Section III: State Employees Workers’ Compensation Study
Overview of the Texas Workers’ Compensation Program
Workers’ compensation is a state-regulated insurance program that pays medical bills and replaces some lost wages for employees who are injured at work or who have work-related diseases or illnesses. Texas workers’ compensation legislation was first enacted in 1913. This legislation has been revised several times over the past 85 years with the last revision occurring during the 1999 Legislature.
Since January 1, 1991, the workers’ compensation benefits have been administered through the Texas Labor Code, Title 5, Subtitle A. This act ensures that injured workers, including those working for state agencies, are compensated fairly and appropriately for workplace injuries. The act provides for:
• Employers’ voluntary participation;
• Workplace heath and safety programs;
• A dispute resolution process with an ombudsman to provide legal assistance to injured workers;
• Guidelines for medical fee and treatment to control medical costs; and
• Oversight by the Research and Oversight Council (ROC).
State Office of Risk Management (SORM)
The State Office of Risk Management, created by the 1997 Legislature, administers the State Employees Workers’ Compensation program, excluding employees of the Texas Department of Transportation, the University of Texas System and the Texas A&M University System, as well as independent contractors, volunteers and prisoners, who are covered by federal workers’ compensation, and clients or patients of a state agency.
The legislation combined the Office of the Attorney General’s (OAG) Workers’ Compensation Division and the Risk Management Division of the Texas Workers’ Compensation Commission (TWCC) to form the new State Office of Risk Management (SORM). OAG provides SORM administrative support and facilities, but SORM’s operations are independent of OAG’s direction. A six-member board appointed by the governor have authority over SORM.
As the state employees workers’ compensation insurance carrier for Texas, SORM:
• investigates all reported injury claims made by state employees who are injured or who become ill due to their work,
• processes claims, and
• pays medical bills and lost income benefits to these state employees.
The Texas Labor Code and the Texas Workers’ Compensation Commission (TWCC) governs, by administrative rules, the benefits that are deemed reasonable, necessary and related to the injury.
Finances for Texas State Employees Workers’ Compensation
For fiscal 2000 and 2001, the Legislature appropriated $92.3 million in general revenue to pay past and future illness/injury claims. This amount covers lost wages and medical benefits. Of the $92.3 million, about $6.5 million will be spent on claims dating from fiscal 1999.
The remaining $85.8 million is earmarked to pay SORM’s portion—75 percent—of the estimated future claims of employees of state agencies funded by general revenue. The remaining 25 percent—expected to total $28 million—will be paid directly by the agencies whose employees make the claims. The 1995 Legislature added the 25 percent requirement in an attempt to rein in costs and create a financial incentive for agencies to reduce the number of claims.
The $92.3 million legislative appropriation and $28 million in contributions from state agencies, however, probably do not represent the total cost of claims that will occur in the current biennium. Appropriations are based on estimated payouts rather than actual expenditures, and in recent years these payouts have consistently exceeded expectations, primarily due to sharp increases in medical costs. Thus the recent pattern has been for appropriations to run short in the second year of each biennium, requiring an emergency appropriation to keep SORM solvent. For the current biennium, the expected shortfall is estimated at $18 million—the largest yet. The total cost of workers’ compensation claims for fiscal 2000 and 2001, then, is expected to reach more than $130 million.
The Legislature requires agencies that use federal revenue or revenue from sources other than general revenue to reimburse SORM for 100 percent of their claims funding. Each biennial SORM appropriation includes money to cover the cost of claims generated by these non-general revenue agencies. In fiscal 1999, this amount totaled $5.8 million. Although these funds ultimately are reimbursed, the necessity of covering these costs in advance reduces the total amount of general revenue available for other purposes in the biennial appropriations cycle.
According to SORM, in fiscal 1999, more than $29 million was spent to pay 148,144 medical bills and more than $39 million was spent to pay 189,120 medical bills in fiscal 2000.
Texas State Employees Workers’ Compensation Program
As stated earlier, the Texas State Employees Workers' Compensation program is administered by the State Office of Risk Management (SORM). SORM operates as a carrier in processing the workers’ compensation illness or injury claims and medical bills. Similar to other worker’s compensation carriers in Texas, SORM follows the Texas Workers’ Compensation Commission’s (TWCC) Treatment and Medical Fee Guidelines. The Texas Labor Code permits the Texas Workers’ Compensation Commission to enact administrative rules regarding the administration of the workers’ compensation program in Texas. These rules and guidelines published by TWCC are part of the Texas Administrative Code.
Medical Injury Claim Process
The Texas Labor Code entitles state employees who sustain work-related injuries or illnesses to receive reasonable and necessary lifetime medical benefits. The medical benefits are “first dollar coverage” with no limit on either the dollar amount in benefits paid or the length of time, so long as medical care is reasonable, necessary and related to the injury.
