DECISION AND ORDER

Travelers Indemnity Company (Carrier) challenges the Medical Fee Dispute Findings and Decision of the Texas Department of Insurance, Division of Worker’s Compensation (Division), that ordered reimbursement of an additional $3,345.04 to Harlingen Medical Center (Provider) for medical services provided to an injured worker (Claimant). The Administrative Law Judge (ALJ) concludes that Carrier met its burden of proving that the additional reimbursement was improper. Consequently, Provider is not entitled to additional reimbursement.

I. JURISDICTION, NOTICE, AND PROCEDURAL HISTORY

There are no disputed issues regarding jurisdiction or the adequacy of notice. Therefore, those matters are set out in the Findings of Fact and Conclusions of Law without further discussion here.

Provider filed a request for medical fee dispute resolution with the Division on May 8, 2012. On February 14, 2013, the Division issued its Medical Fee Dispute Resolution Findings and Decision (Findings and Decision). On March 5, 2013, Carrier requested a hearing at the State Office of Administrative Hearings (SOAH) to contest the Division’s determination. The hearing was held August 26, 2013, before ALJ Henry D. Card, at SOAH’s offices located in Austin, Texas. Carrier was represented by William Weldon. Provider was represented by Karen Lynch, who appeared telephonically. The record closed on August 26, 2013.

I. APPLICABLE LAW

The Texas Department of Insurance rule at 28 Texas Administrative Code (TAC) § 134.403 (the outlier rule) applies to medical services provided in an outpatient acute care hospital on or after March 1, 2008. Under 28 TAC § 134.403(f):

The reimbursement calculation used for establishing the [maximum allowable reimbursement (MAR)] shall be the Medicare facility specific amount, including outlier payment amounts, determined by applying the most recently adopted and effective Medicare Outpatient Prospective Payment System (OPPS) reimbursement formula and factors as published annually in the Federal Register. The following minimal modifications shall be applied.

(1) The sum of the Medicare facility specific reimbursement amount and any applicable outlier payment amount shall be multiplied by:

(A) 200 percent; unless

(B) a facility or surgical implant provider requests separate reimbursement in accordance with subsection (g) of this section, in which case the facility specific reimbursement amount and any applicable outlier payment amount shall be multiplied by 130 percent.

(2) When calculating outlier payment amounts, the facility’s total billed charges shall be reduced by the facility’s billed charges for any item reimbursed separately under subsection (g) of this section.

The party appealing the Medical Fee Dispute Resolution decision has the burden of proving by a preponderance of the evidence in the record that the Medical Fee Dispute Resolution decision does not satisfy these requirements. In this instance, Carrier has the burden of proof.

I. EVIDENCE AND ANALYSIS

A.Evidence

The facts of this case are uncontested. On September 13, 2011, Claimant underwent outpatient surgery at Provider’s facility for the removal of infected mesh from his right groin area. The billed charges were $19,660.04. Provider calculated an allowable reimbursement of $4,215.10 based on its interpretation of the outlier rule and formulas. Carrier reimbursed Provider a total of $182.20.^[1] The bulk of the disallowance was due to Provider’s billing of the surgical procedure itself under CPT Code 11008. CPT Code 11008 denotes inpatient procedures which are not reimbursable under the Medicare OPPS.

In its Medical Fee Dispute Resolution Request, Provider sought additional reimbursement of $4,032.90 ($4,215.10 – $182.20). Carrier responded that CPT Code 11008 and all related charges were not reimbursable and that Provider was not entitled to further reimbursement.^[2]

In its Findings and Decision, the Division took a different approach from that advocated by either party. The Division agreed that CPT Code 11008 was not reimbursable, because it is an inpatient code and the surgery was an outpatient procedure. The Division noted that, under the OPPS, each billed service is assigned an Ambulatory Payment Classification (APC) based on the procedure code used, the supporting documentation, and the other services that appear on the bill. A payment rate is established for each APC. Payment for ancillary and supportive items and services is packaged into payment for the primary service.

After calculating payment for other specific procedures, the Division addressed the procedure codes with a status indicator of “N,” which denotes packaged items and services with no separate APC payment that are packaged into the reimbursement of other services.^[3] It allocated those costs, which totaled $3,420.93, to CPT Code 88305, which by itself had a calculated reimbursement of $20.98.^[4] The total amount for that Code, including the allocated packaged costs, totaled $3,441.91. That amount is greater than the annual fixed-dollar threshold of $2,025. Applying the OPPS formula to its calculated amount for CPT Code 88305 produced reimbursement of $3,450.72 for that Code. That amount, added to the individual reimbursements, yielded total allowable reimbursement of $3,527.24. The Division therefore ordered Carrier to pay additional reimbursement of $3,345.04 ($3,527.24 – $182.20).

At SOAH, Carrier presented records pertaining to the case and the reimbursement dispute, plus an affidavit from J__ F__, who is a Manager for Workers’ Compensation Product Development for the Travelers Companies, Inc. According to the affidavit, Mr. F__ has training and expertise in the calculation of reimbursement for medical services under the Medicare reimbursement system, including the outlier rule methodology.^[5]

In the affidavit, Mr. F__ stated that the APC packaged services should not have been added to the charge for CPT Code 88305. Instead they should have been included in the primary service, which was the non-reimbursable surgical procedure, CPT Code 11008. Because those services should have been packaged with CPT Code 11008, they should not have been included in the outlier cost calculation to determine whether CPT Code 88305 met the outlier reimbursement requirements.

