The Texas Workers' Compensation Commission (the commission) proposes amendments to 28 Texas Administrative Code §134.402, concerning the Ambulatory Surgical Center Fee Guideline. The amendments are proposed to address information received by the commission subsequent to the April 15, 2004 adoption of this rule concerning certain impacts of the new rule guideline on participants in the Texas workers' compensation system.

The Texas Workers' Compensation Act (Act) requires that guidelines for medical services fees be fair and reasonable and designed to ensure the quality of medical care and to achieve effective medical cost control. The guidelines may not provide for payment of a fee in excess of the fee charged for similar treatment of an injured individual of an equivalent standard of living and paid by that individual or by someone acting on that individual's behalf. The commission must consider the increased security of payment afforded by the Act in establishing the fee guidelines (see Texas Labor Code §413.011(d)).

More recent statutory requirements added to §413.011(a) of the Texas Labor Code also require that the commission use health care reimbursement policies and guidelines that reflect the standardized reimbursement structures found in other health care delivery systems with minimal modifications to those reimbursement methodologies as necessary to meet occupational injury requirements. The statute additionally requires the commission to adopt the most current reimbursement methodologies, models, and values or weights used by the federal Health Care Financing Administration (HCFA), (now called the Centers for Medicare and Medicaid Services (CMS)), to achieve standardization, including applicable payment policies relating to coding, billing, and reporting, and may modify documentation requirements as necessary to meet the requirements of §413.053 of the Act (relating to Standards of Reporting and Billing).

Under Texas Labor Code §413.011(b), the commission is required to develop conversion factors or other payment adjustment factors in determining appropriate fees when writing these guidelines, taking into account economic indicators in health care by not adopting conversion factors or other payment adjustment factors based solely on those factors as developed by the CMS. The subsection further states that it does not directly itself adopt the Medicare fee schedule into Texas law.

This rule applies to facility services provided by an ambulatory surgical center (ASC), other than professional medical services. An "ambulatory surgical center" as referenced in the existing rule, and in the proposed amendments to it, means such a center that is properly licensed by the Texas Department of Health under the Texas Ambulatory Surgical Center Licensing Act, which was first enacted in 1985 by the 69th Texas Legislative Session. Further information can be obtained at http://www.tdh.state.tx.us/hfc/asc.htm. ASCs located outside the state of Texas should be licensed by that jurisdiction's licensing body, if such licensing exists, when providing services to Texas injured workers under the Act.

At the request of, and based on some preliminary information provided by some system participants, the commission re-examined two specific areas within §134.402, regarding the Ambulatory Surgical Center Fee Guideline, for potential amendment. The two specific areas explored were: (1) amending the ASC List of Medicare Approved Procedures for the inclusion/exclusion of procedures with appropriate ASC group payment; and (2) exploring reimbursement options for implantable devices.

The commission requested information on procedures not on the ASC List of Medicare Approved Procedures by procedure code to include number of cases, charged and paid amounts by commercial insurance groups, Medicare, Medicaid and worker's compensation in all settings (i.e., physician office, ASC, hospital outpatient and inpatient) for 2003. The commission also requested specific information for implantable device by procedure code to include number of cases, charged and paid amounts by commercial insurance groups, Medicare, Medicaid and workers' compensation in all settings, and a description of the reimbursement methodologies used for 2003.

The commission received a limited amount of information in response to this request. These proposed amendments are based on this information and discussions held with, and information from, ASC Focus Group members. The proposed amendments also address concerns raised by system participants and members of the ASC Focus Group regarding whether the current case rate reimbursement adequately reimburses for devices integral to the surgery.

The proposed amendments to this facility rule would be applicable for dates of service provided by an ambulatory surgical center on or after March 1, 2005.

Subsequent to the rule adoption on April 15, 2004, ASCs expressed concerns regarding various components of the rule and their relationship to the overall reimbursement. These concerns included the site of service limitations tied to the ASC List of Medicare Approved Procedures incorporated into the rule, as well as concerns regarding implant reimbursement. At the August 19, 2004 public meeting, the commissioners directed agency staff to revisit the sites of service and implant issues in light of new information submitted by system participants.

The commission requested public input on these two issues by:

* Posting a notice on the commission's website;

* Mailing the same notice in a letter to all Texas licensed ASCs;

* Providing the notice in all insurance carrier representative boxes;

* Requesting utilization and reimbursement data for CPT codes not currently on the list of Medicare approved procedures;

* Requesting utilization and reimbursement data for implantables; and

* Establishing a commission email address specifically for electronic submission of information

The notice, "Public Request for ASC Information" was posted August 27, 2004. The notice stated the commission was exploring two specific areas within §134.402 for potential amendment: (1) amending the ASC List of Medicare Approved Procedures for the inclusion/exclusion of procedures with appropriate ASC group payment; and (2) exploring reimbursement options for implantable devices. The commission requested information that would help determine if such considerations can be safely, appropriately and economically performed in an ASC setting, given the agency's rules and statutory mandates.

