The Texas Department of Insurance, Division of Workers' Compensation proposes new §§133.305, 133.307, and 133.308, concerning medical dispute resolution (MDR). These proposed sections are necessary to: implement statutory provisions of House Bill (HB) 7, enacted by the 79th Legislature, Regular Session, effective September 1, 2005; address the merger of two agencies with similar purposes and processes; and improve efficiencies of the MDR process. The Division also proposes the simultaneous repeal of existing §§133.305, 133.307, and 133.308, published elsewhere in this issue of the Texas Register.

The proposed sections incorporate HB 7 specific changes to the MDR process. The HB 7 changes remove the State Office of Administrative Hearings from the MDR process, authorize pharmacy processing agents to act on behalf of pharmacies under terms and conditions agreed on by the pharmacies, establish the binding effect of independent review organization (IRO) decisions, specify elements of the IRO decision, create workers' compensation health care networks, and institute quality monitoring of IROs. In addition, HB 7 requires the health care provider to refund a carrier for inappropriate charges upon receiving a carrier's request for refund and opportunity for appeal to the insurance carrier, and establishes that disputes related to carrier refunds are to be pursued by health care providers through MDR.

The overall aim of HB 7, as provided in Labor Code §402.021(b)(3) - (5), is to provide medical benefits in a timely and cost-effective manner. The goal also includes the provision of appropriate, high-quality medical care which supports restoration of the injured employee's (employee) physical condition and earning capacity. Additionally, the goal is to minimize the likelihood of disputes, while maximizing the prompt and fair resolution of identified disputes. In conjunction with these goals, HB 7 established certified workers' compensation health care networks (networks) which offer employers a cost-effective means of delivering medical benefits to employees.

Another significant HB 7 change is the creation of the Division of Workers' Compensation (Division) within the Texas Department of Insurance. The former Texas Workers' Compensation Commission functions were merged within the Texas Department of Insurance to form the new Division. In conjunction with the merger, several cross-agency work groups were created to examine functions shared by the two agencies and identify opportunities for ensuring consistency and efficient operations.

This cross-agency examination included a review and revision of the MDR rules and functions. The examination identified that health care providers (providers) are required to follow different processes to resolve medical necessity disputes for network and non-network claims. In addition, insurance carriers (carriers) with network contracts are required to follow different business processes and use different automated systems to support both network and non-network claims. These processes require the use of specialized forms, the submission of paperwork to separate entities, and IRO assignment by separate divisions of the Department. This duplication of function is expensive and time-consuming.

As a result of the examination, the proposal consolidates the IRO processes to reduce costs and save time. This consolidation is in accordance with Labor Code §413.031 and Insurance Code §1305.355, which both require medical necessity disputes to be conducted by an IRO pursuant to Insurance Code Article 21.58C. Therefore, the proposed rules create a single process for submitting and processing network and non-network requests for IRO review within the Health and Workers' Compensation Network Certification and Quality Assurance Division (HWCN Division) of the Department.

In reviewing the medical necessity dispute processes, the Department considered concerns expressed by stakeholders. Stakeholders were concerned that the current medical fee dispute resolution process was too time-consuming and administratively complex. The Department is aware that historically, a significant percentage of requests for fee dispute resolution involved more than solely fee issues. Issues of compensability, extent of injury or relatedness and/or medical necessity often exist in addition to the fee dispute, which has significantly complicated and slowed the resolution process. The Department identified additional areas of complexity within the process that result in delays in resolving a medical fee dispute. These areas include the proper identification of denial issues and the number of steps in the resolution process.

In the review, the Department also determined that the Division has the authority to resolve disputes related to out-of-network care for which a contracted rate is not established based upon Insurance Code §1305.153. This provision establishes that reimbursement for authorized out-of-network care shall be in accordance with the Labor Code and applicable rules.

