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Title: 

453-01-1314-m4

Date: 

July 29, 2002

Type: 

Medical Fees

453-01-1314-m4

DECISION AND ORDER

I. SUMMARY

This consolidated proceeding involves requests for hearing by Texas Mutual Insurance Company (TMI) and Rio Grande Orthopaedic Institute (RGOI) from the findings and decisions of the Medical Review Division (MRD) of the Texas Workers’ Compensation Commission (Commission). RGOI is an ambulatory surgical center (ASC) in the Rio Grande Valley area of Texas. RGOI provides surgical services to patients not requiring in-patient hospitalization. The MRD ordered additional payment by TMI in nine cases, and declined to order additional payment in five cases. TMI and RGOI each requested hearings in the cases in which they did not prevail. The issue in this docket is determining what is the fair and reasonable reimbursement for facility charges in each of the 14 cases in issue. After considering all of the evidence and arguments, the Administrative Law Judge (ALJ) concludes that the evidence is insufficient to allow the ALJ to answer that question adequately. Therefore, no party is entitled to relief in this docket and the underlying MRD decisions shall stand.

The ALJ concludes at the outset that the purpose of this docket is not to review the amounts ordered by MRD. Rather, this is a de novo proceeding and the amounts decided by MRD do not control, nor do they necessarily limit the amount that RGOI may be entitled to recover.[1] Rather, the initial focus of this docket is on whether the amount that TMI paid is fair and reasonable. Where TMI has the burden of proof, it must show that its reimbursement rate was fair and reasonable. For those cases where RGOI has the burden of proof, it must establish that the amount paid by TMI is not fair and reasonable and that the amount RGOI seeks is fair and reasonable.[2] If the party with the burden of proof does not carry its burden, this does not mean the opposing party’s proposed amount is automatically found to be a fair and reasonable reimbursement. Rather, it means that the party requesting the hearing is not entitled to relief, thus leaving the status quo intact, with the MRD decision remaining in effect. However, because the purpose of these cases is to determine what is a fair and reasonable reimbursement, the party without the burden of proof may be entitled to a decision finding that its proposed amount is fair and reasonable if it can present evidence sufficient to allow the ALJ to make such a finding. But, if no determination can be made, based on a preponderance of the evidence, as to what is a fair and reasonable reimbursement, then the ALJ concludes that no party is entitled to relief and the status quo prior to the request for a hearing governs, i.e., with the parties bound by the underlying MRD decision. And, in fact, this is the outcome the ALJ reaches in this docket after considering the evidence and arguments of the parties.

In applying that legal framework to this docket, the ALJ concludes that neither party has established by a preponderance of the evidence what the appropriate fair and reasonable reimbursement for the ASC services in issue should be. As explained in more detail below, the ALJ has significant questions and doubts as to whether TMI’s methodology produces a fair and reasonable reimbursement. On the other hand, RGOI’s billing amounts do not take into consideration any of the factors set out in the applicable statute and, the ALJ concludes, clearly do not reflect a fair and reasonable payment for the services either. Therefore, because neither party has established an entitlement to relief in this docket, the underlying MRD decisions shall stand.[3] For the 14 cases at issue in this consolidated docket, the underlying MRD decisions ordered TMI to reimburse RGOI the total additional amount of $35,603.29.

II. JURISDICTION AND NOTICE

There were no contested issues of jurisdiction or notice. Therefore, those matters are addressed in the findings of fact and conclusions of law without further discussion here.

III. PROCEDURAL HISTORY

This docket involves 14 separate cases, consolidated together for hearing and the issuance of a decision and order. The hearing commenced on November 14, 2001, in Austin, Texas, before ALJ Earl Corbitt. Because of the parties’ scheduling difficulties, and the reassignment of this case from ALJ Corbitt to ALJ Craig R. Bennett, the hearing reconvened and was conducted on the following dates: February 14, 2002; February 19, 2002; March 11, 2002; and April 12, 2002. TMI appeared and was represented by Patricia Eads and Thomas Hudson, attorneys. RGOI appeared and was represented by Timothy Weitz and Jeffrey MacDonald, attorneys. The Commission neither appeared nor participated in this proceeding. Except as to the first day, ALJ Bennett presided over the hearing. The hearing concluded on April 12, 2002. All closing briefs were filed by June 7, 2002, and the record closed at that time.

IV. BACKGROUND

In each of the cases consolidated in this docket, the claimant sustained a work-related injury. The compensability of the injuries is not in dispute. The claimants all received care at RGOI’s facility. The physicians performing the treatments billed TMI and the physicians’ charges are not in dispute in this proceeding; nor is there a dispute about the treatments given. Rather, what is in dispute is the amount billed separately by RGOI for its facility charges associated with the procedures performed by the treating physicians.

In nine of the 14 cases, MRD ordered additional reimbursement by TMI to RGOI. In five of the 14 cases, MRD denied additional reimbursement. The disputed issue in every case is whether RGOI is entitled to additional reimbursement, beyond what TMI initially paid, for the procedures provided each claimant. Specific information on the individual claimants and dockets is discussed below under the Findings of Fact section of this decision.

V. APPLICABLE LAW

A. Substantive Law.

Workers’ compensation insurance covers all medically necessary health care, which includes all reasonable medical aid, examinations, treatments, diagnoses, evaluations, and services reasonably required by the nature of the compensable injury and reasonably intended to cure or relieve the effects naturally resulting from a compensable injury. It includes procedures designed to promote recovery or to enhance the injured worker’s ability to get or keep employment.[4]

Section 413.011 of the Act provides that the Commission by rule shall establish medical policies and guidelines relating tofees charged or paid for medical services for employees who suffer compensable injuries, including guidelines relating to payment of fees for specific medical treatments or services. That section further provides that guidelines for medical services fees must befair and reasonableand designed to ensure the quality of medical care and to achieve effective medical cost control.[5] Moreover, 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. In setting such guidelines, the increased security of payment afforded by the Act must be considered.

