The Texas Department of Insurance (Department), Division of Workers' Compensation (Division) proposes amendments to §134.1 and new §§134.2, 134.203 and 134.204 concerning medical reimbursement policies and medical fee guidelines.

The proposed changes to Subchapters A and C of Chapter 134 are necessary to meet the requirements of Labor Code §413.011, which requires the commissioner to adopt fee guidelines that are fair and reasonable and designed to ensure the quality of medical care and to achieve effective medical cost control. Changes to Subchapters A and C of Chapter 134 are also proposed pursuant to Labor Code §408.0252, which allows the commissioner to identify areas of the state in which access to health care providers is less available and adopt appropriate standards, guidelines, and rules regarding the delivery of health care in those areas.

In developing fee guidelines, Labor Code §413.011 requires the commissioner to adopt health care reimbursement policies and guidelines that reflect the standardized reimbursement structures found in other health care delivery systems, using the most current reimbursement methodologies, models, and values or weights used by the Centers for Medicare and Medicaid Services (CMS) in order to achieve standardization.

Additionally, Labor Code §413.011 requires the commissioner to develop one or more conversion factors or other payment adjustment factors in determining appropriate fees, taking into account economic indicators in health care, and to provide reasonable fees for the evaluation and management of care as required by Labor Code §408.025(c) and Division rules. 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, may not adopt conversion factors or other payment adjustment factors based solely on those factors as developed by CMS, and must 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 manner prohibited by Insurance Code §1451.104, or as restricting the ability of chiropractors to serve as treating doctors. Labor Code §413.012 is also applicable to the proposed rule amendments and new rules as it requires the commissioner to review and revise the fee guidelines every two years to reflect fair and reasonable fees. These requirements have been taken into consideration in the development of this proposal.

As part of the development of these proposed sections, the Division posted an informal working draft of the sections on its website and received written informal comments from 34 system participants and this proposal incorporates several recommendations offered by insurance carriers and health care providers (HCPs).

The proposed amendments to §134.1 are necessary to address rule name changes and the addition of the proposed new §134.203 and §134.204, clarify when fair and reasonable reimbursement applies, and correct grammatical inconsistencies in the section.

Proposed new §134.2 provides a listing of the ZIP Codes that are designated as workers' compensation underserved areas, which are determined by the ZIP Code where the service is provided. The section provides that when required by Division rule, an incentive payment shall be added to the maximum allowable reimbursement (MAR) for services performed in a designated workers' compensation underserved area. In specifying workers' compensation underserved areas, the Division utilized three criteria simultaneously: a ZIP Code that was not in a designated Medicare Health Professional Shortage Area (HPSA), a ZIP Code that had at least one approved case-by-case exception of Division-approved request to the appointment of a provider who was not on the Division's Approved Doctor List (ADL), and a ZIP Code where there was no provider on the ADL. Using those three criteria, the Division has designated 122 of the 4,254 Texas ZIP Codes as eligible for the 10 percent incentive payment. The Division has determined that 10 percent is a fair and reasonable incentive because it is the percentage factor currently used as the physician bonus payment provided by CMS for its 2007 Primary Care HPSA. The 10 percent incentive payment is anticipated to improve participation because it is a reasonable financial bonus in a physician scarcity geographic area and it is a measure that has been used historically by the federal Medicare system.

New proposed §134.203 and §134.204 are based on and address the same subject as the current §134.202, medical fee guidelines; however these sections will be applicable to medical services provided on or after March 1, 2008, and contain changes that provide for fair and reasonable fee guidelines in the current health care market. In reviewing the conversion factors from §134.202, the Division used the Medicare Economic Index (MEI) to provide updated reimbursement rates that are fair and reasonable. The MEI is a portion of Medicare's Sustainable Growth Rate (SGR). The other components of the SGR serve as major restraints in Medicare's budget neutrality requirements, and do not directly relate to workers' compensation reimbursements. The MEI is a weighted average of price changes for goods and services used to deliver physician services. The goods and services include physician time and effort as well as practice expenses.

Rather than modifying §134.202, two new sections (§134.203 and §134.204) are being proposed in order to create a separation of the conversion factors and Medicare-based fee schedules from workers' compensation specific services and reimbursements that are currently combined in §134.202. With these two separate sections, any future amendments will be easier for the Division to manage and for system participants to implement. Proposed new §134.203 relates to medical fees for reimbursements predominantly based on conversion factors and Medicare, and new §134.204 relates to medical fees for reimbursements of workers' compensation specific codes, services, and programs that, for the most part, are not as dependant on conversion factors and Medicare. Section 134.202 will remain in effect for reimbursements related to professional medical services provided between August 1, 2003 and March 1, 2008.

