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At a Glance:
December 19, 2002
Medical Fees


December 19, 2002


Petitioner, Sadi Pain Center, appealed a Texas Workers' Compensation Commission Medical Review Division (MRD) decision denying additional reimbursement for anesthesia supplies and a sterile tray. Petitioner asserted that the explanation for the claim reduction provided by the Carrier, Liberty Mutual Fire Insurance Company, was wrong. The Carrier contended that it had correctly reduced the claim based on a negotiated contract amount. This decision finds that Petitioner failed to show it is entitled to additional reimbursement.

I. Notice, Jurisdiction, and Hearing

On October 21, 2002, Georgie B. Cunningham, Administrative Law Judge (ALJ), conducted the hearing at the State Office of Administrative Hearings, 300 West 15th Street, Austin, Texas. Attorney H. Douglas Pruett represented Petitioner, and Attorney Mahon B. Garry, Jr. represented the Carrier. The Commission did not participate. As there were no challenges to notice or jurisdiction, those matters are stated in the findings of fact and conclusions of law without further discussion. The hearing closed on October 21, 2002.

II. Discussion

Petitioner administered a lumbar epidural steroid injection (ESI) to an injured worker on ___. Petitioner submitted a claim, which included charges of $661.30 for anesthesia supplies, billed under CPT Code 99070-AS, and $417.40 for a sterile tray, billed under CPT Code 99070-ST. The Carrier paid $85 for each claim leaving $908.70 as the amount in dispute. Petitioner bore the burden of proving it is entitled to additional reimbursement.

In paying the reduced amount, the MRD records show that the Carrier used the letters F and C along with the codes Z560 and Z561 on the explanations of benefits (EOB) form. The code Z560 corresponded to the Carrier’s statement, “The charge for this procedure exceeds the fee schedule or usual and customary values as established by Ingenix.” Code Z561 corresponded to the Carrier’s other statement, “This preferred provider has agreed to reduce this charge below fee schedule or usual and customary charges for your business.” The Carrier identified the preferred provider as First Health Network.

Petitioner stamped “Reconsideration” on the billing forms and resubmitted them to the Carrier. Petitioner also submitted the list of anesthesia supplies, the number of units billed, its charges per unit, and its total charges. Likewise, Petitioner submitted a similar list for the sterile tray supplies, in addition to the physician’s notes about the ESI, a pre-operative assessment, an intraoperative record, and post-anesthesia care. Because the parties presented only documentary evidence without any testimony, the ALJ is uncertain whether these documents were submitted to the Carrier or just to MRD.

Petitioner asserted that the Carrier used the incorrect exception code for reducing the payment. The Commission has not established a maximum allowable reimbursement (MAR) for the supplies billed. Instead of using “M” to indicate it had reduced payment from a billed amount in which the Commission has not set an MAR, the Carrier incorrectly used “F,” representing that it had reduced payment in accordance with the appropriate fee guideline. Citing 28 Tex. Admin. Code (TAC) §133.304(i)(2), Petitioner also argued that the EOBs were inadequate because the Carrier did not document its reasons. Furthermore, Petitioner argued that the MRD review was limited to the codes used by the Carrier in its denial, and the ALJ is limited at the hearing to the consideration of codes the MRD decision addressed.

The Carrier contended it applied the correct exception codes when it used “C” indicating the claim was reduced according to the negotiated contract price, which Petitioner did not contest. It further contended it had reduced the claim because the charge exceeded the fee schedule or usual and customary values. According to the Carrier, the Surgical Ground Rules of the Medical Fee Guideline at Section V.B.(1) and (2) provides that the charges for sterile trays and anesthesia supplies are to be reimbursed at the lesser of the doctor’s usual charge or fair and reasonable reimbursement.[1] The guideline provides that documentation of procedures are to be provided if charges are $50 or greater.

In responding to the MRD request for information, the Carrier wrote a letter on May 20, 2002, indicating that Petitioner had not submitted the manufacturer’s invoices as requested. The letter writer added that the documentation would have served as a reasonable basis to determine if any additional payment was due. The Carrier did not provide any evidence, however, that it had actually requested this information from the Provider.

