The Texas Department of Insurance, Division of Workers' Compensation (Division) adopts amendments to 28 TAC §134.402 concerning Ambulatory Surgical Center Fee Guideline. The section is adopted with changes to the proposed text as published in the June 13, 2008, issue of the Texas Register (33 TexReg 4614) and error corrections published in the June 27, 2008, issue of the Texas Register (33 TexReg 5047).

These amendments are necessary to comply with the requirements of Labor Code §413.011 and §413.012. The rule was originally adopted in 2004 to comply with statutory mandates enacted in 2001 by House Bill (HB) 2600, 77th Legislature, Regular Session. HB 2600 amended Labor Code §413.011 to add new requirements for workers' compensation reimbursement policies and guidelines. Prior to adoption of the 2004 fee guideline, the Texas workers' compensation system did not have a fee schedule for health care provided in ambulatory surgical centers (ASCs). Therefore, those services were reimbursed on a case-by-case basis determination of what was fair and reasonable under what was then §134.1 of this title (relating to Use of the Fee Guidelines, repealed effective May 2, 2006).

Section 134.402 was amended in 2005 to address certain impacts of the new rule on participants in the Texas workers' compensation system. In 2007 the Centers for Medicare and Medicaid Services (CMS) significantly revised the Medicare ASC reimbursement methodology. In order to maintain the stability of the ASC reimbursement, the Commissioner of Workers' Compensation (Commissioner) amended §134.402 and retained the current ASC guidelines while researching and preparing to implement the new Medicare ASC reimbursement methodology. The amendments continued the use of reimbursement structures and amounts of the Medicare ASC 2007 rates for ASC facility services provided on January 1, 2008 through August 31, 2008. This continuation has afforded additional time for the Commissioner to determine and establish the appropriate ASC reimbursement methodology. The amendments to the rule are needed to align with revised Medicare reimbursement methodologies, develop the most suitable reimbursement structure, and utilize appropriate conversion factors or other payment adjustment factors geared to the Texas workers' compensation system.

Labor Code §413.011 establishes the statutory framework for Division fee guidelines for medical services. The statute requires the Commissioner to adopt health care reimbursement policies and guidelines that reflect reimbursement structures found in other health care delivery systems with minimal modifications as necessary to meet occupational injury requirements. In addition, Labor Code §413.011(a) requires the Commissioner to adopt the most current reimbursement methodologies, models, and values or weights used by the 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 Labor Code §413.053 (relating to Standards of Reporting and Billing).

Under Labor Code §413.011(b), the Commissioner is required to develop conversion factors or other payment adjustment factors in determining appropriate fees when developing 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.

Labor Code §413.011(d) requires that guidelines for medical services 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. Notwithstanding §413.016 or any other provision of Title 5 of the Labor Code, §413.011(d-1) provides that an insurance carrier may pay fees to a health care provider that are inconsistent with the fee guidelines adopted by the Division if the insurance carrier or a network under Chapter 1305, Insurance Code, arranging for out-of-network services under Insurance Code §1305.006: (1) has a contract with the health care provider, that includes a specific fee schedule; and (2) complies with the notice requirements established under §413.011(d-2).

Additionally, Labor Code §413.012 requires the Commissioner to review and revise the medical policies and fee guidelines every two years to reflect fair and reasonable fees. Labor Code §413.0511(b)(1) also requires consultation with the Medical Advisor in developing, reviewing, and maintaining guidelines. Section 413.041 of the Labor Code requires health care practitioners and health care providers to submit to the Division financial disclosure information including ASC ownership interests.

These provisions are considered as the rule is amended. This section does not apply to political subdivisions with contractual relationships under Labor Code §504.053(b)(2).

MEDICARE

CMS regulates the Medicare and Medicaid programs. CMS has established a Medicare prospective payment system (PPS) for hospital/facility-based services, which include inpatient and outpatient hospital care, ambulatory surgical services, and other facility-based services such as, but not limited to, rehabilitation, psychiatric, and long term care units. Medicare requires a deductible and co-pay from the patient until the patient reaches a certain level of expenditures. When setting reimbursement amounts, Medicare considers and includes this deductible and co-pay for facility services. CMS has directed extensive research in determining facility reimbursements in the Medicare system. Reimbursements are based on a facility's expected cost to provide a service rather than charged amounts, thus reimbursements differ by facility type. CMS establishes a predetermined amount of reimbursement which bundles or packages services. CMS updates reimbursements periodically based on a variety of factors, including weights (e.g., intensity), clinical issues, costs, inflation, and federal budget constraints. Reimbursement is based on national average costs with adjustments for geographic and facility specific factors. In addition, billed claims are subject to clinical coding edits Medicare has developed.

