Ingenix and the commission estimate overall reimbursement at 230% of Medicare under the proposed §134.402 Ambulatory Surgical Center Fee Guidelines to be approximately 28% less than the current reimbursement. Overall reimbursement under a PAF of 237% was estimated to be approximately 26% less than the current reimbursement. These estimates are based upon the assumption that all ASCs would receive payment at the MAR amount established by this proposed rule. However, if a substantial number of payments are limited based upon inpatient and outpatient hospital reimbursement levels, the amount of the reduction will be greater.

Most carriers should experience reduced medical benefit costs as a result of lower unit prices and an expected reduction in over-utilization and unreasonable billing practices. Medical services are a significant portion of benefit costs employers pay through workers' compensation insurance premiums or directly through self-insurance programs. Employers will benefit from the reduction in aggregate medical costs, which should be favorably reflected in the cost to employers to provide workers' compensation coverage. This will, in turn, potentially increase the availability of coverage to injured workers. In addition, if the new rules reduce over-utilization of medical services, it may also enhance an injured employee's ability to return to work.

Use of standardized coding, reporting, billing, and reimbursement methodologies in the rule as proposed is expected to initially increase but ultimately decrease fee disputes within the workers' compensation system as participants become familiar with the system. Carriers and health care facilities may experience increased cost if the rule generates more disputes initially. However, as system participants become more familiar with the application of CMS policies, the number of disputes and costs to both carriers and health care facilities should decrease.

Health care facilities will benefit from the use of standardized methodologies, reporting, billing, and coding requirements. Some stakeholders and MAC members indicated that health care facilities should find the standardized Medicare reimbursement methods more predictable than the current Texas workers' compensation system reimbursement and thus benefit from the standardization. Additionally, some health care facilities are familiar with the CMS systems, as most health care facilities are Medicare providers.

Insurance carriers should ultimately benefit from use of standardized methodologies, reporting, billing, and coding requirements and decreased disputes as they become accustomed to the CMS systems.

There will be some anticipated economic costs to persons required to comply with the rule as proposed. There will be no economic costs to injured employees, as this proposed rule does not impose any requirements on injured employees. The potential benefit of coverage of employees is discussed elsewhere in this note.

Employers who purchase workers' compensation insurance should experience no direct economic impact from the requirement to comply with this proposed rule because there is no additional administrative requirement for the employer. The potential benefit of smaller premiums and ability to offer coverage to employees is discussed elsewhere in this note.

Self-insured employers who self-administer and perform their own medical bill review should experience costs related to compliance that will likely be offset by a decrease in overall medical reimbursement and in the number of fee disputes. Self-insured employers who outsource claims adjusting and/or medical bill review costs will be impacted based on their vendor relationships but may be offset by a decrease in overall medical reimbursement and in the number of fee disputes.

ASC facilities that do not currently participate in the Medicare system will have some costs associated with training staff and adapting their billing systems to utilize the Medicare policies for their worker's compensation population. Once trained, the costs to bill for workers' compensation health care may remain the same and perhaps even decrease at some point in time when the reimbursement methods have become more static. Facilities are instructed to bill their usual and customary fees; therefore it is not necessary for facilities to calculate Medicare reimbursement in order to bill for services. Facilities that are already participating in the Medicare system will not experience these same increased costs.

Insurance carriers should experience the same increased costs in some areas. It is anticipated that the initial administrative expense may be substantial for a carrier to begin processing reimbursements on a basis consistent with Medicare. Health care facilities and insurance carriers who perform only a small amount of work in the workers' compensation system may be able to comply with these rules without incurring costs. Small carriers in the market may find it feasible to arrange for a third party to act as a claims vendor. For those carriers that do not currently participate in the Medicare system, increased costs include costs associated with training staff and adapting their claim systems to utilize the various Medicare policies for ASC facility reimbursement. Those who are already participating in the Medicare system or using Medicare billing and reimbursement policies will also experience some of these same increased costs to adapt to a worker's compensation system. As discussed, these costs should ultimately be offset by the reduction in fee payments and the decrease in the number of fee disputes.

Small businesses or micro-businesses that would be impacted by this rule include employers, carriers, and ASCs. Most carriers (and employers who pay their premiums) will experience a decrease in payments to ASCs and the operational costs of compliance for carriers and employers will be offset as discussed above. Therefore, there will be no adverse economic impact on small businesses or micro-businesses that are carriers or employers.

Increased operational costs of compliance for ASCs will be offset as discussed above. However, the commission does anticipate a potential adverse economic effect on ASCs that are small or micro-businesses as a result of this proposed rule. This will not be due to any costs of compliance with the rule, as ASCs will incur nominal, if any, additional costs of complying with the rule. Instead, the economic effect on ASCs will result from any reduction in fees that they are reimbursed for services rendered. The ASCs that will be most detrimentally affected in this regard will be those that provide, either exclusively or in large part, services to injured employees within the workers' compensation system and who are largely reimbursed at comparatively high rates. The commission has considered whether the rule proposal should be revised to reduce potential economic impact on small businesses and micro-businesses, but has concluded that it is not feasible to reduce this potentially adverse economic effect without undermining the express purposes of Texas Labor Code §413.011: to develop fees that are designed not only to ensure the quality of care but also to achieve effective medical cost control. The commission is also constrained by the requirement that the rule 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.