Where the Commission has not established a fee guideline, an insurance carrier shall reimburse at fair and reasonable rates as described in Section 413.011(d).[6] Fair and reasonable is defined as:

Reimbursement that meets the standards set out in § 413.011 of the Texas Labor Code, and the lesser of a health care provider’s usual and customary charge, or

(A) the maximum allowable reimbursement, when one has been established in an applicable Commission fee guideline,

(B) the determination of a payment amount for medical treatment(s) and/or service(s) for which the Commission has established no maximum allowable reimbursement amount, or

(C) a negotiated contract amount.[7]

Therefore, when the Commission has not established a fee guideline for a particular procedure, service, or item, the reimbursement amount is to be determined using the same factors used by the Commission in setting fee guidelines. Moreover, when an insurance carrier is to pay a health care provider for treatments or services for which the Commission has not established a maximum allowable reimbursement, as is the case here, the carrier mustdevelop and consistently apply a methodology to determine fair and reasonable reimbursement amounts to ensure that similarprocedures provided in similar circumstances receive similar reimbursement.[8]

The appropriate fair and reasonable reimbursement is the lowest one that ensures the quality of medical care andaccounts for the factors used by the Commission in setting fee guidelines. In regard to the disputed charges in issue, if both RGOI and TMI’s proposed reimbursement amounts reflect a compliance with the statutory considerations and are objectively fair and reasonable, then Section 413.011(d) of the Act dictates that the lesser amount is the proper reimbursement.[9]

B. Procedural Law.

One of the initial difficulties in analyzing the cases in this docket is in defining the appropriate burden of proof. The Commission’s rules are clear that the burden of proof is on the party requesting the hearing. But, equally clear is the fact that these types of proceedings at SOAH are de novo. In light of these two principles, the parties have presented differing views on the appropriate framework within which to analyze these cases.

The ALJ relies on the applicable rules and statutory provisions for guidance. These rules and statutes make clear that, in the absence of a MAR, an insurance carrier is charged with developing a methodology that results in a fair and reasonable reimbursement. The Commission’s decision to place this burden on carriers leads the ALJ to conclude that the carrier’s rate of reimbursement should be the starting point of any analysis. If a carrier shows that its rate of reimbursement results in a fair and reasonable payment, then that amount should govern. This conclusion results in consistency and gives meaning to the rule requiring carriers to develop a methodology for determining a fair and reasonable rate of reimbursement. If the focus were simply on the provider’s charges, then it would be extremely difficult, if not impossible, for carriers to develop a methodology that results in similar procedures receiving similar reimbursement.

However, the focus is not solely on the carrier’s methodology; rather, the methodology must result in a fair and reasonable payment as applied to the facts of the given case. Therefore, unusual circumstances could result in the application of the carrier’s methodology not providing a fair and reasonable payment in a given situation.[10] But, if a carrier has developed a logical and reasonable methodology for determining a fair and reasonable reimbursement amount, and that methodology utilizes the same factors used by the Commission in setting fee guidelines, the resulting amount will be the proper reimbursement in most instances.

VI. DISCUSSION AND ANALYSIS

A. TMI’s Arguments

TMI contends its payment methodology results in a fair and reasonable rate of reimbursement consistent with the criteria of § 413.011(d). TMI argues that its methodology, which is based on the Medicare system’s rate of reimbursement for ASCs, takes into account all of the factors identified in § 413.011(d). Specifically, TMI argues that its methodology ensures quality of care, achieves effective medical cost control, results in comparable amounts paid for persons of an equivalent standard of living, and takes into account the security of payment.

As reflected in the evidence, TMI’s reimbursement methodology for ASCs is based upon Medicare reimbursement amounts. In calculating its reimbursement, TMI uses the CPT code associated with the charge and determines which Medicare ASC group the CPT code falls within. TMI uses the Medicare base reimbursement amount for that ASC group as the base amount. Next, TMI determines the median charge (as reflected in a 1994 HCFA survey of ASCs) by weighted volume for that particular CPT code, multiplies the median charge by 20%, and adds the resulting number to the base amount; this is the reimbursement that TMI provides.[11] TMI contends that the Medicare reimbursement rates are appropriate because the Medicare population is an equivalent population to the workers’ compensation system’s insured population. Moreover, TMI contends that the additional adjustment (adding 20% of the weighted median charge) in TMI’s methodology results in reimbursement being significantly higher than Medicare reimbursement rates, which negates any slight differences between the two populations. TMI contends that the security of payment factor is accounted for, as both Medicare and the workers’ compensation system provide similar security of payment. TMI also contends that its methodology results in cost control because it is based on an objective standard that is not subject to significant manipulation by providers. Finally, TMI asserts that the evidence reflects that its reimbursement amounts still ensure quality of care, and no workers’ compensation patients are denied effective medical care because of TMI’s reimbursement rates.

TMI contends that RGOI’s method of determining its facility charges is inconsistent with, and does not take into account, the factors identified by § 413.011(d). TMI asserts that RGOI failed to show that its methodology will achieve effective medical cost control and failed to present evidence of amounts paid on behalf of managed care patients of ASCs or other non- workers’ compensation patients with an equivalent standard of living. TMI notes that RGOI essentially relies on what it or other ASCs have been reimbursed by other carriers. TMI argues that most other carriers appear to pay based on a percentage of billed charges method, i.e., essentially paying some established percentage of whatever amount is billed by the ASC. TMI alleges that this does not achieve effective medical cost control because the provider may increase its charges at any time. TMI also points out that the percentage of billed charges payment method has been routinely rejected by the Commission.

TMI notes that the statutory standards of § 413.011(d) were interpreted and applied in the 1992 and 1997 hospital fee guidelines (HFGs).[12] When the Commission implemented the HFGs, it rejected percentage of billed charges reimbursement, such as the hospital facility ratio that paid 85% to 100% of billed charges, because it did not provide adequate medical cost control. The Commission also rejected a discount from billed charges approach, TMI argues, because it leaves the ultimate reimbursement in the control of the hospital.[13] Instead, the Commission adopted per diem payments whereby a hospital is paid a fixed sum for each day a workers’ compensation patient is in the hospital.[14]

TMI also asserts that the criterion amounts paid for persons of an equivalent standard of living, sets a ceiling. Workers’ compensation payments may not exceed amounts charged for similar services and paid on behalf of persons with a standard of living equivalent to that of injured workers. To implement this criterion, the Commission examined amounts paid and accepted for persons outside of the workers’ compensation system. The Commission found that Medicare and managed care patients have standards of living equivalent to Texas workers’ compensation patients.[15] Consequently, to set the HFG per diem payments, the Commission used payments made by both Medicare and managed care plans.