The proposed sections govern dispute resolution of workers' compensation medical necessity and medical fee disputes. To accommodate a new dispute resolution framework, these proposed sections implement pertinent portions of HB 7, address the merger of two agencies, and streamline the MDR process. Additionally, the proposed sections incorporate the new processes, which not only simplify the administrative processing for stakeholders, but also allow for a more efficient and consistent method of processing and resolving medical disputes. The proposed sections also clarify that a qualified pharmacy processing agent will be considered a health care provider for purposes of MDR. The new sections apply to medical necessity and fee disputes filed on or after September 1, 2006.

Proposed §133.305 outlines the general requirements of the MDR process. The proposed section defines terms relevant to MDR, including network and non-network health care. The proposed section uses "preauthorization or concurrent" for consistency with the use of those terms in Insurance Code Article 21.58A and related rules. The proposed section sets forth the dispute sequence for resolving medical dispute issues, and requires all issues of compensability, extent of injury and/or medical necessity to be resolved before a fee dispute can be processed. The proposed section also establishes circumstances in which the Division may assess administrative fees and sets out requirements for redacting confidential information.

Proposed §133.307 establishes the new MDR process for resolving disputes regarding the amount of payment due for health care determined to be medically necessary and appropriate for treatment of a compensable injury. This proposed section applies to authorized out-of-network care not subject to a fee contract, as well as non-network care. The request for medical fee dispute resolution shall be filed not later than one year after the date of service in dispute, unless issues of compensability, extent of injury and/or medical necessity exist. Proposed §133.307 allows a requestor access to MDR to resolve a fee dispute for which compensability, extent of injury and/or medical necessity and compensability has been determined through dispute resolution regardless of the date of service, if the submission of the request for MDR is within 60 days of the final determination.

Proposed §133.307 outlines the following three steps for resolving fee disputes. First, the requestor is required to present all information necessary to resolve the dispute upon the initial request for dispute resolution. The Division will notify the respondent of the dispute by providing a copy of all the information submitted by the requestor. Second, in response to the dispute, the proposed section requires the respondent, most often the carrier, to provide all information required by this section, including any missing explanation of benefits that may identify outstanding compensability, extent of injury, medical necessity, or fee issues. If compensability, extent of injury and/or medical necessity issues are identified, the fee dispute request will be abated until the issue is resolved. Third, the proposed section provides that the Division may request additional information from the disputing parties and may raise new issues in the MDR process. The proposed section also sets forth the reasons that justify dismissing a request for dispute resolution.

The proposed section provides that aggrieved parties who disagree with the decision may seek judicial review. The proposed section outlines the appropriate appeal process for parties to MDR seeking judicial review of the IRO's decision, the process for preparing a record for appeal of an MDR decision, and the contents of the record. The proposed section also explains the Division's assessment of expenses for preparing the record.

Proposed §133.308 provides the process for the review of network and non-network preauthorization, concurrent or retrospective medical necessity disputes. The proposed section specifies who can be a requestor, the manner in which requests must be made, and the time requirements that govern requests. The proposed section also states the process for IRO assignment and carrier document submission. The proposed section establishes IRO fees and corresponding time limits for payment along with the consequences of case dismissal in the event of non-compliance with the section. Further, the proposed section addresses the process for an IRO to request a designated doctor exam. The proposed time frames for IRO decisions are set forth, as well as what the IRO decision must include. The proposed section provides that the IRO is responsible for determining the prevailing party and compiling the appellate record in the case of judicial review. The process of appealing IRO decisions is outlined in the proposed section. IRO decisions are not agency decisions, and the Department and the Division are not parties to any such appeals. Both network and non-network appeals processes are detailed, as well as those for appeals of non-network spinal surgery. The section also addresses who will pay the costs for the appeal.

Amy Rich, Director of Medical Disputes, Division of Workers' Compensation, has determined that for each year of the first five years the proposed sections will be in effect, there will be no fiscal impact to state or local governments as a result of the enforcement or administration of the rules. There will be no measurable effect on local employment or the local economy as a result of the proposal.