When state workers are initially injured, such as fracturing a bone during a fall, or becoming ill from occupational injuries, such as carpal tunnel syndrome, they must report it to their employer within 30 days from the date of injury or illness. SORM uses a formal form, a TWCC-1S, for this process. This form is used to set up a claim. An adjuster must review the claim and determine if the injury or illness is work related and thus “compensable” within seven days of receiving the TWCC-1S form.
Throughout this section, there is a distinction between a “claim” and a “bill.” For the State Employees Workers’ Compensation program, a “claim” refers to an injured worker’s entire medical injury or illness case, while a “bill” refers to a specific statement submitted by a health care provider with medical services related to the claim injury or illness. The health care providers that may provide care to injured or ill workers are stipulated by Texas Administrative Code (TAC) Chapter 134, Subchapter A, Rule 134.1 and includes doctors, registered nurses, physical therapists, equipment suppliers and etc.
Medical Bill Processing
Once the claim is opened, the system can process all the health care bills related to this injury. These health care bills are processed according to TWCC’s published rules using one or more of the following guidelines:
• Medical Fee Guideline for Medical Treatments and Services
• Pharmaceutical Fee Guideline
• Dental Fee Guideline
• Acute Care Inpatient Hospital Fee Guideline
• Mental Health Treatment Guideline
• Spine Treatment Guideline
• Upper Extremities Treatment Guideline
• Lower Extremities Treatment Guideline.
In addition to these guidelines, SORM also has internal procedures for pre-authorizing specific treatments and services, such as non-emergency hospitalizations, biofeedback, etc.
As an insurance carrier operating under the Texas Labor Code, SORM is required to pay all health care bills related to a worker’s injury/illness claim by the 45th day after the agency receives the bill unless the amount of the payment or the entitlement to payment is disputed. SORM may also, as a carrier, deny or reduce medical bills when the service has not been provided according to treatment guidelines, the service is unrelated to the claim injury or illness, the care is considered medically unnecessary or the individual is not entitled to the service. To take this action, SORM must send a report explaining the reasons for the reduction or denial of payment to the Texas Workers’ Compensation Commission (TWCC), the health care provider and the injured employee. This action may be followed by a hearing with TWCC.
SORM employs adjusters to monitor and adjudicate all injury/illness claims and bills submitted for payment for that claim. The adjusters manage the claims, making decisions such as whether treatment should continue and whether bills should be paid. Upon notice that a state employee has been injured, a SORM adjuster contacts the employee, the employee’s physician, and the employing agency. Bills are submitted to SORM’s Medical Cost Containment Vendor (MCCV).
SORM’s Medical Cost Containment Vendor (MCCV) is Argus Services Corporation. Argus is contracted to process pre-authorization requests, provide claimant’s clinical oversight (case management services) and process the medical bills, including a review and auditing of the bills and final payment to the provider. Argus employs licensed nurses as case managers to work with injured workers and their health care providers to ensure that state workers are receiving needed care and that resources are used in a cost effective manner. Currently, this case management service is limited to those who have suffered the more catastrophic and costly injuries and may not start when the worker submits a claim.
During the Comptroller’s December 1998 Health Care Claims Study, SORM’s contracted vendor was CorVel Corporation. Argus Services Corporation assumed this role on September 1, 1999. Argus was burdened with processing a backlog of claims and bills within the first three months of its contract. This task was accomplished on time, providing the study an ample volume of paid bills from which to select a sample.
Health care providers submitting statements for health care services are paid according to the Texas Workers’ Compensation Commission’s Medical Fee Guideline 1996, which became effective on April 1, 1996. These guidelines used the procedure codes published in the Physician’s Current Procedural Terminology,(CPT) Fourth Edition, Copyright 1994 by the American Medical Association (AMA). TWCC also incorporated the AMA’s 1995 procedure codes in these 1996 guidelines before publication.
Following is a list of some of the information provided in the guidelines:
• General instructions that cover the usage of the procedure codes, documentation of services, pre-authorization requirements, reimbursement and TWCC procedure billing modifiers;
• Descriptions of the health care services allowed for each type of eligible health care provider;
• The maximum allowable reimbursements (MAR) for each of the services described.
Note that the AMA has revised its Physician’s Current Procedural Terminology, Fourth edition, every year since 1993, including its 2000 edition. AMA is working on a CPT-5 project to develop the next generation that will improve the existing features and correct deficiencies. According to TWCC, health care providers encounter problems billing newer health care or surgical procedures using these guidelines, which sometimes results in improper billing.
Focus of the State Employees Workers’ Compensation Health Care Claims Study
The study’s purpose was to measure the incidence of potential overpayments, including occurrences of fraud and abuse in the Texas State Employees Workers’ Compensation program. An overpayment is a payment for a service that does not follow the published rules or guidelines of the Texas State Employees Workers’ Compensation program.