Conceding that the HFG does not apply to ASCs, TMI still contends that it is appropriate to look to the HFG to compare RGOI’s charges with the payments a hospital would receive for providing the same services. Any procedure done in an ASC can be done in a hospital in a day or less. For a one-day surgical stay, a hospital collects $1,118. In all of the cases in issue, the patient was at the ASC for less than half a day, with most being there less than a couple of hours. TMI argues that it is not reasonable to reimburse ASCs for a few hours worth of time at 3-4 times (or more) the reimbursement a hospital would receive for a patient who stayed a full day.

B. RGOI’s Arguments.

RGOI contends that its facility cannot be compared to a hospital because it provides a much higher level of care and is a specialized facility with high quality, high technology equipment for use in ambulatory surgical procedures. RGOI’s principal witness, Dr. Snyder, testified at length regarding the many benefits of having a surgery performed in RGOI’s facility rather than in a hospital or lesser quality ASC. He concluded that the benefits to the injured worker and society as a whole (in terms of reduced frequency of infection or other complications, quicker healing time, and quicker return to work) greatly outweighed the greater expense associated with such procedures being performed at RGOI’s facility versus a hospital.

In addition to distinguishing the many benefits of RGOI’s facility as compared to a hospital, RGOI disagrees with TMI’s approach for determining fair and reasonable reimbursement in general. RGOI’s primary position in this case is that the market dictates what is fair and reasonable reimbursement. RGOI asserts that TMI’s payments are absurdly lower than most other insurance carriers’ reimbursements and below the market value of the services. In support of its position, RGOI presented evidence on the amounts paid by other workers’ compensation and private medical insurance carriers for the same services. Dr. Snyder testified that TMI’s reimbursement amounts were generally 20% of RGOI’s usual and customary charges, while the majority of insurance carriers reimbursed at 80% of RGOI’s usual and customary charges.[16] Further, RGOI presented correspondence from the Texas Association of School Boards indicating the amounts that its analysis had revealed were the average costs for ambulatory surgical center fees related to ACL surgery (one of the procedures in issue in some of the cases in this consolidated docket).[17] These amounts were much higher than the amounts TMI reimbursed. RGOI also presented numerous charts purportedly showing payment averages for each of the procedures in issue in the consolidated cases.[18] On each chart, TMI’s payments were always much lower than other carriers’ payments. Generally, the average payment of all carriers would be 60-85% of the billed charges, while TMI’s payments would be much less than 50% of billed charges B frequently only 15-20% of the billed charges.

RGOI complains that TMI’s consideration of the Commission’s Acute Care Inpatient Hospital Fee Guideline (HFG) is flawed because ASCs are intentionally excluded from the HFG by 28 TAC § 134.401(a)(4). RGOI disputes TMI’s argument that the HFG is persuasive and helpful, contending instead that the intentional exclusion of ASCs from the HFG means that it should not be considered at all for any purpose when evaluating ASCs.

RGOI also complains that TMI’s methodology is flawed because it is based on the Medicare fee schedule, which the Commission did not adopt in setting the HFG. It points out that workers’ compensation payments in Texas are higher than Medicare payments. RGOI argues that it is difficult to see how the standard of living of the Medicare population, which is defined as a population over 65, is similar to the worker population in Texas. Moreover, RGOI contends that all of the Medicare information on which TMI’s reimbursement methodology is based is either outdated or unreliable. RGOI notes that the HCFA survey of ASC charges was completed in 1994, and is based on information from 1993 B over eight years ago.

RGOI also points out that TMI’s reimbursement methodology is inconsistent with the reimbursement approach used at MRD. The approach apparently used by MRD was to review comparable explanations of benefits (EOBs) from other insurance carriers to determine what a reasonable reimbursement should be. RGOI argues that the only reason it lost before MRD in some cases is because it failed to show that the EOBs submitted were for the same procedure in issue B not because MRD found TMI’s reimbursement method to be persuasive and dispositive. RGOI argues that it remedied this problem at the hearing by putting on adequate evidence to show what other carriers were generally paying for each of the procedures in issue.

C. ALJ’s Analysis.

As noted previously, the ALJ concludes that the applicable statutes and rules place the burden on workers’ compensation insurance carriers to develop reimbursement methodologies for calculating fair and reasonable reimbursement amounts. In calculating reimbursements, the factors identified in Section 413.011(d) must be considered, i.e., the reimbursement must be designed to ensure the quality of medical care and to achieve effective medical cost control, must not exceed 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 should take into account the increased security of payment afforded. Because TMI’s reimbursements were always lower than RGOI’s usual and customary charges, the ALJ first looks to whether TMI’s reimbursement methodology meets all of the statutory requirements and generally results in a fair and reasonable payment.

The evidence reflects that TMI used two different payment methodologies for the disputed cases. Six of the 14 cases involved reimbursement using a percentage of billed charges method.[19] The other eight cases were reimbursed using TMI’s new payment methodology adopted in July 1999. The new payment methodology was developed and applied by TMI based on the use of data compiled by HCFA (now CMS) to set Medicare payments. The new methodology is relevant even to the cases decided under the old methodology, however, because TMI does not attempt to defend its old methodology, but concedes that it was flawed. Instead, TMI contends that its new methodology results in a fair and reasonable payment calculation and should be utilized to determine what the fair and reasonable reimbursement amount was even under the old cases. For the reasons discussed below, the ALJ generally agrees.

