Office of House Bill AnalysisH.B. 2600
By: Brimer
Business & Industry


Prior to the 77th Legislature, the Texas Workers' Compensation Commission
(TWCC) required an employee who sustained a compensable injury to receive
medical treatment from a doctor chosen from a list of doctors approved by
TWCC.  Each doctor licensed in Texas on September 1, 2001, was on the list,
unless subsequently deleted for any conduct considered relevant by TWCC.  A
study by the Research and Oversight Council on Workers' Compensation (ROC)
showed that medical costs for workers' compensation services in Texas were
exceeding the costs of other states in the study, but that the additional
expenditures were not resulting in better return-to-work outcomes or an
increase in workers' satisfaction with their medical services.  The ROC
found that over one-third of workers had not returned to work more than two
years after their injury, and that many health care providers were
frustrated with the workers' compensation system as well.   

House Bill 2600 expands regulation, training, and monitoring for doctors
and insurance carriers in the workers' compensation system, allows for the
creation of health care delivery networks in the workers' compensation
system, expands notification requirements regarding return-to-work issues,
changes medical regulation and medical dispute resolution processes,
provides new benefits for injured workers, and alters current law relating
to the payment of attorney's fees in disputes. 

The bill reflects policy changes based on recent research regarding medical
cost, return-to-work, and patient satisfaction issues.  For example, recent
research by the Research and Oversight Council on Workers' Compensation
(ROC) indicates that medical cost and utilization rates in the Texas
workers' compensation system are higher than those in other state workers'
compensation systems and other health care delivery systems. However,
despite these high medical cost expenditures, injured workers in Texas were
not more satisfied with the care they receive.  ROC research also found
that injured workers in Texas spent more time off the job and are less
likely to return to work.  


It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the Texas Workers' Compensation
Commission in SECTION 1.01 (Sections 408.023 and 408.0231, Labor Code),
SECTION 1.03, SECTION 2.01 (Sections 408.0222 and 408.0223, Labor Code),
SECTION 2.02, SECTION 3.02 (Section 413.021, Labor Code), SECTION 3.03,
SECTION 4.01 (Section 408.026, Labor Code), SECTION 4.02 (Section 413.014,
Labor Code), SECTION 4.03 (Section 413.0141, Labor Code), SECTION 4.04,
SECTION 5.02 (Section 408.0041, Labor Code), SECTION 6.01 (Section 408.028,
Labor Code), SECTION 6.02 (Section 413.011, Labor Code), SECTION 6.04
(Section 413.031, Labor Code), SECTION 6.05 (Section 413.041, Labor Code),
SECTION 6.07 (Section 415.021, Labor Code), SECTION 6.08 (Section 415.023,
Labor Code), SECTION 6.09, SECTION 10.01 (Section 403.006, Labor Code),
SECTION 10.03 (Section 408.042, Labor Code), and in SECTION 10.04 (Section
408.0446, Labor Code) of this bill. 


 House Bill 2600 amends the Labor Code relating to the medical review of
health care provided under the workers' compensation insurance system.  The
bill provides that each doctor licensed in this state is eligible to be on
the Texas Workers' Compensation Commission's (TWCC) list of approved
doctors if the doctor registers with TWCC and complies with the
requirements adopted by TWCC.  The bill requires TWCC to develop a list of
Texas licensed doctors who are approved to provide workers' compensation
services and sets forth provisions authorizing out-of-state doctors to
perform these services.  TWCC is required by rule to establish reasonable
training, impairment rating testing, and financial disclosure requirements
for all types of doctors providing services in the workers' compensation
system, including treating doctors, referral doctors, required medical
examination doctors, designated doctors, peer review doctors, and
utilization review doctors. The bill requires TWCC by rule to provide a
reasonable period, not to exceed 18 months after the adoption of these
rules, for doctors to comply with the registration and training