The Texas Workers’ Compensation Commission defines fraud as occurring when a person knowingly or intentionally conceals, misrepresents, and makes a false statement to either deny or obtain workers’ compensation benefits or insurance coverage, or otherwise profit from the deceit. Fraud can be committed by either the claimant or the provider.
The Workers’ Compensation Fraud Inspector General in the State of New York defined abuse as any practice that uses the workers' compensation system in a way that is contrary to either the intended purpose of the system or the law. This includes some behavior that is not criminal and some that is.
SORM Fraud and Abuse Prevention
SORM has been refining and improving its services to reduce fraud-related losses. Its achievements during 1998 to increase fraud or abuse awareness and detection included:
• The creation of the Fraudulent Activities Investigative Review (FAIR) task force;
• The creation of a toll-free hotline to report suspected fraud;
• The design and distribution of two fraud-awareness posters;
• Securing SORM’s first felony indictment for workers’ compensation fraud by a former state employee stemming from a State Employees Workers’ Compensation investigation.
SORM has provided continuing professional development to adjusters during the year and has highlighted the need for a reorganization of its claims operations in the future, with three major changes:
• Assigning adjuster teams to serve specific agencies to provide continuity in claims handling;
• Assigning a single adjuster to each injured employee for the life of the claim;
• Re-allocating resources to provide more hands-on supervision.
Fraud and Abuse within the Texas Workers’ Compensation System
According to TWCC, fraud costs the Texas workers' compensation system and Texas employers millions of dollars each year. The Texas Workers' Compensation Commission's (TWCC) Office of Investigations works with numerous special investigation units to prosecute those who commit fraud. These units include state and federal law enforcement officials, other regulatory agencies and insurance carriers.
Fraud can be committed by employers, employees, health care providers, attorneys, insurance agents and others. TWCC includes a list of fraud indicators on their Web site for employers, employees and attorney/health care providers. The commission’s Office of Investigations maintains a hotline to receive information on fraudulent activity. Referrals are evaluated to determine which is appropriate for further investigation and potential prosecution.
Research on Texas workers’ compensation fraud is limited. To date, only two research projects have been completed and published reports:
• “Fraud in the Texas Workers' Compensation System” published in January 1998 by the Research and Oversight Council (ROC) on Workers’ Compensation; and
• Final Staff Draft Report on Health Care Claims Study and Comments from Affected State Agencies published in December 1998 by the Comptroller’s office.
The ROC report pointed out that “It is impossible to determine with certainty the amount of fraud in the Texas system because insurance carriers are not required to report fraud. The most common type of fraud referred to, and investigated by, the TWCC is injured worker benefit fraud.”
Forty-three states provide Internet sites and hotlines to gather information on worker’s compensation fraud. Most of these states have departments or agencies that investigate fraud referrals and pursue prosecution and recovery of lost funds. Two states cited references to an estimate of “10 percent of claims are fraudulent”, one attributed to the Federal Bureau of Investigation and the other to the U.S. Commerce Department.
Very few formalized research reports on workers’ compensation fraud and abuse are available. States agree that significant dollars are lost to employers and carriers through undetected fraud. The drawback to recovering these dollars is that workers’ compensation fraud can be difficult to prove. Most states, including Texas, must weigh the cost of an investigation and prosecution against the feasibility of regaining the lost dollars.
State Employees Workers’ Compensation Methodology
December 1998 Study Overview
Two hundred sample days were selected from bills paid in November 1997 for the December 1998 study. These were grouped into four categories: hospital, medical, miscellaneous and pharmacy. The staff reviewed a total of 278 bills from a universe of 6,681 bills. The review methodology consisted of telephone interviews with claimants, an online analysis of the claimants’ billing trends over a three-month period and a review of medical records. The study team only requested medical records from claimants’ providers when there were medical necessity questions during the contextual analysis review. Table 1 presents the distribution of the December 1998 study.
Table 1: State Employees Workers’ Compensation Sample Distribution by Category for December 1998 Study
Categories Number of SampleClaimant Days Number of Sample Bills in Study Number of Bills in the Sample Universe Hospital 50 56 471 Medical 100 151 4,288 Miscellaneous 25 31 389 Pharmacy 25 40 1,533 Totals 200 278 6,681
Source: State Comptroller of Public Accounts, Final Staff Draft Report on Health Care Claims Study and Comments from Affected State Agencies, (Austin, Texas) December 1998.
Similar to the December 1998 study, the Comptroller’s office and SORM staff decided to keep the sample size at 200 and retain the same categories. Instead of using only one month (November), however, a three-month period (September through November) was determined to be a better representation of the universe for the January 2001 study.
In addition, during the current study, staff decided against requesting medical records from the providers. In the previous study, when medical records were requested, few were received, and of those received, most were incomplete, did not apply to the sample day or were not legible. Most importantly, SORM has no legal authority to ensure that providers comply with medical records requests unless there is an appeal or dispute process.