As to the procedures paid under the old methodology, TMI has the burden of proof in each of those because it lost before MRD in each instance. In discussing the old methodology, TMI’s witnesses could not establish exactly how it was applied to the charges in issue in this case. The evidence reflects that TMI generally paid either 100% of an average of billed charges (across all providers) or 85% of a particular provider’s billed charges. But, there is no evidence to show exactly how the payment amount was calculated for the six procedures reimbursed before the new methodology went into effect. For example, when questioned at the hearing, TMI’s witness, Richard Ball, could not specify why the ASC charges for arthroscopy were reimbursed at only $5,500 when they had been billed at $8,695.[20] TMI takes the position that reimbursements under its old methodology resulted in significant overpayment, so it does not attempt to defend its prior payments as being fair and reasonable. Instead, TMI points out that it has presented evidence showing what the fair and reasonable reimbursement would be under TMI’s new methodology and, because the old method resulted in a higher actual reimbursement, RGOI is not entitled to any additional amounts.[21] The ALJ agrees that TMI’s old method of reimbursement, i.e., paying a percentage of billed charges, does not comply with the Act’s requirements for calculating fair and reasonable reimbursement. Therefore, the ALJ believes it is appropriate to consider whether TMI’s new methodology results in a fair and reasonable reimbursement and, if so, to consider the reimbursement amounts that methodology would produce for the cases paid under the old method.

So, the focus in this entire docket is first on whether TMI’s new methodology results in a fair and reasonable reimbursement amount. After reviewing all of the evidence, the ALJ concludes that this question cannot be adequately answered. While the ALJ is persuaded that TMI’s methodology, in general, is a very well-reasoned effort at determining fair and reasonable reimbursement, holes still exist in the methodology.[22] These holes are such that the ALJ is unable to conclude that the amounts resulting from the application of the methodology truly are fair and reasonable amounts. TMI’s methodology is based primarily on information collected by HCFA for use in the Medicare program, and the ALJ concludes that such information is either outdated or potentially unreliable. TMI concedes that the data from the 1994 HCFA survey, reflecting the weighted median charges by ASCs, has not been updated since it was first published.[23] There is no evidence to indicate that TMI made any effort to obtain updated information or adjust the information for inflation or other factors when making reimbursement decisions for procedures performed in 1999 and 2000, six to seven years after the data was collected.

Further, while the ASC group rates were adjusted every year from 1994 through 1998, usually by a few percentage points per year, there is no showing that any additional adjustments were made for 1999 or 2000.[24] Given that significant revisions to the Medicare method of grouping and reimbursing ASCs were proposed in 1998 and have yet to be adopted, it is not surprising that the existing base rates were not adjusted thereafter while the proposed new methodology and rates were pending. But, this failure to make any adjustments, for inflation or otherwise, raises the likely possibility that procedures performed in 1999 and 2000 were under-reimbursed by 2-5%.[25] While this may be a small amount for any single procedure, it becomes more significant when added across many different procedures like those involved in the 14 cases consolidated in this docket.

TMI argues that, because its reimbursement is already higher than the base Medicare reimbursement amount because it pays the full Medicare base group rate and Medicare only reimburses 80% of the group rate, failing to account for inflation does not render its reimbursement unfair or unreasonable. While this argument may have some merit, the ALJ does not find that TMI’s evidence, which is rather cursory, adequately addresses and explains the impact of inflation on TMI’s methodology. TMI’s expert focused on the impact of inflation on the 1993 and 1994 data, without addressing the failure of Medicare to adjust the base rates after 1998. Again, while the impact of inflation on all of these numbers may be relatively minor individually, the cumulative effect is more significant and should be more fully explained and addressed by TMI.

Also of significance, the ALJ notes that the 1998 proposed Medicare reclassification and rebasing of rates for ASCs reflects significant proposed increases in the base reimbursement rates for nearly all of the CPT codes at issue in this docket. For example, CPT code 23455 was proposed to be raised from $941 to $1,110 (an 18% increase); codes 29823, 29826, 29846, 29874, and 29879 were each proposed to be raised from $482 to $807 (a 67% increase); code 29840 was proposed to be raised from $482 to $675 (a 40% increase); code 29881 was proposed to be raised from $595 to $807 (a 36% increase); codes 29882 and 29883 were proposed to be raised from $482 to $860 (a 78% increase); and code 29888 was proposed to be raised from $482 to $1,110 (a 130% increase).[26] Though the reclassification and rebased rates have not been adopted, the proposed rates indicate the likelihood that existing Medicare base rates are underpaying by significant percentages the procedures at issue in this case. This is just further evidence that TMI’s methodology, while appearing objectively reasonable, may not actually result in fair and reasonable reimbursements.

Moreover, while the prevailing market rates do not determine appropriate reimbursement levels, they are some evidence of what is considered fair and reasonable charges for a particular procedure. It is somewhat disconcerting that, in nearly all instances, TMI’s new methodology resulted in reimbursement amounts that were less than 50% (and sometimes less than 35%) of the weighted median charge by ASCs for the particular procedure in issue. This is reflected by TMI’s own evidence. For example, in Docket No. 453-01-2943, TMI reimbursed CPT Code 29888 at a total of $1,221, while the weighted median charge for this procedure by ASCs (as reflected in the 1994 HCFA survey) was $3,695. It is one thing when a carrier reimburses less than 1/2 or 1/3 of a particular provider’scharge, but an entirely different thing when that carrier is paying less than 1/2 or 1/3 of the mediancharges of a broad range of providers. The latter is more indicative that the carriers’ reimbursement level is out of proportion to the market and possibly is not fair or reasonable. While there may be an adequate justification for this discrepancy, TMI’s rote reliance on Medicare data that is at least five years old does little to provide such a justification. For all of these reasons, the ALJ has significant doubts as to whether TMI’s reimbursement methodology resulted in a fair and reasonable reimbursement rate for the procedures in issue in this case.

The evidence is similarly clear, however, that RGOI’s charges are not the result of a specific compliance with the factors identified in Section 413.011. RGOI concedes that it did not attempt to specifically address these factors when it developed its usual and customary charges for the services in issue. Rather, RGOI relied simply on what other carriers are willing to pay and other providers are willing to accept. While this may be some indication of what might be a fair and reasonable amount, it is not dispositive under the statutory guidelines. While it may not be RGOI’s responsibility to consider these factors in developing its usual and customary charges, it is RGOI’s burden to show that these factors are met if it wishes to show that its usual and customary charges are fair and reasonable under the Act. In this case, RGOI’s evidence has not established this. So, in essence, the ALJ cannot conclude that RGOI’s charges are fair and reasonable in light of the factors identified in Section 413.011.

