Workers’ Compensation

Supplement

REPORT OF COUNCIL ON SOCIOECONOMICS

CSE Report 2-A-07
Subject: Workers' Compensation
Presented by: Susan Strate, MD, Chair
Referred to: Reference Committee on Socioeconomics

In 2005, the 79th Texas Legislature passed House Bill 7, which was workers' compensation reform legislation that brought about what its authors - Rep. Burt Solomons (R-Carrollton) and Sen. Todd Stapes (R-Palestine) called radical changes. HB 7 reforms included the formalization of managed care networks from which injured employees must obtain their workers' compensation health care treatment if their employer and insurance company contract with a network, a disability management program that relies upon the use of treatment and return-to-work guidelines, medical case management, and return-to-work initiatives aimed at improving the Texas system's dismal return-to-work outcomes. HB 7 also abolished the dysfunctional Texas Workers' Compensation Commission and replaced it with a new division under the Texas Department of Insurance called the Division of Workers' Compensation.

The reform legislation was said by many stakeholders to offer great promise in improving the performance of the Texas workers' compensation system while reducing unnecessary system costs. Organized medicine's asks for the system reforms to improve the workers' compensation system so that clinically appropriate, cost-effective health care be accessible to injured workers in a timely manner and within a reasonable geographic proximity to the patient. Texas Medical Association suggested that any system providing health care to injured workers should be clearly defined, fair, simple to understand, accountable, and easily accessible to all parties involved. Since the drastic fee cuts that took place in 2003, many physicians have bailed out of the workers' compensation system. Early indications suggest that these new reforms are not attracting physicians back to the workers' compensation system. Physicians and other stakeholders, including labor, are taking a "wait and see" posture and hoping for the best.

More than a year after the law took effect, the new system still is not fully established. The old workers' compensation system, where injured workers choose their doctor from the approved doctor list, still exists where networks have not started. So far, about 17 new managed care-style networks have been certified to offer workers' compensation coverage. Several areas of the state do not have networks, few physicians have returned to the system because fees reportedly still are not being negotiated and the hassles and burdens are at their highest, 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. Physician practices in Texas added managed care to their list of workers' compensation woes and it is yet to be seen if this will attract quality physicians back into the workers' compensation system.

"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 labor union 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 early developments. 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 address stakeholder frustrations by getting the new networks certified and new operating rules in place. They believe with the open market system, issues such as fees and network adequacy may work themselves out as the new system matures.

Since one year has passed since the effective date of the HB 7 reforms, this report examines the impact of the reforms to date and answers the question, "What has changed?"

What has changed for Texas physicians and their workers' compensation patients?
Changes in a system as complex as the Texas workers' compensation system will take time. As new rules are adopted, the system is evolving. A quick look at the system's "landscape" reveals there have been many significant changes to the system since 2005. Changes include:

• The Texas Workers' Compensation Commission (TWCC) no longer exists - the Division of Workers' Compensation (DWC) replaced TWCC on Sept. 1, 2005.
• The six part-time commissioner governing board of the now defunct TWCC has been replaced by a single, full-time commissioner at the DWC.
• Insurance Commissioner Mike Geeslin adopted workers' compensation health care network rules. The certification of network applicants has resulted in 27 certified workers' compensation networks as of Jan. 18, 2007.
• On June 16, DWC Commissioner Albert Betts adopted a rule that provides for treating doctor examinations of injured employees to determine compensable injury. The authority to adopt the rule is provided for by Section 408.0042 of the Texas Labor Code.
• On June 23, DWC staff proposed new medical dispute resolution rules. The rules are scheduled for adoption by Commissioner Betts on Oct. 12, 2007.
• On July 21, Commissioner Betts adopted a rule that provides for the billing and payment of medical bills electronically.
• On July 27, Commissioner Betts adopted new required medical examination and designated doctor rules required by changes made to Sections 408.004 and 408.0041 of the Texas Labor Code under HB 7. HB 7 expanded the scope of designated doctors and limited the scope of required medical examiners.
• On July 27, Commissioner Betts adopted rules that establish peer review doctor standards.
• On September 1, DWC staff proposed a rule that provides for treatment and return to work planning which is a part of the disability management process provided for by HB 7.
• DWC staff adopted a rule that established the most current edition of Workless Data Institutes' Official Disability Guidelines as the state's official workers' compensation treatment guidelines. The rules also proposed the most current edition of the Reed Group's Medical Disability Advisor - Workplace Guidelines for Disability Duration.
• On August 25, DWC staff distributed pre-proposal draft hospital inpatient and outpatient rules to system stakeholders. The rules were tentatively scheduled to be adopted by Commissioner Betts on Jan. 18, 2007.
• DWC staff are currently drafting pre-proposal draft rules regarding the following: initiation of lifetime income benefits, injured employee rights and responsibilities, implementation of Section 480.1415 as it applies to supplemental income benefits, and physician performance based oversight rules.
• On Aug. 9, 2006, Commissioner Betts issued a call for insurance industry peer review data from September and October of 2006. The data call was made in response to legislative concerns about how peer reviews are being used and to provide data that will allow the DWC to determine how peer reviews are being used in the Texas system.
• DWC staff are in the early stages of reviewing the medical fee guideline as required by statute every two years. A stakeholder meeting was held on September 21 to discuss concepts and issues related to the review and amendment, if applicable, of the Medical Fee Guideline.
• TMA scheduled meetings with Commissioners Geeslin and Betts in early March 2007 to talk about a timetable for re-opening the rulemaking for the Medical Fee Guideline. It was hoped those meetings will lead to consideration of a new, more equitable fee schedule.

