DECISION AND ORDER

Petitioner Vista Medical Center Hospital requested a hearing on a decision by the Medical Review Division (MRD) of the Texas Workers’ Compensation Commission (TWCC) denying reimbursement for the hospitalization of a workers’ compensation patient during March 7-12, 2002. This Decision and Order finds that Petitioner is entitled to reimbursement in the amount of $100,907.35, plus interest.

I. PROCEDURAL HISTORY

There were no contested issues of jurisdiction, notice, or venue, which are addressed in the Findings of Fact and Conclusions of Law without further discussion here. Administrative Law Judge (ALJ) Thomas H. Walston convened a hearing in this case on January 18, 2005, at the State Office of Administrative Hearings (SOAH) in Austin, Texas. Attorney David Bragg appeared on behalf of Vista Medical Center Hospital and attorney Dean Pappas appeared on behalf of the Insurance Company of the State of Pennsylvania. The hearing concluded the same day. The parties filed post-hearing briefs on January 19, 2005, and reply briefs on January 21, 2005, at which time the record closed.

II. DISCUSSION

A. Background

Petitioner provided hospital services for spinal surgery to a workers’ compensation claimant during March 7-12, 2002. The bill for these services totals $134,534.13, and under the TWCC stop-loss billing methodology, Petitioner seeks reimbursement of $100,907.25, plus interest.^[1] Prior to Petitioner providing these services, the TWCC Hearings Division conducted a spinal-surgery “second opinion” contested case hearing and ruled on December 6, 2001, that the carrier was not liable for the requested spinal surgery because the two reviewing doctors did not agree fully with the

proposed surgery.^[2] Claimant appealed, but a TWCC Appeals Panel affirmed the TWCC hearing officer’s decision on February 21, 2002.^[3]

The initial request for surgery by Claimant’s treating doctor, the contested-case hearing, and the appeal occurred under Tex. Lab. Code § 408.026 and TWCC Rule 133.206 (Spinal Surgery Second Opinion Process). However, the Texas Legislature amended § 408.026 in 2001 to provide that future requests for spinal surgery would be processed under the carrier-preauthorization procedures contained in Tex. Lab. Code § 413.014. In response to the Legislature’s amendment of § 408.026, the TWCC amended its Rule 133.206 (Spinal Surgery Second Opinion Process) and Rule 134.600 (Preauthorization and Concurrent Review) to provide that future requests for spinal surgery would be handled under the carrier-preauthorization procedures. For the transition period, the TWCC directed that requests for spinal surgery submitted prior to January 1, 2002, would be handled under the Rule 133.206 procedures, and requests submitted after that date would be handled under the carrier preauthorization process of Rule 134.600.

As noted above, Claimant’s initial spinal surgery request was filed before January 1, 2002, and was handled under the second-opinion process of Rule 133.206. It culminated in a decision by the TWCC Appeals Panel on February 21, 2002, denying the requested surgery. However, almost immediately thereafter, Claimant’s treating physician, Dr. Eric Scheffey, submitted a new request for spinal surgery pursuant to the carrier-preauthorization process of Rule 134.600. Carrier referred the request to Genex to perform a utilization review, and the Genex physician advisor found the request appropriate. Therefore, he recommended approval of the preauthorization request; the Carrier granted preauthorization on February 27, 2002; and the disputed hospitalization and surgery occurred March 7-12, 2002.

Petitioner submitted its bill to Carrier for the hospital services, totaling $134,534.13, and Carrier performed an audit of the bill on April 23, 2002. After the audit, Carrier made reductions to the bill totaling $71,261.59 and offered to reimburse Petitioner the difference of $63,272.54 ($134,534.13 – $71,261.59 = $63,272.54). Carrier provided an explanation of benefits (EOB) for the reduction using explanation code “C” for “negotiated contract price.” But Carrier does not have a negotiated contract with Petitioner, so Petitioner appealed the Carrier’s reduction to the TWCC Medical Review Division (MRD).

At MRD, Carrier argued that the preauthorization obtained by Dr. Scheffey under Rule 134.600 was improper because the prior denial of surgery under the second-opinion process of Rule 133.206 was binding and precluded any liability by Carrier for the surgery. MRD agreed with Carrier and denied Petitioner’s entire claim. Petitioner then timely requested a contested case hearing at SOAH.