The ALJ finds unpersuasive RGOI’s evidence regarding what it receives in reimbursement from other insurance carriers. It became clear during the hearing that RGOI’s data runs showing reimbursements for the services in question were incomplete. While RGOI attempted to address the deficiencies, it conceded that the data runs were incomplete and could not conclusively identify all of the information that may have been left off. As such, the ALJ cannot reasonably rely on the information provided.

Further, the ALJ finds relevant the vast discrepancy between what RGOI billed for the procedures in issue and the MAR for hospitals, which is $1,118.00 a day for a patient’s stay and treatment, including operating room, recovery room, medications, and supplies. While there may be reasons that ASCs are entitled to greater payment than hospitals, RGOI has not adequately demonstrated that in this proceeding nor justified such a vast discrepancy between its billings and the MAR for hospitals performing similar procedures. The ALJ is not persuaded that ASCs, for one or two hours’ worth of facility services, are entitled to more than three or four times the reimbursement for hospitals providing full day stays, despite RGOI’s contentions that RGOI provides a much higher quality facility than a typical hospital. RGOI’s billings appear exorbitant, and RGOI has not justified them, except to say that the market has been willing to pay those amounts in the past.[27] This is insufficient for purposes of establishing that the amounts are fair and reasonable under the Act. Similarly, RGOI has not persuasively justified the vast differences between its facility charges and the reimbursement rates provided in Medicare and other states’ workers’ compensation systems for such services.[28]

In light of the concerns the ALJ has with the reimbursement methods proposed by both parties, the ALJ cannot conclude that their proposed reimbursement amounts are fair and reasonable. In all likelihood, a truly fair and reasonable reimbursement is probably closer to that proposed by TMI rather than that sought by RGOI. But, the record is insufficient to enable the ALJ to decide, with some degree of confidence, a fair and reasonable payment for the procedures in issue. Given this, the ALJ concludes that neither party is entitled to specific relief in this proceeding. As such, the status quo governs, and MRD’s findings and order stand in regard to these cases. For these cases, MRD ordered TMI to provide a total additional reimbursement of $35,603.29.[29] Upon concluding that neither TMI nor RGOI have shown themselves entitled to relief from the MRD orders, this is the total reimbursement ordered by the ALJ for these cases.

VII. FINDINGS OF FACT

Case-Specific Findings

Docket No. 453-01-1314.M4

  1. On___________, claimant _____suffered a compensable injury and was employed at the time by an employer carrying workers’ compensation insurance underwritten by Texas Mutual Insurance Company or its predecessor (TMI).
  2. Dr. Snyder treated ____with arthroscopic shoulder surgery on January 16, 1999, at the Rio Grande Orthopaedic Institute (RGOI).
  3. RGOI requested reimbursement of $14,895.00 for its services.
  4. TMI paid $5,500.00 for the services.
  5. RGOI sought additional reimbursement of $9,395.00 and submitted a request for dispute resolution on January 6, 2000. The Medical Review Division (MRD) of the Texas Workers’ Compensation Commission issued its Findings and Decision on November 9, 2000, ordering additional reimbursement of $7,160.75.
  6. TMI requested a hearing on November 30, 2000, and the Commission issued its Notice of Hearing on December 21, 2000.

Docket No. 453-01-1315.M4

  1. On______________, claimant _____suffered a compensable injury and was employed at the time by an employer carrying workers’ compensation insurance underwritten by TMI or its predecessor.
  2. Dr. Snyder treated ____with arthroscopic shoulder reconstruction on January 9, 1999, at RGOI.
  3. RGOI requested reimbursement of $8,695.00 for its services.
  4. TMI paid $5,500.00 for the services.
  5. RGOI sought additional reimbursement of $3,195.00 and submitted a request for dispute resolution on January 6, 2000. MRD issued its Findings and Decision on November 9, 2000, ordering additional reimbursement of $1,890.75.
  6. TMI requested a hearing on November 30, 2000, and the Commission issued its Notice of Hearing on December 21, 2000.

Docket No. 453-01-1324.M4

  1. On_____________, claimant ____suffered a compensable injury and was employed at the time by an employer carrying workers’ compensation insurance underwritten by TMI or its predecessor.
  2. Dr. Snyder treated ____with arthroscopic shoulder surgery on January 9, 1999, at RGOI.
  3. RGOI requested reimbursement of $10,095.00 for its services.
  4. TMI paid $5,500.00 for the services.
  5. RGOI sought additional reimbursement of $4,595.00 and submitted a request for dispute resolution on January 3, 2000. MRD issued its Findings and Decision on November 10, 2000, ordering additional reimbursement of $3,080.75.
  6. TMI requested a hearing on December 1, 2000, and the Commission issued its Notice of Hearing on December 20, 2000.

Docket No. 453-01-1325.M4

  1. On______________, claimant ____suffered a compensable injury and was employed at the time by an employer carrying workers’ compensation insurance underwritten by TMI or its predecessor.
  2. Dr. Snyder treated ____with endoscopic carpal tunnel release surgery on April 8, 1999, at RGOI.
  3. RGOI requested reimbursement of $4,395.00 for its services.
  4. TMI paid $2,400.00 for the services.
  5. RGOI sought additional reimbursement of $1,995.00 and submitted a request for dispute resolution on January 11, 2000. MRD issued its Findings and Decision on November 10, 2000, ordering additional reimbursement of $1,335.75.
  6. TMI requested a hearing on December 1, 2000, and the Commission issued its Notice of Hearing on December 20, 2000.

Docket No. 453-01-1931.M4

  1. On______________, claimant ____suffered a compensable injury and was employed at the time by an employer carrying workers’ compensation insurance underwritten by TMI or its predecessor.
  2. Dr. Snyder treated ____with arthroscopic knee repair surgery on April 29, 1999, at RGOI.
  3. RGOI requested reimbursement of $6,095.00 for its services.
  4. TMI paid $1,221.00 for the services.
  5. RGOI sought additional reimbursement of $4,874.00 and submitted a request for dispute resolution on May 13, 2000. MRD issued its Findings and Decision on January 8, 2001, ordering additional reimbursement of $4,874.00.