The current study’s final sample consisted of 200 claimant days. The sample was selected from paid bills with dates-of-service (DOS) from September 1, 1999 through November 30, 1999. The SORM bill database is not configured to select service detailed dates, but only dates from within the bill date range (first day through the last day). This is the reason that bills were found without actual health care services occurring on the sample day selected.
The study used the Statistical Application Sampler (SAS) software to randomly select a sample date from a bill date range for each claimant. Using the sample date, all related bills for the sample date were included in the sample. At the same time the sample was selected, a reserve sample was selected using the same SAS application and selection process. This selection was performed in February 2000.
Following selection, the sample was classified into the same four categories, using the bill type, as performed in the December 1998 study: hospital, medical, miscellaneous and pharmacy. Unlike the Medicaid system, the bill types are not related to the type or specialty of the provider submitting the bill. Therefore, all the data reported and presented in the tables for this section are not resorted like in Section II on Medicaid, but are based on the sample bills only. Table 2 illustrates the distribution for the January 2001 study sample.
Table 2: State Employees Workers’ Compensation Sample Distribution by Category for January 2001 Study
Categories Number of Sample Days Number of Sample Bills Number of Bills in the Sample Universe Hospital 3 9 1,797 Medical 131 206 20,427 Miscellaneous 6 13 610 Pharmacy 60 83 8,081 Totals 200 311 30,915
Since each worker’s claim is unique to a specific injury or illness, the 200 sample days for the 200 claimants also represented 200 unique claims. The final sample selection consisted of 311 health care bills to review. The total paid dollars for the sample, which totaled $119,532.13, represented 1.5 percent of the sample universe of total payments.
During the initial collection of data, 20 sample bills were identified as reimbursements to the claimants for travel only. That is, the bill selected was submitted by the claimant for automobile gas based on mileage traveled from and to their home to an appointment or health care facility. Since no specific medical service(s) was submitted on these bills or were associated with the sample day selected, these sample days and claimants were deleted and replaced with bills from the reserve list that were randomly selected at the same time as the main sample. Claimants with health care services along with bills for transportation on their sample day were retained in the sample.
During the Contextual Data Analysis (CDA) review, two additional claimants were excluded when a review of the sample bill found no health care services on the sample date selected.
The study reviewed a random sample from a three -month period, which represented annual spending of $31.2 million or about 80 percent of the total $39 million that the State Office of Risk Management spent on medical services for fiscal 2000.
Overpayment Measurement Calculation
The study overpayment measurement was determined by dividing the sample total dollars potentially overpaid (potential recoupments and adjustments) by the sample total dollars paid on the sample bills.
Total Sample Dollars Potentially Overpaid = Potential Overpayment Percent Measurement Total Sample Dollars Paid
Example: $2000 = 20% $10,000
(Detailed information on the development of the results are discussed in the Results Section on page 49 and Appendix Q.)
Two review analyses were performed for all the bills associated within the sample: claimant telephone interviews and a contextual data analysis. Whenever any medical record document was available, it was reviewed during the contextual data analysis. Table 3 provides a definition of each review method.
Table 3: State Employees Workers’ Compensation Review Methodology
Type of Review Description Claimant Telephone Interview State employee claimants were contacted by phone to validate they received the sample services on the sample day from the providers who billed the services. Potential overpayments were only counted if the claimant stated the service did not occur. Contextual Data Analysis Review of bill data submitted by a provider and any adjusters’ notes or case management notes related to a state employee’s claim. Bill information was collected from the SORM claim processing system along with copies of related notes and medical record documentation included in the claim files.
A summary description of each review method follows. (A detailed discussion of both the claimant telephone review and contextual data review methods is included in Appendix O; the tools used for these methods is in Appendix P.)
Claimant Telephone Interview Reviews
The purpose of the claimant interview was to validate the health care service information on the bill paid by SORM. The interview tested whether the individual recalled receiving services from the provider who submitted the bills, whether these services were provided on the sample day and whether the individual could remember receiving all the services on the bill.
The telephone questionnaire tool from the December 1998 study was revised for the claimant’s telephone interviews. The revisions resulted from the experience of the consultant, Comptroller’s office and SORM staff. The tool used the same 13 sections noted in the Medicaid Study on page 19, appropriate to the health care services the claimant received.
Interviewers asked each claimant for two kinds of information: demographic information and data concerning the type of service provided on the sample day. (The interview form and questionnaire are included in Appendix P, Exhibit 1.)
Contextual Data and Document Review Analysis
As in the Medicaid study, consultant research analysts conducted contextual data analyses of all bills associated with the sample claimants for their sample dates online using the SORM claim processing database. Analysts reviewed each claimant’s bills in relation to other bills paid for the specific injury or illness during the time that spanned two months prior to and one month after the sample day, regardless of the provider.
The goals of the contextual data and document review analysis were to identify unusual billing trends, verify that reimbursed bills were coded correctly, determine whether treatment appeared to be medically appropriate, and determine those bills for which a decision could not be made without a review of the medical record.
