Work in Progress: New Workers' Comp System Still Under Construction

Texas Medicine Logo(1)  

Cover Story - November 2006   

By   Ken Ortolon
Senior Editor  

When the Texas Legislature revamped the state workers' compensation system in 2005, physicians and other health care professionals expected that reduced administrative hassles and negotiated fees would attract qualified doctors back into the system to treat injured workers.

Workers were promised better access to higher quality care, employers were promised lower premiums for their workers' compensation coverage, and carriers were promised reduced utilization and lower medical costs through networks.

But more than a year after the law took effect, the new system still is not fully established. About a dozen new managed care-style networks have been certified to offer workers' compensation coverage. But several areas of the state still do not have networks, few physicians have returned to the system because fees still are not being negotiated and the hassles and burdens are still high, and questions about the adequacy of the networks' primary care and specialist panels are raising concerns about patients' access to care.

So far, it appears lower premiums for employers and reduced medical costs for insurers are about the only promises that have been fulfilled.

"We were led to believe this new system would not involve insurance companies just trying to squeeze doctors on price as a way of saving money, but would really be aimed at quality and attracting the best doctors even if it meant they had to be paid more to do so," said Rick Levy, legal director of the Texas AFL-CIO. "So far, we don't see a lot of activity consistent with that."

Still, stakeholders in the workers' compensation system are not ready to write off the changes despite the new system's slow development. Despite some frustrations, most say the Texas Department of Insurance (TDI), which took over the system from the old Texas Workers' Compensation Commission (TWCC), is working diligently to get the new networks certified and new operating rules in place.

And, they believe issues such as fees and network adequacy may work themselves out as the new system matures. 

Starting Over  

TWCC went through the sunset review process in 2005, and members of the Sunset Commission quickly decided that the workers' compensation system was irreparably broken. Low fees and increasing hassles had doctors fleeing the system. The number of physicians and other health care professionals on the Approved Doctor List had dropped from 30,000 in 2000 to just over 11,000 in 2004.

Plus, the system had some of the highest premiums in the nation, partially driven by overutilization of services by some health care professionals. And despite high costs, Texas had the country's worst track record in getting injured workers back on the job.

Rep. Burt Solomons (R-Carrollton), chair of the Sunset Commission, said at the time that just about everyone recognized that "a massive bureaucratic virus" was running through the system and that "almost nothing we do could bandage it enough."

Representative Solomons' legislation didn't so much replace the existing workers' compensation program as lay managed care on top of the old broken system. The bill transferred most of TWCC's duties to a new TDI Division of Workers' Compensation and authorized creation of managed care networks to cover most workers. The old fee-for-service workers' compensation system was left in place for rural areas where a lack of physicians and other health care professionals makes networks unfeasible or for employers who choose not to contract with a network.

The new law took effect in September 2005, but TDI did not have rules in place to allow it to begin certifying networks until the first of this year. The first network applications were received in January, and the first two networks - Texas Mutual Insurance Co.'s Texas Star Network and Concentra Health Care Network (HCN) - were certified to begin offering coverage in late March and mid-April.

But TDI was heavily criticized at legislative hearings over the adequacy of specialist panels in those first two networks.

For example, stakeholders complained the Concentra network had no orthopedic surgeons in Austin, forcing injured workers to travel to San Antonio for orthopedic care. Concentra disputes that allegation. A similar situation exists in the Dallas-Fort Worth area, where Fort Worth patients must go to Dallas to see certain specialists.

Concentra operates the network for its own Concentra HCN, and for Texas Mutual's Texas Star Network, a subnetwork of Concentra's network.

Following the criticism, network certification slowed to a trickle as TDI took a harder look at the network adequacy issues, some stakeholders say. No new networks were certified until June, when Memorial Hermann Health Network Providers Inc. was approved to begin offering coverage, followed by the certification of Corvel Healthcare Corp.'s network in July.

Then in August, nine additional networks were certified. 

Broadening the Network  

"When you look at the networks, there are certain specialties that appear to be underrepresented," said Elaine Chaney, director of legal services for the Office of Injured Employee Counsel, created by the legislation to help injured workers navigate the new system. "They [the networks] tell us they have an access plan, so when somebody needs a specialist who's not contracted [with the network], they will be able to get the injured employee to that doctor."

Ms. Chaney says the networks are so new it is unclear just how those access plans will work.

Mr. Levy says organized labor also is concerned about the "narrowness" of some of the network panels.

"It's safe to say some of the networks are certainly not adequate as far as we're concerned. There needs to be a push to open up the networks to create more choice of doctor."

Jerry Hagins, TDI public information officer, admits network certification has been "a little slower" than expected. "But it's the first time we've done it," he said. "We want to do it right, we want to make sure their coverage is adequate. We want to make sure there's quality in these networks and not just low cost."

Currently, there are at least 18 additional network applications pending at TDI.

Austin orthopedic surgeon Stephen Norwood, MD, cofounder and chief medical officer of the physician-sponsored Physicians Cooperative of Texas (PCT) network, says the pace of network certifications is frustrating.

