The Texas Workers' Compensation Commission (the commission) proposes new §134.202 concerning the Medical Fee Guideline.

This new rule is proposed to comply with statutory mandates in the Texas Labor Code. Section 413.011 of the Texas Labor Code requires the commission to adopt rules to establish medical policies and guidelines relating to fees charged or paid for medical services, including guidelines relating to payment of fees for specific medical treatments or services. The statute 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 Texas Workers' Compensation Act (the Act) in establishing the fee guidelines.

House Bill 2600 (HB-2600), adopted during the 2001 Texas Legislative Session, amended §413.011. In addition to the previous requirements, the revised statute also requires 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;

* adopt the most current reimbursement methodologies, models, and values or weights used by the federal Health Care Financing Administration (HCFA) 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);

* develop conversion factors or other payment adjustment factors in determining appropriate fees, taking into account economic indicators in health care;

* provide for reasonable fees for the evaluation and management of care as required by §408.025(c) and commission rules;

* comply with the statute by not adopting the Medicare fee schedule, and by not adopting conversion factors or other payment adjustment factors based solely on those factors as developed by the HCFA; and

* comply with the statute by not interpreting the legislation in a manner that would discriminate in the amount or method of payment or reimbursement for services in a manner prohibited by Section 3(d), Article 21.52, Insurance Code, or as restricting the ability of chiropractors to serve as treating doctors as authorized by this subtitle.

Currently, reimbursements for medical treatments and services are established by §134.201 of this title (regarding Medical Fee Guideline for Medical Treatments and Services Provided Under the Texas Workers' Compensation Act) and §134.302 of this title (regarding Dental Fee Guideline). The Medical Fee Guideline (MFG) provides maximum allowable reimbursement (MAR) amounts for health care providers (HCPs) treating injured workers in Texas. This proposed new rule uses the required Medicare methodologies for determining reimbursement in the Texas workers' compensation system to comply with the new provisions in Texas Labor Code §413.011.

In February 2001, the commission signed a professional services agreement with Milliman & Robertson, Inc., now Milliman USA (Milliman), a professional firm specializing in actuarial and health care services, to assist the commission in developing and implementing a new MFG. Milliman provided the commission with written reports of their findings and recommendations.

Milliman conducted a market analysis of reimbursements from the 1996 MFG, commercial payers in Texas, workers' compensation systems from other states, and 2001 Medicare allowed fees in Texas, comparing the reimbursement level for corresponding services, and drew the following conclusions as a result of the market analysis:

* commercial reimbursement rates in Texas show variations that are wider than can be explained by geographic differences, and current MFG reimbursement levels fall within this broad range;

* current MFG reimbursement levels tend to be high relative to other state workers' compensation systems, with the exception of Evaluation and Management (E&M) services; and,

* current MFG MARs average approximately 130% of calendar year 2001 Medicare allowed fees.

A revision of the MFG that meets the rigorous statutory criteria and uses the most current reimbursement methodologies, models, and values or weights used by HCFA, (now the Centers for Medicare and Medicaid Services (CMS)), including applicable payment policies relating to coding, billing, and reporting (sometimes referred to as ground rules) is the goal of this proposed new rule.

In developing this proposal, commission staff met and discussed issues with the primary HB-2600 Legislative Stakeholders. This Legislative Stakeholder group included: a delegation of employers, insurance carriers, utilization review organizations, and other interested parties working together under the umbrella name, Texas Association of Business & Chambers of Commerce (TABCC) Technical Work Group; the Texas Chiropractic Association; and the Texas Medical Association. Input from this group was a major factor in developing this proposed rule.

Proposed new §134.202 establishes reimbursement for professional medical services provided on or after the effective date of the new rule. The new rule provides standardization of reimbursement methods and billing procedures by aligning the workers' compensation reimbursement structure with the structure used by the CMS.

Proposed subsection (a) establishes the applicability of the guidelines for reimbursements for professional medical services, which includes all health care as defined in §401.011(19) of the Act other than prescription drugs or medicines, and other than the facility services of a hospital or other health care facility. Current §134.201 and §134.302 would remain in effect for treatments and services provided prior to the effective date of the proposed new rule. Reimbursement is determined in accordance with the rules in effect on the date that the professional medical service was provided. In accordance with Texas Labor Code §413.011(c), subsection (a) provides that chiropractors are an exception to the CMS payment policies, and may be reimbursed for services provided within the scope of their practice act. Specific provisions contained in the workers' compensation Act, or commission rules, shall take precedence over any conflicting provision adopted or utilized by CMS in administering the Medicare program. Additionally, subsection (a) requires use of the most recent payment policies adopted by the Medicare program, including updated relative value units, for compliance with commission rules, decisions and orders. The policies and reimbursement methodologies in effect for Medicare on the date a service is provided are the policies and reimbursement methodologies to be used in the workers' compensation system. This will prevent the workers' compensation system from falling out of synchronization with Medicare and will achieve the standardization goals established in HB-2600.

