The Texas Workers' Compensation Commission (the commission) proposes new §§134.202 - 134.208, concerning Medical Fee Guidelines.

These new rules are proposed to comply with statutory mandates in the Texas Labor Code. Prior to the 77th Texas Legislative Session, 2001, §413.011 of the Texas Labor Code required the commission to adopt rules to establish medical policies and guidelines relating to fees charged or paid for medical services, including guidelines relating to payment of fees for specific medical treatments or services. The statute requires that guidelines for medical services fees be fair and reasonable and designed to ensure the quality of medical care and to achieve effective medical cost control. 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. The commission must consider the increased security of payment afforded the Texas Workers' Compensation Act (the Act) in establishing the fee guidelines. Currently, reimbursements for medical treatments and services are established by §134.201 of this title (regarding Medical Fee Guideline for Medical Treatments and Services Provided Under the Texas Workers' Compensation Act) and §134.302 of this title (regarding Dental Fee Guideline). The Medical Fee Guideline (MFG) provides maximum allowable reimbursement (MAR) amounts for care providers (HCPs) treating injured workers in Texas.

House Bill (HB) 2600, adopted during the 2001 Texas Legislative Session, amended §413.011. In addition to the previous requirements, the revised statute also requires that the commission use health care reimbursement policies and guidelines that reflect the standardized reimbursement structures found in other health care delivery systems with minimal modifications to those reimbursement methodologies as necessary to meet occupational injury requirements. To achieve standardization, the commission is to adopt the most current reimbursement methodologies, models, and values or weights used by the federal Health Care Financing Administration (HCFA), including applicable payment policies relating to coding, billing, and reporting, and may modify documentation requirements as necessary to meet the requirements of §413.053 of the Act (relating to Standards of Reporting and Billing). In determining appropriate fees, the commission must also develop conversion factors or other payment adjustment factors taking into account economic indicators in health care as well as the previous statutory requirements. The commission also must provide for reasonable fees for the evaluation and management of care. The statutory provisions explicitly state the statute does not adopt the Medicare fee schedule, and that the commission shall not adopt conversion factors or other payment adjustment factors based solely on those factors as developed by the HCFA.

Proposed new §§134.202 - 134.208 establish reimbursement for professional medical services (all health care except prescription drugs or medicines and services of health care facilities) provided on or after the effective date of the new rules. The proposed new rules revise, separate, and clarify the information and requirements of the reimbursement scheme into seven rules: applicability; professional service codes; relative value units; conversion factors; methodology; ground rules; and severability. This separation into different rules will allow separate revision and update of components of the reimbursement rules as needed. The current MFG rule contains copyrighted information that cannot be reproduced or distributed electronically. Copyrighted materials are adopted by reference in the proposed new rules. This will enable the commission to post the rules on the commission's website thus facilitating timely and less costly distribution of information to system participants and allowing the efficient and timely updating of necessary components.

The commission signed a professional services agreement with Milliman & Robertson, Inc., now Milliman USA (Milliman), a professional firm specializing in actuarial and health care services, to assist the commission in developing and implementing a new MFG. Milliman provided the commission with written reports of their findings and recommendations. The project required the following major activities:

* a market analysis of reimbursements from the 1996 MFG, commercial payers in Texas, workers' compensation systems from other states, and Medicare allowed fees in Texas, comparing the reimbursement level for corresponding services.

* recommendation of a reimbursement methodology for professional services using relative value units;

* recommendation of conversion factors to use with the relative value units to develop MAR amounts;

* evaluation of Texas regional reimbursement differences and recommendation of a basis to adjust MARs to reflect those differences;

* review of commission proposed ground rules and recommendation of any changes; and,

* recommendation of a methodology to provide reimbursement for supplies and other services, including Durable Medical Equipment (DME), Orthotics and Prosthetics, and Miscellaneous Supplies.

As part of the agreement, Milliman reviewed and analyzed the relative merits the St. Anthony's Relative Values for Physicians (RVP), and compared it with HCFA's Resource Based Relative Value System (RBRVS). Milliman recommended that the commission adopt relative value units from the RBRVS as the underlying basis for assigning payment to each professional medical service. These units are developed for the HCFA to reimburse providers treating Medicare enrollees. Milliman recommended adjustment of the relative value units by applying the HCFA Geographic Practice Cost Index (GPCI) to reflect geographic differences. Milliman also recommended using St. Anthony's RBRVS relative value units, published by Ingenix Publishing Group, to assign relative value units for professional medical services that are not valued by HCFA. Additionally, Milliman agreed with use of American Society of Anesthesiologists, Relative Value Guide for anesthesia procedures. The methodology established in proposed new §134.206 conforms to these recommendations.