6TMI requested a hearing on January 18, 2001, and the Commission issued its Notice of Hearing on February 8, 2001.

Docket No. 453-01-2150.M4

  1. On______________, claimant ____suffered a compensable injury and was employed at the time by an employer carrying workers’ compensation insurance underwritten by TMI or its predecessor.
  2. Dr. Snyder treated ____with arthroscopic partial medial meniscectomy on January 20, 2000, at RGOI.
  3. RGOI requested reimbursement of $5,095.00 for its services.
  4. TMI paid $750.30 for the services.
  5. RGOI sought additional reimbursement of $4,344.70 and submitted a request for dispute resolution on December 4, 2000. MRD issued its Findings and Decision on January 17, 2001, denying additional reimbursement.
  6. RGOI requested a hearing on January 24, 2001, and the Commission issued its Notice of Hearing on March 1, 2001.

Docket No. 453-01-2284.M4

  1. On________________, claimant _____suffered a compensable injury and was employed at the time by an employer carrying workers’ compensation insurance underwritten by TMI or its predecessor.
  2. Dr. Snyder treated _____with wrist surgery on August 14, 1999, at RGOI.
  3. RGOI requested reimbursement of $5,295.00 for its services.
  4. TMI paid $850.40 for the services.
  5. RGOI sought additional reimbursement of $4,444.60 and submitted a request for dispute resolution on February 29, 2000. MRD issued its Findings and Decision on January 29, 2001, ordering additional reimbursement of $4,444.60.
  6. TMI requested a hearing on February 21, 2001, and the Commission issued its Notice of Hearing on March 15, 2001.

Docket No. 453-01-2387.M4

  1. On __________ claimant ___suffered a compensable injury and was employed at the time by an employer carrying workers’ compensation insurance underwritten by TMI or its predecessor.
  2. Dr. Snyder treated ___with endoscopic carpal tunnel release surgery on December 14, 1999, at RGOI.
  3. RGOI requested reimbursement of $5,295.00 for its services.
  4. TMI paid $750.46 for the services.
  5. RGOI sought additional reimbursement of $4,544.54 and submitted a request for dispute resolution on December 4, 2000. MRD issued its Findings and Decision on February 9, 2001, ordering additional reimbursement of $3,750.29.
  6. TMI requested a hearing on March 2, 2001, and the Commission issued its Notice of Hearing on March 28, 2001

Docket No. 453-01-2414.M4

  1. On_______________, claimant ___suffered a compensable injury and was employed at the time by an employer carrying workers’ compensation insurance underwritten by TMI or its predecessor.
  2. Dr. Snyder treated ___with arthroscopic shoulder surgery on August 18, 1999, at RGOI.
  3. RGOI requested reimbursement of $9,495.00 for its services.
  4. TMI paid $860.00 for the services.
  5. RGOI sought additional reimbursement of $8,635.00 and submitted a request for dispute resolution on February 29, 2000. MRD issued its Findings and Decision on February 6, 2001, ordering additional reimbursement of $1,665.75.
  6. TMI requested a hearing on March 5, 2001, and the Commission issued its Notice of Hearing on March 30, 2001.

Docket No. 453-01-2420.M4

  1. On_____________, claimant ___suffered a compensable injury and was employed at the time by an employer carrying workers’ compensation insurance underwritten by TMI or its predecessor.
  2. Dr. Snyder treated ____with arthroscopic knee surgery on June 3, 1999, at RGOI.
  3. RGOI requested reimbursement of $7,195.00 for its services.
  4. TMI paid $4,450.00 for the services.
  5. RGOI sought additional reimbursement of $2,745.00 and submitted a request for dispute resolution on February 29, 2000. MRD issued its Findings and Decision on February 6, 2001, ordering additional reimbursement of $1,665.75.
  6. TMI requested a hearing on March 5, 2001, and the Commission issued its Notice of Hearing on March 30, 2001.

Docket No. 453-01-1645.M4

  1. On_____________, claimant ____suffered a compensable injury and was employed at the time by an employer carrying workers’ compensation insurance underwritten by TMI or its predecessor.
  2. Dr. Snyder treated ____with arthroscopic shoulder surgery on July 1, 1999, at RGOI.
  3. RGOI requested reimbursement of $14,995.00 for its services.
  4. TMI paid $922.00 for the services.
  5. RGOI sought additional reimbursement of $14,073.00 and submitted a request for dispute resolution on February 29, 2000. MRD issued its Findings and Decision on December 19, 2000, denying additional reimbursement.
  6. RGOI requested a hearing on December 27, 2001, and the Commission issued its Notice of Hearing on January 26, 2001.

Docket No. 453-01-2364.M4

  1. On_____________, claimant ___suffered a compensable injury and was employed at the time by an employer carrying workers’ compensation insurance underwritten by TMI or its predecessor.
  2. Dr. Snyder treated ____with arthroscopic ACL reconstruction surgery on September 22, 1999, at RGOI.
  3. RGOI requested reimbursement of $15,420.00 for its services.
  4. TMI paid $1,221.00 for the services.
  5. RGOI sought additional reimbursement of $14,199.00 and submitted a request for dispute resolution on February 29, 1999. MRD issued its Findings and Decision on February 12, 2001, denying additional reimbursement.
  6. RGOI requested a hearing on February 16, 2001, and the Commission issued its Notice of Hearing on March 27, 2001.

Docket No. 453-01-2943.M4

  1. On_________-, claimant __suffered a compensable injury and was employed at the time by an employer carrying workers’ compensation insurance underwritten by TMI or its predecessor.
  2. Dr. Marina treated __with knee surgery, including arthroscopic ACL repair and a partial medial meniscectomy, on November 7, 2000, at RGOI.
  3. RGOI requested reimbursement of $18,295.00 for its services.
  4. TMI paid $1,221.00 for the services.
  5. RGOI sought additional reimbursement of $17,074.00 and submitted a request for dispute resolution on March 12, 2001. MRD issued its Findings and Decision on April 18, 2001, denying additional reimbursement.
  6. RGOI requested a hearing on April 19, 2001, and the Commission issued its Notice of Hearing on May 21, 2001.