In setting the payment rates in the Outpatient Payment Prospective System (OPPS), CMS covers hospitals' operating and capital costs for services they furnish. Within the OPPS Ambulatory Payment Classifications (APCs) were adopted by CMS in August 2000. There are more than 800 APCs based on clinically similar items and services requiring similar amounts of resources. An outpatient visit may include multiple APCs, each APC having a predetermined rate. CMS determines the payment rate for each service by multiplying the APC relative weight for the service by a conversion factor. The relative weight for an APC measures the resource requirements of the service and is based on the median cost of the services in that APC. There are numerous other factors that comprise a reimbursement for a hospital outpatient setting.

On August 2, 2007, CMS published a final rule establishing a revised Medicare payment system for ASCs that applies to services provided on or after January 1, 2008 and expanded access to procedures in the ASC setting by allowing ASC payment to approximately 790 additional procedures in calendar year (CY) 2008. This compares to the nine specific reimbursement categories or ASC groups that were the previous Medicare ASC reimbursement system and are the current Texas workers' compensation ASC reimbursement groups. Also, on November 27, 2007, CMS published a final rule containing CY 2008 payment rates for ASCs based in part on the rates Medicare pays hospital outpatient departments (HOPDs). CMS changed the ASC payment system beginning January 1, 2008 because the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 also called Medicare Modernization Act (MMA) (Pub. L. 108-173, 117 Stat. 2066) required CMS to revise the ASC payment system no later than January 1, 2008.

THE GOVERNMENT ACCOUNTABILITY OFFICE REPORT

CMS based the revised ASC payment system on the OPPS after the Government Accountability Office (GAO) studied ASC costs and found that the relativity of costs among ASC procedures was comparable to their relativity of costs in HOPDs. According to the statutorily mandated GAO report entitled, "Medicare: Payment for Ambulatory Surgical Centers Should Be Based on the Hospital Outpatient Payment System" (GAO-07-86) released in November 2006, ASCs experience greater efficiencies in providing surgical services than HOPDs, resulting in surgical procedures being less costly when performed in an ASC facility setting. The GAO determined that the APC groups in the OPPS accurately reflect the relative costs of the procedures performed in ASCs. The GAO's analysis of the cost ratios showed that the ASC-to-APC cost ratios were more tightly distributed around their median cost ratio than were the OPPS-to-APC ratios. The report's analysis demonstrated that the APC groups reflect the relative costs of procedures performed by ASCs as they do for procedures performed in HOPDs and, therefore, that the APC groups could be used as the basis for an ASC payment. The GAO report concluded that, as a group, the costs of procedures performed in ASCs have a relatively consistent relationship with the costs of the APC groups to which they are assigned under the OPPS. The GAO's analysis also found that the procedures in the ASC setting have lower costs than those same procedures in HOPDs. The GAO reported that the median cost ratio among all ASC procedures was 0.39, whereas the median cost ratio among all OPPS procedures was 1.04. When the ASC median cost ratio is weighted according to Medicare ASC utilization, the ASC median cost increases to 0.84. This weighted ratio may be more indicative of the relationship between ASC and HOPD costs than a direct one-to-one comparison of APCs.

Based on its findings from the study, the GAO recommended that CMS implement a payment system for procedures performed in ASCs based on the OPPS, taking into account the lower relative costs of procedures performed in ASCs compared to HOPDs in determining ASC payment rates. CMS followed the GAO's recommendations.

CMS CY 2008 REVISED ASC PAYMENT SYSTEM

Under the OPPS-based revised ASC payment system, CMS pays for hospital outpatient services on a rate-per-service basis that varies according to APC group to which the service is assigned. CMS uses the Healthcare Common Procedure Coding System (HCPCS) Level I and Level II codes and descriptors to identify and group the services within each APC group. The OPPS includes payment for most hospital outpatient services except those identified in the CMS CY 2008 OPPS/ASC final rule published on November 27, 2007 that updated the OPPS for CY 2008 and provided the CY 2008 ASC conversion factor and payment rates. Medicare now uses the same APCs for ASCs as are used for HOPDs. Because ASCs provide only surgical services and hospitals provide many other types of outpatient procedures, such as emergency room services, HOPDs will utilize more APCs than ASCs.

In accordance with the MMA, the revised Medicare ASC payment system must be "budget neutral" which means that in CY 2008 Medicare expenditures under the revised Medicare ASC payment system must approximate the expenditures that would have occurred in the absence of the revised Medicare ASC payment system. In the CY 2008 OPPS/ASC final rule, CMS estimates that ASCs should be paid about 65 percent of the OPPS payment rates for the same surgical procedures in a HOPD.

The standard Medicare ASC payment for most ASC covered surgical procedures is calculated by multiplying the ASC conversion factor ($41.401 for CY 2008) by the ASC relative payment weight set (based on the OPPS relative payment weight) for each separately payable procedure.

The complete lists of ASC covered surgical procedures and ASC covered ancillary services, the applicable payment indicators, payment rates for each covered surgical procedure and ancillary service before adjustment for regional wage variations, the wage adjusted payment rates, and wage indices are available on the CMS web site at http://www.cms.hhs.gov/ascpayment/.

