In order to provide the most comprehensive range of fair and reasonable reimbursement rates, and address the statutory requirement for cost control and prohibition against paying higher than would be paid by or for persons with similar standards of living, Ingenix excluded the indemnity experience at the lower end of the range and included it at the higher end of the range.

Ingenix initially recommended a 2003 range of 230% (not including indemnity plans) to 250% (including indemnity plans). Upon the commission's request for 2004 projections, Ingenix recommended the 2004 PAF range of 237% (not including indemnity plans) to 264% (including indemnity plans) of Medicare for ASC reimbursement. However, Ingenix's recommended reimbursement range did not contain an explicit reduction for security of payment or for extraordinary encouragement of medical cost control related to reimbursement rates. Consequently, Ingenix indicated that if the commission were to choose a different balance of the statutory objectives, implementation of the ASC rule with PAFs outside the recommended ranges (i.e., 90% of the 237% low endpoint, up to 110% of the 264% of the high endpoint within the ASC recommended range) would be appropriate and meet the statutory standards.

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 Medicare List 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 ASC list of Medicare approved procedures (Medicare's List);

* 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 Medicare's List 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, implant device 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 PAF, allowances for procedures to be performed in an ASC facility that are not on Medicare's List, 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, proposed amendments at the November 2004 public meeting, and now adopts these rule amendments.

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

The commission is required by Texas Labor Code §413.011 to apply exceptions or minimal modifications necessary for adaptation of the Medicare methodology to the Texas workers' compensation system. Medicare payment policies may retroactively alter payment amounts of previously paid claims and require the Medicare system participants to re-adjudicate claims and reconcile payments. The commission determined that such retroactive payment policies would create undue administrative burdens if applied to the Texas workers' compensation system. The adopted rule requires the use of the most current Medicare policies in effect when the services were provided, including Medicare's site of service restrictions, with the exception of retroactive payment policies (no change from the rule adopted April 2004). The adopted amendments add minimal modifications to that exception by including procedures to the ASC List of Medicare Approved Procedures, and separate reimbursement for surgically implanted devices.

Texas Labor Code §413.011 requires the commission to adopt necessary conversion factors or PAFs to take the diverse statutory requirements into account in establishing a fee guideline that uses the federal Medicare reimbursement methodology. Additionally, the commission must take into account economic indicators in health care and the requirements found in subsection (d) of §413.011. The statute also states that the commission shall not adopt a PAF based solely on those PAFs developed by CMS. The commission adopted a multiplier, or PAF, of Medicare reimbursement rates for the reimbursement of ASC facility services to satisfy the statutory requirements.

The rate adopted establishes fair and reasonable reimbursement that is designed to ensure continued access to quality care, along with appropriate medical cost control. Ingenix also stated that in certain instances, going outside the recommended range to meet statutory requirements would be appropriate. Given the data available for analysis, Ingenix indicated that anywhere down to 90% of the low endpoint and up to 110% of the high endpoint of the recommended ASC range would be an appropriate "extended range." Ingenix noted that points in the extended range satisfactorily balance the complex statutory objectives, and the rate adopted in this rule is within the Ingenix extended range. To further address cost containment efforts provided by the statute, the commission adopted a PAF within the extended range.

The PAF multiplier for ASCs is considerably higher than the 125% multiplier provided in §134.202, the commission's Medical Fee Guideline, which covers reimbursement of professional medical services provided within the Texas workers' compensation system. There are several reasons for this. Unlike professional medical services, whose cost inputs are continuously updated by CMS, Medicare has not significantly revised ASC cost inputs since 1994. Moreover, the percentage of Medicare patients who receive ASC services (surgeries) is significantly less than the percentage of Medicare patients who receive professional medical services (typically, physician services). Finally, Medicare reimbursements for professional medical services are generally within the range of payments made by commercial payers; however, Medicare reimbursements for ASC services are well below the range of payments made by most commercial payers for those services. Thus, while the resulting multipliers are different in the two contexts, they are consistent with one another to the extent that the commission has determined that reimbursement for the two types of services is appropriate at the low end of the range of reimbursement provided within the commercial market.

The commission will in the future propose fee guidelines for outpatient facility services, and amendments to the current inpatient fee guideline. Inpatient hospital services are currently reimbursed under the existing commission rules that provide for per diem payments. Ingenix has noted that the current inpatient methodology is reasonably standardized but does not reflect the recent statutory requirement to use Medicare reimbursement methodologies. Ingenix also noted, at the time of its October 2003 report, that outpatient hospital and ASC payments were not standardized in the commission system, or the market in general, and the lack of detail in the available data makes it difficult to determine the current mix of services that are being delivered. Consequently, Ingenix recommended that the commission adopt a separate PAF for each setting (inpatient hospital, outpatient hospital, and ASC), based on Medicare reimbursement methodology and policies in accordance with the statutory mandates, resulting in standardization of all three facility fee guidelines, once adopted or revised. Because the relationship of the Medicare reimbursement to the commercial market varies between inpatient, outpatient, and ASC services, it is likely that the PAF proposed for the inpatient hospital and outpatient hospital facility fee guidelines will differ from the PAF adopted for ASCs in this rule.

