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At a Glance:
August 25, 2002
Medical Fees


August 25, 2002


_____ (Petitioner) appealed the findings and decision of the Texas Workers’ Compensation Commission’s (Commission) Medical Review Division (MRD) which ordered it to reimburse MHHS Hermann Hospital (Respondent or Hermann Hospital) an additional $ 43,624.68, plus accrued interest, for services provided to Claimant during an extended hospital stay. The MRD decision determined that _____ improperly reimbursed Respondent using a per diem rate instead of the stop-loss reimbursement methodology. The ALJ agrees with the MRD decision and finds that Petitioner should pay Respondent the amount ordered.


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

The hearing in this matter was held June 10, 2002, at the State Office of Administrative Hearings, 300 W. 15th Street, Austin, Texas, with Administrative Law Judge (ALJ) Suzanne Marshall presiding. The record remained opened until June 26, 2002, to accept post-hearing briefs.[1] Petitioner was represented by Bradley McClellan, Assistant Attorney General. Respondent MHHS Hermann Hospital was represented by Randy Hewett from Health Source Consultants, Inc. The Commission participated in the hearing and was represented by Jacqueline Harrison.

Petitioner offered no evidence in its case in chief. The evidence consisted of the certified record containing 520 pages from the Commission’s MRD proceeding, testimony from Mr. Hewett, and two exhibits offered by Petitioner as rebuttal evidence, relating to the date that the certified record was sent to and received by counsel for Petitioner.[2]


A. Background Facts

On____, while employed by ____ _____, Claimant,____, fell and suffered C6 quadriplegia. This injury was a compensable injury under the Texas Workers’ Compensation Act (Act). The employer is insured by _____.

From July 24, 2002, through October 3, 2002, Claimant was admitted to MHHS Hermann Hospital for the care of a decubitus ulcer.[3] In addition to receiving treatment for the ulcer, Claimant underwent a laminectomy while at the hospital. Hermann Hospital submitted three bills to _____ for reimbursement for the treatment and services provided to Claimant during the extended hospital stay. Exhibit 1, pp. 53-56. The first two bills (each of which exceeded $ 40,000) were audited on behalf of ____by Medical Business Management Services and were paid using the stop-loss reimbursement rate. The third bill (which was less than $ 40,000) was audited and paid using a per diem reimbursement rate.

B. Parties’ Positions

Petitioner contended that it did not have the burden of proof in this case and that the stop-loss reimbursement method did not apply. Petitioner also made a number of other assertions in this case: Petitioner objected to receiving the Commission’s certified record less than fifteen days before the hearing; Petitioner asserted that the Respondent’s final summary bill showing a zero balance should be applied against the hospital; and Petitioner asserted that an administrative and misdemeanor violation occurred when the Commission’s certified record contained material related to another worker’s compensation claimant besides the Claimant in this case.[4]

Co-Respondents MHHS Hermann Hospital and the Commission asserted that the MRD decision was correct; the stop-loss reimbursement method should be applied to the three bills sent to Carrier (covering the entire admission); and that Petitioner owed Hermann Hospital an additional $43,624.68 in reimbursement for services and treatment provided to Claimant by the hospital during his extended stay.

C. Analysis

Burden of Proof

In this case, Petitioner seeks relief from the order of the Commission’s Medical Review Division. As such, Petitioner bears the burden of proof in this case. Tex. Labor Code § 413.031. Petitioner did not participate in the MRD proceeding. At hearing, Petitioner elected not to introduce any evidence in its case in chief. The only evidence in support of Petitioner’s primary contention relating to the stop-loss methodology is found in the certified record. See, e.g., Exhibit 1, pp. 27-32 (letter from Joyce Maxam, R.N. of Medical Business Management Services to ______ dated September 4, 2001). Interestingly, Petitioner objected to admitting the certified record into evidence. Despite consideration of all the materials contained within the certified record, the ALJ finds that Petitioner failed to meet its burden of proof that the stop-loss reimbursement methodology should not be applied for the reasons set forth below.

Stop-Loss Methodology

The issue in this case is whether the Carrier should have applied the stop-loss reimbursement rate to the three bills received from the Provider. The Commission has adopted the Acute Care Inpatient Hospital Fee Guideline (ACIHFG), 28 Texas Administrative Code (TAC) § 134.401 et seq., for hospital charges under the authority of Section 413.011 of the Texas Workers’ Compensation Act (the Act).