CMS is providing a four-year transition to the fully implemented revised ASC rates. Payments during the four-year transition to the fully implemented revised ASC payment rates will be based on a blend of the CY 2007 ASC payment rates and the revised ASC payment rates at 75/25 in CY 2008, 50/50 in CY 2009, and 25/75 in CY 2010 with payment at 100 percent of the revised ASC payment rates in 2011. Payment for covered surgical procedures added for ASC payment in CY 2008 or later and payment for covered ancillary services that are not paid separately under the existing ASC payment system will not be subject to a transition. For additional explanation, see http://www.cms.hhs.gov/ascpayment/.

IMPLANTABLE DEVICES

Prior to implementation of the revised Medicare ASC payment system, ASCs received separate payment for implantable devices. Under the revised system, CMS uses a modified payment methodology to establish the ASC payment rates for procedures that are designated as "device intensive." Device intensive procedures are specified ASC covered surgical procedures that, under the OPPS, are assigned to certain device dependent APCs. Device dependent APCs are groups of procedures that require the insertion or implantation of expensive devices. Payment for the high cost devices is packaged into the procedure payments under the OPPS. For the device dependent APCs, CMS develops estimates of the "device offset percentage," the proportion of the procedures" costs that are attributable to the cost of the device. CMS identifies the covered surgical procedures for which the device offset percentage of the APC under the OPPS is greater than 50 percent of the APCs median cost and designates those surgical procedures as device intensive. CMS pays the same amount for the device-related portion of the procedure under the revised ASC payment system as under the OPPS for HOPDs. However, in the Medicare system payment for the service portion of the ASC rate will be adjusted by the ASC conversion factor.

For example: If the OPPS payment for a device intensive procedure is $7,000 and the device offset percentage is 75 percent, the device portion is $5,250 ($7,000 x 0.75 = $5,250). The remaining $1,750 ($7,000 - $5,250 = $1,750) is the service portion of the procedure, the non-device cost that the facility incurs when the device is implanted. Under the revised ASC payment system, CMS will pay the same amount for the device portion of the procedure ($5,250) as under the OPPS, but will adjust the service portion to approximately 65 percent of $1,750, or $1,137 ($1,750 x 0.65 = $1,137). This is consistent with other OPPS surgical procedures when ASCs are reimbursed for performance of these procedures. Thus, the Medicare ASC rate will be calculated by adjusting the OPPS service portion by the Medicare ASC conversion factor and that will be added to the full device portion of the OPPS rate to establish the full Medicare ASC payment rate for the procedure. Using the example, the resulting ASC reimbursement would be $6,387 ($5,250 + $1,137 = $6,387).

Because payment for procedures is based on the OPPS, which packages payment for implantable devices in the payment for the surgical procedures to implant them, in the Medicare system ASCs will no longer bill separately under the Durable Medical Equipment, Prosthetics/Orthotics, and Supplies (DMEPOS) fee schedule for any implantable devices.

Procedure payments, into which payment for devices is packaged, including those for device intensive procedures, are subject to the adjustment for geographic differences in wage. Because the labor-related share is 50 percent under the revised ASC payment system, the local wage index adjustment is applied to 50 percent of the national payment rate for the procedure involving the device. Payment rates for each covered surgical procedure before adjustment for regional wage variations, the wage adjusted payment rates, and wage indices are available on the CMS web site at http://www.cms.hhs.gov/ascpayment/.

Pass-through status under the OPPS is granted to new implantable devices that meet explicit OPPS criteria, including demonstrated substantial clinical improvement for patients. Under the OPPS, devices with pass-through status are paid separately for two to three years at hospital charges adjusted to cost. CMS provides separate payment to ASCs at contractor-priced rates for devices that are included in device categories with pass-through status under the OPPS when the devices are an integral part of a covered surgical procedure. Payment for these devices is not subject to the wage adjustment, while payment for procedures used to implant pass-through devices is subject to the wage adjustment.

In the Medicare system, ASCs will bill separately for devices that have pass-through status under the OPPS when provided integral to covered surgical procedures and will be paid separately under the revised ASC payment system. CMS has instructed ASCs in the Medicare system to use the appropriate Level II HCPCS codes to report the devices.

DIVISION DATA

In maintaining a medical billing database, the Division requires insurance carriers to submit billing and reimbursement information to the Division on a regular basis. The Division implemented a new reporting format in late 2006 to facilitate collection of medical billing and reimbursement data from insurance carriers in conjunction with new electronic billing reporting requirements. The new electronic reporting format is the International Association of Industrial Accident Boards and Commission's 837 format. Insurance carriers submitted CY 2005 and 2006 charged and paid data in this new format, and the Division has based the primary components of its analysis on CY 2006 information. In developing an analysis of the data for the amendment of §134.402 of this title, CY 2006 data was determined to be the most complete set of mature claims data available. The Division reviewed the CY 2006 claims data to have an improved understanding of the types of ASC facility services provided to injured employees and to understand the billing and reimbursement calculations associated with those services. The Division was also able to review charge and payment activity for specific types of services.