The bill requires TWCC to issue to an approved doctor a renewable
certificate of registration that is valid for a period provided by TWCC
rule.  Outside of exceptions granted by TWCC and excepting an emergency or
immediate post-injury medical care as defined by TWCC rule, each doctor
must hold a certificate of registration and be on the list of approved
doctors to perform or receive payment for workers' compensation services or

The bill authorizes TWCC by rule to modify registration and training
requirements for doctors who infrequently provide health care, perform
utilization review or peer review functions for insurance carriers
(insurer), or participate in regional networks.  The bill requires a
utilization review agent that uses doctors to perform reviews of workers'
compensation health care services to perform the reviews under the
direction of a doctor licensed in this state.  The bill requires TWCC to
collect information regarding returnto-work outcomes, patient satisfaction,
and the cost and utilization of health care provided or authorized by a
treating doctor. The bill authorizes TWCC to adopt rules to define the role
of the treating doctor and to specify outcome information to be collected
for a treating doctor (Sec. 408.023). 

H.B. 2600 requires TWCC by rule to establish criteria for suspending a
doctor from the list of approved doctors, imposing sanctions for
violations, and monitoring of utilization review agents as provided by a
memorandum of understanding with the Texas Department of Insurance (TDI).
The bill requires TWCC by rule to establish procedures under which a doctor
may apply for reinstatement to the list of approved doctors or for
restoration of doctor practice privileges removed by TWCC based on
sanctions.  The bill specifies conditions for which TWCC is authorized to
impose sanctions on a doctor or an insurer. The bill also allows TWCC to
establish criteria for reducing utilization review and preauthorization
controls on a doctor.  The bill requires TWCC and TDI to enter into a
memorandum of understanding to coordinate the regulation of insurers and
utilization review agents as necessary to ensure compliance with applicable
regulations and to ensure that appropriate health care decisions are
reached (Sec. 408.231).  The bill requires TWCC to adopt rules relating to
approved doctors and medical review no later than February 1, 2002. A
doctor would not be required to hold a certificate before a date specified
by TWCC rule (SECTION 1.03). 

The bill requires TWCC to employ or contract with a doctor who serves as a
medical advisor (advisor) and specifies the advisor's duties (Sec.
413.0511).  The advisor's role is to recommend medical policies for TWCC,
assist in the regulation of the entities, chair the Health Care Network
Advisory Committee, determine the minimal modifications to the Medicare
reimbursement methodology, and perform other duties. 

The bill requires the advisor to establish an independent medical quality
review panel of health care providers as an advisory body to assist the
advisor. The bill requires the advisor to consider appointing some of the
members of the medical quality review panel from lists developed by the
Texas State Board of Medical Examiners and the Texas State Board of
Chiropractic Examiners, and authorizes the advisor to also consider
nominations for the panel made by labor, business, and insurance
organizations.  A person who serves on the medical quality review panel is
not liable in a civil action for an act performed in good faith as a member
of the panel, and the actions of a person serving on the medical quality
review panel do  not constitute utilization review.  The bill sets forth
provisions regarding the confidentiality of information maintained by the
medical quality review panel for TWCC (Secs. 413.0512 and 413.0513). 


H.B. 2600 establishes the Health Care Network Advisory Committee (advisory
committee) to advise TWCC on the implementation of fee-for-service regional
workers' compensation health care delivery networks designed to improve the
quality of and reduce the cost of health care.  The advisory committee is
appointed by and serves at the pleasure of the governor for staggered
two-year terms, and consists of three employer representatives, three
employee representatives, three ex-officio insurance carrier
representatives, three ex-officio health care provider representatives, one
ex officio independent actuarial expert, and the commissioner's medical
advisor, who shall serve as chair.  The first meeting of the advisory
committee shall be no later than October 1, 2001.  The bill requires TWCC
on behalf of the advisory committee to contract with one or more
consultants to evaluate the feasibility of regional networks, to set
standards for network operations and establish criteria for reporting on
the outcomes of the networks through a report card, and, if networks are
found feasible, to contract through competitive procurement with at least
one regional network for the provision of health care no later than
December 31, 2002.  The standards adopted for preferred provider networks
apply as minimum standards for regional health care delivery networks.  The
bill authorizes the advisory committee to recommend additional standards
for regional health care delivery networks, but specifies that the
provision of health care under regional networks does not apply to
prescription medication or services (Sec. 408.0221 and SECTION 2.02). 