Docket No. 453-01-2989.M4

  1. On_____________, claimant ___suffered a compensable injury and was employed at the time by an employer carrying workers’ compensation insurance underwritten by TMI or its predecessor.
  2. Dr. Snyder treated ___with arthroscopic shoulder surgery on August 23, 2000, at RGOI.
  3. RGOI requested reimbursement of $10,295.00 for its services.
  4. TMI paid $922.00 for the services.
  5. RGOI sought additional reimbursement of $9,373.00 and submitted a request for dispute resolution on March 12, 2001. MRD issued its Findings and Decision on April 18, 2001, denying additional reimbursement.
  6. RGOI requested a hearing on April 19, 2001, and the Commission issued its Notice of Hearing on May 29, 2001.

Global Findings

  1. Reimbursement of Dr. Snyder’s and Dr. Marina’s services are not in issue. RGOI billed TMI separately for its facility charges.
  2. TMI utilized two methods of reimbursing ASC procedures at issue in this docket. The first method involved paying based on a percentage of RGOI’s billed charges. The second, and newer, method involved calculating the reimbursement by first determining the Medicare base reimbursement rate and adding to that 20% of the median charge (as reflected in a 1994 HCFA survey of ASCs) by weighted volume for that particular CPT code.
  3. The base Medicare rates used in TMI’s new methodology have not been updated for inflation or otherwise since 1998. The data from the 1994 HCFA survey has not been updated since it was first compiled in 1993 and 1994.
  4. Under the new Medicare base rates proposed in 1998, but not adopted, the Medicare reimbursement for most of the procedures at issue in this case would increase by 40 to 130%.
  5. TMI has not shown that the amount it reimbursed RGOI for the procedures in issue was fair and reasonable.
  6. The amount billed and sought by RGOI for the procedures in issue in this docket are based on what it perceives other providers are willing to accept and what it perceives insurance carriers will pay for the services. RGOI has not shown that the amounts it is seeking in reimbursement achieve effective medical cost control, do not exceed 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, or take into account the increased security of payment afforded from the workers’ compensation system.
  7. Showing what RGOI and/or other ASCs have been paid by other carriers fails to achieve effective medical cost control and fails to present evidence of amounts paid on behalf of managed care patients of ASCs or on behalf of other non-workers’ compensation patients with an equivalent standard of living.
  8. If the same procedures at issue in this docket had been performed in a hospital, the maximum the hospital could have been reimbursed for all charges for the patient’s hospital stay and treatment, including operating room, recovery room, pharmacy, and supplies, would have been $1,118.
  9. RGOI has not shown that the amount it seeks to be reimbursed for the procedures in issue is fair and reasonable.

VIII. CONCLUSIONS OF LAW

  1. The Texas Workers’ Compensation Commission has jurisdiction over this matter pursuant to the Texas Workers’ Compensation Act. Tex. Lab. Code Ann. § 413.031.
  2. The State Office of Administrative Hearings has jurisdiction over this proceeding, including the authority to issue a decision and order, pursuant to Tex. Lab. Code Ann. § 413.031(d) and Tex. Gov’t Code Ann., ch. 2003.
  3. In each case in issue in this proceeding, the request for a hearing was timely made pursuant to 28 Tex. Admin. Code § 148.3.
  4. Adequate and timely notice of the hearing was provided according to Tex. Gov’t Code Ann.§§ 2001.051 & 2001.052.
  5. Workers’ compensation insurance covers all medically necessary health care, which includes all reasonable medical aid, examinations, treatments, diagnoses, evaluations, and services reasonably required by the nature of the compensable injury, and reasonably intended to cure or relieve the effects naturally resulting from a compensable injury. It includes procedures designed to promote recovery or to enhance the injured worker’s ability to get or keep employment. Tex.Lab. Code Ann. § 401.011(19) and (31).
  6. As to nine of the cases in this proceeding (SOAH Docket Nos. 453-01-1314.M4; 453-01-1315.M4; 453-01-1324.M4; 453-01-1325.M4; 453-01-1931.M4; 453-01-2284.M4; 453-01-2387.M4; 453-01-2414.M4; and 453-01-2420.M4; ), TMI had the burden of proving by a preponderance of the evidence that the reimbursement amount it offered to pay was fair and reasonable. 28 Tex. Admin. Code (TAC) § 148.21(h).
  7. As to five of the cases in this proceeding (SOAH Docket Nos. 453-01-2150.M4; 453-01-1645.M4; 453-01-2364.M4; 453-01-2943.M4; and 453-01-2989.M4), RGOI had the burden of proving by a preponderance of the evidence that it was entitled to additional reimbursement. 28 Tex. Admin. Code (TAC) § 148.21(h).
  8. The Commission rules provide, Reimbursement for services not identified in an established fee guideline shall be reimbursed at fair and reasonable rates as described in the Texas Workers’ Compensation Act, Section 8.21(b), until such time that specific guidelines are established by the commission. (Emphasis added) 28 TAC § 134.1(f).
  9. Section 413.011 of the Guidelines and Medical Policies of the Act provides that:
    1. Guidelines for medical services fees must 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 shall consider the increased security of payment afforded by this subtitle in establishing the fee guidelines. (Emphasis added)
  10. A usual and customary charge may be the same as a fair and reasonable reimbursement amount only if there is evidence that the factors set out in § 413.011 are also met; that is, that the amount achieves effective medical cost control, taking into account payments made to others with an equivalent standard of living, and considering the increased security of payment.28 TAC § 133.(8).
  11. RGOI failed to show that its usual and customary charges, and the amounts sought by it in this proceeding, are fair and reasonable. Tex. Lab. Code Ann. § 413.011(d).
  12. TMI has failed to show that the reimbursement amounts resulting from its payment methodology and offered as payment to RGOI are fair and reasonable.
  13. Because neither party has shown itself entitled to specific relief in this proceeding, the decisions issued by the Commission’s Medical Review Division in the cases at issue shall remain in effect.