Proposed new subsection (b) requires system participants to utilize the Medicare reimbursement methodologies, models, and values or weights including its coding, billing, and reporting payment policies for coding, billing, reporting, and reimbursement of professional medical services provided in the Texas workers' compensation system. This allows for the basic Medicare program provisions to be applied with any additions or exceptions necessary for adaptation to the Texas workers' compensation system. The Medicare program is not a static system. Medicare policies change frequently. To achieve standardization it is necessary to use the Medicare billing and reimbursement policies as they are modified by CMS. Adoption of policies in effect on a particular date would require participants in the Texas workers' compensation system to bill and reimburse in a manner different from the current Medicare system. Therefore, the proposed rule, in compliance with the statute, requires the use of the Medicare policies in effect on the day that a service is provided.

The Resource Based Relative Value Scale (RBRVS) system used by Medicare values services according to the relative costs required to provide them, recognizing skill, practice cost, and risk. These relative value units represent national standards assigned to medical treatments and services. The relative value units reflect the relationship between the resources necessary to provide a professional medical service relative to resources necessary to provide other professional medical services.

The RBRVS uses three components to establish the total relative value units for a particular code: work, practice expense, and malpractice insurance. RBRVS relative value units are also adjusted by Geographical Practice Cost Indices (GPCIs) to reflect geographical differences. The proposed rule also requires system participants to use these components and adjustments of relative values. Use of CMS RBRVS aligns the basis for workers' compensation reimbursement with nationally recognized standards of relative values used in other health care delivery systems, and takes into account economic indicators in health care.

New proposed subsection (c) establishes the method to be used for determining the MAR for professional services in the Texas workers' compensation system. The MARs established in the current MFG do not correlate with RBRVS unit values, and the change to the RBRVS in this rule proposal will result in some significant increases and decreases for certain procedures. The use of a different relative value unit system, the RBRVS, results in a significant re-alignment of reimbursements among the CPT groupings. Assuming no net change in total system reimbursement, the estimated re-alignment impact of applying the RBRVS system alone, is approximately:

Evaluation & Management: +48%

Medicine: -27%

Physical Medicine and Rehabilitation: -2%

Surgery: -27%

Radiology: -20%

Pathology: -53%

Anesthesiology: 0%

Mandated by statute, this re-alignment substantially changes reimbursement for some codes.

Proposed new subsection (c) establishes a conversion factor by setting a multiplier to apply to the Medicare conversion factor. In establishing this multiplier the commission considered the statutory requirements and objectives and utilized Medicare data, current commission reimbursement levels, and available commercial payor information. The data reviewed consistently reflected current commission reimbursement equal to approximately 140% of the 2002 Medicare reimbursement and in the mid-range of commercial payor reimbursement.

Proposed new subsection (c) additionally establishes MARs for durable medical equipment, prosthetics, orthotics, supplies, laboratory services, dental treatments and services, and commission specific codes, services, and programs. The subsection provides directions for a system of payment that allows a carrier to assign a relative value for a product or service that does not contain a relative value unit and/or a recommended payment amount in either the CMS system or as established by the commission. Carriers are to assign a relative value which is based on nationally recognized published relative value studies, published medical dispute decisions, and values assigned for services involving similar work and resource commitments.

Subsection (d) provides that the reimbursement for professional medical services is the least of: the MAR as established by rule; the HCP's usual and customary charge; or, the HCP's applicable workers' compensation negotiated or contracted amount that applies to the billed service.

Proposed new subsection (e) addresses payment policies relating to coding, billing, and reporting, of commission-specific codes, services, and programs. There are some services which are specific to and necessary in the Texas workers' compensation system that are not commonly used or not used at all in the Medicare system. Some examples of these services are: case management, tests and measurements, impairment rating evaluation, designated doctor examination, and return to work rehabilitation programs. Subsection (e) sets out the payment policies relating to coding, billing, and reporting for those services. In addition, subsection (e) provides a list of modifiers to be used when billing commission-specific codes, services, and programs. The use of these modifiers will allow the commission to monitor patterns of usual, customary and reasonable medical charges, payments and treatment protocols for commission-specific services. The additions set out in subsection (e) are designed to 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.