The commission received approximately 50 responses representing 20 separate entities. The responses were summarized and presented to an ASC Focus Group comprised of representatives from ambulatory surgical center providers, a medical equipment supplier, insurance carriers, and self-insured businesses. Meeting on October 13, 2004, the ASC Focus Group reviewed and discussed the information received and the issues in general. However, the ASC Focus Group did not reach a consensus.

Despite a lack of consensus from the ASC Focus Group, agency experts and other staff conducted in-depth analyses of the new information received to that point and drafted a preliminary version of possible rule amendments to serve as a primary topic of discussion for a follow-up ASC Focus Group meeting.

The follow-up ASC Focus Group meeting was held on October 27, 2004 to discuss draft amendments to the rule in anticipation of formally proposing amendments in November 2004. Again, no consensus was reached. Some ASC Focus Group members recommended a higher payment adjustment factor, allowances for procedures to be performed in an ASC facility that are not on the ASC List of Medicare Approved Procedures, a higher reimbursement for surgically implanted devices whether reimbursed separately or included in the ASC case rate by Medicare, and a retroactive effective date of September 1, 2004. Conversely, other ASC Focus Group members expressed concerns that such recommendations will increase administrative burdens and medical costs, and will ultimately negate the cost control measures of the existing rule (required under the Act).

Following the second ASC Focus Group meeting, the commission staff posted a pre-proposal draft rule for informal public input on the commission's website from November 2, 2004 through November 10, 2004. The commission reviewed the input and other available information, sought clarification, and now proposes these rule amendments.

The commission believes that the proposed rule will provide an effective regulatory framework for ambulatory surgical centers under the Texas workers' compensation system.

Current subsection (a) addresses the applicability of the guideline. Revision of paragraph (a)(2), along with other changes, clarifies that the amendments to the guideline would go into effect for facility services provided by an ASC on or after March 1, 2005. Nothing in these amendments would have retroactive effect.

Proposed subsection (d) provides that the reimbursement for ASC services is the lesser of the MAR amount (regardless of billed) amount or the facility's and payor's workers' compensation negotiated and/or contracted amount that applies to the billed services. Paragraph (d)(1) is amended by deleting the phrase "established by this rule," which is unnecessary language.

Proposed subsection (e) is reformatted and expanded from the current to proposed. Proposed subsection (e) addresses the exceptions and minimal modifications to the Medicare payment policies. Proposed paragraph (e)(1) clarifies the language, which states that Texas will not incorporate any retroactive portions of Medicare payment policy changes. Proposed paragraph (e)(2) supplements the ASC List of Medicare Approved Procedures with additional procedures, and the associated group assignments (e.g., Medicare Group 1-9). These additions are proposed following review and approval by the Commission Medical Advisor. After receiving the various recommended procedures for an ASC setting from the public request for information, staff compared the list with the procedures that were currently allowed in an ASC setting and the number of times that these procedures were performed. Additional information was received and considered regarding those procedures commonly performed for the workers' compensation population in ASCs. As a result of the review of recommended procedures, discussions during the focus group meetings, and input from the Medical Advisor, staff believes that the proposed list reflects those items that can not only safely be performed in an ASC setting, but also are appropriate for that setting. To prevent unnecessary charges, the proposed list excludes procedures that are bundled within another primary procedure. To determine the appropriate reimbursement group for these procedures, staff assigned groups, which were consistent with the reimbursement groups for similar procedures, including ASC input where available. In order to ensure the proper administrative actions by ASCs and insurance carriers, the individual procedures are referenced by the applicable American Medical Association's Current Procedural Terminology (CPT) codes. Proposed paragraph (e)(3) allows a service that is not included on the ASC List of Medicare Approved Procedures, or on the list at paragraph (e)(2), to be performed in an ASC by prospective agreement between the carrier, the doctor, and the ASC, occurring before, during, or after preauthorization. This will allow ASCs the opportunity to present to carriers the cost effectiveness of performing certain procedures in an ASC setting, which currently are not on the ASC List of Medicare Approved Procedures or on the list at paragraph (e)(2). Details that must be included in an agreement are specified to minimize disputes, which add costs to the system and drain the commission's resources. Proposed paragraph (e)(4) allows a separate reimbursement for surgically implanted, inserted, or otherwise applied devices at the lesser of the manufacturer's invoice amount or the net amount (exclusive of rebates and discounts) actually paid for such device to the manufacturer by the ASC. Reimbursement for the cost of medical supplies related to the surgical procedure is included in the group case rate payment and is not included under this provision. The ASC is required to certify that the billed amount meets this standard, using specific certification language provided in the proposed paragraph.