Section 134.401(b)(2) of the Guideline provides that reimbursement for acute care hospital inpatient services shall be the lesser of a negotiated rate between the hospital and the carrier, the hospital’s usual and customary charges, or reimbursement as set out in subsection (c) of the rule. Subsection (c) describes the reimbursement methodologies to be used for acute care hospital stays. In general, there are two primary reimbursement methodologies, the per diem rate and the stop-loss method. 28 TAC §134.401(c)(1)-(3) and (6). The stop-loss methodology is “an independent methodology established to ensure fair and reasonable compensation to a hospital for unusually costly services rendered during treatment to an injured worker”. 28 TAC §134.401(c)(6).

In order to be eligible for the stop-loss methodology, the total audited charges for a hospital admission must exceed $ 40,000. Section 134.401(c)(6)(A)(i). If the audited charges exceed

$ 40,000, reimbursement for the entire admission shall be paid using a stop-loss reimbursement factor (SLRF) of 75%, which is multiplied by the total audited charges to determine the Workers’ Compensation Reimbursement Amount (WCRA) for the admission. In the course of the Petitioner’s

audit, charges of $ 1,351.00 were identified as not being related to Claimant’s injury. These charges were properly excluded from payment by the Petitioner. 28 TAC § 134.401(c)(6)(A)(v).

In this instance, Carrier received three bills for services provided to Claimant during the course of hospital stay, resulting from his compensable injury. The first and second bills exceeded $ 40,000 and were paid by Petitioner using the stop-loss reimbursement method. The third bill was less than $ 40,000 and was paid using the per diem rate. According to the Guideline, the stop-loss methodology “shall be used in place of and not in addition to the per diem based reimbursementsystem.” (emphasis added) 28 TAC § 134.401(c)(6). In this instance, since the Carrier had originally determined that the stop-loss methodology was appropriate, it should have continued to apply that methodology to the third and final bill since the methodology applies to the entire admission.

According to the testimony of Mr. Hewett, MHH Hermann Hospital bills insurance carriers on a thirty-day basis.[5] Petitioner asserted that it was not possible to know whether a bill was an “interim” bill or a “final” bill which could affect the choice of reimbursement methodology. This distinction might be relevant if the carrier had received an interim bill for less than $ 40,000, and reimbursed on the basis of a per diem rate. The receipt of subsequent bills would have required the carrier to determine whether the stop-loss rate was applicable, perhaps necessitating an adjustment in payment. However, this distinction does not seem to matter in this case since the first bill well exceeded the $ 40,000 amount necessary to invoke the stop-loss reimbursement methodology.

Additionally, as noted by the Commission in its post-hearing brief, each of the first two bills sent to Petitioner did not reflect a discharge time, indicating that the Claimant remained in the hospital. Commission’s Post-Hearing Brief, pp. 2-4; Exhibit 1, pp. 53-55. Consequently, Petitioner could have readily determined that the bills were interim bills. The third bill, dated October 9, 2002, covering the period from September 23 to October 3, 2000, indicates a discharge time, reflecting that Claimant had been discharged on October 3, 2000, at 1400 hours. Exhibit 1, p. 56. Petitioner failed to introduce any evidence that there was confusion about whether the bills were “interim” or “final” and whether this confusion affected the choice of reimbursement methodology.

Petitioner argues that Claimant’s admission should be reimbursed at a “fair and reasonable” rate, pursuant to the provisions of 28 TAC § 134.801(c)(A), on the basis that Claimant’s admission was for a trauma. While Petitioner is correct that Claimant’s original injury may have been classified as a trauma, the primary admission code for his admission to Hermann Hospital was for treatment of a decubitus ulcer, under the admission code of 707.01. Exhibit 1, pp. 53-56. Consequently, the exception to the stop-loss reimbursement methodology for a trauma admission is inapplicable.

There was no evidence of any contract between Provider and Carrier to warrant reduction of the billed charges. Based on the evidence presented in this case, Petitioner failed to show by a

preponderance of the evidence that Hermann Hospital should not be reimbursed using the stop-loss reimbursement methodology.

Objections to TWCC Certified Record

Petitioner complained that it did not receive the Commission’s certified record fifteen days before the hearing date, as required by the Commission’s rules. 28 Tex. Admin. Code (TAC) § 148.21(j). Petitioner introduced an envelope into evidence, showing that something was sent to Petitioner’s counsel from the Commission on May 31, 2002, by Priority Mail. ____ Exhibit 1. Petitioner introduced another exhibit, consisting of the first page of the Commission’s certified record (titled “Certification of Specified Instruments”) with a yellow Post-It note attached that says “Received, June 03, 2002, Office of the Attorney General, Tort Litigation Division.” ___ Exhibit 2. The ALJ will assume that counsel for Petitioner did not receive the Commission’s certified record until June 3, 2002, one week prior to the hearing.

