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State Employees Workers’ Compensation Health Care Claims Study

Purpose
The Comptroller's study measured 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 or exceeds the published rules or guidelines of the Texas State Employees Workers’ Compensation Commission.

The Texas Workers’ Compensation Commission considers it fraud 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. Either the claimant or the provider can commit fraud.[16]

The last three studies performed by the Comptroller's office show that the majority of overpayments are not due to intentional fraud. The overpayments are due to SORM’s payment of services that exceed the TWCC treatment guidelines, specifically paying for over-utilized services. For example, some services occurred three or more years after minor injuries. In some of these instances, provider and possibly claimant abuse is apparent. In the future, these overpayments may be easier to control with the implementation of the new TWCC treatment criteria and fee guidelines. A table comparing this study with studies from1998 and 2001 is in Appendix C.3.

State Employees Workers’ Compensation Sample

Sample Selection
As in the last two studies, the state employees workers’ compensation study sample was selected using Statistical Application Sampler (SAS) software. The sample consisted of 200 claimants with paid medical bills from September 1, 2001 through November 30, 2001. As in the Medicaid Fee-for-Service (FFS) study, the medical bills were selected based on a sample date within the sample timeframe. All related bills on the sample date for the claimant 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 January 2002.

Following the selection process, the sample was separated into three of the four categories used in the December 1998 and January 2001 studies, using the bill type: hospital, medical and pharmacy. In the January 2001 study, the fourth bill type, miscellaneous, consisted of transportation reimbursements made directly to the claimant for traveling to and from health care visits. Claimants with only this type of bills were excluded from sample selection in the 2002 study. Table III-3 illustrates the distribution for the January 2003 study sample.

Table III-3: State Employees Workers' Compensation Sample Distribution

Categories Number of
Sample Days
(Claimants)
Number of
Sample Bills
Amount Paid
for Sample Bills
Number of
SORM Bills for
9/1/01 - 11/31/01
Amount Paid for
SORM Bills for
9/1/01 - 11/31/01
Hospital 4 19 $3,174 3,166 $2,717,918
Medical 155 625 $39,358 30,753 $5,192,985
Pharmacy 41 740 $5,473 11,190 $1,238,552
Miscellaneous 0 0 $0 703 $100,693
Totals 200 1,384 $48,004* 45,812 $9,250,148

*Totals may not add due to rounding, actual amount equals $48,004.37

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 injury claims.

State Employees Workers’ Compensation Review Methods
The same three review methods were used in this study as in the last two studies: claimant telephone interviews, online claim reviews and medical record reviews. In this study, the project team was able to secure all but a few of the medical records for the services in the sample. This resulted in a significant improvement in identifying inappropriate treatment and over-utilization of services from the previous two studies. The tools used are included in Appendices C.4 through C.8.

Claimant Telephone Interview
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. Prior to performing these interviews, the Comptroller's office sent notification letters, developed with SORM, to the claimants to inform them of the study and telephone interview. An example of this letter is in Appendix C.4.

The same telephone questionnaire used in the December 1998 and January 2001 studies was used. The telephone interview consists of 13 sections. During the interview, each individual was asked questions from a minimum of two sections: the demographic information section and the section that corresponded to the type of health care service provided on the sample day. If there were multiple services on the sample day, the individual was asked questions from each section that applied.

The interview sections were:

  • Demographic information
  • Outpatient mental health
  • Physician visit
  • Emergency room visit
  • Dental visit
  • Prescription drugs
  • Visit to other health care professional
  • Laboratory and/or Radiology
  • Inpatient hospital stay
  • Transportation
  • Outpatient hospital visit/Clinic visit
  • Home health
  • Medical supply/Durable medical equipment

All individuals administering the interview were experienced interviewers, and each was given specific instructions for this study before its initiation. Confidentiality was stressed during orientation, and each interviewer signed a statement of confidentiality. Information sheets were provided to interviewers when they were scheduled to conduct interviews, and were returned to a supervisor at the close of the interview session. The supervisor monitored and tallied all information sheets, and filed them in binders. Up to 10 attempts were made for each contact. The interviews were conducted in English and Spanish as necessary. Interviewers recorded responses into an electronic database, which made it easier to compile and analyze results. The English version of the claimant interview is in Appendix C.5.

Claimants were not required to participate in the interviews and they were allowed to end the interview at any point. If a claimant responded that they could not remember a service, the interview was continued by skipping to the next section appropriate for the health care service billed by the provider.