H.B. 2600 requires the advisory committee and the Research and Oversight
Council on Workers' Compensation to develop evaluation standards and
specifications necessary to implement a workers' compensation medical
regional network report card, and sets forth provisions regarding the
contents of the report card.  The bill requires the regional network
administrators to  submit consolidated annual reports and to report
quarterly to TWCC and the advisory committee on the progress of
implementing the regional networks.  The bill requires the Research and
Oversight Council on Worker's Compensation to report to the legislature by
January 1 of each odd-numbered year on the status of the implementation of
regional networks. 

H.B. 2600 requires the cost of assessing the feasibility of, developing,
and evaluating the regional networks to be funded through an assessment on
the subsequent injury fund, and prohibits this cost from exceeding a total
of $1.5 million for the regional networks.  The bill requires the regional
network administrators in consultation with actuaries to determine on an
annual basis any cost savings to the operation of the workers' compensation
system derived from the use of regional networks.  The cost of ongoing
regional network administration and management services shall be included
in the fees for health care services paid by insurers participating in the
regional network  (Sec. 408.0221). 

H.B. 2600 authorizes an insurer or a self-insurer certified to provide
workers' compensation coverage in this state to elect to participate by
contract or not participate in a regional network for each compensable
injury sustained by the employee.  The bill requires insurers participating
in the regional network to be given the opportunity for audits of the
regional networks.  The bill requires TWCC to adopt rules regarding
elections, employee's rights, and the timing and recovery of a payment of
enhanced benefits, and authorizes an insurer to limit its election to
participate in a regional network to a particular employer or region of the
state until January 1, 2006.   

The bill requires a public employer, other than a political subdivision, to
participate in a regional network, and specifies that an insurer who elects
to participate in regional networks agrees to abide by the terms of the
regional network contracts between TWCC and the regional networks.  

The bill gives an employee the option of participating in a regional
network if the employee's employer and the employer's insurance carrier are
in the network.  Participating insurance carriers are also required to
provide participating employers with information to be shared with
employees, including a list of network doctors, information regarding
health care services and benefits available, and report card results for
the  network.  Employees participating in the network are eligible for
increased income benefits, including a reduced waiting period for the first
week of income benefits and an increased cap on the maximum payment for
temporary income benefits.  Employees are bound by their decision to
participate in a network for a particular injury after they receive
enhanced income benefits or 14 days after injury, whichever comes sooner.
The bill prohibits an employer from discharging, subjecting to disciplinary
action, or taking adverse employment action against an employee because the
employee elects not to participate in a regional network, and sets forth
provisions regarding a limited cause of action brought by an employee
against an employer for any of these reasons which is curable by the

The bill sets forth provisions regarding the selection of a physician, the
treatment and services for an employee who participates in a regional
network, and for the payment of those services.  The bill authorizes an
employee or insurer to request that TWCC order a designated doctor medical
examination if an employee has received conflicting impairment ratings or
determinations of maximum medical improvement from more than one treating
doctor.  The bill does not prohibit an insurer from continuing to
participate in networks if those networks allow for the selection of
doctor.  The bill requires TWCC to adopt rules regarding regional networks,
including rules necessary to implement additional standards for regional
networks, no later than October 1, 2002.  Provisions regarding employee
workers' compensation benefits under a regional network take effect on TWCC
certification that the regional network is operational (Secs. 408.0222 and
408.0223 and SECTION 2.02). 


H.B. 2600 sets forth requirements and provisions for an employer, upon
request, to notify an injured employee, the employee's treating doctor, and
the insurer of the possibility of modified duty opportunities or a modified
duty return-to-work program available through the employer (Sec. 409.005). 