New proposed subsection (f) references that insurance carriers may conduct audits under §§133.302 and 133.303 (relating to Preparation for an Onsite Audit and Onsite Audits) if they wish to challenge whether the certified amount referenced in subsection (e)(4) of these proposed amendments actually reflects the standard given in that subsection. Also, it is reiterated that the Medical Dispute Resolution process under §133.307 (relating to Medical Dispute Resolution of a Medical Fee Dispute) may be a forum where disputes concerning the certified amount under subsection (e)(4) are argued.

Former subsection (f) is now new proposed subsection (g).

Mr. Allen McDonald, Director of Medical Review, has determined that for the first five-year period the proposed amendments to the rule are in effect, it is anticipated there will be minimal fiscal implication for state government as a result of enforcing or administering the rule. Although there may be medical fee disputes for the commission to resolve, they should be few in number because of the implant documentation required. There will be no fiscal implications for local governments as a result of enforcing or administering the rule because they do not enforce or administer the rule.

Local government and state government as a covered regulated entity will be impacted in the same manner as described later in this preamble for persons required to comply with the rule amendments as proposed.

Mr. McDonald has also determined that the Texas workers' compensation system will benefit in general through continued access to ASC services and stability provided through consistent application of the commission's adopted fee guideline. By expansion of the number of services allowable in an ASC setting, the commission increases the injured worker's access to procedures that are not on the ASC List of Medicare Approved Procedures. In addition, by allowing the agreement of procedures to be performed in an ASC setting, the commission increases flexibility for system participants and promotes provision of services in a setting that ultimately lowers costs to the system and system participants. The site of service flexibility enhances the cost containment efforts of the commission to meet the requirements of the Act. This is especially important considering the documented high medical cost per claim in the Texas workers' compensation system as previously outlined in the April 2004 adoption preamble of §134.402, the April 2002 adoption preamble of §134.202, and the December 2002 supplemental preamble of §134.202.

Injured workers will benefit from the amended rule as proposed by promoting access to quality surgical ASC services and health care providers rendering services in ASC settings.

Insurance carriers will benefit from the amended rule as proposed with new commission approved procedures and assigned groupings, which lends certainty and stability to the system. Additionally, they benefit from the added flexibility of negotiating reimbursement for a surgical procedure not on the ASC List of Medicare Approved Procedures, and having the procedure performed in a less expensive surgical setting. Also, the insurance carrier benefits by the opportunity to negotiate the facility reimbursement prospectively for procedures on a case-by-case basis, thus reducing administrative costs related to medical fee disputes.

Health care providers, especially ASCs and surgeons, will benefit from the amended rule as proposed with new commission approved procedures and assigned groupings, which lends certainty and stability to the system. Additionally, they also will benefit from the new increased site of service flexibility, potential prospective reimbursement negotiations, and methodology changes for surgically implanted, inserted, or otherwise applied devices.

Employers, similar to insurance carriers, will benefit from the amended rule as proposed due to the carriers' ability to negotiate a lower reimbursement for surgical procedures in the ASC setting, thus lowering the overall medical costs to the system. Additionally, employers' benefit from this provision by having timely and quality care provided to their injured workers.

Mr. McDonald has also determined that for each year of the first five years the proposed amended rule is in effect, there will be an overall increase in costs to the Texas workers' compensation system due to the amended implant reimbursement methodology. It is probable that the methodology change from a fee schedule for separately reimbursed surgically implanted devices to an "actual cost-driven" methodology will increase costs incrementally because some items are currently being reimbursed in the system at 125% of the Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) fee schedule. Further, costs will increase since certain implantables, such as pins, rods, screws, and plates, which were previously reimbursed as part of the group case rate, will now be reimbursed separately at the lesser of the manufacturer's invoice amount or the net amount (exclusive of rebates and discounts) actually paid for such device to the manufacturer by the ASC.

Based on a sample of orthopedic procedures performed in an ASC setting, and forecasting potential increases in the number of procedures over the five-year period, Mr. McDonald determined that the increased reimbursement to ASCs because of these rule changes would be in the range from $8.7 million to $13.5 million annually. The representative sample consisted of 100 pending, but unresolved, medical fee disputes submitted by ASCs during 2003 and 2004. These dispute cases contained both the ASC's position and the insurance carrier's position on various cost and reimbursement issues. When available, the costs of the surgically implanted devices were captured from actual invoices. When actual invoices were not contained in the file, a reasonable cost was assigned based on the information contained in the file and the other files in the sample; including, similar costs for the same items in other disputes files supported by an invoice, information in the carrier response for the cost of similar items, or information from the ASC supporting the amount charged.