The new rules continue the assessment of administrative fees by the Division when a carrier or provider does not comply with a provision of the Insurance Code, Labor Code, or related rules. The new rules, like the current rules, do not assess an administrative fee to the injured employee. The administrative fee of $50.00 per hour is assessed only when there is a violation of the applicable Code or rules. For fiscal year 2005, the Division assessed an administrative fee of $50.00 per hour for approximately 2,634 hours. It is anticipated that a similar number of hours on an fiscal year basis will incur this administrative fee when the rule becomes effective.

Ms. Rich has determined that for each year of the first five years the sections are in effect, the public benefit anticipated as a result of the administration and enforcement of the proposed sections will be improved organization resulting in greater regulatory efficiency in administering regulations under Chapter 133, Subchapter D. The proposed sections reflect the 79th Legislature's express intent that medical benefits are to be provided in a timely and cost-effective manner.

It is anticipated that costs will be incurred by the disputing parties whether requesting or responding to medical dispute resolution. The new rule requires the requestor, typically the provider, to submit two complete sets of all documents related to the medical fee dispute upon the initial request for MDR. The average number of pages per dispute is approximately 60 pages for the two complete sets. The number of pages varies depending on the amount and complexity of the issues in dispute. The new rules require the respondent, typically a carrier, to submit approximately 25 - 30 pages of documents. The Division estimates the cost of copying to be approximately 10 - 30 cents per page. The Division's estimate was based on an estimate provided by an IRO and the Division's published administrative fee schedule.

In addition to cost of copies, the anticipated costs also include staff time and mail service. According to the United States Postal Service, the mail cost associated with a delivery of a small parcel is estimated at 39 cents per pound. The Division estimates that requests and responses vary between 1 - 8 pounds. According to the most recent compensation summary of the Texas Workforce Commission, the average hourly wage for an insurance claims processing clerk is $15.68. The Division estimates that the staff time involved in requesting and responding to MDR is between 1 - 4 hours. Disputing parties currently experience administrative costs in a multi-step process which takes more time than the proposed process. The Department anticipates a slight decrease in administrative costs to disputing parties because the new rules reduce the number of responses required in the process.

The probable economic cost to a party to obtain the record in the event of an appeal as specified in §133.307(f) and §133.308(r) will vary depending on the size of the record, as well as the charge per copy. The Department estimates the cost of copying to be approximately 10 - 30 cents per page, which would result in a total cost of $20.00 - $60.00 for a 200 page record.

In an effort to ensure that requestors have exhausted other avenues and will follow through once a request is made, requestors who withdraw their request for an IRO decision will be assessed fees. These fees are necessary to reimburse IROs for the costs they incur when they receive an assignment by the Department and perform various administrative procedures to assign the review to a provider. The Division anticipates that the fees will deter unnecessary IRO withdrawals. Therefore, requestors who withdraw their request for an IRO decision after the IRO has been assigned and before the IRO sends the case to a reviewer will be liable for a $150 fee payable to the IRO. Requestors who withdraw a request for an IRO decision after IRO assignment of a reviewer will be liable for the entire IRO fee. If the IRO fee is a tier two fee, the amount will be $460. If the IRO fee is a tier one fee, the amount will be $650.

Any additional economic costs currently exist under existing rules or result from the implementation of pertinent portions of HB 7 and are not a result of the adoption, enforcement, or administration of the proposed sections. There will be no difference between the cost of compliance for large and small businesses as a result of the proposed sections. Based on the cost of labor per hour, there is no disproportionate economic impact on small or micro business. Even if the proposed sections would have an adverse effect on small or micro businesses, it is neither legal nor feasible to waive the requirements of the sections for small or micro-businesses because the Labor Code requires equal application of these provisions to all affected individuals.

To be considered, written comments on the proposal must be received no later than 5:00 p.m. on July 24, 2006. Comments may be submitted via the Internet through the Department's Internet website at http://www.tdi.state.tx.us/wc/proposedrules/toc.html or by mailing or delivering your comments to Kristi Dowding, Legal Services, MS-4D, Division of Workers' Compensation, Texas Department of Insurance, 7551 Metro Center Drive, Suite 100, Austin, Texas 78744.