Because the State Employees Workers’ Compensation program has specific rules and guidelines, a consultant with knowledge of the Texas Workers’ Compensation program also conducted a final review of all the documentation collected. This consultant reviewed the bills submitted by the providers, SORM adjusters’ notes and any case management or medical record documentation included with the claimant’s bills.
Documentation Review Criteria
The following criteria were used for conducting the claimants’ documentation reviews:
• The sample claimant’s name had to be documented on the bill;
• The sample service billed and paid had to be documented on the bill;
• The sample date (month, day and year) had to be documented on the bill;
• The sample service billed had to be paid according to the TWCC treatment and medical fee guidelines specific to that service;
• When a medical record was available, the service(s) had to be appropriate and meet the TWCC treatment and medical fee guidelines specific to that service.
State Employees Workers’ Compensation Review Results
Of the two review types, the documentation reviews proved to be the most significant in uncovering discrepancies in payments. The contextual data analysis could identify potential upcoding of office visits and treatment outside the TWCC guidelines. Similar to the Medicaid study’s experience with telephone interviews, the study team was only able to complete 116 out of 200 interviews, 58 percent of the total state employees to be contacted. An overview of the results from each study is summarized below. (Detailed results of the State Employees Workers’ Compensation study are discussed in Appendix Q.)
Claimant Telephone Interview Results
As in the Medicaid Study, timely claimant contact and recall appeared to be a significant factor. The 116 claimants were interviewed between four to 11 months following the actual dates of service. The team was unable to identify working telephone numbers for 47 claimants (24 percent) of the 200 sample claimants, despite using every resource available. This included the claimants’ employer and Comptroller’s staff. The Comptrollers’ staff searched proprietary databases and phone directories to locate telephone numbers for these sampled claimants in July 2000. Table 4 below identifies the survey contact information.
Table 4: State Employees Workers’ Compensation Injured Worker Interview Results
Interview Results Number Percent Completed interviews 116 58% Claimant refused interview 24 12% Claimant terminated before interview completed 4 2% Disconnected telephone number 14 7% Not a working telephone number 11 5% Not at the address last known to the agency employer 19 10% No telephone or no known telephone number 4 2% No answer (called more than 10 times) 5 2% Unable to contact 3 2% Total 200 100%
Overall, for the 116 claimants successfully interviewed, 10 said they did not receive the services billed and then paid by SORM. Twenty-four claimants stated they could not remember receiving the services on the sample bill. These statements could not be conclusively verified since the medical record documentation was not always available. As noted earlier, medical records are not required by the providers except when required for a pre-authorization or when a dispute or appeal is initiated. Table 5 shows the results of the completed interviews.
Table 5: State Employees Workers’ Compensation Telephone Interview Results
No Discrepancy Discrepancy(Denial of services) No Recall Total Number of Claimants 83 10 23 116
Contextual Data and Document Review Analysis Results
The initial contextual data and document review identified 75 (27 percent) sample bills out of the 280 bills reviewed with discrepancies. All the errors were found exclusively in the medical and pharmacy categories.
As with the Medicaid study, the team met with SORM and Argus staff to review the findings of the contextual data and document review. SORM agreed with only 38 (51 percent) of the discrepancies presented, citing from the published TWCC guidelines. For example, the Spine Treatment Guideline (June 1995) states that “a guideline and shall not be used as the sole reason for denial of treatments and services.”
This instruction is noted in the Introductory section of the Spine Treatment Guideline defining the purpose of the guideline. However, within the same document are statements that provided direction and parameters to carriers to question bills for medical necessity. Two examples are:
• One of the goals noted in the Introduction section states “to provide a mechanism of prospective, concurrent, retrospective review for efficient and effective health care utilization.”
• Instruction #2 to the Insurance Carrier in Application Table (B): “When there is no clinical progress, lack of changes in treatment plans and inconsistency between the level of severity and the level of service may require focus review for clarification. Additional documentation may be requested or inform health care provider of no reimbursement. Refer to Medical Dispute Resolution if unsuccessful at this level.”
The following sentence in the purpose statement has been added to the TWCC’s Spine Treatment Guideline that became effective July 15, 2000:
“Similarly the guideline shall not be used as the sole reason for accepting the treatment or service as reasonable and medically necessary simply because the treatment or service is listed in the guideline.”
The Comptroller’s office agrees with SORM that these guidelines are not a basis for denying health care services. However, the Comptroller’s study team believes these guidelines should be used as a basis for beginning the dispute process available to SORM for questioning the medical necessity of services and avoiding significant potential overpayments.
The Comptroller’s study team interviewed TWCC staff to gain an understanding of how TWCC enforces Texas Worker’s Compensation laws and regulations. In this meeting, TWCC concurred that the published rules and guidelines offer insurance carriers, like SORM, opportunities to dispute payment and avoid unnecessary expenses that would otherwise be difficult to recover. After considering the general comments of TWCC staff, the team reviewed the discrepancies and subsequently determined the adjusted discrepancy count was 73 (23 percent) of the sample bills.