The Commission has adopted a rule requiring that the certified record be sent by the Commission to the parties fifteen days prior to the contested case hearing. 28 TAC § 148.21(j). However, this rule has not been adopted by SOAH and is therefore not applicable.[6]See Chapter 2003, Tex. Gov’t Code; 1 TAC § 155.1 et seq. As such, failure to comply with the rule does not prevent the certified record from being admitted into evidence. Further, Petitioner did not demonstrate that it would suffer any harm arising from the admission of the record.[7]

Allegation that the Summary Bill Showing Final Balance Should Be Held Against Provider

Petitioner claimed that Respondent Provider cannot assert that further reimbursement is due because a “zero” balance appears on the summary bill. TWCC Exhibit 1, p. 83. This bill was dated 12-7-00 and reflects the total charges resulting from Claimant’s hospitalization. Counsel’s characterization of this exhibit is misleading.

The bill summary reflects that a total amount of $ 204,499.50 was incurred during Claimant’s hospitalization. It shows that $ 108,736.69 was reimbursed by Petitioner while $ 95,762.81 was allocated to “insurance adjustments,” presumably, reductions pursuant to the claimed contract with PPO Newton Healthcare Network/Rockport. The current balance of “zero” does not, in and of itself, demonstrate that Hermann Hospital agreed that it had been completely reimbursed. There was no testimony from any witnesses regarding the significance, if any, of the “zero” balance. Indeed, the fact that Respondent requested reconsideration of the bill by Petitioner and filed a request for medical dispute resolution indicates that it did not agree that it had been fully compensated by Petitioner. Petitioner failed to prove that this bill demonstrated that full payment had been made.

If the ALJ were to accept Petitioner’s argument that the summary bill established that full payment had been made, given the lack of evidence offered by Petitioner that a contract existed between Petitioner and PPO Newton Healthcare Network/Rockport, it would appear that Petitioner owed Hermann Hospital the amount of $ 95,762.81. As noted in Section 2 above, this is not the case.

Allegations of Administrative and Misdemeanor Violation

At the hearing, counsel for Petitioner noted that the Commission’s certified record contained material related to another workers’ compensation claimant. Exhibit 1, pp. 39-40, 61. Counsel asserted that inclusion of this material in the Commission’s certified record violated § 402.091 of the Texas Labor Code. That section provides that it is a Class A misdemeanor for a person to “knowingly, intentionally, or recklessly” publish, disclose or distribute information that is confidential under this subchapter to a person not authorized to receive the information directly from the commission. Respondents contended that they were unaware of the material and did not cause it to be included in the record. There was no evidence that this limited disclosure was knowingly, intentionally or recklessly published.[8] The ALJ finds that this issue is not relevant to the issues in this case, nor is this the appropriate forum in which to raise this matter.


  1. From July 24, 2000, through October 3, 2002, Claimant ____was hospitalized for treatment of an injury compensable under the Texas Workers’ Compensation Act (Act).
  2. Claimant’s injury is covered by worker’s compensation insurance written for Claimant’s employer, _______, by _________.
  3. Respondent MHHS Hermann Hospital sent three bills to Petitioner for services and treatment rendered to Claimant during his hospitalization. The bills were sent as UB-92s.
  4. The first bill was for dates of service July 24 to August 22, 2000, for $ 82,258.25.
  5. Petitioner audited the first bill and recommended using the stop loss reimbursement factor of 75%, thereby reducing the bill to $ 57,481.31. Petitioner further reduced the bill to
  6. 45,984.99 on the basis of a claimed contract with PPO Newton Healthcare Network/Rockport.
  7. The second bill was for dates of service August 23, 2000, to September 22, 2000, for
  8. 82,626.75. Petitioner again applied the stop loss reimbursement methodology and reduced the bill to $60,861.37. It was further reduced to $48,689.09, pursuant to Petitioner’s claimed contract with PPO Newton Healthcare Network/Rockport.
  9. The third bill was submitted for $ 39,614.50. Petitioner applied the per diem rate of reimbursement and reduced the bill to $ 16,544.25. The bill was further reduced to
  10. 14,062.61, pursuant to Petitioner’s claimed contract with PPO Newton Healthcare Network/Rockport.
  11. There was no evidence of a contract between Petitioner and PPO Newton Healthcare Network/Rockport.
  12. The total amount for services and treatment of Claimant at MHHS Hermann Hospital was $204,499.50.
  13. Claimant incurred charges of $ 1,351.00 in expenses that were not related to his compensable injury.
  14. The total amount for services and treatment of Claimant at MHHS Hermann Hospital for reimbursable expenses is $203148.50.
  15. The stop-loss reimbursement methodology provides that a carrier should pay 75% of the audited charges if the methodology is applicable. In this matter, this amounts to


