SwanSong: CommiSSioner BettS SignS SuBClaimant ruleS …Swansong: Commissioner Betts Signs...

F O L I O C L I E N T N E W S L E T T E R B Y F L A H I V E , O G D E N & L A T S O N �

SwanSong: CommiSSioner BettS SignS SuBClaimant ruleS aS HiS laSt aCt

in this issue…

Beware of a new 90-Day Rule Trap ........p. 5

Work-Related Fatalities Increased in Texas in 2007 ...........................................p. 27

©2008 – Flahive, Ogden & Latson S E P T E M B E R 2 0 0 8 n V O L U M E � 3 , N O . 8

A P R I V I L E G E D AT T O R N E Y - C L I E N T C O M M U N I C AT I O N B Y F L A H I V E , O G D E N & L AT S O N

Commissioner Betts signed revised subclaim rules in his last act as Commissioner of workers’ compensation. Incoming Commissioner Rod Bordelon will be charged with administering the rules as Commissioner Betts developed them.

The Commissioner made substantial revisions to the rules as they had been proposed, following extensive public comment from our firm and other industry stakeholders. The new rules are contained in a 140-page reasoned justification, preamble and rule.

Clients who have responsibilities for processing DWC-26s must become familiar with the new rules, which were adopted August 29, 2008. The new rules become effective 20 days after they are published in the Texas Register, or in early October 2008.

The rules clarify many things that have been in question since the 80th Legislature mandated subclaimant reimbursement in House Bill 724 in September 2007.

The Division has recognized a clear distinction between 409.009 and 409.0091

claims. Only a group health insurer who is pursuing a claim that was obtained from a data match can pursue a 409.0091 claim. Any subclaimant, including a group health insurer who is pursuing a claim that was obtained from a data match can pursue a 409.009 claim.

Carriers can assert all statutory defenses in a 409.009 claim, including any defenses that could be asserted against the claimant such as late reporting or intoxication. Carriers may not assert the excluded defenses in a 409.0091 claim. Those excluded defenses are: 1) that the subclaimant failed to request reimbursement from the provider or the insured; 2) that the subclaimant failed to request preauthorization under Rule 134.600; and 3) that the subclaimant failed to submit a bill within 95 days.

A subclaimant is a party to a claim and is entitled to pursue dispute resolution on issues of compensability, extent of injury and carrier waiver of those issues, even when an injured worker does not want such issues to be pursued. The party pursuing the claim or the subclaim has the burden of proof on such issues.

The injured worker is entitled to receive notice of the subclaimant’s desire to pursue the subclaim from the subclaimant. The injured worker may request a continuance of any dispute resolution proceedings involving

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Flahive, Ogden & Latson, a 26 lawyer firm, defends contested workers’ compensation cases statewide every day. The firm has represented insurance companies and employers before the Texas Workers’ Compensation agency for more than

50 years. For general questions concerning the newsletter call: (512) 435-2234.

Flahive, Ogden & LatsonP.O. Box 13367

Austin Texas 78711

An electronic copy of FOLIO, our monthly client newsletter, is now available for

clients. If you are interested in receiving FOLIO by email, please let us know.

FOLIO is prepared for the exclusive use of Flahive, Ogden & Latson clients only. It contains privileged communications and further sharing of this newsletter

(in either hard copy or electronic format) outside your company without the express written consent of Flahive,

Ogden & Latson is not permitted.

Our regular office hours are 8:15 a.m. to 4:45 p.m. If you need to call after 4:45,

please call Patsy Shelton at (512) 435-2234. She will be on duty until 6:00 p.m. daily.

Fo&l oFFiCe HourSDon’t wait until the last hour of the day for deadline filing. Any faxes with information due must be received by 3:30 p.m. for any deadline handling for same day delivery to the Division, and faxed according to the fax directory listed on the last page of FOLIO.

Furthermore, if you have a last minute deadline, call our office by 3:00 p.m. and

speak with Diana Nelson or Patsy Shelton to advise that a last minute filing is necessary to meet a deadline. We will be watching and waiting for the fax. Otherwise, last

minute faxes could delay receipt. Our last daily run to the Division will be at 4:00 p.m.,

in order to get across town to meet their 5:00 closing time.

Stop loSS CaSe argued at Court oF appealS

You would have been forgiven for confusing the Austin Court of Appeals’ courtroom with a DWC field office waiting room as parties squared off to argue the validity of the 1997 Acute Care Inpatient Hospital Fee Guideline “Stop Loss” rule. The

case, Vista Community Medical Center, L.L.P., dba Vista Medical Center Hospital v. Texas Mutual Insurance Co. and Division of Workers’ Compensation, No. D-1-GN-06-000213, was argued September 10, 2008 before a three-judge panel made up of Justice Jan Patterson, Justice Alan Waldrop and Justice Diane Henson.

System stakeholders and Division regulators filled the courtroom to hear several insurance carriers challenge the validity of the Division’s stop loss rule, which requires that hospitals be reimbursed 75% of their charges that exceed $40,000 in workers’ compensation cases. The stop loss rule is contained in Division Rule 134.401.

A team of attorneys representing carriers, including FO&L Managing Partner Steve Tipton, briefed the case for the Court of Appeals. During argument, the court’s questions focused on three areas: whether the stop loss provision was severable from the remaining portion of the rule; whether the Division had any authority to reduce hospital bills which were unfairly inflated for all admissions under the facility’s “chargemaster” and whether the stop loss rule could be interpreted in a valid manner through use of a 2004 Division staff report.

At specific issue in the case is whether the stop loss rule is triggered by a hospital’s satisfaction of the $40,000 threshold alone, or whether the hospital must also show that the services provided during the admission

Justice Jan Patterson

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a subclaimant and that request will be adjudicated by the Division’s hearings staff.

A subclaimant may not independently pursue dispute resolution of compensability or extent of injury issues that have already been resolved by the agreement of the parties (carrier and claimant) or by a decision of the Division or a court. The subclaimant is bound by such dispute resolution outcomes.

The new rules also answer the question of who is responsible for reimbursing the injured employee’s co-payment. The Division has determined that the health care provider who directly received the additional funds from the injured employee is in the best position to determine the amount of refund that is due to the injured employee.

CarrierS muSt report mediCal paymentS timely

In one of his lasts acts as Commissioner of Workers’ Compensation, Albert Betts issued DWC Commissioner’s Bulletin No. B-0049-08, which is found in this edition of FOLIO.

were “unusually extensive.” Justice Henson questioned whether that term was too vague to have meaning. Justice Patterson, however, observed that the term “fair and reasonable,” which has been successfully construed on many occasions was “hardly more concrete” than the term “unusually extensive.”

Last year, Travis County District Judge Margaret Cooper issued a declaratory judgment that the stop loss rule should be interpreted in the manner advocated by the hospital parties. The lawsuit focused on whether there is a “one-prong” or “two-prong” test for applying the stop-loss provision. Judge Cooper concluded that the test was a “one-prong” test.

The stop loss litigation has a long and complex history. In the spring of 2003, the State Office of Administrative Hearings issued a ruling applying the Hospital Fee Guideline to limit stop loss reimbursement of hospital fee bills to “unusual” cases. Because hospitals had substantially increased their charges, most bills had begun to exceed the stop loss threshold. That was not the intention of the Commission when they adopted the 1997 HFG containing the exception to the standard per diem reimbursement.

In 2004, in response to a request from the chairman of the Texas Workers’ Compensation Commission, agency staff issued a report announcing that TWCC would adopt the SOAH interpretation and would require that hospitals prove that services provided by the hospital were unusually costly and unusually extensive.

The staff report identified extraordinary events to include “complications, infections, or multiple surgeries.” The agency was also permitted to rely upon medical advice of the Medical Advisor, statistical surveys regarding length of stay, or other evidence based guidelines to identify unusual cases meriting reimbursement under the stop loss exception.

The Court of Appeals may also have to address whether the Labor Code’s 1997 requirement that the Division review the hospital fee guideline every two years is “directory” and not “mandatory,” as are the provisions requiring that the guideline be based on Medicare methodology.

This litigation is significant, because the court’s ultimate ruling will guide the Division of Workers’ Compensation in attempting to resolve more than 2,000 pending cases, representing more than $400 million in disputed charges.

The Court of Appeals submitted the case after argument and will issue a ruling on the court’s own internal schedule. Any decision of the Court of Appeals can be appealed to the Texas Supreme Court.

