LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 76th Regular Session May 13, 1999 TO: Honorable Kim Brimer, Chair, House Committee on Business & Industry FROM: John Keel, Director, Legislative Budget Board IN RE: SB1590 by Zaffirini (Relating to the prevention, investigation, and prosecution of fraud in the workers' compensation program for state employees.), As Engrossed ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * SB1590, As Engrossed: positive impact of $761,560 through the * * biennium ending August 31, 2001. * * * * The bill would make no appropriation but could provide the legal * * basis for an appropriation of funds to implement the provisions of * * the bill. * ************************************************************************** General Revenue-Related Funds, Five-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * 2000 $338,965 * * 2001 422,595 * * 2002 422,595 * * 2003 422,595 * * 2004 422,595 * **************************************************** All Funds, Five-Year Impact: ************************************************************************** *Fiscal Probable Probable Change in Number of * * Year Savings/(Cost) from Savings/(Cost) from State Employees from * * General Revenue Fund General Revenue Fund FY 1999 * * 0001 0001 * * 2000 $(430,411) $769,376 6.0 * * 2001 (346,781) 769,376 6.0 * * 2002 (346,781) 769,376 6.0 * * 2003 (346,781) 769,376 6.0 * * 2004 (346,781) 769,376 6.0 * ************************************************************************** Fiscal Analysis The bill requires the State Office of Risk Management (SORM) to conduct reviews of claims for medical benefits periodically. Specifically, SORM would be required to conduct a claim review on claims involving the receipt of psychiatric services or apparent inappropriate prescription drug use. In addition, the bill requires an annual audit of claims for medical benefits, including the performance of a prepayment audit. SORM would also be required to conduct annual training classes to assist state agencies in identifying potential misrepresentation of workers compensation claims. The agency would also be required to use medical care coordination in certain cases. Lastly, this bill requires the agency to investigate all complaints alleging fraud made by a claimant, a health care provider, or state agency. If the agency determines that further action is needed, the executive director would refer the complaint to the Workers' Compensation Commission. Methodology The agency estimates that the provisions for periodic claims reviews would require the employment of one nurse and two administrative technicians to assist in performing periodic reviews of claims for medical benefits, in addition to conducting a claim review on a sample of claims that involve the use of psychiatric services or inappropriate prescription drug use. SORM would incur costs estimated at $50,000 in fiscal year 2000 to reprogram their claims management system to begin to withhold payments from medical providers. The required annual claims audit would be contracted out at a cost of $25,000 per year. Medical care coordination would be contracted out at a cost of $70,000 per year. SORM would also incur costs, estimated at $8,000 a year, to create and provide training classes for state agencies who process workers' compensation claims in order to identify potential misrepresentation. The agency estimates that two new investigators and one administrative technician would be required in order to investigate and take action on complaints alleging a fraudulent act made by a claimant, a health care provider, or a state agency. Other parts of the bill, including the requirements for prepayment audits and for a study of the use of fraud detection software, could be performed within current resources. Possible savings from this bill have been estimated by SORM as approximately two percent of the medical benefit expenditures from the Workers' Compensation Claim Fund. Based on fiscal year 1998 expenditures of $27,968,809, the savings would equal approximately $559,376 per year. In addition, medical care coordination is estimated by the agency to save approximately $210,000 per year in claims expenditures. Local Government Impact No fiscal implication to units of local government is anticipated. Source Agencies: 453 Workers' Compensation Commission, 479 State Office of Risk Management LBB Staff: JK, TH, TP, SC