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Title: 

453-05-9258-m4

Date: 

April 30, 2008

Type: 

Medical Fees

453-05-9258-m4

DECISION AND ORDER

HCA Clear Lake Regional Medical Center (Provider) requested a hearing on a decision by the Medical Review Division (MRD) of the Texas Department of Insurance, Division of Workers’ Compensation (Division)[2] denying 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, Ace Insurance Company of Texas (Carrier) is ordered to pay additional reimbursement in the amount of $21129.42, plus any applicable interest.

I. PROCEDURAL HISTORY, NOTICE AND JURISDICTION

The MRD issued its decision on August 2, 2005. Provider filed a timely and sufficient request for hearing. Notice of the hearing was appropriately issued to the parties. The hearing convened and concluded on March 25, 2008.[4]

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 $41,879.76 based on Provider’s usual and customary charges for the inpatient stay and surgical procedure. To date, Carrier has paid $10,280.40.

B.Issues

Summary of Positions and ALJ’s Decision

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

MRD

Provider

Carrier

ALJ

Charges

$41,879.76

$41,879.76

$41,879.76

$41,879.76

Reimbursement Methodology

per diem[5]

x 75%

per diem[6]

x 75%

Reimbursement Amount

$10,280.40

$31,409.82[7]

$8,886.00

$31,409.82[8]

Less Payment

$10,280.40

$10,280.40

$10,280.40

$10,280.40

Balance Due Provider

$0.00

$21,129.42

$0.00

$21,129.42

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 her employment; her employer had coverage with Ace Insurance Company of Texas (Carrier).
  2. HCA Clear Lake Regional Medical Center (Provider) provided medical treatment to Claimant for the compensable injury.
  3. Provider submitted itemized billing totaling $41,879.76 for services provided to Claimant.
  4. The $41,879.76 billed was Provider’s usual and customary charges for these items and treatments.
  5. Carrier issued payments of $8,886.00 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 Carrier owed additional reimbursement to Provider in the amount of $1,394.40, for a total reimbursement of $10,280.40.
  10. Carrier paid the additional amount ordered by MRD.
  11. Carrier did not request a contested case hearing.
  12. Provider timely filed a request for a contested case hearing on the MRD’s decision.
  13. All parties were provided not less than 10-days notice of hearing and of their rights under the applicable rules and statutes.
  14. On March 25, 2008, Administrative Law Judge James W. Norman 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 that day and the record closed on March 25, 2008.
  15. Provider’s total audited charges under § 134.401(c)(6)(A)(v) are $41,879.76, which allows Provider to obtain reimbursement under the Division’s Stop-Loss Methodology.
  16. Under the Stop-Loss Methodology, Provider is entitled to total reimbursement of $31,409.82. After deduction of Carrier’s prior payment of $10,280.40, Provider is entitled to additional reimbursement of $21,129.42, 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. Provider 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. Provider had the burden of proof in this proceeding 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 $31,409.82.
  18. As specified in the above Findings of Fact, Carrier has already reimbursed Provider $10,280.40 of this amount.
  19. Based on the foregoing findings of fact and conclusions of law, Carrier owes Provider an additional reimbursement of $21,129.42, plus any applicable interest.

ORDER

It is hereby ORDERED that Ace Insurance Company of Texas reimburse HCA Clear Lake Regional Medical Center the additional sum of $21,129.42, plus any applicable interest, for services provided to Claimant. Any requested relief not expressly granted herein is denied.

Signed April 30, 2008.

JAMES W. NORMAN
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. MRD determined that the Stop-Loss Exception did not apply based on its conclusion that the admission did not involve “unusually extensive services.” MRD ordered reimbursement of $5,590.00 for a 5-day admission (5 x $1,118.00), between October 28, 2003, and November 2, 2003, and $4,690.40 for implantables at cost plus 10 percent ($4,264.00 x 110 %) for a total reimbursement of $10,280.40. It ordered Carrier to pay an extra $1,394.40 in addition to its previous payment of $8,886.00.↑
  5. Carrier reimbursed according to the per-diem methodology at $8,886.00. It paid $3,354.00 for a 3-day hospital stay (3 x $1,118.00), $5,000.00 out of a $6,997.00 bill for implants, and $532.00 for a blood storage product, for total reimbursement of $8,886.00. Carrier contended it preauthorized only a 3-day hospital stay. It cited a March 30, 2004 Inracorp audit of Provider’s bill stating that the length of stay, according to Milliman and Robertson’s guidelines, should be three days (Carrier Ex. 1 at 30); a statement from Provider that it needed to seek preauthorization (Carrier Ex. 1 at 90); and testimony from its witness Rosemary Montalbano that Carrier preauthorized only 3 days of hospitalization. Carrier also contended that it appropriately reduced Provider’s audited charges by $2,148.00 for an orthopat blood system–the March 30, 2004 Intracorp audit said the orthopat blood system charge appeared to be excessive without invoices to support the amount billed. Carrier argued that the per-diem methodology should apply because these reductions brought Provider’s audited charges below the Stop-Loss Threshold.↑
  6. Provider contended it is entitled to reimbursement according to the Stop-Loss Methodology at 75 percent of total audited charges ($41,879.76 x .75,$31,409.82). It maintained there is no evidence to support Carrier’s assertion that only three days of hospitalization were preauthorized. It argued that it did not receive adequate notice of Carrier’s denial of an orthopat blood system charged at $2,148.00 because, in its explanation of benefits (EOB), Carrier used only denial code “F,” which it described as a reduction according to medical fee guidelines, with no further explanation.↑
  7. The ALJ finds that Provider should be reimbursed according to the Stop-Loss Methodology with none of the reductions urged by Carrier. On the preauthorization issue, MRD found that Carrier should pay for five days of service, and at least partly on that basis, ordered Carrier to pay an additional $1,394.40 (Carrier Ex. 1 at 7-8). Because Carrier did not request a hearing to contest that finding, the MRD decision stands. Regarding the orthopat blood system issue, Carrier’s reason for denial, as stated in the Intracorp audit statement that the charge was excessive without invoices to support the amount billed, is contrary to the Stop-Loss Methodology and the En Banc Panel ruling which requires insurers to pay 75% of a provider’s total audited charges. Thus, individual items may not be reviewed and paid on a fair and reasonable basis or any basis other than 75% of total audited charges. Moreover, Carrier’s EOB indicates that instead of reducing the orthopat blood system charge to a lesser amount, Carrier paid at the per-diem rate of $1,118.00 per day for that and other items. Under the Stop-Loss Methodology, insurers are not permitted to pay on a per-diem basis.↑
  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.↑