If you have questions about the stop loss litigation, please feel free to contact Steve Tipton or Bobby Stokes in our office.

Swansong: Commissioner Betts Signs Subclaimant Rules as His Last Act – continued from p. 1

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Review this bulletin carefully. The Division of Workers’ Compensation has

become concerned over the past few months that carriers, individually or through their TPAs or medical bill payment vendors, may have failed to accurately and timely report medical bill payment data to the Division.

Carriers must immediately correct any business process impediment to this obligation. Review your business process now. If your medical bill processing, including EDI reporting functions, are handled by a vendor or an administrator (or both), take steps to assure that all medical bill payments are reported accurately and timely.

Timely medical bill processing is a measure for the upcoming Performance Based Oversight process. But more importantly, it is a compliance concern for every carrier in the state.

If you have questions concerning the meaning or implications found in Commissioner’s Bulletin No. B-0049-08, please contact Steve Tipton, James Sheffield or Bobby Stokes in our office.

CommiSSioner’S Bulletin #B-0049-08

August 29, 2008

TO: All Workers’ Compensation Insurance Carriers RE: Medical Billing and Payment Data

The purpose of this bulletin is to reiterate the statutory and rule requirements regarding insurance carrier compliance with medical billing and payment data reporting.

tdi-dwC reView oF mediCal Billing and payment dataTDI-DWC recently conducted a limited review of selected insurance carriers to determine compliance with medical billing data reporting requirements and found that all medical billing and payment data is not being submitted. So far, this review of selected insurance

carriers has identified missing medical bills for calendar years 2006 and 2007. TDI-DWC is in the process of completing these reviews and is currently working with the affected insurance carriers to get this missing data reported in a timely fashion. Furthermore, a review of calendar year 2007 medical bill and payment data reported to TDI-DWC, indicates approximately 16% of the medical bills were not submitted within the 30 days required under 28 Tex. Admin. Code §134.802.

reQuirementS For data SuBmiSSionTex. Lab. Code Ann. §§413.007 and 401.024 require TDI-DWC to collect and maintain a statewide medical billing database and allows the commissioner to require electronic submission of information and prescribe the form, manner, and procedure for electronic submissions of information. 28 Tex. Admin. Code §134.802 requires insurance carriers to submit medical bill and medical payment data electronically to TDI-DWC within 30 days after the insurance carrier makes payment, denies payment, or receives a refund of overpayment on a medical bill.

eXpeCtationS oF mediCal Bill SuBmiSSionThe TDI-DWC expects all medical billing and payment data to be submitted timely, accurately and completely in accordance with the statute and applicable rules. Further, the TDI-DWC reminds all insurance carriers that they are responsible for the actions of their third party administrators’ and trading partners’ data reporting activities. TDI-DWC will be initiating on-going monitoring reviews for selected insurance carriers to ensure that all medical billing and payment data is submitted timely, accurately and completely. All insurance carriers are encouraged to develop and implement a data monitoring strategy that tracks the volume of medical billing records being submitted to TDI-DWC, the percentage of these records that are rejected and corrected and the timeliness of these data submissions. Failure to comply with TDI-DWC data reporting requirements may result in administrative penalties up to $25,000 per day per occurrence.


inSuranCe Carrier aCtionTDI-DWC is requesting that each insurance carrier identify their current trading partners for Medical Electronic Data Interchange as well as identify the person in charge of monitoring data submissions, including that person’s phone number and e-mail address and submit that information via e-mail to TDI-DWC. Please respond to [email protected] by September 26, 2008. Additionally, TDI-DWC expects insurance carriers and their trading partners to notify TDI-DWC on an ongoing basis if this information changes.

FurtHer inFormationFor further information on Medical EDI reporting, please see the EDI Guidelines at: http://www.tdi.state.tx.us/wc/edi/mededitoc.html. You may also contact the TXCOMP Help Desk at 1-888-489-2667.

Albert Betts Commissioner of Workers’ Compensation Texas Department of InsuranceFor more information contact: [email protected]

Beware oF a new 90-day rule trap

We have recently noticed an increase in cases where claimant’s representatives are laying a 90-day trap for the unwary adjuster.

As you know, the 90-day rule provides that the first certification of MMI and/or impairment becomes final if the carrier or the claimant does not dispute it within 90 days of receipt. Filing a request for designated doctor (DWC-32) or a request for benefit review conference (DWC-45) are the two methods by which a party disputes an impairment rating.

The trap is established when a designated doctor’s appointment is requested by either the carrier or the claimant on the issue of MMI and/or impairment. Shortly before the designated doctor’s appointment is scheduled to take place, some treating doctors are

sending the carrier a DWC-69 (certification of MMI) that assigns a high impairment rating (usually over 15 percent).

Because there is already an appointment scheduled on the MMI/IR issue with a designated doctor, claims representatives may be tempted to ignore the first certification, thinking that the already-scheduled appointment will suffice to dispute the first rating.

The same problem exists when you receive a designated doctor’s certification of MMI and impairment, and subsequently receive a report from the treating doctor, but with a certification date that precedes the date of the designated doctor’s report. Arguably, the finality provision is not triggered by the receipt of the certification; only the dispute period is. In other words, what matters is the date of certification. If, after receiving the designated doctor’s report, the carrier subsequently receives a prior certification, then it should still dispute it timely.

The law is far from settled at this time whether a previously requested designated doctor’s examination on the issue of MMI and/or impairment rating will be treated by the Division as an adequate dispute of a certification under these facts.

Until the Appeals Panel or a court hold otherwise, you should be wary of any case in which you receive a request for a designate doctor or a report and a certification of MMI from the treating doctor at about the same time, where one of the reports contains a certification that you disagree with.

We recommend that you review any pending case in your office where a designated doctor has been requested on the issue of MMI or impairment within the last 90 days. In that review, you should determine whether an impairment rating was received shortly before or after the designated doctor’s appointment. If you find any such case, and if you disagree with the impairment rating assigned by the non-designated doctor, you should immediately file a DWC-45 (Request for Benefit

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GQ CORnER

Q: Claimant was hired while living in Oklahoma. The employer’s corporate office is located in Indiana. Claimant

drives a rig to all 48 states within the continental United States. Claimant gets in a motor vehicle accident while driving in Texas. Can the claimant pursue workers’ compensation benefits under Texas law?

A: Yes. The single fact that the work-related injury occurred while the claimant was physically in Texas is

enough to allow him to pursue Texas workers’ compensation benefits. The extra-territorial jurisdiction statutes in the Texas Labor Code, sections 406.071 through 406.075, which allow a claimant to pursue Texas workers’ compensation benefits apply when the work-related injury occurs outside the state of Texas.

Q: Claimant is released to modified-duty. Employer has created a modified-duty job for claimant that requires her to

work during the day shift. Prior to the work-related injury, claimant worked the night shift. Claimant informed the employer that she is not refusing the modified-duty job offer but she cannot work during the day because of childcare issues. This was the reason she worked the night shift in the first place. Since claimant is not earning wages through the modified-duty job, can carrier credit those wages offered through the modified-duty job as post-injury earnings.

A: Carrier will not likely be able to take the wages offered through the modified-duty job offer as post-injury earnings

because the offered modified-duty job does not meet the requirements under Rule 129.6 and it is not work that is reasonably available. The Appeals Panel held in Decision No. 001502 that Rule 129.6 does not require an injured worker to adapt a significantly different schedule that the one on which she was employed at the time of her injury. As such, carrier does not get to credit those offered wages as post-injury wages.

Q: Is a carrier required to submit EDI data to DWC when it makes a payment to a group healthcare carrier pursuant to

section 409.0091 of the Texas Labor Code?

A: Currently, the statute exempts carriers from reporting this payment information electronically until DWC creates a rule

requiring such reporting. DWC has not created a rule requiring the electronic reporting of such payments.


Q: Claimant is in a coma as a result of a work-related injury. Claimant is married and Carrier is issuing temporary income

benefits in the claimant’s name which are being cashed by claimant’s spouse. Is the carrier required to obtain any documentation from claimant’s spouse, such as a power of attorney, in order to issue temporary income benefits?

A: Since the check is issued in the claimant’s name, carrier is not required to have any documentation prior to

issuing the temporary income benefit check.

Q: Claimant is examined by a doctor who does not accept workers’ compensation patients. This doctor, however, issues

an off-work slip for the claimant based upon claimant’s work-related injury. Can the claimant rely upon this off-work slip to assert that he has disability and is entitled to temporary income benefits?