The total amount paid by Petitioner for Claimant’s care at MHHS Hermann Hospital was



  1. The Texas Workers’ Compensation Commission (Commission) has jurisdiction related to this matter pursuant to the Texas Workers’ Compensation Act (Act), Tex labor code Ann. 413.031.
  2. 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 §413.031(d) of the Act and TEX. GOV'T CODE ANN. ch. 2003.
  3. The hearing was conducted pursuant to the Administrative Procedure Act, TEX. GOV’T CODE ANN. ch. 2001 and the Commission’s rules, 28 TEX.ADMIN.CODE (TAC) § 133.305(g).
  4. Adequate and timely notice of the hearing was provided in accordance with TEX. GOV’T CODE ANN. § 2001.051 and 2001.052.
  5. Petitioner has the burden of proof in this proceeding. 28 TAC § 148.21(h) and (i).
  6. Pursuant to Tex. Labor Code Ann. § 408.026 and the Commission’s rule at 28 Tex. Admin. Code § 134.401(c)(6)(A)(i)(iii), Claimant’s entire hospital stay should be reimbursed using the stop loss reimbursement methodology.
  7. Based on Findings of Fact Nos. 10 and 11, an adjustment is made for expenses that are not related to the compensable injury.
  8. Based on Findings of Fact Nos. 12, 13, and 14, Petitioner owes Respondent Provider the amount of $43,624.68.
  9. Based on the foregoing findings of fact and conclusions of law, Petitioner failed to establish by a preponderance of the evidence that Respondent should not be compensated using the stop-loss reimbursement methodology.


IT IS ORDERED that Petitioner _________ pay Respondent MHHS Hermann Hospital the amount of $ 43,624.68.

Signed this 25th day of August, 2002.

Administrative Law Judge

  1. Briefs were received from all parties. Although Petitioner objected to the late-filed brief of the Commission, the ALJ allowed briefs of both Respondents to be filed outside the time limit originally established.
  2. This evidence was not true rebuttal evidence since it was offered to support Petitioner’s claim of not timely receiving the Commission’s certified record. However, it was not objected to by the parties.
  3. Claimant was initially admitted to College Station Medical Center where he stayed until May 16, 2000, when he was transferred to Health South Houston Rehabilitation Institute. He remained at the Institute until July 24, 2000.
  4. The ALJ requested post-hearing briefing from the parties on two issues: (1) Is there any authority within the Commission’s rules or statutes, or any case law, that directs when a hospital must send its bill to a Carrier when there is an ongoing hospital stay? In other words, must a Provider notify the carrier that a bill is not a final bill, but is an interim bill? and (2) Once the stop loss reimbursement methodology is applied to the first bill, must the remaining bills also be paid using this methodology, even though a particular bill may be less than $ 40,000, even though the total of all bills exceeds $ 40,000? Petitioner’s post-hearing brief contains some discussion on why the stop-loss method is inapplicable, but does not otherwise address the questions posed by the ALJ. Petitioner did, however, attempt to raise a number of issues not asserted at the hearing or the MRD proceeding: that Respondent failed to comply with the Commission’s rule relating to requesting reconsideration of the bill by Carrier; that Respondent failed to timely request dispute resolution for dates of service from July 24 to August 16, 2000; and that bills for professional services and pharmaceutical services should not be included in a reimbursement total. Petitioner’s attempt to insert new issues in the case that were not raised at the MRD proceeding or at hearing will not be considered because they are untimely raised. However, the ALJ has considered the issue of whether Respondent made a timely request for dispute resolution for the relevant dates of service and finds that the request was timely.
  5. The Commission has adopted a rule in the ACIHFG that prohibits a hospital from submitting a medical bill later than the first day of the eleventh month after the date the services are provided. 28 TAC § 134.801(c). There is nothing in the rule that prohibits or requires the use of interim billing by the hospital. Consequently, the hospital’s choice to use a thirty-day billing system is not prohibited by the Commission.
  6. Even if this rule was applicable, Petitioner did not comply with it. Petitioner did not file an objection to admission of the certified record at least five working days prior to the hearing, in accordance with the rule’s provisions.
  7. Indeed, given counsel’s choice to not introduce any evidence in its direct case, the certified record is the only source of evidence to support Petitioner’s contentions unrelated to the issue of when counsel received the certified record.
  8. Ironically, counsel for Petitioner continued to refer to the name of the other claimant during his protests about the included confidential information, instead of merely referring to the places in the record where it occurred.
End of Document