In setting the ASC fees in this rule, the commission used Medicare fees as a reference and considered commercial market payments as indicative of economic indicators in health care, as required by the statute. The commission determined "fair and reasonable" is not based solely on the market value of services provided to injured employees. Fair and reasonable compensation in the Texas workers' compensation system is a balance of all the required components of the Act. These are rigorous statutory requirements, which are not easily balanced. In balancing the statutory mandates and objectives, the commission considered numerous issues, with the goal of establishing fair and reasonable fees that will assist in achieving effective medical cost control.

To help in understanding the full picture, the commission has addressed the background and basis for the rule, and requirements of the current rule, including those parts and issues that are not the subject of this rulemaking.

Rule 134.402 establishes reimbursements for ASC health facility services. The rule provides a standardized reimbursement method and billing procedures by aligning the workers' compensation reimbursement structure with the structure used by the CMS. The rule provides minimal modifications within this CMS structure to meet occupational injury requirements.

No amendments to (a) were proposed, other than the effective date for these amendments. Subsection (a) of the adopted rule provides for the reimbursement of health care facility services, as defined by the CMS, other than professional medical services, provided in an ASC on or after September 1, 2004. Paragraph (a)(2) provides for an amended effective date of April 1, 2005 for the amendments in paragraphs (e)(2), (e)(3), and (e)(4), and subsection (f). Subsection (a) also provides that 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 Texas workers' compensation system. Subsection (a) requires use of the most recent payment policies adopted by the Medicare program for compliance with commission rules, decisions, and orders is required. This will prevent the Texas workers' compensation system from falling out of synchronization with Medicare and will achieve the standardization goals established in Texas Labor Code §413.011. However, specific provisions contained in the Act and commission rules shall take precedence over any conflicting provision adopted or utilized by CMS in administering the Medicare program. Pursuant to §408.021 of the Texas Labor Code, injured employees are entitled to all health care reasonably required by the nature of the injury as and when needed to cure or relieve the effect naturally resulting from the compensable injury, promotes recovery or enhances the ability of the employer to return to or retain employment. To the extent that this entitlement may differ from the entitlement of the Medicare recipients, the decision of the commission through its dispute resolution process must take precedence over the provisions adopted or utilized by CMS in administering the Medicare program. Subsection (a)(3) states that: "Specific provisions contained in the Texas Workers' Compensation Act (Act), or Texas Workers' Compensation Commission (commission) rules, including this rule, shall take precedence over any conflicting provision adopted by utilized by CMS in administering the Medicare program. Exceptions to Medicare payment policies for medical necessity may be provided by commission rule. Independent Review Organization (IRO) decisions regarding medical necessity are made on a case-by-case basis. The commission will monitor IRO decisions to determine whether commission rulemaking action would be appropriate."

There is a change from the text of subsection (a) as proposed. The adopted revision of paragraph (a)(2) changes the effective date of these rule amendments from March 1, 2005 to April 1, 2005, thereby allowing system participants adequate time to prepare for these rule amendments. The commission again clarifies nothing in these amendments would have retroactive effect.

No changes to subsection (b) were proposed. 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 health facility 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 the 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 and the standardization required by the statute would be eliminated. However, Medicare also makes some policies retroactive, which is not workable for the workers' compensation system that has approximately 250 insurance carriers. Therefore, the rule, in compliance with the statute, did not adopt the retroactivity aspect of Medicare payment policies, and instead requires the use of the Medicare policies in effect on the day that a service was provided.

No changes from the text of subsection (c) were proposed. Subsection (c) establishes the method to be used for determining the MAR for ASC health facility services in the Texas workers' compensation system. In establishing the PAF for the rule, which is 213.3% of Medicare, the commission previously considered the statutory requirements and objectives and utilized Medicare data, current commission reimbursement levels, and available commercial payer information. As stated in the April 2004 adoption preamble, the adopted PAF is the low limit of the extended range of acceptable fair and reasonable reimbursements included in the Ingenix report and reflects the commission's statutory responsibility related to effective medical cost control and fair and reasonable reimbursement. The adopted PAF is in the range of commercial reimbursement. Ingenix estimated that 2004 ASC reimbursement under current commission rules (requiring fair and reasonable reimbursement) equals approximately 320% of 2004 Medicare reimbursement. Additionally, Ingenix estimated commercial (HMO/PPO/POS/Indemnity) payer reimbursement equal to a range of 168% to 564%. This commercial range produces a weighted average of approximately 274% (not including indemnity plans) to 293% (including indemnity plans) of Medicare reimbursement. With Medicare added to the commercial market, the weighted average for ASC services trended to 2004 is 237% (not including indemnity plans) to 264% (including indemnity plans) of Medicare reimbursement. This identified range (237% to 264%) was extended in the Ingenix report to 213.3% to 290.4% to recognize the potential for the commission to emphasize a different balance of the statutory objectives than that emphasized by Ingenix.

There are no changes from the text of subsection (d) as proposed. Adopted 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 payer's workers' compensation negotiated and/or contracted amount that applies to the billed service(s).

There are changes from the text of subsection (e) as proposed, which reformatted and expanded the current rule. Subsection (e) addresses the exceptions and minimal modifications to the Medicare payment policies.

As adopted, amended paragraph (e)(1) reformatted the language, which states that Texas will not incorporate any retroactive portions of Medicare payment policy changes.

There are changes from the text of paragraph (e)(2) as proposed. Amended paragraph (e)(2) supplements Medicare's List with additional procedures, and the associated group assignments (e.g., Medicare Group 1-9). These additions were 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 adopted 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 adopted 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 Cont'd...