HBA-JEK, CCH H.B. 2600 77(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 2600 By: Brimer Business & Industry 7/27/2001 Enrolled BACKGROUND AND PURPOSE Prior to the 77th Legislature, the Texas Workers' Compensation Commission (TWCC) required an employee who sustained a compensable injury to receive medical treatment from a doctor chosen from a list of doctors approved by TWCC. Each doctor licensed in Texas on September 1, 2001, was on the list, unless subsequently deleted for any conduct considered relevant by TWCC. A study by the Research and Oversight Council on Workers' Compensation (ROC) showed that medical costs for workers' compensation services in Texas were exceeding the costs of other states in the study, but that the additional expenditures were not resulting in better return-to-work outcomes or an increase in workers' satisfaction with their medical services. The ROC found that over one-third of workers had not returned to work more than two years after their injury, and that many health care providers were frustrated with the workers' compensation system as well. House Bill 2600 expands regulation, training, and monitoring for doctors and insurance carriers in the workers' compensation system, allows for the creation of health care delivery networks in the workers' compensation system, expands notification requirements regarding return-to-work issues, changes medical regulation and medical dispute resolution processes, provides new benefits for injured workers, and alters current law relating to the payment of attorney's fees in disputes. The bill reflects policy changes based on recent research regarding medical cost, return-to-work, and patient satisfaction issues. For example, recent research by the Research and Oversight Council on Workers' Compensation (ROC) indicates that medical cost and utilization rates in the Texas workers' compensation system are higher than those in other state workers' compensation systems and other health care delivery systems. However, despite these high medical cost expenditures, injured workers in Texas were not more satisfied with the care they receive. ROC research also found that injured workers in Texas spent more time off the job and are less likely to return to work. 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 (Sections 408.0222 and 408.0223, Labor Code), SECTION 2.02, SECTION 3.02 (Section 413.021, Labor Code), SECTION 3.03, SECTION 4.01 (Section 408.026, Labor Code), SECTION 4.02 (Section 413.014, Labor Code), SECTION 4.03 (Section 413.0141, Labor Code), SECTION 4.04, SECTION 5.02 (Section 408.0041, Labor Code), SECTION 6.01 (Section 408.028, Labor Code), SECTION 6.02 (Section 413.011, Labor Code), SECTION 6.04 (Section 413.031, Labor Code), SECTION 6.05 (Section 413.041, Labor Code), SECTION 6.07 (Section 415.021, Labor Code), SECTION 6.08 (Section 415.023, Labor Code), SECTION 6.09, SECTION 10.01 (Section 403.006, Labor Code), SECTION 10.03 (Section 408.042, Labor Code), and in SECTION 10.04 (Section 408.0446, Labor Code) of this bill. ANALYSIS ARTICLE 1 House Bill 2600 amends the Labor Code relating to the medical review of health care provided under the workers' compensation insurance system. The bill provides that each doctor licensed in this state is eligible to be on the Texas Workers' Compensation Commission's (TWCC) list of approved doctors if the doctor registers with TWCC and complies with the requirements adopted by TWCC. The bill requires TWCC to develop a list of Texas licensed doctors who are approved to provide workers' compensation services and sets forth provisions authorizing out-of-state doctors to perform these services. TWCC is required by rule to establish reasonable training, impairment rating testing, and financial disclosure requirements for all types of doctors providing services in the workers' compensation system, including treating doctors, referral doctors, required medical examination doctors, designated doctors, peer review doctors, and utilization review doctors. The bill requires TWCC by rule to provide a reasonable period, not to exceed 18 months after the adoption of these rules, for doctors to comply with the registration and training 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 receive 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). H.B. 2600 requires TWCC by rule to establish criteria for suspending a doctor from the list of approved doctors, imposing sanctions for violations, and monitoring of utilization review agents as provided by a memorandum of understanding with the Texas Department of Insurance (TDI). The bill requires TWCC by rule to establish procedures under which a doctor may apply for reinstatement to the list of approved doctors or for restoration of doctor practice privileges removed by TWCC based on sanctions. The bill specifies conditions for which TWCC is authorized to impose sanctions on a doctor or an insurer. The bill also allows TWCC to establish criteria for reducing utilization review and preauthorization controls on a doctor. The bill requires TWCC and TDI to enter into a memorandum of understanding to coordinate the regulation of insurers and utilization review agents as necessary to ensure compliance with applicable regulations and to ensure that appropriate health care decisions are reached (Sec. 408.231). The bill requires TWCC to adopt rules relating to approved doctors and medical review no later than February 1, 2002. A