There are no additional rules or rule amendments anticipated in order to implement the proposed changes.

Proposed §134.203 is applicable to professional services provided on or after March 1, 2008; it does not apply to facility, pharmaceutical, dental, and other services, and it is not applicable to services provided through a workers' compensation health care network certified pursuant to Insurance Code Chapter 1305.

In place of the single conversion factor that is currently provided by §134.202, new §134.203 proposes the use of two conversion factors. The two proposed conversion factors are established in consultation with the Medical Advisor pursuant to Labor Code §413.0551(b)(1). The conversion factor of $52.93 for calendar year 2008 is to be used for all professional service categories, with the exception of surgical procedures performed in a facility setting, such as a hospital or ambulatory surgical center (ASC). This "non-facility" conversion factor is based on the MEI proposed by CMS to be used in 2008. The conversion factor of $66.45 for calendar year 2008 is to be used for surgical procedures performed in a facility setting. With the passage of House Bill 7 in the 2005 Texas Legislative Session, the Labor Code was amended at §413.011(b) to direct the commissioner develop one or more conversion factors taking into account economic indicators in health care and the requirements of subsection (d), which requires that reimbursement be fair and reasonable and designed to ensure the quality of medical care. The Division proposes the alternate conversion factor for surgical procedures performed in a facility setting to promote the quality of the surgical procedures available to injured employees and to provide fair and reasonable reimbursement to health care providers providing those procedures in a facility setting. The Division notes that numerous other workers' compensation jurisdictions that utilize Medicare's Resource Based Relative Value Scale (RBRVS) have adopted one or more conversion factors and a higher conversion factor is generally assigned to surgical services.

Currently §134.202 applies a fixed 125 percent multiplier to the current Medicare conversion factor in order to determine reimbursement. This has been the multiplier for professional services reimbursements since the implementation of the section in August 2003. Rather than using 125 percent of the most current Medicare conversion factor, the proposed §134.203 establishes conversion factors that reflect the aggregate changes in the MEI since the baseline year of 2002. The conversion factor will adjust annually based on annual changes to the MEI and subject to monitoring by the Division pursuant to its rulemaking authority. The recommended conversion factor of $52.93 for calendar year 2008 was developed by beginning with the 125 percent multiplier developed for §134.202, and applying the annual MEI adjustment activity year-to-year beginning with the baseline year of 2002.

Labor Code §413.011(b) allows for the use of one or more conversion factors. The proposed section establishes a conversion factor of $66.45 for calendar year 2008 to be used for surgical procedures performed in a facility setting, such as a hospital or ASC. This conversion factor is based on the average reimbursement differential between reimbursement rates for surgical services and overall services of those states using RBRVS as listed in Benchmarks for Designing Workers' Compensation Medical Fee Schedules: 2006 (Workers' Compensation Research Institute, 2006). This conversion factor also takes into consideration the expertise of the health care providers who provide these services in a facility setting as well as the limited availability of health care providers with that expertise and the administrative processes required by the Labor Code to secure those services. As reported by the Texas Medical Association in their 2006 Survey of Texas Physicians Research Findings, there has been a dramatic loss of access to surgical specialties by injured employees since the adoption of §134.202. As a result of input received in response to the posting of the informal working draft sections, the $66.45 conversion factor applies only to surgical services when performed in a facility setting, instead of the earlier suggestion of specialty surgical procedures distinguished by CPT codes.

Both proposed conversion factors are to be updated each subsequent calendar year to reflect the annualized MEI percentage adjustment published in the Federal Register each November.

Proposed §134.203 maintains reimbursement of Healthcare Common Procedure Coding System (HCPCS) Level II codes at the level specified in §134.202, 125 percent of fees listed in the Medicare Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) fee schedule, or 125 percent of the published Texas Medicaid fee schedule for durable medical equipment if the code has no published Medicare DMEPOS rate.

Proposed §134.203(a) describes the applicability of the section. Proposed §134.203(a)(1) states that the section does not apply to workers' compensation codes, services, and programs described in §134.204; prescription drugs or medicine; dental services; facility services of a hospital or other health care facility; or medical services provided through a workers compensation health care network certified pursuant to Insurance Code Chapter 1305, except as provided in Insurance Code Chapter 1305. Proposed §134.203(a)(2) notes that the section only applies to professional medical services provided on or after March 1, 2008, the applicability date of proposed new §134.203. Proposed §134.203(a)(3) provides that §134.202 is to be applied to professional medical services provided between August 1, 2003 and March 1, 2008.