The change in the amount of payments to ASCs will also economically affect carriers. While the aggregate amount paid to ASCs by most carriers will decrease, some carriers will in the aggregate pay more to ASCs. These are the carriers that have been substantially lowering payments to ASCs for some time, during which time the number of medical fee disputes filed by ASCs has increased. To some extent, the increased payments by these carriers will be offset by decreased costs from standardization and fewer fee disputes for resolution by the commission and the State Office of Administrative Hearings (SOAH); there appears to be a correlation between the carriers who pay the lowest fees to ASCs and the carriers with high numbers of fee disputes filed by ASCs. Thus, the carriers who will be paying more pursuant to the proposed rule are most likely the ones that will also experience the greatest savings from a reduction in fee disputes and SOAH proceedings. Whether any of these carriers constitutes a small business or micro-business is not known. The commission has considered whether the rule proposal should be revised to reduce potential economic impact on small businesses and micro-businesses, but has concluded that it is not feasible to reduce this potentially adverse economic effect without undermining the express purposes of Texas Labor Code §413.011: to develop fees that are designed not only to ensure the quality of care but also to achieve effective medical cost control. The commission is also constrained by the requirement that the rule 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.

There will be no difference in economic effect between ASCs that are small or micro-businesses and those that are the largest businesses. There will be no difference in the cost of compliance for small businesses and micro-businesses as compared to the largest businesses. The same basic processes and procedures apply, regardless of the size or volume of the business. The business size cost difference will be in direct proportion to the volume of business that falls under the purview of this proposed rule.

Comments on the proposed rule must be received by 5:00 p.m., December 17, 2003. You may comment via the Internet by accessing the commission's website at www.twcc.state.tx.us clicking on "Laws, Rules and Forms," and then on "Proposed Rules." This medium for commenting will help you organize your comments. You may also comment by emailing your comments to RuleComments@twcc.state.tx.us or by mailing or delivering your comments to Linda Velásquez, Legal Services, Mailstop #4-D, Texas Workers' Compensation Commission, 7551 Metro Center Drive, Suite 100, Austin, Texas 78744-1609.

Commenters are requested to clearly identify by number the specific rule and paragraph (e.g., §§134.402 (a)(1), 134.402(b), 134.402(c)(2), etc.) commented upon. The commission may not be able to respond to comments that cannot be linked to a particular proposed rule. Along with your comment, it is suggested that you include the reasoning for the comment in order for commission staff to fully evaluate your recommendations.

Based upon various considerations, including comments received and the staff's or commissioners' review of those comments, or based upon the commissioners' action at the public meeting, the rule as adopted may be revised from the rule as proposed in whole or in part. Revisions that may be made from the proposed rule include, but are not limited to, the PAF and associated reimbursements, which may be revised to be higher than proposed or lower than proposed, and the effective date.

Persons in support or opposition of the rule as proposed, in whole or in part, are encouraged to comment to that effect. The failure to comment accordingly is not indicative of support or opposition.

A public hearing on this proposal will be held on December 17, 2003 at the Austin central office of the commission (7551 Metro Center Drive, Suite #100, Austin, Texas 78744-1609). Those persons interested in attending the public hearing should contact the Commission's Office of Executive Communication at (512) 804-4430 to confirm the date, time, and location of the public hearing for this proposal. The public hearing schedule will also be available on the commission's website at www.twcc.state.tx.us.

The new rule is proposed under Texas Labor Code §402.061, which authorizes the commission to adopt rules necessary to administer the Act; Texas Labor Code §408.021, which entitles injured employees to all health care reasonably required by the nature of the injury as and when needed; Texas Labor Code §413.002, which requires the commission's Medical Review Division monitor health care providers, insurance carriers and claimants to ensure compliance with commission rules; Texas Labor Code §413.007, which sets out information to be maintained by the commission's Medical Review Division; Texas Labor Code §413.011, which mandates that the commission by rule establish medical policies and guidelines; Texas Labor Code §413.012, which requires review and revision of the medical policies and fee guidelines at least every two years; Texas Labor Code §413.013, which requires the commission by rule to establish programs related to health care treatments and services for dispute resolution, monitoring, and review; Texas Labor Code §413.014, which requires express preauthorization by the insurance carrier for health care treatments and services; Texas Labor Code §413.015, which requires insurance carriers to pay charges for medical services as provided in the statute and requires that the commission ensure compliance with the medical policies and fee guidelines through audit and review; Texas Labor Code §413.016, which provides for refund of payments made in violation of the medical policies and fee guidelines; Texas Labor Code §413.017, which provides a presumption of reasonableness for medical services fees that are consistent with the medical policies and fee guidelines; Texas Labor Code, §413.019, which provides for payment of interest on delayed payments refunds or overpayments; and Texas Labor Code §413.031, which provides a procedure for medical dispute resolution.

The new rule is proposed under the Texas Labor Code §§402.061, 408.021, 413.002, 413.007, 413.011, 413.012, 413.013, 413.014, 413.015, 413.016, 413.017, 413.019, and 413.031.

The previously cited sections of the Texas Labor Code are affected by this proposed rule action. No other code, statute, or article is affected by this rule action.