doctor would not be required to hold a certificate before a date specified by TWCC rule (SECTION 1.03). The bill requires TWCC to employ or contract with a doctor who serves as a medical advisor (advisor) and specifies the advisor's duties (Sec. 413.0511). The advisor's role is to recommend medical policies for TWCC, assist in the regulation of the entities, chair the Health Care Network Advisory Committee, determine the minimal modifications to the Medicare reimbursement methodology, and perform other duties. The bill requires the advisor to establish an independent medical quality review panel of health care providers as an advisory body to assist the advisor. The bill requires the advisor to consider appointing some of the members of the medical quality review panel from lists developed by the Texas State Board of Medical Examiners and the Texas State Board of Chiropractic Examiners, and authorizes the advisor to also consider nominations for the panel made by labor, business, and insurance organizations. A person who serves on the medical quality review panel is not liable in a civil action for an act performed in good faith as a member of the panel, and the actions of a person serving on the medical quality review panel do not constitute utilization review. The bill sets forth provisions regarding the confidentiality of information maintained by the medical quality review panel for TWCC (Secs. 413.0512 and 413.0513). ARTICLE 2 H.B. 2600 establishes the Health Care Network Advisory Committee (advisory committee) to advise TWCC on the implementation of fee-for-service regional workers' compensation health care delivery networks designed to improve the quality of and reduce the cost of health care. The advisory committee is appointed by and serves at the pleasure of the governor for staggered two-year terms, and consists of three employer representatives, three employee representatives, three ex-officio insurance carrier representatives, three ex-officio health care provider representatives, one ex officio independent actuarial expert, and the commissioner's medical advisor, who shall serve as chair. The first meeting of the advisory committee shall be no later than October 1, 2001. The bill requires TWCC on behalf of the advisory committee to contract with one or more consultants to evaluate the feasibility of regional networks, to set standards for network operations and establish criteria for reporting on the outcomes of the networks through a report card, and, if networks are found feasible, to contract through competitive procurement with at least one regional network for the provision of health care no later than December 31, 2002. The standards adopted for preferred provider networks apply as minimum standards for regional health care delivery networks. The bill authorizes the advisory committee to recommend additional standards for regional health care delivery networks, but specifies that the provision of health care under regional networks does not apply to prescription medication or services (Sec. 408.0221 and SECTION 2.02). H.B. 2600 requires the advisory committee and the Research and Oversight Council on Workers' Compensation to develop evaluation standards and specifications necessary to implement a workers' compensation medical regional network report card, and sets forth provisions regarding the contents of the report card. The bill requires the regional network administrators to submit consolidated annual reports and to report quarterly to TWCC and the advisory committee on the progress of implementing the regional networks. The bill requires the Research and Oversight Council on Worker's Compensation to report to the legislature by January 1 of each odd-numbered year on the status of the implementation of regional networks. H.B. 2600 requires the cost of assessing the feasibility of, developing, and evaluating the regional networks to be funded through an assessment on the subsequent injury fund, and prohibits this cost from exceeding a total of $1.5 million for the regional networks. The bill requires the regional network administrators in consultation with actuaries to determine on an annual basis any cost savings to the operation of the workers' compensation system derived from the use of regional networks. The cost of ongoing regional network administration and management services shall be included in the fees for health care services paid by insurers participating in the regional network (Sec. 408.0221). H.B. 2600 authorizes an insurer or a self-insurer certified to provide workers' compensation coverage in this state to elect to participate by contract or not participate in a regional network for each compensable injury sustained by the employee. The bill requires insurers participating in the regional network to be given the opportunity for audits of the regional networks. The bill requires TWCC to adopt rules regarding elections, employee's rights, and the timing and recovery of a payment of enhanced benefits, and authorizes an insurer to limit its election to participate in a regional network to a particular employer or region of the state until January 1, 2006. The bill requires a public employer, other than a political subdivision, to participate in a regional network, and specifies that an insurer who elects to participate in regional networks agrees to abide by the terms of the regional network contracts between TWCC and the regional networks. The