Most of the discrepancies found were services that exceeded the TWCC Medical Treatment Guidelines (including spine treatment) and/or the TWCC Medical Fee Guidelines. Generally, two type of errors were noted:
1) Medical treatment extending months to years after the TWCC guideline’s recommended maximum period of time for the specific injury or illness, and
2) prescription drugs (narcotics, tranquilizers and muscle-relaxants) also continued to be paid for months to years after the TWCC guideline’s recommended a maximum period of time for the specific injury or illness.
These errors occurred in only two health care groups, Medical and Pharmacy. Table 6 illustrates the review results.
Table 6: State Employees Workers’ Compensation Contextual Data and Document Review Results
Type of Error Number of ErrorsIdentified in theMedical Group Number of ErrorsIdentified in thePharmacy Group Totals Rank Exceeding TWCC Medical Treatment Guidelines 8 18 26 1 Exceeding TWCC Chiropractic Treatment Guidelines 22 0 22 2 Upcoding Services 11 2 13 3 Incorrect Payment of Services 4 3 7 4 Duplicate Billing of Services 4 0 4 5 Incorrect Coding of Services 1 0 1 6 Totals 50 23 73
Type of Errors Found
Summarized below are the main types of errors found in the bill discrepancies from the contextual data and document record review and listed in the table above. As stated on page 48 of the Methodology Section of this report, medical services that were of questionable medical necessity were only designated as a discrepancy when medical record documentation for the service was available. Within the study, 27 of the sample bills (9 percent) had enough information to consider the service questionable, however, without the medical record, the reviewers were unable to make a conclusive decision. These bills were not included in the potential overpayment measurement.
Exceeding Texas Workers’ Compensation Commission Treatment Guidelines
The TWCC Treatment Guidelines identify the normal course of treatment for injured or ill workers, clarifying services that are reasonable and medically necessary for operative and non-operative care specific to the injury or illness as listed on page 41 in the Overview Section of this study. The guidelines specify treatment according to the level of service performed: primary, secondary and tertiary. Table 7 provides an example of these treatment levels.
Table 7: Example of Levels of Treatment for the Texas Workers' Compensation Program
Level of Treatment Duration of Time Goal of Treatment Primary 0-8 Weeks Symptom control to facilitate rapid recovery and return to work before deconditioning or psychosocial barriers occur. Secondary 0-8 Weeks Arresting and preventing progressive physical deconditioning and appearance of psychosocial barriers to work return with a reactivation process, generally associated with the post-acute and early postoperative periods Tertiary 0-6 Weeks To present the final phase of non-operative or postoperative treatment for severe cases, with the goal of giving injured workers an opportunity for cooperating actively in programs designed to achieve Maximum Medical Improvement. Total 0-22 Weeks
Source: Texas Workers’ Compensation Commission, Spine Treatment Guideline, (Austin, Texas) June 1, 1995.
When evaluating the medical necessity of a service, these treatment time duration guidelines are applied cumulatively. For example, primary care may take only four weeks or evolve to the secondary level that requires the full eight weeks of treatment. This timetable would result in a cumulative total of 12 weeks of treatment before the injured or ill worker can return to work.
When applying these guidelines to determine a discrepancy, the reviewers used the maximum cumulative total of 22 weeks to indicate that a sample service exceeded the treatment guideline. In total, 48 of the sample bills (15 percent) with discrepancies exceeded the treatment guidelines for the specific injury or illness and could be disputed. Two examples found were:
• Payment for services for a 15-year-old injury to the neck when an adjuster noted that a Required Medical Exam (RME) stated the claimant’s problems were related to “natural disease of life, not a traumatic event.”
• Payment for services two years following a back sprain and muscle spasm.
These discrepancies were referred to SORM for further investigation and potential action for future bill processing on these claimants based on the new rules effective July 15, 2000.
As in Medicaid, billing higher procedure codes than the level of care provided is considered upcoding to increase a provider’s reimbursement. Medical services were only designated as a discrepancy in the study when medical record documentation for the service was available to identify the level of care and the treatment decision complexity.
Using the medical record documentation to identify the level of care and treatment decision complexity, 13 sample bills (4 percent of sample) were determined to be upcoded. All of the discrepancies consisted of billing a complicated office visit code when the documented service provided indicated a brief visit with a minimal or no level of complexity to the treatment decision, i.e. a follow-up visit to check the status of an ongoing treatment.
These were referred to SORM as examples for further evaluation on a post-payment review of the providers with a recommendation to educate the providers.
Duplicate Billing of Services
Billing two or more times for the same service with the same date-of-service by the same provider accounted for four sample bills or 1.2 percent.