The ALJ agrees with Petitioner that the Carrier incorrectly used the “F” denial code rather than the “M” denial code. Clearly, the Commission’s guide to the use of codes specifies that the “F” code is not used for reductions based on a lack of documentation or for charges for which the Commission has not established an MAR. Conversely, the ALJ finds that the Carrier’s use of the “C” denial code was not necessarily incorrect. The ALJ does not accept Petitioner’s argument that the MRD officer rejected the Carrier use of this code. Instead, the MRD decision simply did not address this issue. Petitioner offered no basis for not considering the two reasons for denial raised by the Carrier initially.

When no MAR has been established, according to 1 TAC § 134.1(f) services shall be reimbursed at a fair and reasonable rate as described in Section 413.011 of the Texas Labor Code. This section specifies that the Commission by rule shall design medical policies relating to necessary treatments for injuries that shall ensure the quality of medical care and achieve effective medical cost control. The Commission has defined fair and reasonable reimbursement in 28 TAC §133.1(a)(8) as reimbursement that meets the standards set out in Section 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.

Although the Carrier may have used one denial code incorrectly, no evidence was offered that it incorrectly used the second denial code. Petitioner provided no evidence to refute the existence of a negotiated contract with the Carrier that would show the reimbursement was not fair and reasonable. The ALJ concludes that Petitioner simply failed to meet its burden of proof in this case and declines ordering the Carrier to provide additional reimbursement of its claims.

III. Findings of Fact

  1. On ___, Petitioner Sadi Pain Center provided services to an injured worker (the Claimant).
  2. When she sustained her compensable injury on_________, the Claimant was an employee of _____________
  3. At the time of the employee's injury, Liberty Mutual Fire Insurance Company (the Carrier) provided workers’ compensation insurance to _____________
  4. Petitioner submitted its claim, which included charges of $661.30 for anesthesia supplies, billed under CPT Code 99070-AS, and $417.40 for a sterile tray, billed under CPT Code 99070-ST.
  5. The Carrier reimbursed Petitioner for $170 of the $1,078.70 billed for the anesthesia supplies and sterile tray.
  6. The amount remaining in dispute is $908.70.
  7. Petitioner requested that the Carrier reconsider the claim, but the Carrier again denied additional payment.
  8. Petitioner submitted a request to the Texas Workers’ Compensation Commission (the Commission) for medical dispute resolution by the Commission’s Medical Review Division (MRD).
  9. An MRD dispute resolution officer issued a decision on June 19, 2002, denying Petitioner any additional reimbursement.
  10. On July 8, 2002, Petitioner requested a hearing on the disputed claim.
  11. On August 7, 2002, and October 11, 2002, the Commission issued its hearing notice and statement of matters asserted which included a statement of the time, place, and nature of the hearing; a statement of the legal authority and jurisdiction for the hearing; a reference to the sections of the statutes and rules involved; and a brief statement of the matters asserted.
  12. The Carrier supplied explanations of benefits (EOBs) by using the letters "F" and “C” along with the codes “Z560" and “Z561" in paying the reduced amount.
  13. The EOB Z561 corresponds to the Carrier’s statement, "This preferred provider has agreed to reduce this charge below fee schedule or usual and customary charges for your business.”
  14. The code “C” is used when reducing payment in accordance with a negotiated contract between a carrier and a health care provider.
  15. Petitioner did not challenge the basis for the fee reduction based on a negotiated contract price.

IV. Conclusions of Law

  1. The Texas Workers’ Compensation Commission has jurisdiction over this matter pursuant to the Texas Workers' Compensation Act, Tex. Lab. CodeAnn. § 413.031.
  2. The State Office of Administrative Hearings 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(d) and Tex. Gov’t Code Ann. ch. 2003.
  3. The parties received proper and timely notice of the hearing. Tex. Gov’t Code Ann §§ 2001.051 and 2001.052; 1 Tex. Admin. Code (TAC) §155.27.
  4. Petitioner had the burden of proof in establishing it was entitled to the requested relief, as specified in 28 TAC § 148.21(h) and (i).
  5. Petitioner failed to show the Carrier incorrectly reduced the claim payment in accordance with a negotiated contract.
  6. Based on the foregoing findings of fact and conclusions of law, Petitioner failed to meet its burden of proof to establish it is entitled to additional reimbursement.


Liberty Mutual Fire Insurance Company is not ordered to reimburse Sadi Pain Center any additional fees for anesthesia supplies and a sterile tray.

Signed this 19th day of December, 2002.

Administrative Law Judge

  1. Medical Fee Guidelines, 28 TAC § 134.201.
End of Document