DECISION AND ORDER

Valley Forge Insurance Company (Carrier), appealed the Findings and Decision of the Medical Review Division (MRD) of the Texas Workers’ Compensation Commission (TWCC) that it reimburse OxyMed, Inc. (Provider) for the purchase of certain durable medical equipment (DME) in the amount of $1,138.00. Carrier disputes the IRO’s conclusion that these services were medically necessary. The Administrative Law Judge (ALJ) concludes that Provider is not entitled to additional reimbursement because it failed to obtain preauthorization and failed to provide adequate documentation for the DME. Accordingly, Carrier should not reimburse Provider for the disputed DME.

I. PROCEDURAL HISTORY

ALJ Penny Wilkov conducted a hearing in this case on December 20, 2004, at the State Office of Administrative Hearings, Austin, Texas. Attorney Erin Hacker Shanley represented Carrier. Provider did not appear and was not represented at the hearing. The hearing concluded and the record closed on the same day. No party challenged jurisdiction or notice.

II. DISCUSSION

Background

Claimant sustained a compensable injury on ___, and subsequently underwent surgery for a shoulder injury. Claimant’s treating physician, John C. McConnell, M.D., in order to reduce pain, swelling, and inflammation, prescribed cryotherapy, a sling, and a pain pump.^[1] Provider, a DME supplier, furnished Claimant the following equipment on ___:

DESCRIPTION	CPT CODE	AMOUNT BILLED	EXPLANATION OF BENEFITS	AMOUNT PAID
AMBULATORY INFUSION PUMP	E0781	$485.00	S/U	$291.00
WATER CIRCULATING PUMP	E0236	$494.00	G/U	$0.00
COLD THERAPY COOLER WRAP	E1399	$75.00	G/U	$0.00
WATER CIRCULATING PAD	E1399	$155.00	S/U	$60.00
LSO FLEX SURGICAL SUPPORT	E3670	$340.00	S/U	$60.00
TOTAL		$1,549.00		$411.00

Carrier denied payment, using denial code, “G,” unbundling^[2], with the explanation that the service is included in the global value of another billed procedure, denial code “S,” supplemental payment, with the explanation that the recommended allowance had been adjusted, and denial code “U”, unnecessary treatment, without peer review. The difference between the amount billed and amount paid is $1,138.00.

Evidence and Argument

Carrier argued that the treating physician, Dr. McConnell, prescribed cryotherapy (ice-related therapy) but did not specify the method for delivering it. According to Carrier, Provider decided to furnish an excessively expensive “ice unit” to Claimant, comprised of a water circulating unit, water circulating pad, and a cold therapy cooler wrap, when a simple ice pack would have sufficed. Therefore, Carrier partially reimbursed the water-circulating pad in the amount of $60.00, comparable to an ice pack, which it considered fair and reasonable, rather than the $724.00 billed for the entire unit.

Similarly, Carrier took issue with the ambulatory infusion pump and flex surgical support sling since Dr. McConnell did not specify the qualities or type of equipment to be provided to Claimant and there is no indication that Provider verified that the equipment provided was appropriate or necessary. Instead, Carrier maintains that Provider made the sole decision to furnish the expensive DME to Claimant without regard to the cost or medical necessity. Therefore, Carrier partially reimbursed the ambulatory infusion pump in the amount of $291.00, rather than the billed

amount of $485.00, and partially reimbursed $60.00 for the sling, which it considered fair and reasonable, rather than the $365.00 billed for the sling.

Carrier also argued that Provider failed to follow several procedural prerequisites in order to claim reimbursement. Specifically, Provider did not request preauthorization prior to providing DME in excess of $500.00, since the water circulating unit, the wrap, and the pad were intended as

one integrated unit with a total billing of $724.00. The cost of the unit would therefore require preauthorization. Further, Carrier argued that Provider did not comply with the billing requirements of the Medical Fee Guidelines (MFG),^[3] in that Provider did not submit adequate documentation with the billing so that Carrier could determine if the claim was fair and reasonable. Without the requisite medical necessity narrative and other required documents submitted with the initial billing, Carrier argued that the DME provided were not shown as medically necessary to Claimant’s recovery.^[4]

Lastly, Carrier introduced two letters of medical necessity written by Dr. McConnell on January 8, 2003, which Carrier argued were untimely and of no value. Carrier pointed out that the letters were written three months after the equipment was delivered to Claimant and after the billing was submitted.^[5] Concerning the water circulating unit, Dr. McConnell stated that the use of a circulating cryotherapy unit is more efficacious than a stagnant cold source such as an ice bag or ice pack, which could leak and contaminate wounds. As to the pain management system, Dr. McConnell stated that the pain control pump reduces the need for narcotics and promotes mobility, decreasing Claimant’s risk of complications after surgery.