B. Parties’ Arguments

Petitioner argues that it is entitled to reimbursement because the Carrier preauthorized the surgery; Petitioner had no knowledge of the prior proceedings and previous denial under Rule 133.206; Carrier’s EOBs did not deny payment for lack of preauthorization but only reduced the

amount it would pay under code “C” for “negotiated contract price,” even though no such contract existed; and Carrier was not entitled to raise new reasons for the denial of payment once the dispute was submitted to MRD. Petitioner also complains that MRD stated that “the requestor”improperly filed the documents to request preauthorization under Rule 134.600 after surgery had been denied under Rule 133.206. However, Claimant’s treating physician B not Petitioner B filed the requests for preauthorization, so Petitioner argues that MRD erroneously suggested that it committed some type of wrongful conduct. Finally, Petitioner argues that it is entitled to interest at 6.17%, which amounts to an additional $16,068.15, for a total recovery of $116,975.50.

Carrier argues that Claimant’s treating doctor improperly requested preauthorization under Rule 134.600 almost immediately after the TWCC Appeals panel denied his appeal under Rule 133.206. Carrier cites Rule 133.206(b)(4) to suggest that the denial of surgery was binding for one year. That subsection provides:

Determinations of carrier’s liability made pursuant to subparagraph (1)(B), (1)(C), (1)(D), (1)(E), or (1)(F) of this subsection are valid for one year from the date the determination is made. After one year, medical necessity for the proposed spinal surgery shall be reevaluated before surgery occurs.

Carrier also contends that Petitioner’s lack of knowledge of the prior denial of surgery under Rule 133.206 is irrelevant; that Carrier’s preauthorization did not bind it for payment; and that Petitioner had constructive knowledge of the actions of the treating doctor to circumvent the Rule 133.206 denial of surgery. In Carrier’s view, the proper way for Claimant’s treating doctor to get permission for the surgery would have been to appeal the TWCC Appeals Panel decision or submit documentation of a changed condition in Claimant to both second-opinion doctors under Rule 133.206(l)(1).

Finally, and in the alternative, Carrier argues that at most it should only be liable for 75% of its audited amount, or $47,454.40 ($63,272,54 X 0.75 = $47,454.40). Carrier also argues that no interest should be awarded because the MRD found in its favor.

C. ALJ’s Analysis and Decision

The ALJ finds that Carrier is liable to Petitioner for $100,907.25, plus interest. The ALJ respects the decisions of the TWCC Hearings Division and Appeals Panel and agrees that those decisions are binding for Claimant’s request for surgery under the second-opinion procedures of Rule 133.206. However, Rule 133.206 expired and ceased to apply to requests for surgery made after January 1, 2002, so the rule and the prior decisions simply do not apply to the request for surgery made in February 2002. Instead, the new request for surgery made in February 2002 was governed by the carrier-preauthorization procedures of Rule 134.600. On February 27, 2002, Carrier preauthorized Claimant’s surgery at issue in this case under Rule 134.600, which Petitioner relied on in providing its hospital services. Further, Rule 134.600(f)(7) provides that a carrier cannot withdraw preauthorization once given, and Rule 133.301 provides that a carrier cannot deny payment based on lack of medical necessity after giving preauthorization. In the ALJ’s view, Rule 134.600 governs this case as the request for surgery in dispute was made in February 2002, after the Rule 133.206 procedures had been discontinued. Claimant’s treating doctor plainly took advantage of the rule change by making a new request for surgery, but Carrier has not cited any TWCC rule or statute that the doctor violated in making his new request. If Carrier believed the new request under Rule

134.600 was improper or illegal, it should have refused preauthorization for the requested surgery. Instead, however, Carrier preauthorized the surgery and it could not withdraw that preauthorization once given. Indeed, even when Carrier audited Petitioner’s bill, it did not raise the issue of improper preauthorization. Instead, it simply tried to reduce the bill based on a contracted price, even though it did not have a contract with Petitioner.

Carrier also argues that Rule 133.206(b)(4) made the second-opinion-procedure denial of surgery binding for one year and trumped the Carrier’s own preauthorization. However, as noted previously, that subsection provided:

Determinations of carrier’s liability made pursuant to subparagraph (1)(B), (1)(C), (1)(D), (1)(E), or (1)(F) of this subsection are valid for one year from the date the determination is made. After one year, medical necessity for the proposed spinal surgery shall be reevaluated before surgery occurs.

