DECISION AND ORDER

Vista Medical Center Hospital (Provider) and American Zurich Insurance Company (Carrier) both requested a hearing on a decision by the Medical Review Division (MRD) of the Texas Department of Insurance, Division of Workers’ Compensation (Division)^[2] ordering additional reimbursement for a hospital stay provided to Claimant, an injured worker. Provider argued that reimbursement for this admission should be based on the Stop‑Loss Exception to the per diem reimbursement methodology contained in the 1997 Acute Care Inpatient Hospital Fee Guideline (1997 ACIHFG).^[3] The Administrative Law Judge (ALJ) finds the Stop-Loss Exception should be followed in this proceeding. Accordingly, Carrier is ordered to pay additional reimbursement in the amount of $34,806.68, plus any applicable interest.

I. PROCEDURAL HISTORY, NOTICE AND JURISDICTION

The MRD issued its decision on May 12, 2005. Both Provider and Carrier filed timely and sufficient requests for hearing. Notice of the hearing was appropriately issued to the parties. The hearing convened and concluded on April 10, 2008.^[4] The record closed that same day.

II. DISCUSSION

A. Factual Overview

The basic facts were uncontested. Claimant sustained a compensable injury and was admitted to Provider, where Claimant underwent treatment. After Claimant was discharged from the hospital, Provider submitted a bill to Carrier in the amount of $119,911.71 based on Provider’s usual and customary charges for the inpatient stay and surgical procedure. To date, Carrier has paid $55,127.10.

B.Issues

Summary of Positions and ALJ’s Decision

In summary, the parties’ positions and ALJ’s findings are as follows:

	MRD	Provider	Carrier	ALJs
Charges	$233,237.71	$119,911.71	$119,911.71	$119,911.71[5]
Reimbursement Methodology	modified Stop-Loss[6]	x 75%	unknown[7]	x 75%[8]
Reimbursement Amount	$76,208.78	$89,933.78	$55,127.10	$89,933.78
Less Payment	$55,127.10	$55,127.10	$55,127.10	$55,127.10
Balance Due Provider	$21,081.68	$34,806.68	$0.00	$34,806.68

Background

When a hospital’s total audited bill is greater than $40,000, the Division’s Stop-Loss Exception applies, and the hospital is reimbursed at 75% of its total audited bill. The purpose of the Stop-Loss Methodology is “to ensure fair and reasonable compensation to the hospital for unusually costly services rendered during treatment to an injured worker.”^[9] The following legal issues in this case were decided by a SOAH En Banc Panel^[10](En Banc Panel), and those determinations are incorporated herein. Legal arguments related to these issues will not be addressed, other than in the Conclusions of Law.

1. The ALJs conclude that a hospital’s post-audit usual and customary charges for items listed in 28 TAC § 134.401(c)(4) are the audited charges used to calculate whether the Stop-Loss Threshold has been met for a workers’ compensation admission. The ALJs decline to adopt the Carriers’ argument to use the carve-out reimbursement amounts in § 134.401(c)(4) as audited charges, and they decline to adopt the Division’s argument to use a fair-and-reasonable amount as determined by a carrier in its bill review as audited charges.
2. The ALJs find that when the Stop-Loss Methodology applies to a workers’ compensation hospitalization, all eligible items, including items listed in § 134.401(c)(4), are reimbursed at 75% of their post-audit amount. Items listed in § 134.401(c) (4) are not reimbursed at the carve out amounts provided in that section when the Stop-Loss Methodology is applied.
3. The ALJs conclude that any reasons for denial of a claim or defenses not asserted by a Carrier before a request for medical dispute resolution may not be considered, whether or not they arise out of an audit. The ALJs also conclude that Carriers’ audit rights are not limited by § 134.401(c)(6)(A)(v) when the Stop-Loss Methodology applies. In such cases, carriers may audit in accordance with § 134.401(b) (2) (c).
4. The ALJs find that a hospital establishes eligibility for applying the Stop-Loss Methodology under § 134.401(c)(4) when total eligible amounts exceed the Stop-Loss Threshold of $40,000. There is no additional requirement for a hospital to establish that any or all of the services were unusually costly or unusually extensive.^[11]

Finally, in reply to a request for clarification, the En Banc Panel found that when referring to a hospital’s usual and customary charges, the rules are referring to the hospital’s own usual and customary charges and not to charges that are an average or median of other hospitals’ charges.^[12] Provider charged its usual and customary charges for the items and services provided.

In summary, the ALJ concludes that the Stop-Loss Threshold was met in this case and that the amounts in dispute should be calculated accordingly.