The interviewers used the claimant’s Social Security Number to verify the claimant’s identity. The interview tool provided three opportunities for the claimant to remember receiving the service:

  1. the claimant was asked if they went to a doctor (hospital, etc.) in the sample month;
  2. the claimant was asked if they visited a doctor or received a service on the sample day; and
  3. the claimant was asked if they saw the provider on the sample day.

Some problems were encountered during this survey. Many phone numbers had been disconnected or had been changed, and many of the people surveyed could not remember the services they had received four to 10 months earlier. Table III-4 shows the difference between the number of claimants in the sample and the number of available telephone numbers and completed calls.

Table III-4: Telephone Survey

Study Categories Number of
Sample Claimants
Number of Claimants
with Telephone Numbers
Number of Completed
Claimant Interviews
Hospital 4 2 2
Medical 155 116 111
Pharmacy 41 29 27
Totals 200 147 140

Table III-5 shows a more detailed breakdown of the telephone contact information for this study. The “refusals” listed are claimants who declined an interview.

Table III-5: Telephone Contact Information

Study Categories Hospital Medical Pharmacy Totals
Completed Interviews 2 111 27 140
Refusals 0 5 2 7
Disconnected or wrong telephone numbers 2 30 11 43
No phone or phone number 0 3 0 3
No answer or unable to contact at number given 0 6 1 7
Totals 4 155 41 200

No phone calls were made after August 2002.

Because it is difficult to contact claimants so long after they receive medical services, the results of the survey were not used to determine when overpayments were made. For this reason also, phone surveys will not be used in future studies on this topic.

Online Claim Review
Because the workers’ compensation program has specific rules and guidelines, the criteria for selecting the review consultant required knowledge of the Texas Workers’ Compensation program. This consultant performed both the online claim and medical record reviews.

The consultant and a Comptroller project team member reviewed all the injury claims and associated medical bills for the sample claimants using the SORM claim processing database. The injury claim and all case notes from the adjusters and case managers were reviewed along with all the medical bills for the claim. These case notes provided information on surgery dates, treatments and return-to-work plans in addition to each adjuster’s notes that included decisions, service denials or statements of controversion on a claimant’s medical treatment.

One of the observations made during this review was time gaps between the case notes and the actual medical events, even though medical bills for surgery and treatments were submitted and paid. In some claims, SORM was paying medical bills on claimants several months and even years after the last case note entry. One claimant was receiving prescriptions in 2002 for an injury that occurred in 1994, when the last case note was from 1997.

Medical Record Review
In July 2000, TWCC modified its treatment guidelines. One of the modifications allows workers’ compensation carriers to request medical records for conducting retrospective reviews.[17] With this change the Comptroller's office was able to request medical records for the sample services. Only a small number of records had to be requested because the majority of sample services had the medical record documentation submitted by the provider at the same time as the bill. This allowed the team to validate that the service was provided and was medically necessary. For the records that were requested, a provider request letter was developed with SORM. An example of this request letter is in Appendix C.6.

Medical Record Review Criteria
The review contractor, a professional nurse with expertise in the Texas Workers’ Compensation program, reviewed all the medical records for the study sample. A standardized review worksheet was used during the reviews. An example of this worksheet is in Appendix C.7. A peer physician with knowledge and experience of the worker’s compensation treatment and fee guidelines reviewed medical services with questionable medical necessity.

The review criteria for designating potential overpayments were based on the TWCC treatment and fee guidelines in effect for the sample dates of service, September 2001 through November 30, 2001. These guidelines serve as the Texas Workers’ Compensation program policy and procedure manual for all the insurance carriers and for appropriate program payments and were considered the industry standard until H.B. 2600 was implemented.

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 for these physical areas: spinal treatment by a physician (M.D.), spinal treatment by a chiropractor (D.C.), spine treatment testing, and the upper (arm) and lower (leg) extremities. The guidelines specify treatment according to the level of service performed: primary, secondary and tertiary. Table III-6 provides an example of these treatment levels.[18]

Table III-6: Example of Levels of Treatment for the Texas Workers' Compensation Program for Spine Treatment by a Physician

Level of
Treatment
Duration
of Time
Goal of Treatment
Primary 0-8 Weeks Control of the injured worker's symptoms to aid rapid recovery and the claimant's re-turn to work.
Secondary 0-8 Weeks Preventing progressive physical deterioration and appearance of psychosocial barriers to return to work with an improvement process to restore the claimant's health condition, generally associated with care immediately following an acute injury or surgery.
Tertiary 0-6 Weeks The final phase of medical, therapeutic or post surgery treatment for severe injury cases, with the goal of giving injured workers an opportunity for participating actively in pro-grams designed to achieve their Maximum Medical Improvement.
Total 0-22 Weeks  

Source: Texas Workers' Compensation Commission.