A: Regardless of the doctor’s status within the workers’ compensation system, the off-work slip is still some evidence

of disability. Carrier would not be able to successfully defend against claimant’s disability claim based solely on the argument that the doctor who issued the off-work slip does not participate in the workers’ compensation system.

Q: Carrier is paying death benefits to a child beneficiary who has now reached 18 years old. She is going to enroll in

college. Is the beneficiary required to maintain a certain GPA while in college in order to be able to continue to receive death benefits?

A: Rule 132.4(f) provides that a child who is a full-time student at the time of the employee’s death and is less than 25

years old shall submit evidence of enrollment at an accredited educational institution. A child shall only be considered a full-time student if the child meets the educational institution’s requirements for a full-time student in the child’s course of study. Therefore, as long as the child meets her particular institution’s GPA requirements to continue to be eligible to take classes, then she has met the requirements of the rule.

Q: Are beneficiaries receiving death benefits entitled to a cost-of-living increase similarly to claimants who are

receiving lifetime income benefits?

A: No. Section 408.181 of the Texas Labor Code and Rule 132.1 provide that beneficiaries are entitled to 75% of the

decedent’s average weekly wage. There are no provisions allowing cost-of-living adjustments.


Review Conference) with the Division, which challenges the validity or applicability of the offending certification in the case.

Moreover we recommend that this issue be made the subject of discussion and training with all claims staff (including your medical only staff) so that anyone handling a Texas claim in the future will recognize the trap and know how to avoid being caught in it.

CommiSSioner adoptS aSC guidelineS

The Commissioner of Workers’ Compensation has adopted a health facility fee schedule for Ambulatory Surgical Centers that will dramatically increase payments made to those facilities. The new rule takes effect August 31, 2008. The new schedule is found at 28 TAC §134.402. This rule replaces the ASC fee schedule that was adopted in 2004.

The Division estimates that the new rule will increase ASC facility payments by $5 million or 23 percent in 2008 and by $14.9 million or 38 percent in 2009 when compared against historical workers’ compensation ASC payments.

The rule is designed to align ASC reimbursement with the Medicare system. This alignment will make the Texas workers’ compensation system more comparable to other health care systems, which, in the Division’s view, will discourage overutilization of services.

The new rule does not apply to political subdivisions with contractual relationships under Labor Code §504.053(b)(2).

The Division adopted Medicare’s reimbursement methodology, with minimal modifications to reflect use of separate reimbursement for surgically implanted devices in non-device intensive procedures to ensure injured employees have access to care,

including surgery where surgically implanted devices are medically necessary.

The new rule establishes two payment adjustment factors (PAFs): a high PAF of 235 percent and a low PAF of 153 percent of the Medicare ASC reimbursement rate. The new rule permits separate reimbursement of implantables in order to insulate facilities from potential losses directly related to the high costs of surgically implanted devices. This concept is replicates the implantable process adopted in the Hospital Fee Guidelines earlier this year.

The lower PAF (153 percent) maintains the offset ratio the Division used in establishing the lower PAF adopted in the hospital outpatient facility reimbursement methodology. Most Texas claims involving ASC services fall into this category.

The higher PAF (235 percent) represents a reimbursement methodology for device intensive procedures which allows separate reimbursement for the surgically implanted device either at the Medicare estimated cost, or the actual cost of the item plus an administrative fee. A Division study concluded that approximately 2 percent of Texas workers’ compensation claims are for ASC services are classified by Medicare as device intensive. These device intensive procedures are specifically identified by Medicare and have device costs that are at least 50 percent of the Medicare APC reimbursement. In certain APCs, the device portion of the APC may be as high as approximately 88 percent of the Medicare APC rate.

The standard Medicare ASC payment for most ASC covered surgical procedures is calculated by multiplying the ASC conversion factor ($41.401 for CY 2008) by the ASC relative payment weight set (based on the OPPS relative payment weight) for each separately payable procedure.

The complete lists of ASC covered surgical procedures and ASC covered ancillary services, the applicable payment indicators, payment rates for each covered surgical procedure and ancillary service before adjustment for regional wage variations, the wage adjusted payment rates, and wage indices are available on the

Beware of a new 90-Day Rule Trap – continued from p. 5


CMS web site at http://www.cms.hhs.gov/ascpayment/.

CMS is providing a four-year transition to the fully implemented revised ASC rates. Payments during the four-year transition to the fully implemented revised ASC payment rates will be based on a blend of the CY 2007 ASC payment rates and the revised ASC payment rates at 75/25 in CY 2008, 50/50 in CY 2009, and 25/75 in CY 2010 with payment at 100 percent of the revised ASC payment rates in 2011. Payment for covered surgical procedures added for ASC payment in CY 2008 or later and payment for covered ancillary services that are not paid separately under the existing ASC payment system will not be subject to a transition. For additional explanation, see http://www.cms.hhs.gov/ascpayment/.

In proposing payment adjustment factors for use in Rule 134.402, the Division considered historical reimbursement rates, the reimbursement rates as compared to Medicare reimbursement, and the reimbursement rates as compared to non-workers’ compensation reimbursement for ASC facility services.

ASC facility services account for a proportionally smaller portion of the medical benefits paid in the Texas workers’ compensation system than hospital or doctor services. The Division estimates that professional services make up approximately 65 % of total medical payments, non-ASC hospital payments make up approximately 21 % of total medical payments, and that ASC payments make up approximately three percent of total medical payments.

The ASC market is concentrated among a relative handful of facilities. Only 41 ASCs had more than 100 admissions each, representing 64 percent of ASC charges and 62 percent of ASC reimbursements. Seventy-six ASCs had almost 80 percent of the admissions.

deSCription oF tHe new ruleSRule 134.402(a) describes the applicability of the section. Rule 134.402(a)(1) states that the section applies to facility services provided on or after September 1, 2008 by an ASC, other than professional medical services. Rule 134.402(a)(2) notes that the section does not

apply to professional medical services billed by a health care provider not employed by the ASC, except for a surgical implant provider as described in the section; and, that it is not applicable to services provided through a workers’ compensation health care network certified pursuant to Insurance Code Chapter 1305, except as provided in Insurance Code Chapter 1305.

Rule 134.402(b) provides definitions for words and terms that are used in the section. Rule 134.402(b)(1) defines the term “Ambulatory Surgical Center” to mean a health care facility appropriately licensed by the Texas Department of State Health Services. Rule 134.402(b)(2) defines the term “ASC device portion” to mean the portion of the ASC payment rate that represents the cost of the implantable device, and says that it is calculated by applying the CMS OPPS device offset percentage to the OPPS payment rate. Rule 134.402(b)(3) defines the term “ASC service portion” to mean the Medicare ASC payment rate less the device portion. Rule 134.402(b)(4) defines the term “Device intensive procedure” to mean an ASC covered surgical procedure that has been designated by CMS as device intensive in TABLE 56-ASC COVERED SURGICAL PROCEDURES DESIGNATED AS DEVICE INTENSIVE FOR CY 2008, as published in the November 27, 2007 publication of the Federal Register, or its successor. Rule 134.402(b)(5) defines the term “Implantable” to mean an object or device that is surgically implanted, embedded, inserted, or otherwise applied, and related equipment necessary to operate, program, and recharge the implantable. Rule 134.402(b)(6) defines the term “Medicare payment policy” to mean reimbursement methodologies, models, and values or weights including its coding, billing, and reporting payment policies as set forth in the CMS payment policies specific to Medicare. Rule 134.402(b)(7) defines the term “Surgical implant provider” to mean a person that arranges for the provision of implantable devices to a health care facility and that seeks reimbursement for the implantable devices provided directly from an insurance carrier.

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Rule 134.402(c) clarifies that a surgical implant provider is subject to Chapter 133 and is considered a health care provider for purposes of the section and the sections in Chapter 133 of this title.

Rule 134.402(d) requires that for coding, billing, and reporting of facility services covered in the section, Texas workers’ compensation system participants shall apply Medicare payment policies in effect on the date a service is provided with any additions or exceptions specified in this section. Rule 134.402(d)(1) provides for the inclusion of specific provisions contained in the Labor Code or the Texas Department of Insurance, Division of Workers’ Compensation (Division) rules, including Chapter 134, as taking precedence over any conflicting provision adopted or utilized by the CMS in administering the Medicare program. Rule 134.402(d)(2) provides for the inclusion of Independent Review Organization decisions regarding medical necessity made in accordance with Labor Code §413.031 and §133.308 of this title (relating to MDR by Independent Review Organizations), which are made on a case-by-case basis, as taking precedence in that case only, over any Division rules and Medicare payment policies. Rule 134.402(d)(3) provides for the stated inclusion that whenever a component of the Medicare program is revised and effective, use of the revised component shall be required for compliance with Division rules, decisions, and orders for services rendered on and after the effective date, or after the effective date or the adoption date of the revised Medicare component, whichever is later.