Incorrect Payment of Services
Using the TWCC Medical Fee Guidelines, seven sample bills (2 percent of the sample) were found with payment errors committed by SORM. For example, a provider was paid $48.80 for a medical report when the appropriate reimbursement is $15. This item was referred to SORM for an adjustment.
Summary of the Errors
In some instances, duplicates of medications were purchased by claimants, multiple times without any apparent physician supervision. For example, nine years after an injury, one injured worker received duplicate medications of the same classes, including narcotics, analgesics, anti-emetics and skeletal relaxants. In three months, State Employees Workers’ Compensation paid $4,600 on all medications for this injured worker.
Many findings from this study are consistent with those noted in reviews by federal agencies and other insurers. Examples are listed below.
Some physician office visits were upcoded. Although medical records were not available, the contextual data and documentation review analysis often supplied enough information to suggest that upcoding had occurred, based on a review of the injured worker’s diagnosis, type and frequency of medical services provided and on the adjusters’ notes.
The billing for some physician visits was fragmented, that is, the service should have been included in a “global” code, which would have resulted in a single payment, as opposed to having been billed separately, resulting in two payments that were higher than the single payment.
Duplicate and erroneous billing occurred. For example, one provider billed and was paid twice for a physical therapy service, while another billed for three arthroscopies in one day when the medical record showed no arthroscopies, but instead, one lumbar arthrogram that was performed as part of an operative procedure.
It appears the medical cost containment company, Argus, may not have sufficient electronic edits and also may not be performing routine utilization review functions. However, it is important to note that the samples drawn were from the first three months of the new contract with Argus Service Corporation.
As recommended in the December 1998 study, many cases could benefit from clinical case management. These cases included claims with old dates of injury where individuals continued to receive extensive treatment, claims where State Employees Workers’ Compensation made significant medical expenditures, and claims where the treatment did not appear medically appropriate for the injury. While the agency provides case management for a small number of injured workers, reviewers found many other cases that could benefit from case management, for example, injured workers who are receiving medications or passive physical therapy long after the initial injury.
It appeared that coordination between adjusters and SORM’s medical cost containment contractor, Argus Service Corporation, should be improved and that cases should be monitored more closely by adjusters. This coordination, along with improved utilization review, expanded case management, and a more complete system of edits in the electronic claims management system would benefit many injured workers and result in a more cost effective program.
The lack of medical records continues to be a problem in conducting this study, leaving some questions unresolved. Reviewers identified 27 bills for 20 injured workers for whom a decision could not be made without the medical record. For some cases, an accurate medical report on the severity of the original injury, as well as ongoing records that detail the injured worker’s progress, are crucial to the ability to make informed decisions and to determine potential fraud and abuse.
TWCC Guideline Modifications Related to the Errors Identified
TWCC modified its treatment guidelines, effective July 15, 2000, which address some of the issues identified in the study’s findings. Some of these rule modifications are:
• All insurance carriers are to review all complete medical bills retrospectively for guideline compliance, duplicate billing, upcoding, unbundling, etc;
• The insurance carriers may change a billing code or reimbursement if they contact “the sender of the bill and the sender agrees to the change;”
• Medical record documentation may be requested on a medical bill if needed to conduct the retrospective review;
• Guidelines are clarified for onsite audits to the provider and peer reviews that may result in reduction or denial of payments for questionable services.
The implementation of these rule changes will be reviewed in the 2002 study.
Potential Overpayment Measurement
Unlike the Medicaid study’s stratified sample, the State Employees Workers' Compensation study sample was a true random sample. The sample bills were classified into the four categories of health care until after the sample selection. Thus a weighted calculation was not necessary to derive the overpayment measurement.
The sum of all of the amounts that were potentially paid in error was divided by the total amount paid in the sample. The total dollars calculated as potentially overpaid from the sample services with discrepancies is $9,671.17 or 8.09 percent of the $119,532.13 paid for the sample bills.
Dollars at Risk
The overpayment measurement can be applied to the annual State Employees Workers' Compensation expenditures to determine the “dollars at risk” in the State Employees Workers' Compensation program. This can be accomplished because the sample study was a random sample and, therefore, mirrors the universe from which it was selected. The annual State Employees Workers' Compensation expenditures reflect the same provider categories that were selected and excluded from the universe used for the random sample.
The term “dollars at risk” is used because the amount that is computed when applying the overpayment measurement to the annual expenditures is not recoverable unless all of those individual services that are questionable are identified through a complete medical record review of all services submitted for payment, which is not possible given the size of the Texas State Employees Workers' Compensation program and the difficulty of obtaining medical records. However, SORM can use the findings in this study to target specific areas of improvement.
The dollars at risk for fiscal 2000 are $3.2 million dollars. This figure was computed by multiplying the overpayment measurement rate of 8.09 percent times $39.8 million of the State Employees Workers' Compensation expenditures for fiscal 2000. The margin of error is plus or minus three percent.
State Office of Risk Management (SORM)
The Comptroller’s office suggests SORM implement the following recommendations to avoid overpayments.
