In developing the proposal for the Health Facility Fees, one of which is this adopted rule, commission staff met and discussed issues with various stakeholders, including hospitals, ASCs, specialty care facilities, the Texas Hospital Association, the Texas Workers' Compensation Research and Oversight Council and the primary HB-2600 Legislative Stakeholders group. The HB-2600 Legislative Stakeholders 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 Technical Work Group; Texas Chiropractic Association; Texas Osteopathic Medical Association; and the Texas Medical Association. The commission held four HB-2600 Legislative Stakeholder meetings to discuss, in part, the facility fee guidelines, which included this ASC rule. Stakeholder participation included discussion of Medicare reimbursement policies and identification of any areas of concern and also included an informal comment process where stakeholders were given a conceptual presentation of the rule and an opportunity to provide input to commission staff.

The commission's Medical Advisory Committee (MAC) was presented with general historical commission medical claims data, current commission and Medicare reimbursement methodologies, and information regarding guideline development. The MAC provided feedback concerning issues and potential impact through discussion and individual written responses.

Draft rules were presented at a November 2002 meeting of the MAC. In early 2003, the MAC formed a facility fee guideline (FFG) workgroup, which met three times in February and March of 2003, to study and provide feedback to the commission on the draft facility fee guidelines (ASC, hospital outpatient, and hospital inpatient). In addition to the draft rules, commission staff provided the workgroup with educational materials related to Medicare reimbursement methodology, historical TWCC medical billing and payment information, and a copy of the Ingenix November 2002 report.

At the March 28, 2003 MAC meeting, the FFG workgroup presented information concerning the development of the health facility fee guidelines. The workgroup presented concerns regarding perceived administrative and operational burdens anticipated by utilizing Medicare fee schedules, including:

* The Medicare inpatient fee schedule (Diagnosis Related Groups (DRG)) is very complex but could be administered by system participants,

* The Medicare outpatient fee schedule (Ambulatory Payment Classifications (APC)), which is new to Medicare, would be very complex and difficult to administer,

* Potentially variable (and therefore, inaccurate) amounts paid for the same procedure by the hundreds of payers within the workers' compensation system,

* Additional costs to the system involving collection and fee disputes, and

* Carriers' ability to stay up to date with the various Medicare methodologies.

The workgroup also expressed concern about the potential inaccuracy of the financial impact on facilities raised by the Ingenix report indicated that the hospital inpatient data was reliable but certain hospital outpatient information was limited. Additionally, the workgroup was concerned that facilities may elect not to participate in the workers' compensation system due to concerns regarding decreased reimbursement amounts, creating access to care issues. The administrative complexities of multiple procedures was also a concern, as well as procedures that are not on the ASC List of Medicare Approved Procedures, based on an estimated 60% of workers' compensation patients who receive multiple procedures. The lack of clarity regarding how carriers will determine which procedure is the primary, and which is the secondary, for reimbursement purposes, using Medicare's multiple procedure rule was another concern. Finally, the workgroup expressed concern that the commercial managed care data considered by Ingenix was outdated.

The workgroup recommended further study regarding how Medicare based fee guidelines would be administered by carriers and the possible implementation of a pilot program; creating stronger incentives for carriers to accurately administer payments; further research concerning outpatient and ASC data, which was limited; the acquisition of more current commercial market data; consideration of utilization management policies to address cost containment; consideration of reimbursement of a percent of charges or, if relying on the Medicare group rate methodology, consideration of reimbursement for implants and other high cost procedures.

The commission considered all information presented and subsequent discussion of the FFG workgroup and the MAC. As a result of this input, the commission requested updated information from Ingenix in the area of the commercial market information used in the analysis of the PAFs. The commission subsequently decided to propose an ASC fee guideline initially, instead of three facility fee guidelines at once, to phase in the use of Medicare reimbursement methodologies for system participants. This is expected to ease the administrative challenges of implementing numerous methodologies simultaneously, as relayed by the FFG workgroup. It will also standardize the reimbursement of ASCs in the Texas workers' compensation system, for which there is currently no fee guideline and which has an inordinate number of disputes. However, due to existing statutory requirements and the existence of other rules addressing carrier compliance, not all MAC recommendations were implemented.