ORDER

Having found thatno parties have shown themselves entitled to relief from the orders of the Medical Review Division of the Texas Workers’ Compensation Commission in the underlying cases, IT IS, THEREFORE, ORDERED that Texas Mutual Insurance Company is to pay Rio Grande Orthopaedic Institute the total additional sum of $35,603.29 in accordance with such MRD orders.

Signed this 29th day of July, 2002.

.

CRAIG R. BENNETT
Administrative Law Judge
STATE OFFICE OF ADMINISTRATIVE HEARINGS

  1. While this is different than the ALJ’s comments on the record early in this proceeding, the ALJ believes, after further consideration, that it is the proper legal approach to these cases. Moreover, the parties were aware of the ALJ’s reconsideration of this by virtue of the order denying summary disposition and the ALJ’s comments on the record at the end of the case.↑
  2. The Commission’s rules regarding burden of proof, fair and reasonable reimbursement, and carriers’ responsibilities for developing methodologies for consistently reimbursing at fair and reasonable amounts are difficult to harmonize and this decision reflects the ALJ’s best attempt to give effect to the wording and intent of those rules.↑
  3. Because this is a de novo proceeding, the ALJ makes no specific determination as to the propriety of MRD’s methodology in reaching its decisions in the underlying cases, and the ALJ’s decision to allow the MRD orders to stand reflects only a determination that neither party has shown itself entitled to relief in this docket – not that MRD was correct in its decisions.↑
  4. Tex. Lab. Code Ann. § 401.011(19) and (31). The Texas Workers’ Compensation Act is found at Tex. Lab. Code Ann. § 401.001et seq. and is hereafter referred to as the Act.↑
  5. § 413.011(d) of the Act. In 2001, the legislature amended ‘ 413.011 so that ‘ 413.011(b) became § 413.011(d), but the text is unchanged. The ALJ uses the current subsection (d) for reference herein, but the evidence sometimes refers to subsection (b).↑
  6. 28 TAC § 134.1(f).↑
  7. 28 TAC § 133.1(a)(8).↑
  8. 28 TAC § 133.304(i)(1).↑
  9. If both are reasonable, the lower amount of the two is the proper reimbursement because Section 413.011(d) states that fair and reasonable is the lesser of the provider’s usual and customary charges or the determination of a payment amount (presumably by the insurer) when the Commission has not established a MAR.↑
  10. One such scenario was raised by RGOI during the hearing. If a provider were to establish that the procedure involved expensive supplies (such as special skin, tendon, or ligament grafts that are global to the facility charge), then the normal rate of reimbursement under a particular carrier’s methodology might not be fair and reasonable. In such situations, the mere existence of a methodology that normally results in a fair and reasonable payment would not preclude a provider from recovering more than the normal reimbursement rate.↑
  11. Practical examples of this calculation are seen in each of the certified records. Specifically, the certified MRD record in each case contains a letter from TMI showing the reimbursement calculation method for the particular procedure in issue in the case.↑
  12. Preamble to the Acute Care Inpatient Hospital Fee Guideline, 22 Tex. Reg. 6264 (July 4, 1997).↑
  13. 22 Tex. Reg. at 6276.↑
  14. Id. at 6267-69.↑
  15. Id. at 6270‑72.↑
  16. Tr. Vol. IV, at 93:13 – 95:4.↑
  17. RGOI Exs. 49 and 50.↑
  18. See, e.g., RGOI Exs. 4-18.↑
  19. The six cases decided under TMI’s old methodology are 453-01-1314.M4; 453-01-1315.M4; 453-01-1324.M4; 453-01-1325.M4; 453-01-1931.M4; and 453-01-2420.M4.↑
  20. Tr. Vol. I, at 124:17 – 126:4.↑
  21. For example, TMI notes that it paid $5,500 in Docket No. 453-01-1315, but later determined the proper reimbursement (under its new methodology) is only $1,403. Because its new methodology supposedly results in a fair and reasonable payment, TMI argues it is not required to address its old methodology which already has resulted in a greater payment than RGOI would otherwise be entitled.↑
  22. The ALJ finds that the evidence establishes that TMI’s payment methodology generally complies with the applicable legal requirements. The use of Medicare information as a basis for setting payments to ASCs is appropriate because paying a specific dollar amount B rather than paying a percentage of billed charges B ensures cost control and because the Commission has found that the Medicare population has an equivalent standard of living to that of Texas workers’ compensation patients. And like Medicare fees, the workers’ compensation fee need only be set high enough to induce enough providers to participate in the system and thus ensure quality of care for injured workers.↑
  23. Tr. Vol. III, pp. 344-346.↑
  24. TMI’s methodology relies on two separate aspects of Medicare information. First is the base rates paid by Medicare to ASCs. This was updated through 1998. The second is the 1994 HCFA survey data reflecting weighted median charges by ASC for different procedures. This is discussed in the previous paragraph and has not been updated after it was collected in 1993 and published in 1994.↑
  25. This is an estimate made by the ALJ based on previous Medicare base rate increases connected to the consumer price index. In 1995 Medicare raised rates by 3.2 %; in 1996 by 2.6%; and in 1998 by 0.6%. See 63 Fed. Reg. 32,292 (June 12, 1998).↑
  26. 63 Fed. Reg. 32,290 et seq. (June 12, 1998) (more specifically, see Addendum A at 32,328 et seq.).↑
  27. In closing argument, RGOI asserts that the cost of the ASC services is known, by virtue of Dr. Snyder’s testimony regarding tissue grafts and the TASB documents regarding average costs of ACL surgery. However, there is no evidence that such grafts were used in any of the surgeries in issue, and the TASB documentation clearly does not purport to reflect RGOI’s costs in providing the services in issue. Ultimately, it is clear from the record that RGOI has not attempted to show what its actual costs are for the services in issue.↑
  28. See TMI Ex. 2-11 (Tab 11 of TMI’s Exhibit Notebook, admitted as exhibit 2).↑
  29. This amount is determined by adding the individual reimbursements ordered by MRD in each case.↑