Milliman drew the following conclusions as a result of the market analysis:

* commercial reimbursement rates in Texas show variations that are wider than can be explained by geographic differences, and current MFG reimbursement levels fall within this broad range;

* current MFG reimbursement levels tend to be high relative to other state workers' compensation systems, with the exception of Evaluation and Management services; and,

* current MFG MARs average approximately 130% of Medicare allowed fees.

Milliman also recommended the conversion factors established in proposed §134.205 and made recommendations with respect to ground rules in proposed §134.207.

These proposed rules adopt a methodology based on relative value units. In general, reimbursement for professional medical services is determined by:

* the relative value units which are assigned to the service by the documents adopted by reference; multiplied by

* the conversion factor assigned to convert relative value units into reimbursement payment amounts (the conversion factor is specific to the service category, as described in §134.205).

Materials to be adopted by reference in the proposed new rules are available for inspection but not duplication or sale at the commission offices, Southfield Building, 4000 South IH-35, Austin, Texas 78704-7491 and are also filed with the Texas Register. Some materials have also been published in and are available through theFederal Register (http://www.access.gpo.gov/nara/index.html) and some are available through HCFA (http://www.hcfa.gov) and may be downloaded at no cost.

Each document adopted by reference is also available for purchase from:

1. Ingenix Publishing Group, Medicode, St. Anthony's Publishing Group, P.O. Box 27116, Salt Lake City 84127, (800-999-4600), for American Medical Association's Current Procedural Terminology 2001, Fourth Edition Revised, copyright 2000 and 2001 RBRVS, A Comprehensive Listing of RBRVS Values For all CPT and HCPCS Codes, copyright 2000.

2. American Society of Anesthesiologists, 520 North Northwest Highway, Park Ridge, Illinois, 60068-2573, 847-825-5586, for ASA's Relative Value Guide 2001, copyright 2001.

3. National Heritage Insurance Company (NHIC), P.O. Box 200555, Austin, Texas 78720-0555, 512-514-3000, for The Texas Medicaid Fee Schedule, May 2001, Durable Medical Equipment/Medical Supplies Report J, April 2001.

4. American Dental Association, 211 East Chicago Avenue, Chicago, Illinois, 60611, 312-440-2753 for ADA's Current Dental Terminology, Third Edition, copyright 1999.

5. United States Government Printing Office, Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954, 202-512-1800, order online from the U. S. Government Online Bookstore at www.gpo.gov, for the following:

Volume 65 Federal Register Number 212, November 1, 2000, Addendum B "Relative Value Units and Related Information," Addendum C "Codes with Interim Relative Value Units," and Addendum E "2001 Geographic Practice Cost Indices by Medicare Carrier and Locality."

Volume 62 Federal Register Number 211, October 31. 1997, Addendum G, "Counties Included in 1998 Localities (Alphabetically by State and Locality Name Within State)"

"Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) 2001 Fee Schedule" December 19, 2000.

DESCRIPTION OF THE RULES

§134.202. Applicability.

The proposed new rules are applicable to and establish guidelines for reimbursements for "professional medical services." This includes all health care as defined in §401.011(19) of the Act other than prescription drugs or medicines, and the services of a hospital or other health care facility. Current §134.201 and §134.302 would remain in effect for treatments and services provided prior to the effective dates of the proposed new rules and current §134.201 would remain in effect for pharmaceutical services. Reimbursement is determined in accordance with the rules in effect on the date that the professional medical service was provided. Specific provisions contained in these proposed new rules would take precedence over any conflicting provisions in the documents adopted by reference.

§134.203. Professional Services Codes.

Proposed §134.203 establishes required coding for reporting, billing, and reimbursement of professional medical services. This rule adopts by reference the definitions, descriptions, and guidelines for coding from several sources. This rule achieves standardization by using these recognized coding standards.

If a document adopted by reference is revised, the rule provides for the executive director of the commission to make an administrative determination regarding use of the revised document and to establish the date by which use of the revised document is required for compliance with commission rules, decision, and orders. In determining whether to use a revised document, the executive director shall consider whether such use is consistent with applicable statutory requirements and objectives including standardization, and with commission rules in effect on the date of the revision. The executive director shall inform the commissioners of the determination, and shall inform the public by issuing a commission advisory regarding the determination and filing the determination for publication in the Texas Register.

Adoption by reference and allowing incorporation of routine revisions of coding terminology enables system participants and the commission to maintain consistency with current industry standards. Adopting documents by reference will also allow the commission to post these rules on the commission's website without necessitating the publication of any copyrighted materials. Further, website publication will facilitate timely and less costly distribution of updated information to system participants. The documents adopted by reference are widely used and readily available to system participants.

§134.204. Relative Value Units.