Although it did not seek review of the Division’s Findings and Decision, Provider did not advocate the approach taken by the Division. Provider contended, as it did in its correspondence with Carrier and before the Division itself, that the outlier rule methodology should have been applied to the bill as a whole. Mr. F__, and the Carrier, disagreed with that approach. They stated that the outlier methodology is applied on a line item basis per Medicare. Mr. F___ calculated the total reimbursement for the services at issue to be $147.04, which is below the amount already reimbursed.

A.Analysis

Mr. F__ did not actually testify and was not cross-examined. Nevertheless, his affidavit was the only thorough analysis provided of the application of the Medicare reimbursement system to the services billed in this case. Neither party provided case law or agency policy interpretations. Mr. F___ analysis was persuasive.

In its Findings and Decision, the Division observed that “Payment for ancillary and supportive items and services . . . is packaged into payment for the primary service.” The Division packaged those codes into CPT Code 88305. The ALJ finds that the surgical procedure itself, CPT Code 11008, was the primary procedure. Claimant was not at the hospital primarily for pathological analysis; he was at the hospital to have infected mesh surgically removed. If the ancillary services were to be packaged with the primary service, as both Carrier and the Division stated, they should have been packaged with CPT Code 11008, which was non-reimbursable.

Neither party endorsed the Division’s approach of packaging the ancillary services into CPT Code 88305. No evidence was presented to support Provider’s methodology, which would base the outlier rule calculation, in part, on services for which reimbursement is not available under Medicare. Therefore, based on the evidence presented, the ALJ concludes that Provider is not entitled to additional reimbursement.

I. FINDINGS OF FACT

1. Harlingen Medical Center (Provider) filed a request for medical fee dispute resolution with the Texas Department of Insurance, Division of Workers’ Compensation (Division) on May 8, 2012.
2. On February 14, 2013, the Division issued its Medical Fee Dispute Resolution Findings and Decision (Findings and Decision).
3. On March 5, 2013, Travelers Indemnity Company (Carrier) requested a hearing at the State Office of Administrative Hearings (SOAH) to contest the Division’s determination.
4. The Division issued a Notice of Hearing on June 5, 2013.
5. The notice contained a statement of the time, place, and nature of the hearing; a statement of the legal authority and jurisdiction under which the hearing was to be held; a reference to the particular sections of the statutes and rules involved; and a short, plain statement of the matters asserted.
6. The hearing was held August 26, 2013, before Administrative Law Judge Henry D. Card, at SOAH’s offices located in Austin, Texas. Carrier was represented by William Weldon. Provider was represented by Karen Lynch, who appeared telephonically. The record closed on August 26, 2013.
7. On September 13, 2011, an injured worker (Claimant) underwent outpatient surgery at Provider’s facility for the removal of infected mesh from his right groin area.
8. The billed charges for Claimant’s procedure were $19,660.04.
9. Provider calculated an allowable reimbursement of $4,215.10 based on its interpretation of the outlier rule and formulas.
10. Carrier reimbursed Provider a total of $182.20.
11. The bulk of the disallowance was due to Provider’s billing of the surgical procedure itself under CPT Code 11008.
12. CPT Code 11008 denotes inpatient procedures, which are not reimbursable under the Medicare Outpatient Prospective Payment System (OPPS).
13. In its Findings and Decision, the Division agreed that CPT Code 11008 was not reimbursable, because it is an inpatient code and the surgery was an outpatient procedure.
14. In its Findings and Decision, the Division allocated procedure codes with a status indicator of “N,” which denotes packaged items and services with no separate APC payment that are packaged into the reimbursement of other services, to CPT Code 88305.
15. In its Findings and Decision, the Division ordered Carrier to pay additional reimbursement of $3,345.04 ($3,527.24 – $182.20).
16. The affidavit of Travelers Companies, Inc., employee J__ F___ was the only thorough analysis provided of the application of the Medicare reimbursement system to the services billed in this case.
17. Under the OPPS, payment for ancillary and supportive items and services is packaged into payment for the primary service.
18. Claimant was not at the hospital primarily for pathological analysis; he was at the hospital to have infected mesh surgically removed.
19. The surgical procedure itself, CPT Code 11008, was the primary procedure.
20. The ancillary items should be packaged with CPT Code 11008, which is non-reimbursable.
21. Provider was entitled to $147.04 in total reimbursement for the services at issue, which is below the amount already reimbursed.
22. SOAH has jurisdiction over this proceeding, including the authority to issue a decision and order. Tex. Lab. Code § 413.031 and Tex. Gov’t Code ch. 2003.
23. Adequate and timely notice of the hearing was provided. Tex. Gov’t Code §§ 2001.051 and 2001.052.
24. Carrier had the burden of proof in this proceeding by a preponderance of the evidence.
25. Carrier proved it was not required to pay Provider additional reimbursement for the services provided to Claimant. 28 Tex. Admin. Code § 134.403(f).

Carrier is not required to pay Provider additional reimbursement for services provided to the Claimant.

Signed October 18, 2013.

1. Carrier Ex. 1 at 18.↑
2. Carrier Ex. 1 at 1, 21.↑
3. Those codes were J1885, J2001, J2175, J2250, J2405, J2710, and J3010.↑
4. CPT Code 88305 is a code relating to surgical pathology.↑
5. Carrier Ex. 1 at 5-7.↑