H.B. 2600 requires an insurer to notify the employer of the availability of
return-to-work coordination services, which include worksite assessments
and job modification services.  An insurer is not required to provide nor
pay for physical workplace modifications. With the participating employer's
consent, insurers and TWCC are required to target employers without
return-to-work programs and focus return-to-work efforts on workers who
begin to receive temporary income benefits.  The bill also requires TWCC to
utilize appropriately certified or trained specialists to train TWCC staff
on return to work issues. 

The bill requires TWCC to adopt rules necessary to collect data on
return-to-work outcomes and may adopt these rules not earlier than January
1, 2004, and to report twice annually to the Research and Oversight Council
on Workers' Compensation regarding the implementation and outcome of
return-towork initiatives (Sec. 413.021 and SECTION 3.03). 


H.B. 2600 eliminates the current spinal surgery second opinion process and
provides that except in a medical emergency, an insurer is liable for
medical costs related to spinal surgery only if the insurer preauthorizes
the surgery in accordance with applicable law and TWCC rules.  Disputes
over spinal surgery are handled by an independent review organization,
rather than TWCC's dispute resolution process.  The bill specifies that
TWCC may not prohibit an insurer and health care provider from voluntarily
discussing health care treatment or an insurer from certifying or agreeing
to pay for health care (Secs. 408.026 and 413.014). 

H.B. 2600 establishes a minimum list of medical services that require
preauthorization. The bill requires TWCC to specify by rule which other
health care treatments and services require preauthorization or concurrent
review by the insurer no later than February 1, 2002.  Additionally, in an
effort to facilitate communication between insurers and medical providers,
each insurer is required to allow health care providers the option to
request that the insurer certify coverage for health care and
pharmaceutical services that do not require preauthorization and concurrent
review, but the insurer retains the right to review and contest the request
(Sec. 413.014 and SECTION 4). 
H.B. 2600 authorizes TWCC by rule to require an insurer to provide for
payment of specified pharmaceutical services sufficient for the first seven
days following the date of injury if the health care provider requests and
receives verification of insurance coverage and a verbal confirmation of an
injury from the employer or the insurer.  The rules may provide that an
insurer is eligible for reimbursement for pharmaceutical services paid from
the subsequent injury fund in the event the injury is determined not to be
compensable.  The bill authorizes TWCC to adopt these rules on or after
September 1, 2002 (Sec. 413.0141 and SECTION 4.04).  


H.B. 2600 alters the process for required medical examinations. The bill
directs workers to designated doctor exams first, rather than a exam by a
doctor chosen by the insurer. Insurers may still require an exam by a
doctor of their choosing after the designated doctor exam. Issues involving
the appropriateness of medical care will continue to be handled through the
current order of examinations, but for all other issues, the designated
doctor exam will be conducted first.  The bill requires TWCC to adopt rules
as necessary to hold an expedited benefit review conference to dispute a
decision made through a designated doctor examination, and specifies that
this provision expires September 1, 2003.   

H.B. 2600 changes the qualifications for selection as a designated doctor.
The bill stipulates that the designated doctor must be trained and
experienced with the treatment and procedures used by the doctor treating
the patient's medical condition.  The bill modifies provisions regarding
disputes as to impairment ratings, and requires TWCC to direct an employee
to the next available designated doctor if an impairment rating is

The bill requires the Research and Oversight Council on Workers'
Compensation to report to the legislature no later than December 31, 2002,
regarding issues related to medical examinations (Sec. 408.0041 and
SECTIONS 5.04 and 5.05). 


H.B. 2600 requires TWCC to adopt rules no later than February 1, 2002 to
develop an open formulary that requires the use of generic pharmaceutical
medications and clinically appropriate over-the-counter alternatives to
prescription medications unless otherwise specified by the prescribing
doctor.  The bill requires TWCC to adopt rules by June 1, 2002,  to allow
an employee to receive reimbursement from an insurer for those medications
(Sec. 408.028 and SECTION 6.09). 