Applicable Law

Under the workers’ compensation system, an employee who sustains a compensable injury is entitled to all health care reasonably required by the nature of the injury. The employee is specifically entitled to health care that: (1) cures or relieves the effects naturally resulting from the injury; (2) promotes recovery; or (3) enhances the ability to return to or retain employment. Tex. Lab. Code Ann. § 408.021. Health care includes all reasonable and necessary medical . . . services. Tex. Lab. Code Ann.§ 401.011(19).

Certain healthcare, however, must be preauthorized before it can be provided and such preauthorization will be granted only if there is a prospective showing of medical necessity. Tex. Lab. Code Ann. § 413.014. DME in excess of $500.00 per item (either purchase or expected accumulative rental) is included in the type of treatment that requires preauthorization. 28 Tex. Admin. Code § 134.600(h)(11).

Reimbursement for medical services using guidelines must be fair and reasonable and designed to ensure the quality of medical care and to achieve effective medical cost control. Tex. Lab. Code Ann.§ 413.011(d). The Commission has adopted medical fee guidelines concerning DME. 28 Tex. Admin. Code §134.201(a).

Analysis

The evidence established that Provider did not comply with the requirement to obtain preauthorization prior to supplying the cryotherapy unit DME with a value in excess of $500.00. The preponderant evidence established that the cryotherapy unit was comprised of three component

parts: a water circulating unit, a water circulating pad, and a cold therapy cooler wrap. Since the expensive component of the unit, the water circulating unit, billed separately at $494.00, could not operate as a separate and distinct DME without a pad or wrap into which the ice water flows, the entire unit should be considered as one piece of medical equipment. Therefore, since the aggregate amount of the unit was $724.00, above the $500.00 threshold requiring preauthorization for DME, Provider was required to obtain preauthorization prior to supplying the cryotherapy unit.

Further, the evidence established that Provider did not comply with the billing requirements of the Medical Fee Guidelines for the cryotherapy unit, the ambulatory infusion pump, or the flex surgical support sling.^[6] Specifically, the Medical Fee Guideline, DME Ground Rule IX, provides that a statement of medical necessity along with the order or prescription appropriate for the equipment shall accompany initial claims for the purchase of DME. The statement shall include the medical necessity and specify the Claimant’s diagnosis, prognosis, and the expected duration of the equipment required. Here, the letter of medical necessity was dated January 8, 2003, months after the initial billing submitted to Carrier on September 30, 2002, and after furnishing of the unit by Provider to Claimant on September 16, 2002. Therefore, since the letter of medical necessity was supplied months after the date of service and two months after the initial billing, Provider failed to submit the required documentation to Carrier for the DME supplied to Claimant in this case.

In conclusion, since Provider failed to obtain preauthorization and failed to submit the required documentation to Carrier for the DME provide to Claimant, no further reimbursement is due to Provider from Carrier in this case.

III. FINDINGS OF FACT

1. Claimant sustained a compensable injury on ___, and subsequently underwent surgery for a shoulder injury.
2. Claimant’s treating physician, John C. McConnell, M.D., in order to reduce pain, swelling, and inflammation, prescribed cryotherapy, a sling, and a pain pump
3. At the time of the injury, Claimant’s employer had its workers’ compensation insurance through Valley Forge Insurance Company (Carrier).
4. Provider, a DME supplier, furnished Claimant the following equipment on ___:

DESCRIPTION	CPT CODE	AMOUNT BILLED	EXPLANATION OF BENEFITS	AMOUNT PAID
AMBULATORY INFUSION PUMP	E0781	$485.00	S/U	$291.00
WATER CIRCULATING PUMP	E0236	$494.00	G/U	$0.00
COLD THERAPY COOLER WRAP	E1399	$75.00	G/U	$0.00
WATER CIRCULATING PAD	E1399	$155.00	S/U	$60.00
LSO FLEX SURGICAL SUPPORT	E3670	$340.00	S/U	$60.00
TOTAL		$1,549.00		$411.00