Proposed new subsection (f) provides that the invalidation of a section of this subchapter or its application or applications to any person or circumstance by a court of competent jurisdiction does not affect other provisions or applications of the subchapter that can be given effect without the invalidated provision or application.

Bill DeCabooter, Acting Director of the Medical Review Division, has determined the following with respect to fiscal impact for the first five-year period the proposed rules are in effect.

With regard to enforcement and administration of the rule by state government, the commission will experience increased costs in some areas and decreased costs in others. Increased costs may include expenses associated with the preparation of training materials and presentation of training classes for commission staff and other system participants, and costs associated with monitoring the Medicare payment policies.

Initially costs may increase due to increased disputes for the next twelve to twenty-four months, resulting from the initiation of a new payment methodology and the utilization of Medicare billing and payment policies. However, after system participants become familiar with the policies and the commission's administration of these policies, the use of standardized coding, billing, and methodology is expected to result in fewer disputes regarding medical reporting, billing and reimbursement because use of:

* a standardized reimbursement structure found in other health care delivery systems should reduce the number of disputes, in part because of familiarity with other reimbursement systems, and in part because of the predictability of reimbursement amounts;

* the most current Medicare program reimbursement methodologies, models and weights or values is expected to eliminate some disputes because changes in Medicare reimbursement system will be reflected in the workers' compensation system as they become effective keeping the system current and therefore reducing disputes relating to the amount of reimbursement;

* current coding, billing and reporting policies clarifies the proper coding for some professional medical services about which there were uncertainties and disputes under the current MFG; and

* standardized components of the Medicare system should decrease the cost and time required for the commission to review or revise the fee schedules.

There may be some increase in revenue to the commission as a result of enforcing or administering the rule due to an initial increase in disputes heard by the commission. Although the fees from the increase in this activity will increase revenue, these fees generally cover expenses only and are expected to be offset by a subsequent decrease in this activity.

In recent correspondence with the commission, the TCA, stated, "the TCA believes that adoption of Medicare reimbursement methodologies and payment systems could provide a reduction to the commission for enforcing and administering these rules. This is because the commission would no longer be required to develop, maintain, and administer its own unique fee structure and payment policies. Medicare would be the basis of a fair structure, with modifications as needed, as required by HB 2600. This would benefit all parties, by allowing greater access to care, fewer disputes, and reduces administrative costs."

There will be no fiscal impact on local government as a result of enforcing or administering the rule, as local governments do not have regulatory authority with respect to these rules. Local governments and state governmental entities as regulated entities will be impacted in the same manner as persons required to comply with the rules as proposed. Aggregate medical costs should decrease for all participants in the system. The commission cannot predict if local governments will experience a decrease in their premium costs if the local government's workers' compensation coverage is provided by an insurance company. Any local government that is self-insured will likely experience a cost decrease if utilization and injury experience remain unchanged.

Mr. DeCabooter has also determined that for each year of the first five years the proposed rule is in effect, the public benefits anticipated as a result of a reimbursement system with a well-known, standardized structure for delivery of quality medical care with effective cost control, that will provide positive benefits to all participants in the system: injured employees, employers, insurance carriers, and health care providers. As suggested by the Legislative Stakeholder group, the Texas workers' compensation system as a whole will benefit by bringing its payment policies and unit costs in line with mainstream medicine. Adoption of Medicare policies should lead to reduced administrative costs, a reduced number of medical disputes, and a reduction in unproductive costs for medical services.

The commission estimates that the proposed rules will result in an aggregate reduction of approximately (16% ) in total payments, if applied to historical workers' compensation system claim costs. The commission projects a similar impact on future aggregate claim costs, assuming that there is not a significant shift in the distribution of claims. A number of other factors could affect the impact including frequency of injury, severity of injury, and changes in the practice of medicine for injured workers in Texas, distribution of services provided, current billing practices, and random fluctuations. The differential between the current MFG MAR and the proposed MAR varies from service to service even within a category of services because of the adjustments made to the current MFG relative value units. Use of standardized coding, reporting, billing, and reimbursement methodologies in the rules as proposed is expected to decrease fee disputes within the workers' compensation system after a period of time for system participants to become familiar with the system.