The Division will consider the adoption of the proposal in public hearing scheduled for July 26, 2006 in the Tippy Foster Room, Division of Workers' Compensation, 7551 Metro Center Drive, Austin, Texas.

The new sections are proposed under Labor Code §§408.027(g), 408.0271, 408.031, 413.002, 413.0111, 413.020, 413.031, 413.032, 401.024, 402.00111, 402.083 and 402.061; Insurance Code Article 21.58A, §14(c); and Government Code §2001.177. Labor Code §408.027(g) provides that §408.027 and §408.0271 apply to health care provided through a workers' compensation health care network established under Chapter 1305 and that the commissioner of workers' compensation shall adopt rules as necessary to implement the provisions of §408.027 and §408.0271. Section 408.0271 states that if health care services provided to an employee are determined by the carrier to be inappropriate, the carrier shall notify the provider in writing of the carrier's decision and demand a refund of the portion of payment on the claim received by the provider for the inappropriate services and the provider may appeal such a carrier's determination no later than the 45th day after the date of the carrier's request for the refund. Section 408.031(a) allows injured employees to receive benefits under a workers' compensation health care network established under Insurance Code Chapter 1305. Section 413.002(d) provides that if the commissioner determines that an IRO is in violation of Labor Code Chapter 413, rules adopted by the commissioner under Chapter 413, applicable provisions of Labor Code Title 5, the commissioner or a delegated representative shall notify the IRO of the alleged violation and may compel the production of any documents or other information as necessary to determine whether the violation occurred. Section 413.0111 provides that the rules adopted by the commissioner for the reimbursement of prescription medications and services must authorize pharmacies to use agents or assignees to process claims and act on behalf of the pharmacies under terms and conditions agreed upon by the pharmacies. Section 413.020 provides the authority to adopt rules which enable the Division to charge a carrier a reasonable fee for access to or evaluation of health care treatment, fees, or charges. The section also provides that the Division may charge a provider who exceeds a fee or utilization guideline or a carrier who unreasonably disputes charges that are consistent with a fee or utilization guideline a reasonable fee for review of health care treatment, fees, or charges. Section 413.031 specifies the processes for an IRO decision and appeal and states that the commissioner by rule shall specify the appropriate dispute resolution process for fee disputes in which a claimant has paid for medical services and seeks reimbursement. Section 413.032(a) provides that an IRO that conducts a review under Chapter 413 shall specify the minimum elements on which the IRO decision is based. Section 401.024 authorizes the commissioner to require by rule the use of facsimile or other electronic means to transmit information. Section 402.00111 provides that the commissioner of workers' compensation shall exercise all executive authority, including rulemaking authority, under the Labor Code and other laws of this state. Section 402.083 provides that information in or derived from a claim file regarding an employee is confidential. Section 402.061 provides that the commissioner of workers' compensation has the authority to adopt rules as necessary to implement and enforce the Texas Workers' Compensation Act. Insurance Code Article 21.58A, §14(c), grants the commissioner of workers' compensation the authority to adopt rules as necessary to implement Article 21.58A, as that Article applies to utilization review of health care services provided to persons eligible for workers' compensation medical benefits under Labor Code Title 5. Government Code §2001.177(a) provides that a state agency by rule may require a party who appeals a final decision in a contested case to pay all or a part of the cost of preparation of the original or a certified copy of the record of the agency proceeding that is required to be sent to the reviewing court.

The following sections are affected by this proposal:

Insurance Code, Article 21.58A, 21.58C, and Chapter 1305, Subchapter H, and Labor Code §§401.024, 402.00111, 402.083, 408.0041, 408.027, 408.0271, 408.031, 413.002, 413.0111, 413.020, 413.031, 413.032, 413.0511, and 413.0512