bill gives an employee the option of participating in a regional network if the employee's employer and the employer's insurance carrier are in the network. Participating insurance carriers are also required to provide participating employers with information to be shared with employees, including a list of network doctors, information regarding health care services and benefits available, and report card results for the network. Employees participating in the network are eligible for increased income benefits, including a reduced waiting period for the first week of income benefits and an increased cap on the maximum payment for temporary income benefits. Employees are bound by their decision to participate in a network for a particular injury after they receive enhanced income benefits or 14 days after injury, whichever comes sooner. The bill prohibits an employer from discharging, subjecting to disciplinary action, or taking adverse employment action against an employee because the employee elects not to participate in a regional network, and sets forth provisions regarding a limited cause of action brought by an employee against an employer for any of these reasons which is curable by the 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 authorizes an employee or insurer to request that TWCC order a designated doctor medical examination if an employee has received conflicting impairment ratings or determinations of maximum medical improvement from more than one treating doctor. The bill does not prohibit an insurer from continuing to participate in networks if those networks allow for the selection of doctor. The bill requires TWCC to adopt rules regarding regional networks, including rules necessary to implement additional standards for regional networks, no later than October 1, 2002. Provisions regarding employee workers' compensation benefits under a regional network take effect on TWCC certification that the regional network is operational (Secs. 408.0222 and 408.0223 and SECTION 2.02). ARTICLE 3 H.B. 2600 sets forth requirements and provisions for an employer, upon request, to notify an injured employee, the employee's treating doctor, and the insurer of the possibility of modified duty opportunities or a modified duty return-to-work program available through the employer (Sec. 409.005). H.B. 2600 requires an insurer to notify the employer of the availability of return-to-work coordination services, which include worksite assessments and job modification services. An insurer is not required to provide nor pay for physical workplace modifications. With the participating employer's consent, insurers and TWCC are required to target employers without return-to-work programs and focus return-to-work efforts on workers who begin to receive temporary income benefits. The bill also requires TWCC to utilize appropriately certified or trained specialists to train TWCC staff on return to work issues. The bill requires TWCC to adopt rules necessary to collect data on return-to-work outcomes and may adopt these rules not earlier than January 1, 2004, and to report twice annually to the Research and Oversight Council on Workers' Compensation regarding the implementation and outcome of return-towork initiatives (Sec. 413.021 and SECTION 3.03). ARTICLE 4 H.B. 2600 eliminates the current spinal surgery second opinion process and provides that except in a medical emergency, an insurer is liable for medical costs related to spinal surgery only if the insurer preauthorizes the surgery in accordance with applicable law and TWCC rules. Disputes over spinal surgery are handled by an independent review organization, rather than TWCC's dispute resolution process. The bill specifies that TWCC may not prohibit an insurer and health care provider from voluntarily discussing health care treatment or an insurer from certifying or agreeing to pay for health care (Secs. 408.026 and 413.014). H.B. 2600 establishes a minimum list of medical services that require preauthorization. The bill requires TWCC to specify by rule which other health care treatments and services require preauthorization or concurrent review by the insurer no later than February 1, 2002. Additionally, in an effort to facilitate communication between insurers and medical providers, each insurer is required to allow health care providers the option to request that the insurer certify coverage for health care and pharmaceutical services that do not require preauthorization and concurrent review, but the insurer retains the right to review and contest the request (Sec. 413.014 and SECTION 4). H.B. 2600 authorizes TWCC by rule to require an insurer to provide for payment of specified pharmaceutical services sufficient for the first seven days following the date of injury if the health care provider requests and receives verification of insurance coverage and a verbal confirmation of an injury from the employer or the insurer. The rules may provide that an insurer is eligible for reimbursement for pharmaceutical services paid from the subsequent injury fund in the event the injury is determined not to be compensable. The bill authorizes TWCC to adopt these rules on or after September 1, 2002 (Sec. 413.0141 and SECTION 4.04). ARTICLE 5 H.B. 2600 alters the process for required medical examinations. The bill directs workers to designated doctor exams first, rather than a exam by a doctor chosen by the insurer. Insurers may still