The commission is required by Texas Labor Code §413.011 to apply exceptions or minimal modifications necessary for adaptation of the Medicare system 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. Consequently, 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.

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 payment adjustment factor based solely on those payment adjustment factors developed by CMS. The commission is adopting 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's adopted PAF remains 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. TWCC inpatient hospital services are currently reimbursed under the existing TWCC 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 TWCC 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 has recommended that the commission adopt a separate Payment Adjustment Factor (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 has used Medicare fees as a reference and has considered commercial market payments as indicative of economic indicators in health care, as required by the statute. The commission determines "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.

Adopted new §134.402 establishes reimbursements for ASC health facility services provided on or after the effective date of the new rule. The new rule provides a standardized reimbursement method and billing procedures by aligning the workers' compensation reimbursement structure with the structure used by the CMS.

Subsection (a) of the adopted rule provides for the reimbursement of health care facility services, as defined by the Centers for Medicare and Medicaid Services, other than professional medical services, provided in an ASC on or after September 1, 2004. The effective date of September 1, 2004, is a change to the text of subsection (a) as proposed, made in response to public comments received by the commission, which raised concerns about carriers' ability to implement the new reimbursement system by June 1, 2004, the originally proposed effective date. 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, promote recovery or enhance 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 are no changes to subsection (b) from proposal. 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. As discussed elsewhere in this preamble, this is not workable for the workers' compensation system, which has approximately 250 insurance carriers. Therefore, the adopted rule, in compliance with the statute, does 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.

There are changes from the text of subsection (c) as proposed. Subsection (c) establishes the method to be used for determining the maximum allowable reimbursement (MAR) for ASC health facility services in the Texas workers' compensation system. In establishing the PAF for the rule, the commission considered the statutory requirements and objectives and utilized Medicare data, current commission reimbursement levels, and available commercial payer information.

The rule as proposed would have established a facility specific reimbursement amount in (c)(1) by setting a PAF of 230% to apply to the Medicare reimbursement amount. The adopted PAF has been changed from proposal, now subsection (c) of the rule. The change to the adopted PAF of 213.3% of Medicare results from concerns expressed in public comments received by the commission in response to the rule as proposed, the continued high medical cost per claim in Texas, and the significant change from proposed subsection (d)(3), related to payment limitations. 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 remains in the range of commercial reimbursement. Ingenix estimated that 2004 ASC reimbursement under current TWCC 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%-264%) is extended in the Ingenix report to 213.3% - 290.4% to recognize the potential for the commission to emphasize a different balance of the statutory objectives than that emphasized by Ingenix.

Subsection (c)(1) of the rule as proposed has been deleted and incorporated into subsection (c).

Subsection (c)(2) of the proposed rule provided direction for a system of payment that allows a carrier to reimburse a fair and reasonable amount for services for which neither Medicare nor the commission establishes a payment amount. This subsection is unnecessary because only services on the ASC List of Medicare Approved Procedures may be reimbursed when performed in an ASC setting in the Texas workers' compensation system. Services included on the ASC List of Medicare Approved Procedures are assigned a group with a specific Medicare reimbursement amount for each group. Consequently, a fair and reasonable reimbursement provision is unnecessary and has been removed from the rule as adopted.

There are changes from the text of subsection (d) as proposed. Proposed subsection (d) would have provided that the reimbursement for ASC services is the lesser of the MAR as established by the adopted rule or the facility's and payer's workers' compensation negotiated and/or contracted amount that applies to the billed service(s). In addition, subsection (d)(3) as proposed attempted to address cost containment efforts provided by the statute with a reimbursement limitation so that an ASC payment could not exceed the amount established by the commission in a fee guideline for the same or similar service provided in either an inpatient or outpatient hospital setting.