Cover Story - November 2006
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
"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
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.
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
Concentra operates the network for its own Concentra HCN, and
for Texas Mutual's Texas Star Network, a subnetwork of Concentra's
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
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
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.
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
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
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
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,"
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
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
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 "
," August 2006
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
"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
- Decide whether you want to participate in the workers'
compensation system and be sure all of your contracts reflect
- 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
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
"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
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.
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