The RBRVS system values services according to the relative costs required to provide them, recognizing skill, practice cost, and risk. These relative value units represent national standards assigned to medical treatments and services. The relative value units reflect the relationship between the resources necessary to provide a professional medical service relative to resources necessary to provide other professional medical services. Proposed §134.204 establishes relative value units by adopting by reference the relative value units from several sources.

The RBRVS uses three components, work, practice expense, and malpractice relative values to establish the total relative value units. RBRVS relative value units are also adjusted by Geographical Practice Cost Indices to reflect geographical differences. The proposed rules also use these components and adjustments of relative values, providing the statutory adjustment factors that take health care economic indicators into account. The proposed relative value units align the basis for workers' compensation reimbursement with nationally recognized standards of relative values used in other health care delivery systems, and take into account economic indicators in health care. This proposed rule contains the same provisions regarding incorporation of revised documents.

§134.205. Conversion Factors.

Proposed §134.205 establishes the conversion factors to be applied in the calculation of reimbursement for professional medical services that are assigned relative values. The conversion factors are specific to categories of services established in the CPT plus a category of services for Physical Medicine and Rehabilitation. Conversion factors apply only to the professional medical services for which HCFA, and in certain cases, Ingenix RBRVS have assigned a relative value unit. The service categories and conversion factors are:

Evaluation & Management--$39.75

General Medicine--$53.56

Physical Medicine and Rehabilitation--$43.43

Surgery--$65.51

Anesthesiology--$30.00

Radiology--$56.06

Pathology--$55.18

Milliman reviewed current reimbursement levels for Texas insurance carriers, ten other state workers' compensation fee schedules, and Texas Medicare allowed fees. In addition, Milliman analyzed historical billed and paid Texas workers' compensation claim data provided by the commission from its medical billing database. Milliman prepared written summary reports of their analyses, including fee schedule impact, and recommended conversion factors.

The Milliman market analysis revealed: in aggregate, the current MFG generally provides a reasonable level of reimbursement relative to commercial payers; commercial payers and other states' workers' compensation fees reimburse Evaluation and Management (E/M) services at a higher level than the current MFG; and the current MFG reimburses approximately 130% of Medicare.

The conversion factors recommended by Milliman are based on analyses of the relationship between the reimbursement levels in the current MFG and the reimbursement levels of each of these other payers and consideration of the statutory requirements and objectives discussed above.

Milliman recommended conversion factors that vary by service category in order to maintain a relationship with reimbursement levels in commercial and workers' compensation payer systems (i.e., non-Medicare market).

The current MFG MARs do not correlate with RBRVS unit values; within any service category, the percentages of Medicare fees that are paid for specific services within that category vary widely. Therefore, the reimbursement of some professional medical services under the proposed rules may be significantly different than the current MFG MAR.

The conversion factor recommendations for anesthesia and pathology were developed using the comparison to Medicare allowed fees. Commercial fee schedule amounts for anesthesia were difficult to obtain, in part because anesthesia is paid on a base plus time units system. Commercial fee schedule data relating to pathology are inconsistent, reflecting both differences in reimbursement methodology and wide variations in reimbursement amounts.

These conversion factors were chosen to provide fair and reasonable compensation to health care providers, to set fees that are not 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, and to provide compensation that is reasonable when compared to the level paid by other states' workers' compensation systems.

§134.206. Methodology.

Proposed §134.206 describes the actual calculation process for determination of the MAR for professional medical services. The rule requires that the gross MAR be rounded to the nearest whole dollar amount. The proposed rule clarifies the actual calculation of reimbursement appropriate for professional medical services rendered. The methodology for professional medical services that have an assigned relative value unit is: (relative value units assigned to procedure adjusted by geographical variance) x (conversion factor), rounded to the nearest whole dollar amount. Examples of MAR calculations are presented for professional medical services that have assigned relative values.

The methodology for total anesthesia reimbursement (TAR) is: ((basic value + modifying factors + time units) x conversion factor), rounded to the nearest whole dollar amount.

For HCPCS Level II codes, the reimbursement level is set at 125% of the Texas Medicare allowed reimbursement. This reimbursement level is reasonable and comparable to the reimbursement levels provided by the conversion factors recommended in proposed §134.205 for professional medical services. For services and supplies lacking a Medicare reimbursement, the reimbursement level is set at 125% of the Texas Medicaid DME schedule. If the Medicare and Medicaid fee schedules do not apply, a reimbursement of 60% of usual, customary and reasonable charges is established.

For all other professional medical services, a reimbursement of 60% of usual, customary and reasonable charges is established.

The proposed rule additionally provides that the MAR for professional medical services is the least of the HCP's usual, customary and reasonable charge; any applicable contracted amount; and the MAR established by the proposed rules.

The proposed rule establishes standard methods of determining reimbursement, thereby potentially reducing the number of fee disputes related to fair and reasonable methodologies currently established by individual insurance carriers.

§134.207. Ground Rules.