require an exam by a doctor of their choosing after the designated doctor exam. Issues involving the appropriateness of medical care will continue to be handled through the current order of examinations, but for all other issues, the designated doctor exam will be conducted first. The bill requires TWCC to adopt rules as necessary to hold an expedited benefit review conference to dispute a decision made through a designated doctor examination, and specifies that this provision expires September 1, 2003. H.B. 2600 changes the qualifications for selection as a designated doctor. The bill stipulates that the designated doctor must be trained and experienced with the treatment and procedures used by the doctor treating the patient's medical condition. The bill modifies provisions regarding disputes as to impairment ratings, and requires TWCC to direct an employee to the next available designated doctor if an impairment rating is disputed. The bill requires the Research and Oversight Council on Workers' Compensation to report to the legislature no later than December 31, 2002, regarding issues related to medical examinations (Sec. 408.0041 and SECTIONS 5.04 and 5.05). ARTICLE 6 H.B. 2600 requires TWCC to adopt rules no later than February 1, 2002 to develop an open formulary that requires the use of generic pharmaceutical medications and clinically appropriate over-the-counter alternatives to prescription medications unless otherwise specified by the prescribing doctor. The bill requires TWCC to adopt rules by June 1, 2002, to allow an employee to receive reimbursement from an insurer for those medications (Sec. 408.028 and SECTION 6.09). The bill requires TWCC to adopt the health care reimbursement policies and guidelines that reflect the standardized reimbursement structures found in other Medicare systems with as few modifications as necessary to meet occupational injury requirements, and to adopt the most current reimbursement methodologies, models, and values or weights used by the federal Health Care Financing Administration. The bill requires TWCC to develop conversion factors or other payment adjustment factors taking into account economic indicators in health care, and authorizes rather than requires TWCC by rule to establish medical policies or treatment guidelines, including return-to-work guidelines, relating to necessary treatment to injuries. The required rules and guidelines must be created no later than May 1, 2002 (Sec. 413.011 and SECTION 6.09). H.B. 2600 authorizes an insurer to contract with a separate entity to forward payments for medical services (Sec. 413.015). The bill provides that a claimant is entitled to a review of a medical service for which preauthorization is sought by the health care provider and denied by the insurance carrier, and requires TWCC to adopt rules to notify claimants of their rights. The bill provides that TWCC's role in disputes over the amount of payment due for services determined to be medically necessary is to adjudicate the correct payment given the relevant statutory provisions and TWCC rules. The bill requires TWCC to publish its medical dispute decisions on its Internet website. The bill provides that a review of the medical necessity of a health care service requiring preauthorization shall be conducted by an independent review organization. The bill requires TWCC by rule to specify the appropriate dispute resolution process for disputes in which a claimant has paid for medical services and is seeking reimbursement and entitles a party to an unresolved medical dispute regarding spinal surgery to dispute resolution. The bill requires the insurer to pay the cost of a review arising out of a dispute in connection with a request for health care services that requires preauthorization. In other cases, the losing party pays the cost of the review. The bill authorizes a party who has exhausted its administrative remedies and who is aggrieved by a final decision of the State Office of Administrative Hearing to seek judicial review of the decision. These provisions take effect January 1, 2002 (Sec. 413.031 and SECTION 6.09). H.B. 2600 requires each health care practitioner to disclose to TWCC, in accordance with TWCC rule, the identity of any health care provider in which the practitioner or the health care provider that employs the practitioner has a financial interest. TWCC shall require by rule that a practitioner disclose financial interests in other health care providers as a condition of registration for the approved doctor list. The bill requires TWCC by rule to adopt the federal standards that prohibit the payment or acceptance of payment in exchange for health care referrals. The bill sets forth penalties, effective June 1, 2002, for a doctor or health care provider that fails to comply with these provisions, and requires TWCC to publish all final disclosure enforcement orders on the TWCC Internet website. TWCC is required to adopt these rules by June 1, 2002 (Sec. 413.041 and SECTION 6.09). An insurer or health care provider may also be assessed administrative penalties for repeat violations after a prior notice of noncompliance. Prior notice is not required if the violation was committed wilfully or intentionally, or the violation was of a decision or order of TWCC. Provisions regarding the violations take effect September 1, 2002 (Sec. 415.0035 and SECTION 6.08). TWCC by rule shall adopt a schedule of specific monetary