Rule 134.402(e) establishes that regardless of billed amount, reimbursement methods shall be determined in the following order. The first method is in Rule 134.402(e)(1), which states that reimbursement is the amount for the service that is included in a specific fee schedule in a contract that complies with the requirements of Labor Code §413.011. The second method is provided in proposed §134.402(e)(2), which states that if no contracted fee schedule exists that complies with Labor Code §413.011, the maximum allowable reimbursement (MAR)

amount is as described under subsection (f) of the section, including reimbursements for implantables. The last method is addressed in Rule 134.402(e)(3) and provides that if no contracted fee schedule exists that complies with Labor Code §413.011, and an amount cannot be determined by application of the formula to calculate the MAR as outlined in subsection (f) of the section, then reimbursement shall be determined in accordance with §134.1 (relating to Medical Reimbursement).

Rule 134.402(f) requires that the reimbursement calculation used for establishing the MAR shall be the Medicare ASC reimbursement amount determined by applying the most recently adopted and effective Medicare Payment System Policies for Services Furnished in Ambulatory Surgical Centers and Outpatient Prospective Payment System reimbursement formula and factors as published annually in the Federal Register. Reimbursement shall be based on the fully implemented payment amount as in ADDENDUM AA, ASC COVERED SURGICAL PROCEDURES FOR CY 2008, as published in the November 27, 2007 publication of the Federal Register, or its successor.

Rule 134.402(f)(1) allows two payment structures. The first reimbursement for non-device intensive procedures is proposed to be the Medicare ASC facility reimbursement amount multiplied by 235 percent. In the alternative, if an ASC facility or surgical implant provider requests separate reimbursement for an implantable, reimbursement for the non-device intensive procedure is proposed to be the sum of two parts. The first part is the lesser of the manufacturer’s invoice amount or the net amount (exclusive of rebates and discounts) plus 10 percent or $1,000 per billed item add-on, whichever is less, but not to exceed $2,000 in add-on’s per admission. The second part is the Medicare ASC facility reimbursement amount multiplied by 153 percent.

Rule 134.402(f)(2) allows a proposed reimbursement for device intensive procedures to be the sum of the ASC device portion, and the ASC service portion multiplied by 235 percent. It also provides that if an ASC

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facility or surgical implant provider requests separate reimbursement for an implantable, reimbursement for the device intensive procedure shall be the sum of the lesser of the manufacturer’s invoice amount or the net amount (exclusive of rebates and discounts) plus 10 percent or $1,000 per billed item add-on, whichever is less, but not to exceed in $2,000 in add-on’s per admission and the ASC service portion multiplied by 235 percent.

Rule 134.402(g) states that a facility, or surgical implant provider with written agreement of the facility, may request separate reimbursement for an implantable. Rule 134.402(g)(1) provides that the facility or surgical implant provider requesting reimbursement for the implantable shall bill for the implantable on the Medicare-specific billing form for ASCs; attach a copy of the manufacturer’s invoice, or vendor’s invoice to the ASC facility or surgical implant provider; and include with the billing a certification that the amount billed represents the actual cost as specified in the text. Rule 134.402(g)(2) states that an insurance carrier may use the audit process under §133.230 (relating to Insurance Carrier Audit of a Medical Bill) to seek verification that the amount certified under paragraph (1) properly reflects the requirements of this subsection. Such verification may also take place in the Medical Dispute Resolution process under §133.307 (relating to MDR of Fee Dispute), if that process is properly requested, notwithstanding §133.307(d)(2)(B). Rule 134.402(g)(3) provides that nothing in the rule precludes an ASC or insurance carrier from utilizing a surgical implant provider to arrange for the provision of implantable devices and that implantables provided by such a surgical implant provider shall be reimbursed according to the subsection.

Rule 134.402(h) establishes that for medical services provided in an ASC, but not addressed in the Medicare payment policies as outlined in subsection (f) of the section, and for which Medicare reimburses using other Medicare fee schedules, reimbursement shall be made using the applicable Division Fee Guideline in effect for that service on the date the service was provided.

Rule 134.402(i) provides that if Medicare prohibits a service from being performed in an ASC setting, the insurance carrier, health care provider, and ASC may agree, on a voluntary basis, to an ASC facility setting. Rule 134.402(i)(1) states that the agreement may occur before or during preauthorization. Proposed amended subsection (i)(2) also sets forth that a preauthorization request may be submitted for an ASC setting only if an agreement has already been reached and a copy of the signed agreement is filed as a part of the preauthorization request. Proposed amended subsection (i)(3) provides that the agreement between the insurance carrier and the ASC must be in writing and include the reimbursement amount; any other provisions of the agreement; and names, titles, and signatures of both parties, with dates. Proposed amended subsection (i)(4) states that copies of the agreement are to be kept by both parties and that the agreement does not constitute a voluntary network established in accordance with Labor Code §413.011(d-1). Proposed amended (i)(5) provides that copies of the agreement are to be kept by both parties and that upon request of the Division, the agreement information shall be submitted in the form and manner prescribed by the Division.

Rule 134.402(j) establishes the severability of this section and states, if a court of competent jurisdiction holds that any provision of the section is inconsistent with any statutes of this state, are unconstitutional, or are invalid for any reason, the remaining provisions of the section shall remain in full effect.

Supreme Court SetS oral argument in ‘entergy’

CaSe

The Texas Supreme Court has scheduled an October 16, 2008 oral argument for the rehearing of it’s decision in Entergy Gulf States, Inc. v. Summers, No. 05-0272 (Tex. August 31, 2007). The argument will take place on


the campus of the SMU Law School and is scheduled to start at 9:00 a.m.

The Court granted rehearing on the case and scheduled a second oral argument despite an initial unanimous decision. The court may have granted rehearing because the court’s original opinion misstated the statutory language being construed in the case. The key language to be construed was first enacted in the 1989 reform act rather than in a 1993 recodification, as suggested by the court.

In Entergy, the high court clarified the distinction under Texas law between a premises-owner and a “General Contractor” and held that an owner acting as its own general contractor may obtain the protection under the Texas Labor of restricting an injured employee’s remedies to workers’ compensation benefits. Opponents of the decision say the ruling has sweeping implications for worker safety because plant owners can easily avoid contract employees’ negligence lawsuits by buying workers’ compensation insurance.

Members of both houses of the Legislature have complained bitterly about the high court’s decision. This spring, the court’s decision was criticized in hearings before the Senate State Affairs Committee, House Business and Industry and House Insurance Committees.

The Entergy decision has generated the filing of no fewer than eight Amicus Curiae briefs from interested non-parties, including the Texas Civil Justice League, the Texas Trial Lawyers Association, the Texas AFL-CIO and Texans for Lawsuit Reform. Representative Craig Eiland (D- Galveston) filed a brief in opposition to the court’s ruling, which was signed on behalf of Sen. Rodney Ellis (D- Houston), Sen. Jeff Wentworth (R- San Antonio) and Rep. Bryan Hughes (R- Mineola).

The court has announced that a live video webcasts of the argument would not be available but that the proceedings would be video-recorded and that the recordings will be posted soon as possible after the arguments. It is possible that the court will find a way to webcast the argument live from the law school campus.

John Summers worked as the employee of International Maintenance Corp., which

contracted to perform construction and maintenance at Entergy Gulf States’s plant. The parties’ contract provided that Entergy was a statutory employer that would procure workers’ compensation coverage for IMC’s employees.

Section 406 of the Texas Labor Code provides that a “general contractor” may enter a written contract to provide workers’ compensation coverage for a subcontractor’s employees, which makes the general contractor the employer of the subcontractor’s employees for purposes of the workers’ compensation laws. A “general contractor” is defined as “a person who undertakes to procure the performance of work or a service, either separately or through the use of subcontractors.” (Tex. Labor Code Sec. 406.123 (e)).