III.FINDINGS OF FACT

1. Claimant sustained a compensable injury in the course and scope of employment; the employer had coverage with American Zurich Insurance Company (Carrier).
2. Vista Medical Center Hospital (Provider) provided medical treatment to Claimant for the compensable injury.
3. Provider submitted itemized billing totaling $119,911.71 for services provided to Claimant.
4. The $119,911.71 billed was Provider’s usual and customary charges for these items and treatments.
5. Carrier issued payments of $55,127.10 to Provider for the services in question.
6. Carrier denied further reimbursement to Provider.
7. Provider requested Dispute Resolution Services from the Medical Review Division (MRD) of the Texas Workers’ Compensation Commission (Commission).
8. Effective September 1, 2005, the legislature dissolved the Commission and created the Division of Workers’ Compensation within the Texas Department of Insurance. The Commission and its successor are collectively referred to as the Division.
9. MRD issued its Findings and Decision holding that additional reimbursement was owed Provider.
10. Both Provider and Carrier timely filed a request for a contested case hearing on the MRD’s decision.
11. All parties were provided not less than 10-days notice of hearing and of their rights under the applicable rules and statutes.
12. On April 10, 2008, Administrative Law Judge Howard S. Seitzman convened a hearing on the merits at the hearing facilities of the State Office of Administrative Hearings (SOAH) in Austin, Texas. Carrier and Provider were present and represented by counsel. The Division did not participate in the hearing. The hearing concluded and the record closed that day.
13. Provider’s total audited charges under § 134.401(c) (6) (A) (v) are $119,911.71, which allows Provider to obtain reimbursement under the Division’s Stop-Loss Methodology.
14. Under the Stop-Loss Methodology, Provider is entitled to total reimbursement of $89,933.78. After deduction of Carrier’s prior payment of $55,127.10, Provider is entitled to additional reimbursement of $34,806.68, plus any applicable interest, under the Stop-Loss Methodology.

IV.CONCLUSIONS OF LAW

1. The State Office of Administrative Hearings has jurisdiction over matters related to the hearing in this proceeding, including the authority to issue a decision and order, pursuant to Tex. Lab. Code Ann. §§ 402.073 and 413.031(k) and Tex. Gov’t Code Ann. ch. 2003.
2. Both Provider and Carrier timely requested a hearing, as specified in 28 Tex. Admin. Code (TAC) § 148.3.
3. Proper and timely notice of the hearing was provided to the parties in accordance with Tex. Gov’t Code Ann. §§ 2001.051 and 2001.052.
4. In this proceeding, the party seeking relief from adverse findings of MRD had the burden of proof on those issues pursuant to 28 TAC § 148.21(h) and (i).
5. All eligible items, including the items listed in 28 TAC § 131.401(c)(4), are included in the calculation of the $40,000 Stop-Loss Threshold.
6. In calculating whether the Stop-Loss Threshold has been met, all eligible items are included at the hospital’s usual and customary charges in the absence of an applicable MARS or a specific contract.
7. The carve-out reimbursement amounts contained in 28 TAC § 134.401(c)(4) are not used to calculate whether the Stop-Loss Threshold has been met.
8. When the Stop-Loss Methodology applies to a workers’ compensation admission, all eligible items, including items listed in 28 TAC § 134.401(c)(4), are reimbursed at 75% of their post-audit amount.
9. Under the Stop-Loss Methodology, items listed in 28 TAC § 134.401(c)(4) are not reimbursed at the carve-out amounts provided in that section when the Stop-Loss Methodology applies.
10. Carriers’ audit rights are not limited by 28 TAC § 134.401(c)(6)(A)(v) when the Stop-Loss Methodology applies. In such cases, carriers may audit in accordance with 28 TAC § 134.401(b)(2)(C).
11. Pursuant to 28 TAC § 133.307.j)(2), any defense or reason for denial of a claim not asserted by a carrier before a request for medical dispute resolution may not be considered at the hearing before SOAH, whether or not it arises out of an audit.
12. A hospital, Provider in this case, establishes eligibility for applying the Stop-Loss Methodology under 28 TAC § 134.401(c) (6) when total eligible charges exceed the Stop- Loss Threshold of $40,000. There is no additional requirement for a hospital to separately establish that any or all of the services were unusually costly or unusually extensive.
13. The Stop-Loss Methodology applies to this case.
14. The February 17, 2005 Staff Report (Staff Report) by MRD Director Allen C. McDonald, Jr., is not consistent with the Stop-Loss Rule, 28 TAC § 134.401(c)(6), and is not consistent with the Division’s prior interpretation of the rule that the $40,000 Stop-Loss Threshold alone triggered the application of the Stop-Loss Methodology.
15. The Staff Report is not consistent with the Stop-Loss Rule, the preambles to the Stop-Loss Rule published in the Texas Register, or MRD decisions issued prior to February 17, 2005.
16. The Staff Report has no legal effect in this case.
17. Applying the Stop-Loss Methodology in this case, Provider is entitled to total reimbursement of $89,933.78.
18. As specified in the above Findings of Fact, Carrier has already reimbursed Provider $55,127.10 of this amount.
19. Based on the foregoing findings of fact and conclusions of law, Carrier owes Provider an additional reimbursement of $34,806.68, plus any applicable interest.