The ALJ concludes that this rule does not support Carrier’s position as it applies only to determinations of carrier liability under subparagraphs (1)(B), (1)(C), (1)(D), (1)(E), or (1)(F). Those subparagraphs dealt with a carrier’s liability based on the carrier’s waiver of a second opinion or failure to timely request a second opinion, concurrence by both second-opinion doctors, carrier’s failure to appeal a split decision by the second-opinion doctors, or a final non-appealable commission order to pay. But none of those situations occurred in this case. Further, Rule133.206(b)(4) deals with a determination of carrier liability, but in the present case the Hearings Officer and Appeals Panel found no carrier liability. So the ALJ disagrees with Carrier’s argument that Rule133.206(b)(4) made the prior finding of non-liability binding for one year. Instead, when a carrier was found not liable for surgery, a claimant could seek reconsideration at any time under Rule 133.206(l)(1). In this case, when Claimant’s treating doctor made a new request for surgery, Rule 133.206 was no longer in effect, so he made the new request pursuant to the preauthorization procedures of Rule 134.600. Carrier granted preauthorization for surgery, and it cannot now refuse to pay for the services by arguing lack of medical necessity.

The ALJ also denies Carrier’s alternative request that Petitioner’s charges should be reduced from $134,534.13 to $63,272.54 (before application of the stop-loss methodology) based on Carrier’s audit. The only reason given for the audit reduction was “negotiated contract price,” but it is undisputed that no contract existed between Carrier and Petitioner. Thus, Carrier has provided no evidence to authorize a reduction to Petitioner’s charges. The parties do not dispute the applicability of the TWCC’s stop-loss methodology under Rule 134.401(c)(6). Therefore, the ALJ finds that Petitioner is entitled reimbursement in the principal amount of $100,907.35 ($134,534.13 X 0.75 = $100,907.35).

Finally, the ALJ finds that Petitioner is entitled to interest on the unpaid bill. Rule 134.803 provides that interest accrues beginning 60 days after a carrier receives a complete bill from the provider. Although the evidence does not establish exactly when Carrier received Petitioner’s bill, the evidence does show that Carrier performed its audit on April 23, 2002, so it is reasonable to conclude that Carrier had received Petitioner’s bill by that date. Carrier argues that it should not be liable for interest because the MRD found in its favor, but Carrier cited no authority for this position and Rule 134.803 does not provide such an exception. Therefore, the ALJ finds that Carrier is liable to Petitioner for interest under Rule 134.803, calculated with a billing date of April 23, 2002.

In summary, the ALJ finds that Carrier preauthorized the disputed surgery under Rule 134.600 and is liable to Petitioner for hospital services in the amount of $100,907.35, plus interest.

III. FINDINGS OF FACT

1. Claimant ___ suffered a compensable injury on ___.
2. On May 30, 2001, Claimant’s treating doctor, Dr. Eric Scheffey, requested spinal surgery for Claimant for a foraminotomy and to remove hardware from a prior laminectomy and fusion.
3. The Insurance Company of the State of Pennsylvania (Carrier) was the workers’ compensation insurance carrier for Claimant’s injury. Carrier opposed the requested surgery, so the request for surgery proceeded through the second-opinion review process under Tex. Lab. Code § 408.026 and Texas Workers’ Compensation Commission (TWCC) Rule 133.206.
4. After a spinal surgery contested case under Rule 133.206, a TWCC Hearing Officer found on December 6, 2001, that Carrier was not liable for the requested surgery.
5. On February 21, 2002, a TWCC Appeals Panel affirmed the decision of the TWCC Hearing Officer in Appeal No. 020076.
6. Neither Claimant nor her treating doctor appealed the decision of the TWCC Appeals Panel.
7. The Texas Legislature amended Tex. Lab. Code § 408.026 in 2001 to provide that future requests for spinal surgery would be processed under the carrier-preauthorization procedures contained in Tex. Lab. Code § 413.014.
8. In response to the Legislature’s amendment of Tex. Lab. Code § 408.026, the TWCC amended its Rules 133.206 (Spinal Surgery Second Opinion Process) and 134.600 (Preauthorization and Concurrent Review) to provide that future requests for spinal surgery would be handled under the carrier-preauthorization procedures. For the transition period, the TWCC directed that requests for spinal surgery submitted prior to January 1, 2002, would be handled under the Rule 133.206 procedures, and requests submitted after that date would be handled under the carrier preauthorization process of Rule 134.600.
9. In February 2002, shortly after the decision of the Appeals Panel affirming the decision that Carrier was not liable for Claimant’s requested spinal surgery, Dr. Scheffey submitted a new request for surgery to Carrier under the carrier-preauthorization process contained in TWCC Rule 134.600.
10. On February 27, 2002, Carrier determined that the requested surgery was medically appropriate and Carrier preauthorized spinal surgery for Claimant for hardware removal, exploration of fusion, and possible grafting.
11. Petitioner Vista Medical Center Hospital provided hospital services for Claimant’s spinal surgery during March 7-12, 2002. Petitioner’s bill for these services based on its ususal and

customary charges totaled $134,534.13, and Petitioner requested reimbursement from Carrier for the bill.

