recent adoption of §134.403 of this title (relating to Hospital Facility Fee Guideline--Outpatient) and §134.404 of this title (relating to Hospital Facility Fee Guideline--Inpatient) (hospital fee guidelines) estimated payments to hospitals for CY 2006 services totaled approximately $205 million, which represents approximately 21 percent of total medical payments. These hospital payments were split relatively evenly between inpatient services ($93 million) and outpatient services ($111 million). A similar Division review of reimbursement data for CY 2006 doctor services estimated payments at approximately $625 million, or nearly 65 percent of total medical payments.

In CY 2006, 338 ASCs had approximately 13,700 Texas workers' compensation admissions, whereas 177 ASCs had ten or fewer admissions. Forty-one ASCs had more than 100 admissions each, representing 64 percent of ASC charges and 62 percent of ASC reimbursements. Seventy-six ASCs had almost 80 percent of the admissions. This concentration is also evident in the services provided in the ASC facility setting. Ninety-five percent of all Texas workers' compensation ASC services were grouped to only 40 APCs. Further, the five most utilized APCs accounted for approximately 70 percent of the Texas workers' compensation system ASC encounters.

DELOITTE CONSULTING, LLP

In March 2008, the Division entered into a professional services agreement with Deloitte, a subsidiary of Deloitte Touche Tohmatsu. Deloitte is one of the leading providers of complex consulting services, with a long history of service to most of the state governments across the country. Deloitte provides technology integration services, supporting the implementation of new legislation, designing operations to support refined business processes, and developing tools to support management decisions, and is often an advisor to some of the largest government agencies in the United States. Deloitte is experienced in deploying ASC and APC fee schedule reimbursement methodologies and is experienced in the workers' compensation area. Deloitte has access to industry and national normative databases that allows it to develop comparative analyses and assess differentials with the Division's internal data.

Specifically, the agreement sought Deloitte's expertise to perform actuarial services that indexed the Texas workers' compensation ASC facility reimbursement to Medicare's 2008 ASC facility reimbursement. Additionally, Deloitte was to index other health care systems' ASC reimbursement with Medicare reimbursement for ASC services.

Texas Workers' Compensation ASC Reimbursement Comparison to Medicare

The Division provided Deloitte detailed ASC utilization, charge, and payment data for CY 2005 and 2006 from the Division medical billing data base. The data set included over 29,000 bills attributable to more than 20,000 injured employees. Deloitte found the data set to be credibly populated and appropriate for use in the analysis. Data for the two calendar years were reviewed at a high level and determined to be consistent. The final analysis focused on the services provided during CY 2006.

As a preliminary review, Deloitte grouped and repriced the CY 2006 according to the CY 2006 Medicare and the §134.402 reimbursement methodologies. Analysis indicated that overall claims were paid at a rate of 213.6 percent of the Medicare ASC rate. This figure is consistent with the Division's previously stated reimbursement rate of 213.3 percent of Medicare and indicated a high level of data confidence for the majority of 2006 claims.

Almost 98 percent of the Texas workers' compensation claims are for ASC services that are not classified by Medicare as device intensive. Deloitte grouped and repriced these claims according to the new Medicare ASC reimbursement methodology. The resulting analysis estimates that CY 2006 ASC services provided and reimbursed in the Texas workers' compensation system were paid at approximately 189 percent of CY 2008 Medicare ASC reimbursement. This ratio establishes a reference point for the Division in establishing appropriate ASC reimbursement.

The remaining two percent of Texas workers' compensation claims involved services that Medicare identifies as device intensive. Device intensive procedures are identified as procedures including an implantable device where the device costs are on average more than 50 percent of the total Medicare procedure reimbursement. Deloitte estimated that these claims were reimbursed at approximately 112 percent of the CY 2008 Medicare ASC rate. Deloitte noted that the low figure for reimbursement of device intensive procedures may be related to the high proportion of these claims' overall costs associated with the implantable device rather than the procedure.

Comparison of Commercial and Medicare ASC Payment Rates

Deloitte also provided detailed information regarding reimbursement of ASC services by commercial payors outside the Texas workers' compensation system. The source of the commercial data for this analysis was the 2006 Medstat Market Scan Databases (Medstat). Medstat captures person-specific clinical utilization, expenditures and enrollment across patient types from large employers, health plans, government and public organizations, Blue Cross Blue Shield plans, and third party administrators. Medstat links paid claims and encounter data to detailed patient information across sites and types of providers and over time. This data represents a broad spectrum of insured employees and their dependents. Texas Medstat data for CY 2006 includes claim information for over one million members.

Deloitte analyzed the Medstat data in a similar fashion to the Texas workers' compensation data set. ASC services were identified and the data set processed to eliminate non-groupable claims, claims with negative allowed amounts, and claims where the patient age was less than 18. After applying Medicare grouping and pricing methodologies, Deloitte estimated the average commercial reimbursement for ASC services to be approximately 236 percent of Medicare reimbursement. Deloitte estimated the average ASC reimbursement for Preferred Provider Organizations (PPO) to be 265 percent of Medicare reimbursement, and Health Maintenance Organizations (HMO) to be 148 percent of Medicare reimbursement. Various other payor types such as traditional indemnity, high deductible, basic medical and major medical coverage payment rates were estimated at approximately 217 percent of Medicare ASC reimbursement.