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 a full eight weeks of treatment. This would result in a cumulative total of 12 weeks of treatment for the injured or ill worker to be able to 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.

The review criteria was classified into distinct types of potential errors and listed in a State Employees Workers' Compensation Discrepancy Error Code Table. An example of this table is in Appendix C.8.

State Employees Workers’ Compensation Review Findings
Of the three review types, the medical record reviews proved to be the most useful in uncovering discrepancies in payments. The online claim reviews identified internal procedure issues, particularly in case management, timely information on claimant’s treatments and monitoring the necessity of long-term treatment. Telephone interviews proved to be the most costly review method and yielded the least useful information. An overview of the findings from each review is summarized below.

Claimant Telephone Interview Results
The difficulty in contacting the claimants four to 11 months after the services occurred made recall and service confirmation a significant issue. Out of 200 sample claimants, 140 (70 percent) were successfully interviewed. Out of these interviews, 35 could not remember if they had the service. Thirteen claimants said they did not receive the services paid for by SORM. Six of these claimants had prescription services. Most of them responded that they had received the service during the month of the sample date but not on the sample date. These claimants have been referred to SORM for further investigation and possible action. Table III-7 identifies the telephone interview findings for each of the health care services.

Table III-7: State Employees WorkersÕ Compensation Completed Telephone Interviews

Workers' Compensation Healthcare Services Number of
Claimants Unsure or
Did Not Remember
Number of
Claimants Stating
Service Not Received
Totals
Physician Visit 0 0 0
Other Health Care Professional 14 1 15
Inpatient Hospital Visit 1 0 1
Outpatient Hospital/Clinic 10 3 13
Prescription Drugs 9 6 15
Ancillary Services 0 2 2
Medical Supplies/Durable Medical Equipment 0 1 1
Home Health 1 0 1
Totals 35 13 48

Online Claim Review Results
In the majority of the sample claims, the information on the claimant’s treatment plan, progress and healthcare status was detailed and was entered into the computer system as soon as an event took place. There were discrepancies in eight cases related to time gaps of claimant information into the SORM claim system. Seven of these cases had periods of no claim or medical treatment information in their files. These cases were missing information between two months to five years from the system file’s last dated entry and the most recent paid medical bill. In one case the claimant has been receiving electrical nerve stimulator supplies each month for two years without any physician visits or therapist supervision. Another of these cases with poor documentation involved a claimant who had had two surgical procedures that had not been recorded. The other documentation case had an injury claim closed by the adjuster on August 31, 2001, though prescription bills were still submitted and paid after October 30, 2001.

The SORM Claims Operations department is addressing these cases. The Medical Management Teams will be responsible for reviewing all injury claims with extended or excessive health care services such as those cited above and ensuring well-timed documentation and appropriate case management.

Medical Record Review Results
Out of 1,384 medical services provided, 162 had discrepancies. The majority of the discrepancies were for services that did not have fees that matched the TWCC Medical Fee Guideline. Another common problem was a lack of sufficient documentation for verifying a service or the medical necessity of a service. Table III-8 shows the distribution of the errors found in the study.

Table III-8: Distribution of Medical Record Review Discrepancy Findings

Type of Discrepancy (Error) Number of
Errors Identified in the Hospital Services
Number of Errors Identified in the Medical Services Number of Errors Identified in the Pharmacy Services Totals
Exceeds Spinal Treatment Guidelines for Physician services 0 5 0 5
Exceeds Spinal Treatment Guidelines for Chiropractic services 0 18 0 18
Exceeds Spine Treatment Guideline, testing 0 0 0 0
Unbundled services (services billed separately that should be billed all together such as global surgical services) 0 2 0 2
Not according to Medical Fee Guidelines (i.e., Incorrect proce-dure coding) 0 57 0 57
No documentation for services 0 26 4 30
Duplicate payment 0 0 0 0
Exceeds Lower Extremity Treatment Guidelines 0 2 0 2
Global charge to procedure 0 2 0 2
Not according to Administrative Rule 0 4 0 4
Service is unrelated to the injury 0 1 2 3
Not medically necessary 0 5 22 27
Exceeds Upper Extremity Treatment Guideline 0 4 0 4
Exceeds Pharmacy Fee Guidelines 0 0 0 0
Preauthorization issue 0 7 0 7
Overpayment 0 1 0 1
Totals 0 134 28 162