1. Carrier performed an audit of Petitioner’s bill on April 23, 2002. After the audit, Carrier made reductions to the bill totaling $71,261.59 and offered to reimburse Petitioner the difference of $63,272.54 ($134,534.13 B $71,261.59 = $63,272.54). Carrier provided an explanation of benefits (EOB) for the reduction using explanation code “C” for “negotiated contract price.”
2. Petitioner did not have a negotiated contract with Carrier, so it appealed the Carrier’s reduction of its bill to the TWCC Medical Review Division (MRD).
3. At MRD, Carrier argued that the preauthorization obtained by Dr. Scheffey under Rule 134.600 was improper because the prior denial of surgery under the second-opinion process of Rule 133.206 was binding and precluded any liability by Carrier for the surgery.
4. MRD agreed with Carrier and denied Petitioner’s entire claim on March 23, 2004.
5. Petitioner requested a hearing before the State Office of Administrative Hearings (SOAH), seeking to reverse the MRD’s denial of reimbursement for the hospital services it provided to Claimant.
6. A hearing was conducted at SOAH January 18, 2005. The parties filed post-hearing briefs on January 19, 2005, and reply briefs on January 21, 2005, at which time the record closed.
7. Petitioner and Carrier were represented by counsel at the hearing.
8. All parties received not less than ten days notice of the time, place, and nature of the hearing; the legal authority and jurisdiction under which the hearing was to be held; a reference to the particular sections of the statutes and rules involved; and a short, plain statement of the matters asserted.
9. All parties were allowed to respond and present evidence and argument on each issue involved in the case.

IV. CONCLUSIONS OF LAW

1. The State Office of Administrative Hearings has jurisdiction over matters related to the hearing, including the authority to issue a decision and order. Tex. Labor Code Ann. § 413.031(k).
2. All parties received proper and timely notice of the hearing. Tex. Gov’t Code Ann. §§ 2001.051 and 2001.052.
3. Petitioner has the burden of proof by a preponderance of the evidence.
4. Claimant’s treating doctor’s request for spinal surgery in February 2002 was properly processed under the carrier-preauthorization process of TWCC Rule 134.600.
5. The prior adverse finding against Claimant’s 2001 request for spinal surgery under TWCC Rule 133.206 did not preclude Claimant from seeking preauthorization for spinal surgery in 2002 under TWCC Rule 134.600.
6. Because Carrier preauthorized Claimant’s surgery, Carrier cannot deny payment for the surgery based on medical necessity.
7. Because Carrier and Petitioner did not have a contract, Carrier was not authorized to reduce the reimbursement of Petitioner’s bill under explanation code C, “negotiated contract price.”
8. Under the TWCC stop-loss payment methodology contained in TWCC Rule 134.401(c)(6), Petitioner is entitled reimbursement in the amount of $100,907.35 ($134,534.13 X 0.75 = $100,907.35).
9. Under TWCC Rule 134.803, Petitioner is entitled recover interest on its allowed reimbursement, calculated with a billing date of April 23, 2002.

ORDER

IT IS, THEREFORE, ORDERED that Petitioner Vista Medical Center Hospital’s appeal is granted and Petitioner shall have and recover from Respondent Insurance Company of the State of Pennsylvania the sum of $100,907.35, plus interest for the time and at the rate allowed by law, calculated with a billing date of April 23, 2002.

Signed March 21, 2005.

THOMAS H. WALSTON
Administrative Law Judge
STATE OFFICE OF ADMINISTRATIVE HEARINGS

1. The stop-loss methodology provides for reimbursement of 75% of a hospital’s usual and customary billing rates. $134,534.13 X 0.75 = $100,907.35. See TWCC Rule 134.401(c)(6).↑
2. Decision and Order, TWCC Docket No. MI-97-048544-07-CC-MI43 (Dec. 6. 2001).↑
3. Decision, Appeal No. 020076, Docket No. MI-97-048544-07-CC-MI43 (Feb. 21, 2002).↑