SETTING PAYMENT ADJUSTMENT FACTORS

In adopting amended payment adjustment factors (PAFs) for use in §134.402 of this title, the Division conducted extensive research to understand ASC facility reimbursement in the current Texas workers' compensation system, including: reimbursement rates, the reimbursement rates as compared to Medicare reimbursement, and the reimbursement rates as compared to non-workers' compensation reimbursement for ASC facility services, all of which are requirements of the Labor Code at §413.011.

The Division also considered economic indicators for hospitals that are particularly relevant to the analysis process. Medicare margins and market basket information reflect the general increasing costs of care over time.

Deloitte reviewed Texas workers' compensation facility utilization and reimbursement. The reports prepared by Deloitte did not recommend a PAF, however, Deloitte did estimate that for CY 2006 ASC facility services were paid in the Texas workers' compensation system on average 189 percent of CY 2008 Medicare ASC facility services. In reviewing the estimated reimbursement rate, the Division considered the rate and the failure of CMS to adjust its reimbursement method for ASCs for an extended period of time. Although the Division adjusted for this situation when adopting the rate included in the initial §134.402, neither the previous §134.402 of this title nor the Medicare methodology actively considered medical inflation on an annual basis. CMS will utilize the Consumer Price Index for all Urban Consumers (CPI-U) (U.S. city average) to adjust its ASC reimbursement rates in CY 2010 and going forward. The CPI-U has increased approximately 15 percent since the adoption of the current rule in May of 2004. If the Texas workers' compensation rate of 189 percent of 2008 Medicare reimbursement had been adjusted to reflect the change in the CPI-U since the original adoption of the rule in 2004, the equivalent rate would currently be approximately 217 percent of the 2008 Medicare ASC rate.

The Division, however, considered additional factors in setting the PAFs. The ratio of Medicare reimbursement to reimbursement made by other payors is an important comparison. Using commercially available data, Deloitte estimated commercial payor reimbursement for ASC services at approximately 236 percent of Medicare. The disparity between Texas workers' compensation system and commercial market is particularly evident in the five most frequently used APCs for musculoskeletal surgeries. These five APCs account for nearly 30 percent of all Texas workers' compensation system ASC encounters. Commercial reimbursement for the same APCs is approximately 290 percent of Medicare, compared to 172 percent of Medicare in the Texas workers' compensation system. Although Texas workers' compensation system payments exceed the Medicare payment, the existing payments have not been competitive with the commercial market.

In adopting a revised PAF, the Division noted and considered the recommendations made by system participants. Those recommendations ranged from approximately 110 percent to 262 percent of the Medicare ASC facility services rate.

The Division also recognized the importance of surgically implanted devices to Texas injured employees. In establishing hospital facility reimbursement rates (see §134.403 and §134.404 of this title), the Division established methodologies to allow separate reimbursement of implantables to insulate facilities from potential losses directly related to the high costs of surgically implanted devices. This concept is replicated in the adopted amended ASC reimbursement methodologies to assure that costs of implantable devices are not a barrier to injured employee's access to services in an ASC facility setting.

The Division is adopting minimal modifications to Medicare's reimbursement methodology to reflect use of separate reimbursement for surgically implanted devices in non-device intensive procedures to ensure injured employees have access to care, including surgery where surgically implanted devices are medically necessary. The modification establishes two PAFs for the adopted amended rule, which are 235 percent and 153 percent of Medicare ASC reimbursement rate. The lower PAF maintains the offset ratio the Division used in establishing the lower PAF adopted in the hospital outpatient facility reimbursement methodology (see §134.403 of this title).

Additionally, the Division is adopting a specific reimbursement methodology for device intensive procedures that utilizes the higher PAF and allows separate reimbursement for the surgically implanted device either at the Medicare estimated cost, or the actual cost of the item plus an administrative fee. These device intensive procedures are specifically identified by Medicare and have device costs that are at least 50 percent of the Medicare APC reimbursement. In certain APCs, the device portion of the APC may be as high as approximately 88 percent of the Medicare APC rate. This methodology impacts a small number of APCs that warrant special consideration due to the disproportionate allocation of the device payment relative to other APCs.

The adopted amendments not only comply with the requirements of Labor Code §413.011, they also provide the Texas workers' compensation system with a rate that:

*is within the commercial market range;

*is less than the current preferred provider organization rate, but more than the current health maintenance organization rate;

*accounts for inflation based on the CPI-U since the initial adoption of §134.402 of this title;

*provides an increase over current reimbursement, improving the availability of ASC services to injured employees; and

*maintains injured employee access to surgical implanted devices through separate reimbursement when appropriate for those devices.