The rulemaking activities of the DWC illustrate how changes have been constant in workers' compensation since adoption of HB 7. Organized medicine is expected to remain fully engaged with Commissioner Betts and DWC staff as the rulemaking process continues.

Assessing the new Texas  workers' compensation system
The adequacy of networks appears to the focus of the legislature. While network adequacy issues may be real public policy priorities, stakeholder physicians say the networks' unwillingness to offer reasonable fees for both physicians and hospitals are significant issues that contribute to network adequacy issues.

Hospitals were initially 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. The networks are required to offer decent contracts to hospitals because they can't be certified without a hospital on board. Where freestanding PPOs 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. It now is primarily independent networks that are struggling to strike new agreements with hospitals and providers, and the hospitals have held out until they are offered reasonable contracts. Physicians often do not share that leverage in their communities. A significant factor to consider is that these networks are primarily based on existing unregulated freestanding PPOs that have an overwhelming advantage for certification.

Some physicians also have been reluctant to jump on the network bandwagon. To get physicians into these networks, lawmakers allowed physicians to negotiate fees with the networks with no regard for the established medical fee guideline. 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.

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.

Some physicians feel the fees they have 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 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 late 2006, there were still only about 11,500 physicians on the Approved Doctor List; prior to the 2003 fee guideline revisions there were more than 30,000 physicians on the Approved Doctor List.

The legislature expected these networks to make workers' compensation look like group health. The reality is 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 of workers' compensation - especially considering the treatment guideline and return to work requirements. 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.

Many changes have occurred since the effective date of HB 7. Yet, much remains to be done to effectively reform the Texas workers' compensation system. The success or failure of HB 7 reforms rest with the Texas Department of Insurance and Division of Workers' Compensation since those agencies adopt rules to implement system reforms. System stakeholders will have a better idea about the state of the Texas workers' compensation system when the reform efforts are given adequate time and effort. Until then, system stakeholders continue to hope for the best as they carefully watch every action taken to implement HB 7.

TMA continues to work with policymakers and the Texas Department of Insurance to improve workers' compensation as a health care delivery system. The association has worked actively with county medical societies, specialty societies, and member physicians who routinely treat workers' compensation patients. With the task force's guidance, TMA has developed effective strategies, written/oral comments, and talking points for use in rulemaking.

Recommendation: That the Texas Medical Association support the following action steps in pursuit of a fair, efficient and accountable workers' compensation delivery system in Texas :

1. Continue dialogue with legislative and executive branch policymakers to establish an out-of-network medical fee reimbursement formula that will result in fair and reasonable physician payments;
2. Educate those policymakers on the need for employer accountability when dealing with injured workers;
3. Consider all appropriate strategies to help correct injustices within the system for doctors;
4. Diligently work with Texas Department of Insurance in the regulatory arena to improve physician input and physician stakeholder involvement to produce much needed reforms to the workers' compensation system.

TMA House of Delegates: TexMed 2007