Before determining if a discrepancy error or overpayment occurred, the project team presented the review findings to the SORM management staff. SORM disagreed with half of the Comptroller’s professional review team findings, including the physician’s medical necessity decisions. The majority of the disagreements were with the project team’s use of the TWCC guidelines as a parameter for determining discrepancies, even though these are the rules all insurance carriers processing workers’ compensation claims were required to follow during 2001.


Types of Errors Found

Exceeding Texas Workers’ Compensation Commission Treatment Guidelines for physician, chiropractic, spine, and the upper and lower extremities

  1. The TWCC Treatment Guidelines identified the normal course of treatment for injured or ill workers, clarifying services that are reasonable and medically necessary for care specific to the injury or illness. Examples of services that exceed the maximum treatment time for these guidelines found in the study were:
  2. monthly transcutaneous electrical nerve stimulator supplies for a strain of the sacroiliac region provided for seven years after an injury;
  3. a full sole and heel shoe wedge prescribed six years after a sprain injury;
  4. continuous chiropractic therapy provided a year and a half after a cervical disc displacement without spinal cord injury or pathology;
  5. continuous physical therapy provided four years after a lumbar strain, authorized without a time limit;
  6. passive physical therapy (heat or ice packs, ultrasound, etc.) provided nine months after spinal surgery, authorized without a time limit; and
  7. continuous physical therapy provided a year and a half after a neck strain.

A total of 29 services for $1,272 exceeded the TWCC treatment guidelines. Some of these services may have been warranted, however, without professional medical utilization or peer reviews, allowing unlimited payment makes it difficult to lower costs.

Payment Discrepancies
Payment discrepancies in this study include unbundled (separated) services, services not paid according to the TWCC medical fee guidelines and overpayments for incorrect procedure coding. Examples include:

  1. anesthesia supplies billed separately from the global anesthesia charged by a physician;
  2. carbon dioxide expired gas determination during anesthesia billed separately from the global anesthesia charge;
  3. billing office and consulting visits at the highest payable code even though the documentation indicated minimal time and level of care;
  4. billing multiple surgical procedure codes, such as arthroscopy and a ligament release, for a global surgical procedure; and
  5. billing for manual muscle studies that were not ordered by the treating physician.

Payment discrepancies were found in 66 sample services for $4,912. Most of these overpayments can be avoided with improving the claim processing
system to enable it to identify procedure codes that are billed incorrectly or
inappropriately.

Insufficient Documentation
The Comptroller identified 30 services provided with either insufficient documentation or no documentation to confirm the service was actually provided. The Comptroller also found discrepancies in the amounts of time billed and the amounts of time in the records. For example 11 minutes of physical therapy were documented for a 30 minute bill and one hour of therapeutic activities was billed when only 30 minutes were documented. SORM paid $1,192 for these services.

Services not Medically Necessary:
All the medical necessity discrepancies were for prescription drugs and were reviewed by a peer physician. Most were for medications such as narcotics, muscle relaxants and sedatives billed two to seven years after an injury. One of the cases had bills for anti-depressants, anti-hypertensives and an anti-ulcer drug that were unrelated to a lower back strain.

Thirty services for $2,122 were medically unnecessary. These discrepancies could be avoided with improvements to the claim processing system to enable it to identify prescriptions billed after a specified time from the date of injury. This should be monitored closely particularly in cases where there are no corresponding physician visits to indicate that the claimant is treated appropriately.

Inappropriate Pre-authorizations:
There were many cases, some cited above in the documentation error findings, that Argus had authorized some services without any apparent time or quantity limit. Two claims of this type for seven services worth $108 dollars were found in the sample. One exceeded maximum treatment guidelines by a year. Prior authorization of a treatment is a successful cost containment measure only if time and quantity limits are set at the time of the authorization and these limits are monitored by either the claim processing system or the claims operations staff.

Summary of the Medical Record Review Findings
The potential overpayments identified in this study were not comparable to those identified in the January 2001 study because in this study the project team had medical records for verifying which services were actually provided to each claimant. This information was not available for all the January 2001 sample services. Many of the same discrepancies were identified through the online injury claim notes, however, without the medical record documentation, the Comptroller’s office could not count them as potential overpayments. Even though this study’s overpayment errors cannot be compared with the last two studies, there are enough to warrant changes to SORM’s claims processing policies and procedures.