The lower appeals court had followed earlier cases and held that a general contractor had to enter a prime contract with another [an owner] and then agree to subcontract all or part of that work to a subcontractor. This interpretation was based on language in the Labor Code that the court mistakenly described to have been changed in 1993 revisions when the Code was recodified, ostensibly “without substantive change.” Nevertheless, the Texas Supreme Court held that a court must give effect to a statute’s clear and specific wording despite a generic statement disclaiming substantive changes. The current statute contains no limitation on the definition and permits an owner to qualify as a general contractor on its own behalf.

How tHe SeCtionS will FunCtion

Adopted §140.6 establishes the procedures that apply to all subclaimants, including health care insurers. Subsection (a) specifies that §140.6 applies to a subclaim under Labor Code §409.009. Subsection (b) specifies that a subclaimant is a party to a claim concerning workers’ compensation benefits. Subsection

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(c) specifies a subclaimant’s rights in relation to the injured employee and the circumstances in which a subclaimant may pursue a claim for reimbursement of a benefit without the participation of the injured employee. Subsection (d) provides that subclaimants who are not described in §409.0091 must pursue a claim for reimbursement of medical benefits and medical dispute resolution under Chapters 133 and 134 of this title (relating to General Medical Provisions and Benefits—Guidelines for Medical Services, Charges, and Payments). A health care insurer must submit a request in the form and manner prescribed by the Division. Workers’ compensation insurance carriers must process requests from subclaimants pursuant to Chapters 133 and 134 of this title. Subsection (e) provides for a subclaimant to pursue a contested case hearing under Chapters 140-143 of this title (relating to Dispute Resolution).

Adopted §140.7 applies to health care insurers under Labor Code §409.0091. Subsection (a) specifies that this section only applies to subclaims by a health care insurer based on information received under Labor Code §402.084(c-3). Subsection (b) defines the term “health care insurer” as an insurance carrier and an authorized representative of an insurance carrier, as described by Labor Code §402.084(c-1). Subsection (c) provides for the reimbursement of health care insurers for medical benefits provided to or paid on behalf of an injured employee with a compensable workers’ compensation claim in accordance with §409.0091 and §140.7 and §140.8 of this title. Subsection (d) specifies that it is not a defense to a subclaim by a health care insurer under §409.0091 that: (1) the health care insurer has not sought reimbursement from a health care provider or the health care insurer’s insured; (2) the health care insurer or the health care provider did not request preauthorization under §134.600 of this title (relating to Preauthorization, Concurrent Review, and Voluntary Certification of Health Care) or Labor Code §413.014; or, (3) the health care provider did not bill the workers’ compensation insurance carrier, as provided by §408.027, before the 95th day after the date the

health care for which the health care insurer paid was provided.

Adopted §140.8 establishes the process for health care insurers seeking reimbursement from a workers’ compensation insurance carrier when pursuing a claim for reimbursement of medical benefits under §409.0091. Subsection (a) states that this section only applies to subclaims by a health care insurer based on information received under Labor Code §402.084(c-3). Subsection (b) defines the term “health care insurer.” Subsection (c) provides that a health care insurer seeking reimbursement must first file a reimbursement request with the workers’ compensation insurance carrier. Subsection (c)(1) sets forth the procedure for filing a reimbursement request with the workers’ compensation insurance carrier. The form used for the reimbursement request must be the form prescribed by the Division and must contain all the required elements listed on the form. Subsection (c)(2) also requires the health care insurer to provide a notice of the reimbursement request to the injured employee and the health care provider that performed the services that are the subject of the reimbursement request. Subsection (d) sets forth the deadlines for responding to the request for reimbursement and establishes criteria for the workers’ compensation insurance carrier when requesting additional information from the health care insurer for processing the reimbursement request. Any request by the workers’ compensation insurance carrier for additional information shall be in writing and be relevant and necessary for the resolution of the request. A workers’ compensation insurance carrier shall not be held responsible or otherwise penalized for the costs of obtaining additional information if the workers’ compensation insurance carrier denies payment in order to move to dispute resolution to obtain additional information to process the request. Subsection (d) also establishes that it is the health care insurer’s obligation to furnish its authorized representatives with any information necessary for the resolution of a reimbursement request. The Division considers any medical billing

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information or documentation possessed by the health care insurer or one of its authorized representatives to be simultaneously possessed by the health care insurer and all of its authorized representatives. If the workers’ compensation insurance carrier has requested information from the health care insurer, the carrier must respond to the request for reimbursement within 120 days after the date the request was first received.

Section 140.8(e) provides that a workers’ compensation insurance carrier must either pay, reduce, or deny a reimbursement request and provides the procedures to follow with each response. Subsection (f) requires a health care provider to refund to the injured employee all payments received from the injured employee for care relating to the claim within 45 days of receipt of the notice that the claim is compensable. Subsection (g) sets forth the procedures for filing notice of subclaimant status if the reimbursement request is not accepted in its entirety. Subsection (h) sets forth the procedures for filing a request for dispute resolution, based on the reasons for the denial of the reimbursement request. Subsection (i) sets forth the procedures when multiple entities seek reimbursement for the same services.

SeleCted CommentS From tHe preamBle to

tHe SuBClaim ruleS

The Division has passed rules governing subclaims under Sections 409.009 and 409.0091 of the Texas Labor Code. Carriers and subclaimants must now begin to file claims and process claims using the new rules. Moreover, the Division must begin to adjudicate claims pursuant to the rules.

The preamble to the new rules was drafted by Division staff and contains the agency’s view of the meaning of the new rules. We have outlined the Division’s comments to many common questions below.

Submitting Subclaims under the rules1. Who can pursue recovery under § 409.009 and § 409.0091?All of the filing deadlines in §409.0091 are tied to the date of a data match. Without a data match, there would be no basis upon which to establish a filing deadline. Therefore, §409.0091 only applies to cases where there is a data match under §402.084(c-3).

If an authorized representative meets the definition of subclaimant under §409.009, they necessarily have all rights of a §409.009 subclaimant. If they do not meet the definition of a §409.009 subclaimant, the authorized representative is limited to pursuing only that which is allowed under §409.0091.

The Division disagrees that §409.0091 is the exclusive remedy for a §402.084(c-1) health care insurer. No such exclusive remedy language is contained in §409.0091. Additionally, §409.009 was not amended to exclude §402.084(c-1) health care insurers. Section 409.0091 allows a health care insurer to bring a claim which resulted from a data match, and limits the defenses available to a workers’ compensation insurance carrier. Section 409.009 allows any person who has provided compensation, directly or indirectly, to or for an employee or beneficiary, and has sought and been refused reimbursement, to pursue dispute resolution.

2. What deadlines apply to subclaimants?Although there are statutory limitations in §409.0091 on time limits for filing a claim for reimbursement and bringing a case to dispute resolution which are reflected in §140.7 and §140.8, there are no statutory deadlines for filing under §409.009.

3. Is the date of the data match a required element of the request for reimbursement under § 409.0091?The Division agrees that the date of the data match is a threshold requirement for reimbursement eligibility. As such, health care insurers seeking reimbursement should provide the workers’ compensation insurance carriers with information detailing the date of the data match.


4. How must a group health insurer submit a request for reimbursement under § 409.0091?The Division clarifies that a health care insurer seeking reimbursement must submit a form DWC-26, as adopted §140.8(b)(1) requires a request to be in the form/format and manner prescribed by the Division and requires the request to contain all the required elements listed on the form. However, the Division declines to insert the word “complete” before the words “reimbursement request” in §140.8(b), §140.8(c), and §140.8(d), because the Division does not want to create additional disputes based on arguments that a request is not “complete” which would unnecessarily delay the reimbursement determination process. For this same reason, the Division declines to create a definition for “complete reimbursement request.” If a workers’ compensation insurance carrier believes it has not obtained all the information necessary to make a determination, it should request additional information as permitted by the statute.

5. What subclaims are governed by the new rules?The statute did not “grandfather” claims already in process. An administrative agency may make changes applicable to future steps in pending cases. No one has a vested right in a procedural remedy. Texas Dept. of Health v. Long, 659 S.W. 2d 158. These are procedural rules. The rules will apply to all procedures and processes occurring on or after the effective date of these rules. They will not apply to procedures and processes that have occurred prior to the effective date of these rules.