The bill requires TWCC to adopt the health care reimbursement policies and
guidelines that reflect the standardized reimbursement structures found in
other Medicare systems with as few modifications as necessary to meet
occupational injury requirements, and to adopt the most current
reimbursement methodologies, models, and values or weights used by the
federal Health Care Financing Administration. The bill requires TWCC to
develop conversion factors or other payment adjustment factors taking into
account economic indicators in health care, and authorizes rather than
requires TWCC by rule to establish medical policies or treatment
guidelines, including return-to-work guidelines, relating to necessary
treatment to injuries.  The required rules and guidelines must be created
no later than May 1, 2002 (Sec. 413.011 and SECTION 6.09). 

H.B. 2600 authorizes an insurer to contract with a separate entity to
forward payments for medical services (Sec. 413.015).  The bill provides
that a claimant is entitled to a review of a medical service for which
preauthorization is sought by the health care provider and denied by the
insurance carrier, and requires TWCC to adopt rules to notify claimants of
their rights.  The bill provides that TWCC's role in disputes over the
amount of payment due for services determined to be medically necessary is
to adjudicate the correct payment given the relevant statutory provisions
and TWCC rules.  The bill requires TWCC to publish its medical dispute
decisions on its Internet website. The bill provides that a review of the
medical necessity of a health care service requiring preauthorization shall
be conducted by an independent review organization.  The bill requires TWCC
by rule to specify the appropriate dispute resolution process for  disputes
in which a claimant has paid for medical services and is seeking
reimbursement and entitles a party to an unresolved medical dispute
regarding spinal surgery to dispute resolution. The bill requires the
insurer to pay the cost of a review arising out of a dispute in connection
with a request for health care services that requires preauthorization.  In
other cases, the losing party pays the cost of the review. The bill
authorizes a party who has exhausted its administrative remedies and who is
aggrieved by a final decision of the State Office of Administrative Hearing
to seek judicial review of the decision.  These provisions take effect
January 1, 2002 (Sec. 413.031 and SECTION 6.09). 

H.B. 2600 requires each health care practitioner to disclose to TWCC, in
accordance with TWCC rule, the identity of any health care provider in
which the practitioner or the health care provider that employs the
practitioner has a financial interest.  TWCC shall require by rule that a
practitioner disclose financial interests in other health care providers as
a condition of registration for the approved doctor list.  The bill
requires TWCC by rule to adopt the federal standards that prohibit the
payment or acceptance of payment in exchange for health care referrals.
The bill sets forth penalties, effective June 1, 2002, for a doctor or
health care provider that fails to comply with these provisions, and
requires TWCC to publish all final disclosure enforcement orders on the
TWCC Internet website.  TWCC is required to adopt these rules by June 1,
2002 (Sec. 413.041 and SECTION 6.09). 

An insurer or health care provider may also be assessed administrative
penalties for repeat violations after a prior notice of noncompliance.
Prior notice is not required if the violation was committed wilfully or
intentionally, or the violation was of a decision or order of TWCC.
Provisions regarding the violations take effect September 1, 2002 (Sec.
415.0035 and SECTION 6.08).  TWCC by rule shall adopt a schedule of
specific monetary administrative penalties for specific violations (Sec.
415.021).  The bill authorizes TWCC to adopt rules providing for referral
and petition to the appropriate licensing agency for appropriate
disciplinary action, including the restriction, suspension, or revocation
of a violator's license (Sec. 415.023).  


H.B. 2600 changes from September 1, 2007 to September 1, 2005 the date that
TWCC is abolished unless continued in existence as provided by the Texas
Sunset Act (Sec. 401.002).  The bill provides that TWCC is subject to audit
by the state auditor, and specifies issues that the state auditor should
consider when conducting the audit, including the level and quality of
service provided to system participants, employee turnover, access to
public information, adoption and implementation of administrative rules and
assessment of administrative violations. (Sec. 401.003). 