ORDER

It is hereby ORDERED that American Zurich Insurance Company reimburse Vista Medical Center Hospital the additional sum of $34,806.68, plus any applicable interest, for services provided to Claimant. All relief not expressly granted herein is DENIED.

Signed June 6, 2008.

HOWARD S. SEITZMAN
Administrative Law Judge
STATE OFFICE OF ADMINISTRATIVE HEARINGS

1. Effective September 1, 2005, the legislature dissolved the Texas Workers’ Compensation Commission (Commission) and created the Division of Workers’ Compensation within the Texas Department of Insurance. Act of June 1, 2005, 79th Leg., R.S., ch. 265, § 8.001, 2005 Tex. Gen. Laws 469, 607. This Decision and Order refers to the Commission and its successor collectively as the Division.↑
2. The 1997 ACIHFG established a general reimbursement scheme for all inpatient services provided by an acute care hospital for medical and/or surgical admissions using a service-related standard per diem amount. Independent reimbursement is allowed on a case‑by‑case basis if the particular case exceeds the Stop‑Loss Threshold as described in paragraph (6) of 28 Tex. Admin. Code (TAC) § 134.401(c). This independent reimbursement mechanism, the Stop-Loss Method or Stop-Loss Methodology, is sometimes referred to as the Stop-Loss Exception or the Stop-Loss Rule.↑
3. Beginning in 2003, the Division began referring a significant number of ACIHFG cases to SOAH. Between 2003 and August 31, 2005, approximately 885 ACIHFG cases were referred to SOAH for contested case hearings on issues including the Stop-Loss Exception, audits, and the reimbursement of implantables. In order to efficiently and economically manage this growing number of cases, SOAH in late 2004 and early 2005 began to join the cases into a Stop-Loss Docket, and the cases were abated. By the close of the 2005 regular legislative session, SOAH realized a finite, but still unknown, number of Stop-Loss cases would be referred to SOAH by the Division through August 31, 2005.↑
4. Provider originally submitted a bill totaling $233,237.71, including charges of $151,426.00 for implantables. Provider subsequently reduced it charges for implantables to $38,100.00 and reduced the total charges to $119,911.71.↑
5. MRD determined that the Stop-Loss Exception did apply since the admission did involve “unusually extensive services.” However, in determining the total audit charges, MRD noted that Carrier questioned the charges for implantables. MRD stated that Provider submitted charges of $151,426.00 for implantables whose cost invoices totaled $9,900.00. MRD then stated that based on a review of numerous medical disputes and our experience, the average markup for implantables in many hospitals is 200%. Based on a cost of $9,900.00 for implantables, MRD calculated a $19,800.00 usual and customary charge for the implantables ($9,900.00 x 200%). MRD added its computed implantables charge of $19,800.00 to the other audited charges of $81,811.71 and calculated total audited charges of $101,611.71. Using the Stop-Loss Exception, MRD calculated total reimbursement of $76,208.78 ($101,611.71 x 75%).↑
6. Carrier’s March 2003 Explanation of Benefits (EOB) used an “M” denial code (No MAR). Carrier also entered a notation in the body of the EOB that reads “Please provide vendor invoices and additional documentation on items listed on attached spreadsheet. Unbundled items were carved out of total charges.” The evidence does not contain a spreadsheet or any other documentation showing unbundled items or requests for documentation. Carrier, pursuant to this EOB, paid $43,847.85 for room and board, $10,642.50 for implantables, and $0.00 for blood. A May 2003 EOB, also using an “M” denial code, accompanied a supplemental payment of $224.25 for blood and an additional $412.50 for implantables; bringing the total payments to $55,127.10.↑
7. The Stop-Loss Threshold was met in this case and the reimbursement for the preauthorized 5-day hospitalization should be calculated according to the Stop-Loss Exception. Contrary to Carrier’s argument at the hearing on the merits, Provider’s election to reduce the amount of reimbursement it is seeking at the hearing does mean the original bill was not complete. The original bill was a complete bill. The “M” denial code reductions for vendor invoices were not valid under the Stop-Loss Exception. Based on the evidence in the record, the unbundling and documentation requests did not comply with the requirements of 28 TAC § 133.304(c) and were not valid audit reductions.↑
8. 28 TAC § 134.401(c)(6).↑
9. En Banc Panel Order in Consolidated Stop-Loss Legal Issues Docket, SOAH Docket No. 453-03-1487.M4 (Lead Docket), issued January 12, 2007.↑
10. Because of a typographical error, the En Banc Panel’s decision incorrectly cites § 134.401(c) (4) rather than
    § 134.401(c) (6) as the applicable rule.↑
11. Letter from ALJ Catherine C. Egan dated February 23, 2007.↑