6. Can subclaimants pursue non-medical claims?Adopted §140.6(c)(1) and (2) have been revised and the term “compensation” has been deleted. The text now states “reimbursement of a benefit” as the term “benefit” is defined in Labor Code §401.011(5). Accordingly, §409.009 does not limit a subclaimant to pursue reimbursement for only medical benefits.

processing Subclaims under the rules1. What happens if the request for reimbursement under § 409.0091 is incomplete when submitted?The Division notes that adopted §140.8(b)(1) provides that “The request must be in the form/format and manner prescribed by the Division of Workers’ Compensation (Division) and must contain all the required elements listed on the form.” Upon receipt of a request for reimbursement, if a workers’ compensation insurance carrier believes that this rule has been violated it can file a complaint with the Division pursuant to 28 TAC §180.2, relating to Referrals.

2. Should a carrier refuse to process or delay processing an incomplete request for reimbursement under § 409.0091?Section 409.0091(f) requires submission of specific information in an health care insurer’s request for reimbursement; however, §409.0091(f), does not specify that time frames are to be stayed if all the information is not submitted, and §409.0091(i) and (j) permit a workers’ compensation insurance carrier to request additional information, establishing an additional amount of time for such a request. The Division believes that introducing a delay based on arguments concerning the “completeness” of a request for reimbursement would unnecessarily delay the reimbursement process, considering that the rule contains provisions allowing a workers’ compensation insurance carrier to request additional information.

3. Are there any limitations on the nature of the “additional information” that a carrier can request from the subclaimant in order to process the subclaim request?The statute does not contain language stating that “additional information” is solely information needed beyond the elements outlined in the statute, and the Division does not believe that creating such a provision would aid in the resolution of claims. Instances might occur when a workers’ compensation insurance carrier needs to request additional information, even if such information had previously been provided pursuant to the statute, such as if

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the information could not be read or was accidentally left incomplete. Preventing the workers’ compensation insurance carrier from requesting the information as part of the initial request and response period would only increase the likelihood of such a claim leading to a dispute resolution.

4. Must a health care insurer comply with a carrier’s request for additional information under § 409.0091?The Division agrees with the comment in part and agrees to change the wording as follows: “It is the health care insurer’s obligation to furnish its authorized representatives with any information within its possession or control that is necessary for the resolution of a reimbursement request.” Also, hearing officers have been delegated authority to approve subpoena requests to enable parties to properly prepare and possibly reach an agreement before requesting dispute resolution.

5. Are carriers subject to administrative violations for failure to respond to a request for reimbursement under § 409.0091?§409.0091(q) provides: “An action or failure to act by a workers’ compensation insurance carrier under this section may not serve as the basis for an examination or administrative action by the department or the division, or for any cause of action by any person, except for judicial review under this subtitle.” If the Division were to order immediate payment of the request for reimbursement because a workers compensation insurance carrier failed to respond to a request for reimbursement, it would constitute an administrative action in violation of §409.0091(q).

6. Can a carrier respond to a request for reimbursement by using an EOB?§140.8(e)(1)(E) is amended to clarify that “If the claim is compensable” then “the notice shall include an explanation that the claim is compensable and that the health care provider must reimburse the injured employee for any amounts paid to the health care provider

by the injured employee.” The Division also clarifies that this notice may be included in the explanation of benefits required by adopted subsection (e)(2).

The notice requirement in §140.8(d)(1)(E) requires the carrier to give its response to the reimbursement request to the injured employee and health care provider. In the same notice, it requires an explanation that, if the claim is compensable, the health care provider must reimburse the injured employee for any amounts paid to the health care provider by the injured employee. It is appropriate that the carrier explain its own position on the reimbursement request. It is economical and efficient to include the notice on reimbursement in the same communication.

7. Are there different time limits for responding to a request for reimbursement and for producing an EOB?Time limits are set for a workers’ compensation insurance carrier to respond to a health care insurer’s request for reimbursement. The workers’ compensation carrier’s response must include an explanation of benefits as required by §140.8(d)(1)(E), (2) & (3). Therefore, the time limit for providing an explanation of benefits is the same as the time limit for the response to the request for reimbursement.

8. Must a carrier respond with payment when it receives a request for reimbursement, resulting in a reduction of the applicable amount, if it has a liability defense?Section 140.8(d)(2) accommodates the rights of the carrier to deny or reduce payment. Subsection (d)(1) does not imply that the “carrier must pay the applicable fee amount, regardless of other defenses” when read in conjunction with the totality of §140.8(d)(1).

9. Who is responsible for reimbursing the injured employee’s co-payment?A health care provider directly received the additional funds from the injured employee and is in the best position to determine the amount of refund that is due to the injured employee.


10. Is it a defense to a subclaimant’s request that the carrier has already reimbursed a different health care insurer?The rule does not preclude the statutory defense of a prior payment for the medical care that is the subject of the reimbursement request. The rule merely sets out a non-exclusive process to help those involved to decide which of the multiple entities attempting to collect payment for the same medical service should be paid.

11. Are subclaimants entitled to reimbursement from carriers who have network contracts?If a health care insurer believes it has a valid subclaim under the §409.0091, it may request reimbursement and pursue dispute resolution. However, if the injured employee for whom the care was provided is subject to certified network requirements, the workers’ compensation insurance carrier may not be liable for the health care unless the health care was provided by an in-network provider selected or assigned pursuant to Insurance Code Chapter 1305 or unless the health care meets one of the three out-of-network exceptions listed in Insurance Code §1305.006.

resolving Subclaims under the rules1. How is dispute resolution generally supposed to happen in subclaimant cases?Section 409.0091(m) provides “In a dispute filed under Chapter 410 that arises from a subclaim under this section, a hearing officer may issue an order regarding compensability or eligibility for benefits and order the workers’ compensation insurance carrier to reimburse health care services paid by the health care insurer as appropriate under this subtitle. Any dispute over the amount of medical benefits owed under this section, including medical necessity issues, shall be determined by medical dispute resolution under §413.031 and §413.032.” Section 140.8(g)(1) concerns indemnity disputes that are based on lack of compensability. In this context the compensable disputes are whether the claimed injury is compensable and whether the requested medical fee is for medical care

for an injurious condition that is part of the compensable injury. Subclaimants who wish to file a request for dispute resolution for such a dispute are referred to §141.1 of this title (relating to Requesting and Setting a Benefit Review Conference), because it contains the Division rules promulgated pursuant to Labor Code Chapter 410. Section 140.8(g)(2) concerns disputes that are based on lack of medical necessity and §140.8(g)(3) concerns fee disputes. Subclaimants who wish to file a request for dispute resolution for such disputes are referred to §133.307 and §133.308 of this title, because these are the Division rules promulgated pursuant to Labor Code §413.031 and §413.032. Subclaimant disputes are already handled in “Exceptions” and are specifically listed in §140.8(g)(2) and (3) to address differences that are necessary to address subclaimant disputes. Division proceedings under Labor Code Chapter 410 currently include subclaimants, so no exceptions for subclaimants need to be included in §140.8(g)(1).

2. How will Dispute Resolution of Medical Fee Disputes Be Handled by the Division?When there is a medical fee dispute filed, all parties are required to be given notice. Parties include the health care provider, the health care insurer, the injured worker, and the workers’ compensation insurer. A party wishing to participate in dispute resolution has the burden to establish that they are entitled to the relief they seek. This includes establishing that health care was provided and that it was provided for a compensable injury. The final result of dispute resolution is sent to all parties. Furthermore, subrogation of claims between insurance carriers is a remedy in equity which is a complex and challenging process within the civil legal system and is equally complex and challenging in the Division’s informal administrative system. However, the Division is committed to adjudicating disputes between insurance carriers in the same manner as disputes between injured employees, employers, health care providers, and workers’ compensation insurance carriers.


3. How will Dispute Resolution of Medical Necessity Be Handled by the Division?The Division clarifies that appeals of medical necessity and medical fee disputes are subject to the current version of §133.307 and §133.308, with any modifications addressed in §140.8.

4. Can subclaimants pursue claims and obtain resolution of compensability issues?The Division agrees that some health care insurers may have a direct legal interest in a workers’ compensation claim, but disagrees with commenters’ assertion that a subclaimant health care insurer is entitled to dispute resolution regardless of action or inaction by the injured employee.

It is accurate to state that a health care insurer has an interest in proceedings related to claims for which they have paid health care, and that a health care insurer’s rights are created by statute, the terms of the policy, and common law. Subrogation is a remedy in courts of equity by which the court places one party, to whom a legal right does not belong, into the shoes of another party for the purpose of doing justice. However, the Division’s appeals process is not a court of equity, and the Division has not been given the opportunity to create rules based solely on equitable principals. Instead, the Division’s rules must be based on statutes, and §§140.6 – 140.8 implement §409.009 and §409.0091. In §§140.6 – 140.8, the Division has not attempted to interpret or promulgate rules based on the language in health care insurer policies or the common law.