H.B. 2600 provides that an insurer who seeks judicial review of a final
decision by a TWCC appeals panel regarding compensability or eligibility
for income or death benefits is liable for reasonable and necessary
attorney's fees incurred by the claimant as a result of the insurer's
appeal if the claimant prevails. This article of the bill expires September
1, 2005 (Sec. 408.221).   


The bill expands the current definition of eligibility for lifetime income
benefits to include employees who suffer third degree burns that cover at
least 40 percent of the body and require grafting or third degree burns
covering the majority of either both hands or one hand and the face (Sec.


H.B. 2600 sets forth procedures for computing the average weekly wage of an
employee with multiple employment for the purpose of determining temporary
income benefits, impairment income benefits, supplemental income benefits,
lifetime income benefits and death benefits, allowing employees with more
than one job to collect benefits based on all of their IRS reportable wages
rather than only the wages at the job where the injury occurred.  The bill
requires TWCC to determine by rule the manner by which  wage information is
collected and distributed to implement these provisions.  The bill entitles
an insurer to apply for and receive reimbursement at least annually from
the fund for the amount of income benefits paid to a worker that is based
on employment other than the employment during which the compensable injury
occurred, and authorizes TWCC to adopt rules to govern the documentation,
application process, and other administrative requirements necessary to
implement this provision (Sec. 408.042). 

H.B. 2600 expands the liabilities of the subsequent injury fund (fund)
(Sec. 403.006).  The bill requires the fund to be supplemented by
maintenance taxes paid by insurers other than governmental entities if TWCC
determines that the funding is not adequate.  The bill requires TWCC's
actuary or financial advisor to report biannually to the Research and
Oversight Council on Workers' Compensation on the financial condition,
projected assets, and liabilities of the subsequent injury fund and to make
the reports available to the public and legislature.  The bill authorizes
TWCC to purchase annuities to provide for payments due to claimants if TWCC
determines that the purchase of annuities is financially prudent for the
administration of the fund (Sec. 403.007). 

H.B. 2600 provides that the average weekly wage of a school district
employee be used to compute the amount of temporary income benefits
received under workers' compensation benefits.  The bill  sets forth
procedures to determine the amount of impairment income, supplemental
income, lifetime income, or death benefits of a school district employee.
The bill requires TWCC to adopt rules and specifies that these provisions
take effect December 1, 2001, and apply only to compensable injuries
occurring on or after July 1, 2002 (Sec. 408.0446 and SECTION 10.05). 


H.B. 2600 requires TWCC to study the implementation and development of
drug-free workplace policies and the adverse impact of drug abuse on the
workplace and workers' compensation insurance systems. The bill requires
TWCC to report its findings to the legislature and the Research and
Oversight Council on Workers' Compensation no later than February 1, 2003
(Sec. 411.093). 


The bill requires that the costs of risk management services provided by a
state agency under interagency contract with State Office of Risk
Management (SORM) be allocated in the same proportion and determined in the
same manner as the costs of workers' compensation (Sec. 412.012).  The bill
requires SORM to establish a risk reward for the payment of workers'
compensation claims and risk management services incurred by a state
agency.  The bill requires SORM to establish a formula for allocating the
state's workers' compensation costs among covered agencies and specifies
that the risk management board of SORM has final authority to determine the
assessments to be paid by the covered agencies (Secs. 412.0123 and

H.B. 2600 expands the definition of peace officer to include more officers
in those who are eligible for workers' compensation coverage (Sec.
501.001).  The bill authorizes a Texas Department of Transportation
employee to elect to use accrued sick leave before receiving workers'
compensation income benefits but does not entitle an employee to income
benefits until the elected number of weeks of leave have been exhausted
(Sec. 505.060). 


H.B. 2600 requires TWCC to compute and publish the Texas Workers'
Compensation Act interest and discount rate using the treasury constant
maturity rate for one-year treasury bills issued by the United States
government rather than the auction rate (Sec. 401.023). 


H.B. 2600 prohibits the waiver of a cause of action against an employer who
does not have workers'  compensation insurance coverage before an
employee's injury or death (Sec. 406.033). 


June 17, 2001.