administrative penalties for specific violations (Sec. 415.021). The bill authorizes TWCC to adopt rules providing for referral and petition to the appropriate licensing agency for appropriate disciplinary action, including the restriction, suspension, or revocation of a violator's license (Sec. 415.023). ARTICLE 7 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 H.B. 2600 provides that an insurer who seeks judicial review of a final decision by a TWCC appeals panel regarding compensability or eligibility for income or death benefits is liable for reasonable and necessary attorney's fees incurred by the claimant as a result of the insurer's appeal if the claimant prevails. This article of the bill expires September 1, 2005 (Sec. 408.221). ARTICLE 9 The bill expands the current definition of eligibility for lifetime income benefits to include employees who suffer third degree burns that cover at least 40 percent of the body and require grafting or third degree burns covering the majority of either both hands or one hand and the face (Sec. 408.161). ARTICLE 10 H.B. 2600 sets forth procedures for computing the average weekly wage of an employee with multiple employment for the purpose of determining temporary income benefits, impairment income benefits, supplemental income benefits, lifetime income benefits and death benefits, allowing employees with more than one job to collect benefits based on all of their IRS reportable wages rather than only the wages at the job where the injury occurred. The bill requires TWCC to determine by rule the manner by which wage information is collected and distributed to implement these provisions. The bill entitles an insurer to apply for and receive reimbursement at least annually from the fund for the amount of income benefits paid to a worker that is based on employment other than the employment during which the compensable injury occurred, and authorizes TWCC to adopt rules to govern the documentation, application process, and other administrative requirements necessary to implement this provision (Sec. 408.042). H.B. 2600 expands the liabilities of the subsequent injury fund (fund) (Sec. 403.006). The bill requires the fund to be supplemented by maintenance taxes paid by insurers other than governmental entities if TWCC determines that the funding is not adequate. The bill requires TWCC's actuary or financial advisor to report biannually to the Research and Oversight Council on Workers' Compensation on the financial condition, projected assets, and liabilities of the subsequent injury fund and to make the reports available to the public and legislature. The bill authorizes TWCC to purchase annuities to provide for payments due to claimants if TWCC determines that the purchase of annuities is financially prudent for the administration of the fund (Sec. 403.007). H.B. 2600 provides that the average weekly wage of a school district employee be used to compute the amount of temporary income benefits received under workers' compensation benefits. The bill sets forth procedures to determine the amount of impairment income, supplemental income, lifetime income, or death benefits of a school district employee. The bill requires TWCC to adopt rules and specifies that these provisions take effect December 1, 2001, and apply only to compensable injuries occurring on or after July 1, 2002 (Sec. 408.0446 and SECTION 10.05). ARTICLE 13 H.B. 2600 requires TWCC to study the implementation and development of drug-free workplace policies and the adverse impact of drug abuse on the workplace and workers' compensation insurance systems. The bill requires TWCC to report its findings to the legislature and the Research and Oversight Council on Workers' Compensation no later than February 1, 2003 (Sec. 411.093). ARTICLE 14 The bill requires that the costs of risk management services provided by a state agency under interagency contract with State Office of Risk Management (SORM) be allocated in the same proportion and determined in the same manner as the costs of workers' compensation (Sec. 412.012). The bill requires SORM to establish a risk reward for the payment of workers' compensation claims and risk management services incurred by a state agency. The bill requires SORM to establish a formula for allocating the state's workers' compensation costs among covered agencies and specifies that the risk management board of SORM has final authority to determine the assessments to be paid by the covered agencies (Secs. 412.0123 and 412.0124). H.B. 2600 expands the definition of peace officer to include more officers in those who are eligible for workers' compensation coverage (Sec. 501.001). The bill authorizes a Texas Department of Transportation employee to elect to use accrued sick leave before receiving workers' compensation income benefits but does not entitle an employee to income benefits until the elected number of weeks of leave have been exhausted (Sec. 505.060). ARTICLE 15 H.B. 2600 requires TWCC to compute and publish the Texas Workers' Compensation Act interest and discount rate using the treasury constant maturity rate for one-year treasury bills issued by the United States government rather than the auction rate (Sec. 401.023). ARTICLE 16 H.B. 2600 prohibits the waiver of a cause of action against an employer who does not have workers' compensation insurance coverage before an employee's injury or death (Sec. 406.033). EFFECTIVE DATE June 17, 2001.