Labor Code §410.030(b) provides that a signed agreement: “…is binding on the claimant, if represented by an attorney, to the same extent as on the insurance carrier. If the claimant is not represented by an attorney, the agreement is binding on the claimant through the conclusion of all matters relating to the claim while the claim is pending before the division, unless the commissioner for good cause relieves the claimant of the effect of the agreement.” A health care insurer may obtain the rights of the injured employee once it provides health care to an injured employee; however, pursuant to Labor Code §410.030(b), once an injured employee has

signed an agreement, he or she is bound by the agreement and does not have the right to ignore that agreement, so there is no longer a right to pass on to the health care insurer. Pursuant to Labor Code §410.205, “a decision of the appeals panel regarding benefits is final in the absence of a timely appeal for judicial review.” Once an injured employee receives a final decision from the appeals panel he or she is bound by the decision and does not have the right to ignore that decision, so there is no longer a right to pass on to the health care insurer.

The Division notes that §§140.6 – 140.8 do not attempt to restrict or limit the rights a health care insurer has under other statutes, the terms of an insurance policy, or common law. If a health care insurer chooses to pursue the remedies available under §409.009 and §409.0091, it must comply with Title 5 of the Labor Code and Division rules. However, the health care insurer is not precluded from pursuing other remedies available under other statutes, the terms of an insurance policy, or common law instead.

The Division disagrees that §409.009 only grants a right to file a written claim without the right to take any kind of action regarding that claim. The Labor Code and court cases establish and clarify the authority and obligation of the Division to provide administrative relief in the form of dispute resolution to resolve disputed claims.

Section 409.009 places no limitations or restrictions on arguments, defenses, or legal theories which a subclaimant may bring [ed. including the right to raise a “waiver” argument]. Likewise, a subclaimant is subject to any defenses which the workers’ compensation carrier may have against the injured employee. Section 409.0091 specifically limits defenses available to the workers’ compensation carrier, but does not limit arguments or legal theories available to the health care insurer.

5. Can subclaimants argue “waiver” issues?Can carrier assert liability defenses against subclaimants?Section 409.009 allows any person who has provided compensation, directly or indirectly,


to or for an employee or beneficiary, and has sought and been refused reimbursement, to pursue dispute resolution. Section 409.009 places no limitations or restrictions on arguments, defenses, or legal theories which a subclaimant may bring. Likewise, a subclaimant is subject to any defenses which the workers’ compensation carrier may have against the injured employee. Section 409.0091 specifically limits defenses available to the workers’ compensation insurance carrier, but does not limit arguments or legal theories available to the health care insurer.

6. Is the subclaimant bound to follow the injured workers’ wishes on compensability issues?The Division disagrees that a subclaimant is subject to the position and control of an injured employee in every circumstance. However, §140.6 provides sufficient safeguards for the injured employee that did not exist previously by rule.

7. What rights to notice do injured employees have?In any dispute, the injured employee is required to be given notice at that injured employee’s last known address of record. If the injured employee has an objection to the timing of the hearing, the injured employee may request a continuance. New §140.6 affords safeguards for the injured employee that did not previously exist and adopted §140.6(c)(2)(D) and (c)(3)(A) are added to the rule to require a subclaimant to provide the injured employee with written notice of the intent to pursue a claim for reimbursement of a benefit and to show the subclaimant has met this requirement at a contested case hearing.

8. Will the Division still use the 10-day letter process?The practice of sending a “10-day letter” to a party who fails to attend a contested case hearing is not mandated by statute or rule. It is a practice performed by Hearings Officers to insure due process. The Division has no intention of discontinuing the 10-day letter practice at this time. If the injured employee

requires additional time for the hearing, the injured employee may request a continuance.

miscellaneous dwC responses to Comments regarding Subclaims under the rulesComment: Commenter recommends that the form DWC-026 be revised to require the mailing address of the provider be included. This creates problems for the carrier as to where to send a copy of the carrier’s response under §140.8(d)(1)(E) and where to send the explanation of benefits as required under §140.8(g)(3)(C) or where the carrier may request documents from the provider.

Commenter recommends that the form DWC-026 be revised to include the dates under §409.0091(n) or (s), as applicable. The commenter states that carriers are forced with every reimbursement request to ask for these dates as “additional information” in order to determine compliance with §409.0091(n) time limits, made applicable through §409.0091(f). The commenter states that the Division has made no mention of how, or if, it intends to enforce the §409.0091(n) deadlines. Agency Response: The Division duly notes the recommendations. However, the recommendations do not constitute comment on the proposed rules, but rather comment regarding a Division form. The Division will apply the deadlines, if the issue is raised, in dispute resolution.

Comment: Commenter recommends that the rule [§ 140.8(e)] provide that the Division should place a copy of the subclaimant’s notice in the workers’ compensation insurer’s box at Division’s Central office within two days of receipt. Agency Response: The Division disagrees. Prior to filing for Notice of Subclaimant Status, the party must file a request for reimbursement with the workers’ compensation insurer and have that request denied. Filing a Notice of Subclaimant Status merely allows the subclaimant to be notified of any further proceedings on the claim. The workers’ compensation insurer is already aware of the existence and claim of the subclaimant, based on the Request for Reimbursement.


Comment: Commenters state §140.8(e)(2) permits subclaimants to file their notice of subclaimant status with any field office location or the Division’s central office. Commenters recommend that subclaimants file their notice of subclaimant status only with the Division’s central office. This requirement would greatly reduce the chance of the requests being misplaced by field office personnel and generally speed up processing time. Agency Response: The Division disagrees. Any notice is deemed received by the Division when filed at any Division office.

Comment: Commenter asserts that the subclaimant has no independent right to pursue compensability. The commenter states that §409.009 grants no more than the right to “file” a claim. Section 11 of HB 724 specifically provided that “[t]he changes made by this Act apply only to subclaims based on an injury that has not been denied for compensability or that has been determined by the division to be compensable.” Thus, the commenter reasons that §409.009(m) must be read in this context. Further, subsection (m) explicitly references Chapter 410 of the Labor Code (Adjudication of Disputes). Chapter 410 discusses the parties to disputes under that chapter in Labor Code §410.006: the claimant and the insurance carrier. Subclaimants are not mentioned. Health care providers are not mentioned. While the Labor Code §413.0311 (relating to Review of Certain Medical Disputes; Contested Case Hearing) also references Chapter 410, it does so only as a matter of procedure as evidenced by the use of the word “manner”. Thus, per commenter, subsection (m), particularly when read in light of Section 11 of HB 724, merely provides that if the subclaimant files a claim for reimbursement, and if the claimant then elects to pursue the claim, then the hearing officer may make a finding of compensability. The commenter concludes that to hold otherwise would be to render Section 11 meaningless and since subsection (m) and Section 11 may be read together, they must be. Agency Response: The Division disagrees. The authority of the Division to provide dispute resolution to subclaimants is fully

discussed in the reasoned justification portion of this preamble.

Resolution of disputes is addressed in §409.0091(l) and (m). Section 409.0091(l) provides, in part, “Any dispute that arises from a failure to respond to or a reduction or denial of a request for reimbursement of services that form the basis of the subclaim must go through the appropriate dispute resolution process under this subtitle and division rules.” Section 409.0091(m) provides, in part, “Any dispute over the amount of medical benefits owed under this section, including medical necessity issues, shall be determined by medical dispute resolution under §413.031 and §413.032.”

Pursuant to these provisions, a fee dispute or a medical necessity dispute resulting from a request for reimbursement under §409.0091 should be resolved under the Division’s medical dispute resolution process and §413.031 and §413.032. These sections provide the initial level of dispute resolution for fee disputes and medical necessity disputes.

Fee disputes fall under §413.031(c); pursuant to this section the Division has the role of resolving disputes over the amount of payment due. Medical necessity disputes fall under §413.031(d) and (e); pursuant to these subsections, medical necessity disputes are resolved through use of an Independent Review Organization (IRO), and §413.032 establishes the minimum elements that must be included in an IRO decision. Additionally, §413.031(f) provides, “The commissioner by rule shall specify the appropriate dispute resolution process for disputes in which a claimant has paid for medical services and seeks reimbursement.”