1. Carrier denied payment, using denial code, “G,” unbundling, with the explanation that the service is included in the global value of another billed procedure, denial code “S,” supplemental payment, with the explanation that the recommended allowance had been adjusted, and denial code “U”, unnecessary treatment, without peer review.
2. The cryotherapy unit consisted of a water- circulating unit, water circulating pad, and a cold therapy cooler wrap.
3. To provide cold therapy, the cryotherapy unit must have both the pump and the pad.
4. A cryotherapy unit was billed at $724.00.
5. Provider did not request preauthorization of the cryotherapy unit.
6. No statement of medical necessity was submitted to Carrier for the initial claim for the purchase of the cryotherapy unit, the ambulatory infusion pump, or the flex surgical support sling.
7. No documentation was submitted to Carrier with information concerning the Claimant’s diagnosis, prognosis, and the expected duration of the equipment required.
8. Carrier denied Provider’s request for a total reimbursement in the amount of $1,549.00, but partially reimbursed Provider the amount of $411.00.
9. The Texas Workers’ Compensation Commission’s (Commission) Medical Review Division (MRD) issued its Decision and Order on May 14, 2004, requiring Carrier to pay Provider $1138.00 for the cryotherapy unit components, the ambulatory infusion pump, and the flex surgical support sling.
10. On June 1, 2004, Carrier filed a request for a hearing before the State Office of Administrative Hearings.
11. The Commission sent notice of the hearing to the parties on July 2, 2004. The hearing notice informed the parties of the time, place, and nature of the hearing; the legal authority and jurisdiction under which the hearing was to be held; the statutes and rules involved; and the matters asserted.
12. The hearing convened on December 20, 2004, at the State Office of Administrative Hearings, Austin, Texas. Attorney Erin Hacker Shanley represented Carrier. Provider did not appear and was not represented at the hearing. The hearing concluded and the record closed on the same day. No party challenged jurisdiction or notice.

IV. CONCLUSIONS OF LAW

1. The State Office of Administrative Hearings (SOAH) has jurisdiction over matters related to the hearing, including the authority to issue a decision and order, pursuant to Tex. Lab. Code Ann. § 413.031(k) and Tex. Gov’t Code Ann. ch. 2003.
2. Provider timely filed a request for hearing before SOAH, as specified in 28 Tex. Admin. Code § 148.3.
3. The parties received proper and timely notice of the hearing pursuant to Tex. Gov’t Code Ann. ch. 2001 and 1 Tex. Admin. Code § 155.27.
4. Carrier had the burden of proving the case by a preponderance of the evidence pursuant to 28 Tex. Admin. Code § 148.21.
5. An employee who has sustained a compensable injury is entitled to all health care reasonably required by the nature of the injury as and when needed. The employee is specifically entitled to health care that cures or relieves the effects naturally resulting from the compensable injury, promotes recovery, or enhances the ability of the employee to return to or retain employment. Tex. Lab. Code Ann. § 408.021(a).
6. Health care includes all reasonable and necessary medical services. Tex. Lab. Code Ann. § 401.011(19)(A).
7. For Carrier to be liable for reimbursement, Provider must obtain preauthorization for all durable medical equipment (DME) in excess of $500 per item (either purchase or expected cumulative rental). 28 Tex. Admin. Code § 134.600(h)(11).
8. As one item of DME costing over $500, the cryotherapy unit needed to be preauthorized if Carrier was to be held liable to reimburse Provider for its cost.
9. Without preauthorization, Carrier is not liable for reimbursement of the cryotherapy unit.
10. Carrier is not obligated to reimburse Provider for the cryotherapy unit.
11. Provider failed to submit required documentation to Carrier for the DME provided to Claimant in this case. Medical Fee Guideline, pp. 1-2; Durable Medical Equipment Ground Rules in Medical Fee Guideline; pp. 253-254.
12. No further reimbursement is due to Provider from Carrier in this case.

ORDER

IT IS, THEREFORE, ORDERED that Carrier is not required to reimburse OxyMed, Inc. for durable medical equipment in the amount of $1,138.00

Signed February 3, 2005.

PENNY WILKOV
Administrative Law Judge
STATE OFFICE OF ADMINISTRATIVE HEARINGS

1. ¹ Petitioner’s Exhibit 1, page 5.↑
2. ² Crrier provided a AResponse to MRD Request for Additional Documentation, explaining that the water circulating unit, cold therapy cooler wrap, and water circulating pad were considered as unbundled and accordingly, should have been submitted as one DME billing, rather than as three separate billings.↑
3. ³ Medical Fee Guideline, effective date 04/01/96, Copyright 1996 Texas Workers’ Compensation Commission.↑
4. ⁴ The Medical Fee Guideline, DME Ground Rule IX, provides that a statement of medical necessity along with the order or prescription appropriate for the equipment shall accompany initial claims for the purchase of DME. The statement shall included the medical necessity and specify the Claimant’s diagnosis, prognosis, and the expected duration of the equipment required.↑
5. ⁵ Petitioner’s Exhibit 6.↑
6. ⁶ Medical Fee Guideline, effective date 04/01/96, Copyright 1996 Texas Workers’ Compensation Commission.↑