The adopted amendments additionally comport with the Commissioner's authority under the Labor Code to audit and investigate both health care providers and insurance carriers as might be used in auditing implantable devices. Considering the value of implantable devices in returning the injured employee to work, the Commissioner may pursue audits to monitor, review, and study the utilization, billing, and reimbursement of implantable devices.

Upon consideration of all these factors and statutory requirements, the Division determines that adopted amended rates of 235 and 153 percent of the Medicare ASC reimbursement are the appropriate PAFs to be utilized in the Texas workers' compensation system along with the other identified adopted amendments for reimbursement of ASC facility services.

In response to comments from interested parties, and in consultation with the Medical Advisor, the Commissioner has adopted this section with a change to the proposal as published.

Language in subsection (g)(1)(B) of this section that required a facility or surgical implant provider, when requesting separate reimbursement for a surgically implanted device, to attach a copy of the invoice that supports actual cost to the facility or surgical implant provider is deleted in its entirety. This change from proposal is made as a result of public comment and to clarify the requirements that providers are required to provide documentation of the cost of the implantable through §133.210 of this title (relating to Medical Documentation). Section 133.210(c)(4) of this title establishes that a provider should include with its bill any supporting documentation for procedures which do not have an established Division maximum allowable reimbursement (MAR) and the exact description of the health care provided. Since surgically implanted devices do not have an established MAR, §133.210(c)(4) of this title applies. Stating the proposed subparagraph (B) in the rule is duplicative of the requirements of §133.210 of this title. Additionally, the deleted language created a perceived conflict or inconsistency with the implantable billing requirements in §134.403 and §134.404 of this title. It is the Division's intent to maintain consistency in all facility settings for the billing and reimbursement processes concerning separate reimbursement of surgically implanted devices.

Adopted amended §134.402(a) describes the applicability of the section. Adopted amended §134.402(a)(1) states that the section applies to facility services provided on or after September 1, 2008 by an ASC, other than professional medical services. Adopted amended §134.402(a)(2) notes that the section does not apply to professional medical services billed by a health care provider not employed by the ASC, except for a surgical implant provider as described in the section; and, that it is not applicable to services provided through a workers' compensation health care network certified pursuant to Insurance Code Chapter 1305, except as provided in Insurance Code Chapter 1305.

Adopted amended §134.402(b) provides definitions for words and terms that are used in the section. Adopted new §134.402(b)(1) defines the term "Ambulatory Surgical Center" to mean a health care facility appropriately licensed by the Texas Department of State Health Services. Adopted new §134.402(b)(2) defines the term "ASC device portion" to mean the portion of the ASC payment rate that represents the cost of the implantable device, and says that it is calculated by applying the CMS OPPS device offset percentage to the OPPS payment rate. Adopted new §134.402(b)(3) defines the term "ASC service portion" to mean the Medicare ASC payment rate less the device portion. Adopted new §134.402(b)(4) defines the term "Device intensive procedure" to mean an ASC covered surgical procedure that has been designated by CMS as device intensive in TABLE 56 - ASC COVERED SURGICAL PROCEDURES DESIGNATED AS DEVICE INTENSIVE FOR CY 2008, as published in the November 27, 2007 publication of the Federal Register, or its successor. Adopted amended §134.402(b)(5) defines the term "Implantable" to mean an object or device that is surgically implanted, embedded, inserted, or otherwise applied, and related equipment necessary to operate, program, and recharge the implantable. Adopted new §134.402(b)(6) defines the term "Medicare payment policy" to mean reimbursement methodologies, models, and values or weights including its coding, billing, and reporting payment policies as set forth in the CMS payment policies specific to Medicare. Adopted new §134.402(b)(7) defines the term "Surgical implant provider" to mean a person that arranges for the provision of implantable devices to a health care facility and that seeks reimbursement for the implantable devices provided directly from an insurance carrier.

Adopted amended §134.402(c) clarifies that a surgical implant provider is subject to Chapter 133 and is considered a health care provider for purposes of the section and the sections in Chapter 133 of this title.

Adopted amended §134.402(d) requires that for coding, billing, and reporting of facility services covered in the section, Texas workers' compensation system participants shall apply Medicare payment policies in effect on the date a service is provided with any additions or exceptions specified in this section. Adopted amended §134.402(d)(1) provides for the inclusion of specific provisions contained in the Labor Code or Division rules, including Chapter 134, as taking precedence over any conflicting provision adopted or utilized by the CMS in administering the Medicare program. Adopted amended §134.402(d)(2) provides for the inclusion of Independent Review Organization decisions regarding medical necessity made in accordance with Labor Code §413.031 and §133.308 of this title (relating to MDR by Independent Review Organizations), which are made on a case-by-case basis, as taking precedence in that case only, over any Division rules and Medicare payment policies. Adopted new §134.402(d)(3) provides for the stated inclusion that whenever a component of the Medicare program is revised and effective, use of the revised component shall be required for compliance with Division rules, decisions, and orders for services rendered on and after the effective date, or after the effective date or the adoption date of the revised Medicare component, whichever is later.