Proposed §134.203(a)(4) describes that for professional medical services provided before August 1, 2003, §134.201 (relating to Medical Fee Guideline for Medical Treatments and Services Provided under the Texas Workers' Compensation Act) and §134.302 (relating to Dental Fee Guideline) apply. Proposed §134.203(a)(5) defines the term "Medicare payment policies" to mean reimbursement methodologies, models, and values or weights, including its coding, billing, and reporting payment policies as set forth in the CMS payment policies specific to Medicare, when used in this section. As with current §134.202, this section 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.

Proposed §134.203(a)(6) clarifies that, notwithstanding Medicare payment policies, chiropractors may be reimbursed for services provided within the scope of their practice act, which, in accordance with the Labor Code, allows them to serve as treating doctors in the Texas workers' compensation system. Proposed §134.203(a)(7) states that specific provisions contained in the Labor Code or the Division rules, including this chapter, take precedence over any conflicting provision adopted or utilized by CMS in administering the Medicare program and that Independent Review Organization (IRO) decisions regarding medical necessity be made in accordance with Labor Code §413.031 and §133.308 (relating to MDR by Independent Review Organizations), which are made on a case-by-case basis, take precedence in that case only, over any Division rules and Medicare payment policies. Proposed §134.203(a)(8) establishes that whenever a component of the Medicare program is revised, use of the revised component shall be required for compliance with Division rules, decisions, and orders for professional services rendered on or after the effective date, or after the effective date or the adoption date of the revised component, whichever is later.

Proposed §134.203(b)(1) requires that for coding, billing, reporting, and reimbursement of professional medical services, Texas workers' compensation system participants shall apply the Medicare payment policies, including its coding; billing; correct coding initiatives (CCI) edits; modifiers; bonus payments for health professional shortage areas (HPSAs) and physician scarcity areas (PSAs); and other applicable payment policies in effect on the date a service is provided with any additions or exceptions in the rules.

Proposed §134.203(b)(2) provides that a 10 percent incentive payment shall be added to the maximum allowable reimbursement (MAR) for services outlined in subsections (c) - (f) and (h) of the section that are performed in designated workers' compensation underserved areas in accordance with §134.2.

Proposed §134.203(c) requires system participants to apply the Medicare payment policies with minimal modifications to determine the maximum allowable reimbursements (MARs). Proposed §134.203(c)(1) provides a table setting out the annual conversion factors beginning in calendar year 2008 for use in the various service categories. Proposed §134.203(c)(2) indicates that the conversion factors in paragraph (1) of that subsection are for calendar year 2008 and that the subsequent year's conversion factors will be determined by applying the annual percentage adjustment of the MEI to the previous year's conversion factors and the new conversion factors shall be effective January 1 of the new calendar year. Paragraph (2) also provides an example of the calculation methodology used early in rule development in calendar year 2007 to describe the 2007 workers' compensation conversion factor based on the Medicare 2006 conversion factor with the annual increase of 2.1 percent of the MEI. This calculation methodology is to be applied each new subsequent calendar year based on the annualized MEI percentage adjustment published each November in the Federal Register for the ensuing calendar year.

As in §134.202(c)(2), proposed §134.203(d) provides that the MAR for HCPCS Level II codes A, E, J, K, and L shall be 125 percent of the Medicare DMEPOS fee schedule, or 125 percent of the published Medicaid fee schedule, or, if neither applies, according to subsection (f) of this section.

As in §134.202(c)(3), proposed §134.203(e) provides that the MAR for pathology and laboratory services not addressed in (c)(1) of this section or in other Division rules shall be 125 percent of the fee listed for the code in the Medicare Clinical Fee Schedule for the technical component, and 45 percent of the Division established MAR for the technical component shall be the professional component.

Proposed §134.203(f) establishes that where no relative value unit or payment has been assigned by Medicare, Texas Medicaid, or the Division, reimbursement shall be provided in accordance with §134.1.

Proposed §134.203(g) establishes that where there is a negotiated or contracted amount that complies with Labor Code §413.011, that amount shall be the reimbursement amount that applies to the billed services.

Proposed §134.203(h) establishes that where there is no negotiated or contracted amount that complies with Labor Code §413.011, the reimbursement shall be the least of the MAR amount, the HCP's usual and customary charge, unless a Division rule specifies a specific bill amount, or the fair and reasonable amount consistent with the standards of §134.1.

Proposed §134.203(i) requires HCPs to bill their usual and customary charges using the most current HCPCS Level I and Level II codes and to submit medical bills in accordance with the Labor Code and Division rules.

Proposed §134.203(j) describes that appropriate modifiers, including more than one modifier if necessary, shall follow the appropriate Level I and Level II HCPCS codes on the bill to identify modifying circumstances. Division-specific modifiers are identified in proposed new §134.204(n) along with instructions for application.