After the initial level of dispute resolution under §413.031(c), (d), (e), or (f), parties with an unresolved dispute are entitled to an administrative hearing. Section 413.0311 applies to disputes that have been through the initial process as set out in §413.031(b) through (i) and that involve a medical fee dispute in which the amount of reimbursement sought by the requestor in its request for medical dispute resolution does not exceed $2,000 or an appeal of an IRO regarding determination of the retrospective medical necessity for a health care service for which the amount billed does

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not exceed $3,000. It provides for a hearing by a Division hearing officer under Labor Code Chapter 410, Subchapter D. Section 413.031(l) applies to a medical dispute regarding spinal surgery that remains unresolved after a review by an independent review organization as provided by subsections (d) and (e), and provides for dispute resolution as provided by Chapter 410. Section 413.031(k) applies to any dispute that does not fall under §413.0310 or §413.031(l), and provides for a SOAH hearing.

Comment: While §133.307(e)(3)(F) was intended to apply to a contractual fee arrangement between a workers’ compensation insurance carrier or network, the commenter recommends that the Division clarifies that §133.307(e)(3)(F) does not apply to a contractual fee arrangement between a health care insurer and health care provider. The commenter recommends that the Division can make the clarification regarding both subsections either in the rule preamble or by amendments to the text. Agency Response: The Division disagrees with the recommended clarification of §140.8(g)(2)(C). The recommended change is contrary to the statutory language in §409.0091(d).

The Division disagrees with the recommended clarification of §140.8(g)(3)(B). §133.307(e)(3)(F) does apply to a contractual fee agreement between a health care insurer and health care provider. Further, §409.0091(h) provides that “For each medical benefit paid, the workers’ compensation insurance carrier shall pay to the health care insurer the lesser of the amount payable under the applicable fee guideline as of the date of service or the actual amount paid by the health care insurer.”

diViSion ClariFieS How to uSe tHe odg

Formulary

The Division of Workers’ Compensation has not yet passed a closed formulary, although it is under legislative mandate to do so. The

agency has, however, adopted the Official Disability Guidelines (ODG) as the official treatment guideline for Texas workers’ compensation claims. The ODG recently incorporated a draft drug formulary into its guidelines and system stakeholders have begun to question how the ODG formulary relates to Texas claims.

The Division recently issued a memo addressing this question. Below are the relevant passages from the Division’s latest memo.

TDI-DWC adopted the Official Disability Guidelines – Treatment in Workers’ Comp (ODG) as the treatment guidelines, effective May 1, 2007, for non-network health care services for workers’ compensation injuries. ODG recently incorporated a draft Workers’ Compensation Drug Formulary (Appendix A) into its treatment guidelines; however, TDI-DWC has not adopted ODG’s Appendix A as its pharmacy closed formulary pursuant to Texas Labor Code §408.028(b).

Use of the ODG

System participants should continue using the ODG treatment guidelines and continue to seek preauthorization for treatment, including prescriptions, when services fall outside or in excess of the ODG treatment guidelines. Appendix A, whether in draft or not, should be considered a tool and not a substitute for the evidence based pharmaceutical guidance included in the ODG. It is also important to understand that insurance carriers may not deny treatment or benefits solely based on a drug’s status in Appendix A of the ODG.

The key to understanding the Division’s memo is found in the second paragraph quoted above. “Appendix A, whether in draft or not, should be considered a tool and not a substitute for the evidence based pharmaceutical guidance included in the ODG.” This means


that your preauthorization decisions should be based upon the evidence based text of the ODG and not based upon Appendix A. If use of the drug exceeds or is not addressed in the text of the ODG for the compensable diagnosis, then it is subject to preauthorization. If the use of the drug is addressed and is within the text of the ODG, then it need not be preauthorized.

The Division describes Appendix A as “a tool and not a substitute for” the guidance

memorandum

DATE: August 29, 2008 TO: Workers’ Compensation System Participants FROM: Howard Smith, M.D., J.D., DWC Medical Advisor Matthew Zurek, Executive Deputy Commissioner for Policy and Research RE: Use of Pharmaceuticals in the Texas Workers’ Compensation System The purpose of this memorandum is to inform system participants that a Texas Department of Insurance, Division of Workers’ Compensation (TDI-DWC) pharmacy closed formulary for prescription medications has not yet been adopted for use in the Texas workers’ compensation system.

TDI-DWC adopted the Official Disability Guidelines – Treatment in Workers’ Comp (ODG) as the treatment guidelines, effective May 1, 2007, for non-network health care services for workers’ compensation injuries. ODG recently incorporated a draft Workers’ Compensation Drug Formulary (Appendix A) into its treatment guidelines; however, TDI-DWC has not adopted ODG’s Appendix A as its pharmacy closed formulary pursuant to Texas Labor Code §408.028(b).

Use of the ODG System participants should continue using the ODG treatment guidelines and continue to seek preauthorization for treatment, including prescriptions, when services fall outside or in excess of the ODG treatment guidelines. Appendix A, whether in draft or not, should be considered a tool and not a substitute for the evidence based pharmaceutical guidance included in the ODG. It is also important to understand that insurance carriers may not deny treatment or benefits solely based on a drug’s status in Appendix A of the ODG. Pharmacy Closed Formulary Rule Development Texas Labor Code §408.028(b) requires the Commissioner of Workers’ Compensation to adopt a pharmacy closed formulary. The TDI-DWC is preparing for rulemaking activity that will lead to the development of a pharmacy closed formulary and associated rules. If there are any questions regarding the information in this memo contact Christopher Voegele at 512-804-4856 or by email at [email protected] .

found in the ODG. Accordingly, Appendix A can certainly be useful in formulating treatment plans with the provider, in making decisions regarding voluntary certification of care, as well as in other situations where the ODG does not provide guidance, but you are trying to make a good claims decision. But it is important to remember that Appendix A of the ODG is not the Texas Prescription Formulary, nor is it a part of the evidence based text of the ODG.

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oieC adoptS rule regarding payment For

mediCal reCordS

The Office of Injured Employee Counsel (OIEC) has adopted new Rule 276.11 concerning the cost and time frame of obtaining copies of an injured employee’s medical documentation for use by an Ombudsman in assisting the injured employee in the Texas Department of Insurance, Division of Workers’ Compensation’s administrative dispute resolution system. Section 276.11 is necessary to implement Labor Code §404.155(e) pursuant to House Bill (HB) 888, 80th Texas Legislature, Regular Session, 2007.

Adopted rule 276.11 states upon written request a health care provider shall provide OIEC with medical documentation regarding an injured employee at no cost within five business days of the date posted on the request. A health care provider shall be reimbursed by the insurance carrier for the cost of the medical documentation as prescribed by Division of Workers’ Compensation Rule 134.120. If either party fails to comply, an administrative violation shall be enforced by the Commissioner of Workers’ Compensation.

OIEC maintains that new Rule 276.11 was necessary to fulfill OIEC’s “mission critical function to assist an injured employee in DWC’s administrative dispute resolution system pursuant to Labor Code §§404.101”. The ombudsman agency stated that “access to an injured employee’s medical documentation is imperative to adequately assist an injured employee during a medical dispute resolution hearing”.

House Bill 724 as passed by the 80th Texas Legislature, Regular Session, 2007, provides for an administrative hearing subsequent to an Independent Review Organization’s (IRO) decision in DWC’s medical dispute resolution system. OIEC’s anticipates that its Ombudsmen will assist a majority of injured employees in these medical dispute resolution hearings as a result of an attorney’s limited ability to get

reimbursed for services rendered on medical issues within the workers’ compensation system.

In claims where compensability is contested, OIEC states that health care providers will benefit from an Ombudsman’s assistance to an injured employee in proving up a compensable injury. In these cases, a health care provider’s payment for services is dependent on an Ombudsman’s access to medical documentation. Thus, in OIEC’s view, access to an injured employee’s medical documentation “is imperative” in disputed claims to an injured employee’s access to necessary and appropriate medical care which would allow them to get well and back to work.

Section 276.11 was adopted as proposed with the exception of a nonsubstantive change that increases clarity for the reader: the term “prescribed” replaced “governed” in the second sentence of the section.

new rule text§276.11.Access to Injured Employee Medical Documentation. Upon written request, a health care provider shall provide the Office of Injured Employee Counsel (OIEC) medical documentation regarding an injured employee within five (5) business days from the date posted on the request at no cost to OIEC. A health care provider’s reimbursement from an insurance carrier for costs of documentation provided to OIEC are prescribed by the provisions of §134.120 of this title. A health care provider or insurance carrier that fails to comply with the requirements of this section commits an administ

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