Part of that frustration is that TDI is still making rules while network applications are pending. Networks still awaiting approval must go back and amend their applications to comply with new rules that the earlier networks did not have to meet.

PCT, which has recruited and credentialed a network of 500 providers, filed its application in March but was not certified until early October.

While annoyed by the delay, Dr. Norwood is "impressed with the Texas Department of Insurance and its candidness about where you are in the process."

So far, the certified workers' compensation networks seem to be centered in the state's large urban areas, but with coverage extending to surrounding counties. Several areas still lack network coverage, including much of far West Texas, the Panhandle, and some counties in deep East Texas. Among urban areas without a network are Abilene, Wichita Falls, Laredo, and the Midland-Odessa area.

As of Aug. 29, network coverage was available in 153 Texas counties. Texas Mutual, one of the state's largest workers' compensation carriers, says its Concentra-based network alone is now available to 92 percent of workers in the state.

Mr. Hagins says TDI hopes the "map will get filled in" as additional networks are certified.

"It's certainly possible that there will be parts of the state that aren't going to have easy access to the network model," he conceded. In those areas, the old fee-for-service system will remain in effect. 

Low-Hanging Fruit  

While network adequacy issues may have slowed certification, stakeholders say the networks' unwillingness to offer reasonable fees for both physicians and hospitals may also have delayed approval of networks and contributed to network adequacy issues.

Michael Reed, director of Texas Medical Association's Managed Care Delivery Systems Department, says hospitals initially were reluctant to sign on with the workers' compensation networks because of alleged low-ball contract offers. But the networks could not get certified without having hospitals under contract, so that situation is starting to correct itself, Mr. Reed says.

"We're seeing a correction of the market," he said. "The networks are required to offer decent contracts to hospitals because they can't be certified without a hospital on board. Where you had a freestanding PPO that already had established contracts with hospitals, it was fairly easy to walk through the certification process, a la Concentra and Texas Mutual's Concentra-based Network."

Now, he says, "these independent networks have to strike new agreements with hospitals and providers, and I believe the hospitals have held out until they are offered reasonable contracts. As you can see, these networks based on existing unregulated, freestanding PPOs have an overwhelming advantage for certification."

Some physicians also have been reluctant to jump on the network bandwagon, as well. To get good physicians into these networks, lawmakers allowed physicians to negotiate fees with the networks. They anticipated that those fees ultimately would be significantly higher than the previous workers' compensation fee schedule, which was set at 125 percent of Medicare. That same fee schedule still applies to non-network coverage.

But instead of offering physicians higher fees to attract them back into the workers' compensation system, many of the networks tried to use their existing PPO business and their ability to steer patients into physician practices to leverage doctors into accepting PPO rates for workers' compensation patients.

Bernard T. "Buddy" Swift Jr., DO, chief executive officer of Texas MedClinic in San Antonio, says he believes the networks are offering low fees in an effort to "pick off the low-hanging fruit. They have cast a broad net and signed up physicians who do not read their contracts and sign anything that comes across their desk," Dr. Swift said. "These networks use interesting tactics in that some leverage existing PPO business and some play scare tactics with practices that feel they have no leverage to negotiate with these large businesses. For the most part, at least in the initial stages, it is take it or leave it. There is little negotiating. One thing is very clear: A race to the bottom price is not what the legislature intended in order to deliver quality health care to Texas' injured workers,"   he said.

While Austin doctors have complained that there are not enough orthopedic surgeons in the Austin networks, Concentra says there is an adequate number.

Bruce Singleton, vice president of Concentra Network Services, says the Texas Star Network actually has 20 orthopedic surgeons in the network who practice within 75 miles of Austin, which is the acceptable service area under the new law.

However, only three of those surgeons are actually in Austin, with the others practicing in Temple, Killeen, Fredericksburg, and San Antonio.

Still, Mr. Singleton says that is an adequate number to service Austin based on the company's calculation of expected injury rates among the population covered by the network.

TMA has heard anecdotally that fees being offered to Austin-area orthopedic surgeons are below the non-network fee schedule.

Dr. Swift says Texas Mutual initially agreed to pay Texas MedClinic the rates it requested. Once the company's Texas Star Network - which exclusively uses Concentra clinics and doctors - was certified, however, that offer was withdrawn in favor of a substantially lower fee schedule.

"The networks were approved with the existing Concentra doctors in the urban areas, and they didn't think they needed anybody else," Dr. Swift said. "I'm certain the legislation did not anticipate, nor would the legislators approve, a system in which the network's employee doctors would be the exclusive choice for injured workers in a given market. Since injured workers have given up their right to sue their employer for negligence, it would seem that a reasonable choice of physicians to care for their injuries would be appropriate. It does not appear that the Concentra Network is providing that choice at the present time."

Dr. Swift says the fees his group has been offered by most networks are inadequate given the amount of time that must be spent to properly identify and treat injured workers, many of whom are at risk for delayed recovery.