Many of the errors found are similar to ones found in a process improvement assessment SORM requested from the State Auditor's Office’s (SAO) Management Advisory Services (MAS) department in October 2001. The purpose of the assessment was to enhance service delivery and business activity efficiencies through an analysis of SORM’s document management (mailroom) and claims operations departments.[19]

MAS made recommendations to SORM that addressed organizational changes, policies and procedures, and information technology support issues. These recommendations relate to the findings of the Comptroller's study. Organizational changes included bringing the pre-authorization function in-house and contracting the services of a medical director for case management. In the policy and procedures recommendations, MAS states that SORM should review and clarify criteria for approving/denying claims, closing or inactivating claims, claim referrals for medical case management or peer review. The application of the TWCC medical fee and treatment guidelines for clams assessment was also considered an area for improvement in SORM’s policies and procedures. The most significant information technology recommendation related to the Comptroller's study was establishing automated system controls in the claims management process and programming the claim processing system to deny or flag a claim before further payment of medical bills was made.[20]

The new payment policies developed by TWCC for H.B. 2600 addresses a majority of the discrepancies identified in this study. These payment policies include time limits for medical treatments and limits on procedure codes that can be billed for specific diagnoses. The implementation of the fee guidelines is in litigation at the time of this report. If the guidelines and the policies associated with them are implemented the following section identifies the medical services effected.

Impact of H.B. 2600 related to the discrepancies identified in the study
Many of the treatment and coding overpayment discrepancies found during this study can be reduced through software programs either commercially sold or specially coded that review medical bills for appropriate payments using the new H.B. 2600 payment policies. These payment policies include:

  1. Guidelines for:
    • MRI indications and limited coverage according to diagnosis;
    • appropriate length of care, limited coverage, indications for specific physical medicine treatments;
    • mandated supervision, written treatment plans and required proof of a claimant’s continued physical improvement from physical medicine treatments;
    • limited coverage, according to diagnosis and indications for specific nerve conduction studies; and
    • proof for and continued use of neuromuscular stimulation devices.
  2. Documentation rules to outline the requirements necessary to bill specific evaluation and management (office visit and consultation) codes.
  3. Coding edits developed by TWCC to determine if two specified codes can be used for one payment for one visit. This includes grouping of services (bundling) that not only relates to professional services, such as inpatient surgery, but also outpatient services within ambulatory surgical centers.

Measuring Potential Overpayments
The overpayment calculation performed by the State Auditor’s Office used the same method applied in the Medicaid Vendor Drug Program Pilot Study. To determine the amount of overpayments, the amount paid for the state employees workers’ compensation medical services considered potential overpayments was divided by the amount paid for the sample services. Example:

State Employees Workers’ Compensation Study Overpayment Calculation

Potential Overpayment Amount

Paid Amount of Sample
$ 9,568.55
$48,004.37
= 19.9 percent Overpayment Rate

Tables with the statistical information and the overpayment calculation are in Appendix C.9.

Dollars at Risk
The overpayment measurement can be applied to SORM’s annual medical expenditures by the overpayment error rate to determine the “dollars at risk” in the State Employees Workers’ Compensation program. The term “dollars at risk” is used because the amount cannot be recovered unless all of the questionable claims are identified. That is not possible given the size of the State Employees Workers’ Compensation program and the size of SORM’s staff. However, SORM can use the findings in this study to improve their current cost containment efforts.

According to the study, $8 million was at risk in 2001. This figure was computed by multiplying the overpayment measurement rate of 19.9 percent by $40.3 million of the State Employees Workers' Compensation program medical expenditures for calendar year 2001.


Endnotes

[16] Texas Workers’ Compensation Commission, “Fraud Costs Texans Millions” (Austin, Texas), http://www.twcc.state.tx.us/information/fraud.html/. (Last visited January 16, 2003.)

[17] 28 T.A.C. §133.301.

[18] 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.

[19] State Office of Risk Management, “An Assessment of Process Improvement at the State Office of Risk Management,” Austin, Texas, October 2001. p. 1.

[20] State Office of Risk Management, “An Assessment of Process Improvement at the State Office of Risk Management,” Austin, Texas, October 2001. pp. 41-42.