A. Direct the Medical Cost Containment Vendor (MCCV) to add audits and/or enhance existing edits in the bill processing system to catch potential overpayments.
The current MCCV, Argus Services Corporation, has 99 system edits that identify missing or incorrect information on the required bill forms. Audits, similar to those used in the Medicare and Medicaid programs, can be added to compare the date of service to the date of injury to “flag” any bill that exceeds the recommended treatment period based on the TWCC guideline specific to the illness or injury. This change would allow Argus and SORM staff to review and request documentation to support medical necessity or, if appropriate, deny payment.
B. Conduct post-payment reviews on paid bills.
At monthly, quarterly and annual time periods, SORM can move all the data on the paid bills and associated claims from their system into a data warehouse. Various query programs can be created to identify potential fraudulent or abusive billing patterns by either the claimant or the provider.
For example, using one of the TWCC employee fraud indicators, “injuries occurring late Friday or early Monday,” a query can compare the dates of injury for each claimant’s claims to the calendar dates and flag any claimant with 3 or more claims that meet this criteria.
C. Amend the SORM rules to require adjusters to have health care related education and experience.
The lack of a requirement for minimal professional medical training or equivalent experience jeopardizes the quality of health care review and decision expected of the SORM adjusters.
Basic knowledge of diseases, traumatic injuries, diagnosis and procedure billing codes is essential for an individual to be able to spot irregularities with medical treatment and/or billing. Medically trained adjusters also could assume the responsibility for performing the post-payment reviews.
D. Use the professional physician/health care reviewers and advisors.
As noted in the study findings, services exceeding the TWCC treatment guidelines represented 65 percent of all the discrepancies. Significant inappropriate payments may be avoided by requesting the medical record documentation and initiating a timely peer review.
These recommendations can be implemented within these agency’s current appropriations.
 Texas Workers’ Compensation Commission, “History of Workers’ Compensation in Texas,” (http://www.twcc.state.tx.us/information/historyOfwc.html. (Internet document).
 V.T.C.A., Labor Code §501.024 ((Texas Legislative Council text online at http://www.capitol.state.tx.us/statutes/la/la050100.html#la006.501.024).
 Texas H.B. 1, 76th Leg. Reg. Sess. (1999).
 Interview with Stuart B. Cargile, manager, Fund Accounting, Texas State Office of Risk Management, Austin, Texas, August 28, 2000.
5 Interview with Stuart B. Cargile, manager, Fund Accounting, Texas State Office of Risk Management, Austin, Texas, September 6, 2000.
 Texas State Office of Risk Management, “Financial Report,” Austin, Texas, December 4, 2000.
 28 T.A.C. §134 Subchapters A-K, 2000 (replaces 1999 pamphlet); amendments effective through December 31, 1999.
 V.T.C.A., Labor Code §408.027 (Texas Legislative Council text online at http://www.capitol.state.tx.us/statutes/la/la050100.html#la006.501.024).
 Texas Workers’ Compensation Commission, Medical Fee Guideline 1996 (Austin, Texas, April 1, 1996).
 Interview with Laurie Crumpton, Adam Leonard, David R. Martinez, William Nemeth, MD, CPE, Bob Shipe and Christopher J. Voegele, Texas Workers’ Compensation Commission, Austin, Texas, October 5, 2000.
 Texas Workers’ Compensation Commission, “Fraud Costs Texans Millions” (http://www.twcc.state.tx.us/information/fraud.html). (Internet document)
 Texas Workers’ Compensation Commission, “Fraud Costs Texans Millions,” (http://www.twcc.state.tx.us/information/fraud.html). (Internet document)
 Texas Workers Compensation Commission, Medical Review Division, Spine Treatment Guideline, (Austin, Texas, June 1, 1995), p. 38; also at 28 T.A.C. §134.1001 2000 (replaces 1999 pamphlet); amendments effective through December 31, 1999.
 Texas Workers’ Compensation Commission, Medical Review Division, Spine Treatment Guideline, (Austin, Texas, June 1, 1995), p. 38; also at 28 T.A.C. §134.1001 2000 (replaces 1999 pamphlet); amendments effective through December 31, 1999.
 Texas Workers’ Compensation Commission, Medical Review Division, Spine Treatment Guideline, p. 44; also at 28 T.A.C. §134.1001 2000 (replaces 1999 pamphlet); amendments effective through December 31, 1999.
 Interview with Laurie Crumpton, Adam Leonard, David R. Martinez, William Nemeth, MD, CPE, Bob Shipe and Christopher J. Voegele, Texas Workers’ Compensation Commission, Austin, Texas, October 5, 2000.
 Texas Workers Compensation Commission, Medical Review Division, Spine Treatment Guideline, (Austin, Texas, June 1 1995), pp. 53-55; also at 28 T.A.C. §134.1001 2000 (replaces 1999 pamphlet); amendments effective through December 31, 1999.