Other physicians also seem reluctant to join the networks, not only because of low fees, but also because of continuing hassles within the system. Ms. Chaney of the Office of Injured Employee Counsel sees no evidence that physicians are rushing back to the workers' compensation system.

"The people who got out got out because they thought the hassle of being in was too much to deal with," she said. "I don't think there's any sense that's been dealt with very effectively. There has not been the huge return they were hoping for."

As of September, there were still only about 11,500 physicians on the Approved Doctor List.

Added Mr. Reed, "The legislature expected these networks to make workers' compensation look like group health. Well, the reality is that there is a huge difference between the two in terms of administrative hassle and burdens, and physicians must place a real value on the administrative hassle and burdens in comp. Physicians should evaluate contracts to determine whether the benefits are adequate to balance out the additional hassle and burdens encountered in dealing with workers' compensation patients." 

Hard to Verify  

Physicians hoped the new law would reduce hassles within the system, but in some cases new ones have been created. Dr. Swift says coverage verification is a major headache for his group.

Unlike patients in traditional managed care networks, patients in the workers' compensation networks do not receive insurance cards. When his office calls an employer to verify coverage, the company frequently doesn't know what, if any, network covers its employee. Those patients usually will be treated even if coverage isn't verified, Dr. Swift says, but Texas MedClinic doesn't get paid if it turns out the patient is in a network with which it does not have a contract.

"That's a real problem, and I foresee that continuing to be a problem as more and more networks are approved," he said.

He recommends TDI create a toll-free number to help physicians.

Another hassle is the intrusion of so-called rental or silent PPOs into the workers' compensation system. A rental or silent PPO is created when one carrier sells or rents its network to another payer without the physician's knowledge and takes advantage of the negotiated discount without providing a volume of patients to the physician in return. (See " Reimbursement Shell Game ," August 2006 Texas Medicine .)

Mr. Reed says he's received at least 100 complaints from physicians who have experienced problems with the new workers' compensation networks, which can be based on existing PPO networks.

"It is a reality that these new workers' compensation networks may be based on existing PPOs that are unregulated. Rental networks thrive in the unregulated PPO industry. The problem we see is that TDI has no enforcement authority over these networks, until they choose to become certified as workers' compensation networks. Physicians often find difficulty in the tactics these networks use to satisfy their provider panel. Although each physician is required to have a separate contract for workers' compensation, this is not always the case," he said.

Mr. Reed recommends physicians keep these three things in mind:

  • Decide whether you want to participate in the workers' compensation system and be sure all of your contracts reflect that desire.
  • If you do choose to participate in the system, be sure you know if the patient is in a workers' comp network and the name of that network. You can be denied payment if you treat a patient from a network with which you do not have a contract.
  • Read and understand every provision of your contract. 

Reaping the Benefit  

Despite the slow start-up and other concerns, it appears employers are reaping the benefit of the new networks. Texas Association of Business President Bill Hammond says it's too early to gauge how successful the new system will be, but recent advertisements by Texas Mutual offering a 12-percent discount to employers who purchase its network product is the "clearest example" that premiums are going down.

Dr. Swift adds that costs within the workers' compensation system also may go down because of the system's Medical Quality Review Panel (MQRP), which was in place before the system was changed. He says the MQRP has weeded "some egregious practitioners" out of the system.

"It appears that since the managed care component really hasn't taken off yet that the MQRP has had some effect on the overall cost structure."

While the jury is still out on how well the new networks will function, stakeholders are optimistic the new system will be an improvement over the old one. "I encourage the doctors of the state not to throw the network idea out just yet,"   Dr. Norwood said.

Mr. Levy of the AFL-CIO also said he sees some positives in the new system.

"We feel like the agency and the people who are charged with implementing the system are really working very hard and are endeavoring to make the system as responsive as possible," he said, "and that's very valuable in changing the whole climate of the system."

While there may be some sentiment for further legislative tinkering with the workers' compensation system, stakeholders say the existing law needs to be given a chance to work.

"There's a tendency to pull the whole plant up by its roots when it's little and small to determine whether it's working or not," Mr. Hammond said. "We should avoid that."

Representative Solomons says he's "very pleased" with implementation of the changes so far.

"Rules on network, e-billing, prompt pay, and exams to determine compensability have all been adopted. Fee guidelines on hospitals, outpatient facilities, performance-based oversight, and treatment guidelines are currently being discussed. Some people think it has taken too long already, but a reform this size is going to take some time, and I am pleased with the speed with which the agencies are tackling the issues."

TMA also is working with TDI Commissioner Mike Geeslin on potentially increasing the non-network fee schedule to more appropriate levels. This particular move on the part of TDI could in essence "raise all boats in the harbor," including payment levels for network physicians, and entice more physicians to reenter the system, Dr. Norwood says.

Ken Ortolon   can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email at  Ken Ortolon.   


November 2006 Texas Medicine Contents
Texas Medicine Main Page