HBA-JEK, CCH C.S.H.B. 2600 77(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 2600 By: Brimer Business & Industry 4/12/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE Under current law, the Texas Workers' Compensation Commission (TWCC) requires an employee who sustains a compensable injury to receive medical treatment from a doctor chosen from a list of doctors approved by TWCC. Currently, each doctor licensed in Texas on January 1, 1993, is on the list, unless subsequently deleted for any conduct TWCC considers relevant. A study by the Research and Oversight Council on Workers' Compensation (ROC) showed that medical costs for workers' compensation services in Texas exceeds the costs of other states in the study, but that the additional expenditures did not result 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. C.S.H.B. 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 about 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, among other provisions. Several of the provisions of the bill reflect policy changes based on recent research on medical cost, returnto-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. RULEMAKING AUTHORITY 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 (Section 408.0222, 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 6.03 (Section 413.031, Labor Code), SECTION 6.04 (Section 413.041, Labor Code), SECTION 6.06 (Section 415.021, Labor Code), SECTION 6.07 (Section 415.023, Labor Code), SECTION 6.08, and in SECTION 10.03 (Section 408.042, Labor Code) of this bill. ANALYSIS ARTICLE 1 C.S.H.B. 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 requirements. 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 received payment for workers' compensation services or examinations. 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). C.S.H.B. 2600 requires TWCC by rule to establish criteria for removing 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 other 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). ARTICLE 2 C.S.H.B. 2600 establishes the Health Care Network Advisory Committee (advisory committee) to advise TWCC on the implementation of regional workers' compensation health care delivery networks. The advisory committee is appointed and serves at the pleasure of the governor, chaired by the advisor, and consists of three employer representatives, three employee representatives, two ex-officio insurance carrier representatives, and two ex-officio health care provider representatives. 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 (Sec. 408.0221 and SECTION 2.02). C.S.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. C.S.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 $250,000 per regional network or a total of $1.5 million for up to six 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). C.S.H.B. 2600 authorizes an insurer or a self-insurer certified to provide workers' compensation coverage in this state to elect to participate in a regional network by contract. The bill requires insurers participating in the regional network to be given the opportunity for audits of the regional networks. 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 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 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, and requires TWCC by rule to establish the form and manner by which an employee receives notice of the employee's rights. Participating insurance carriers are also required to provide participating employers with information to be shared with employees, including a list of network doctors and 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 employer. 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 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 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). ARTICLE 3 C.S.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). C.S.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). ARTICLE 4 C.S.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 (Sec. 408.026). Disputes over spinal surgery are handled by an independent review organization, rather than TWCC's dispute resolution process. C.S.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). C.S.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 requires these rules to be adopted no later than February 1, 2002 (Sec. 413.0141 and SECTION 4.04). ARTICLE 5 C.S.H.B. 2600 alters the process for required medical examinations. The bill would direct 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 would continue to be handled through the current order of examinations, but for all other issues, the designated doctor exam would be conducted first. The bill also changes the qualifications for selection as a designated doctor. The bill would stipulate that the designated doctor's qualifications be appropriate to the issue under consideration and the employee's medical condition. 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 SECTION 5.04). ARTICLE 6 C.S.H.B. 2600 requires TWCC to adopt rules by June 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 6.08). The bill requires TWCC by rule to adopt the reimbursement methodology and model used by the Medicare system with as few modifications as necessary to meet occupational injury requirements, and to adopt other Medicare requirements, rules, and standards to meet required documentation and billing standards. The bill makes the adoption of a treatment guideline by TWCC optional rather than mandatory, and specifies that any treatment guideline adopted must be nationally-recognized, scientifically valid, and outcome-based. The required rules and guidelines must be created no later than May 1, 2002 (Sec. 413.011 and SECTION 6.08). C.S.H.B. 2600 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. 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. These provision take effect January 1, 2002 (Sec. 413.031 and SECTION 6.08). C.S.H.B. 2600 requires each doctor to disclose to TWCC, in accordance with TWCC rule, the identity of any health care provider in which the doctor or the health care provider that employs the doctor has a financial interest. TWCC shall require by rule that a doctor 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 shall adopt these rules by June 1, 2002 (Sec. 413.041 and SECTION 6.08). 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). ARTICLE 7 C.S.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). ARTICLE 8 C.S.H.B. 2600 provides that an insurer that 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). ARTICLE 9 The bill expands the current definition of eligibility for lifetime income benefits to include employees who suffer third degree burns over 40 percent of the body (Sec. 408.161). ARTICLE 10 C.S.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). C.S.H.B. 2600 expands the liabilities of the subsequent injury fund (Sec. 403.006). The bill requires the subsequent injury fund (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). EFFECTIVE DATE September 1, 2001. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 2600 differs from the original bill by conforming to Texas Legislative Council style and format. The substitute provides that the certificate of registration for approved doctors expires as provided by Texas Workers' Compensation Commission (TWCC) rules, rather than for four years or as determined by TWCC (Sec. 408.023). The substitute expands the rulemaking authority of TWCC, and establishes the Health Care Network Advisory Committee to advise TWCC on the implementation of regional health care delivery networks (Sec. 408.0221). In addition, the substitute requires, rather than authorizes, the medical advisor to establish a medical quality review panel (Sec. 413.0512). The substitute sets forth provisions regarding an employee's decision whether to participate in a regional network. The substitute also authorizes an insurance carrier (insurer) to elect to participate in a regional network. The substitute prohibits an employer from taking negative 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 for a violation of this provision (Sec 408.0222). C.S.H.B. 2600 provides for the funding of regional networks (Sec. 408.0221). The substitute requires TWCC to ensure that regional network contracts provide insurers with reasonable rights to conduct audits, and subjects TWCC to audit by the state auditor. The substitute changes the date on which TWCC is next subject to review under the Texas Sunset Act (Secs. 401.002, 401.003, and 408.0221). C.S.H.B. 2600 expands the liabilities of the subsequent injury fund and sets forth provisions related to ensuring the financial soundness of the fund (Secs. 403.006 and 403.007). The substitute requires TWCC to publish its medical dispute decisions and final disclosure enforcement orders on the TWCC website (Secs. 413.031 and 413.041). The substitute requires TWCC by rule to adopt the reimbursement methodology and model used by the Medicare system, with minimal changes necessary to meet occupational injury requirements (Sec. 413.011). C.S.H.B. 2600 expands upon provisions regarding return-to-work coordination services and pharmaceutical coverage (Secs. 413.021 and 413.0141). The substitute clarifies the order of required examination. The substitute directs the employees to TWCC designated doctors, rather than a doctor selected by an insurer, for an initial required medical examination related to most issues. However, issues related to the appropriateness of care are directed to examinations by doctors selected by insurers first, as under current law. The substitute includes a provision to move the TWCC sunset date from 2007 to 2005 and provides direction for any audit conducted of TWCC (Secs. 401.002 and 401.003). The substitute includes provisions related to attorney's fees in certain instances of judicial review of a final decision of a TWCC appeals panel (Secs. 413.031 and 408.221). The substitute includes a provision for lifetime income benefits for certain employees who suffer third degree burns (Sec. 408.161). The substitute provides for the computation of benefits for employees with multiple employment (Sec. 408.042). The substitute includes provisions to safeguard and utilize funds from the subsequent injury fund (Secs. 403.006 and 403.007). C.S.H.B. 2600 requires TWCC and the Texas Department of Insurance to enter into a memorandum of understanding to coordinate the regulation of insurance carriers and utilization review agents, and sets forth provisions regarding a workers' compensation medical regional network report card (Secs. 408.0221 and 408.231).