PROPOSED RULEMAKING
INSURANCE DEPARTMENT
[31 PA. CODE CH. 167]
Workers' Compensation Act--Provider Fees; Payment for Anesthesia Services
[34 Pa.B. 3255] The Insurance Department (Department) proposes to add Chapter 167 (relating to Workers' Compensation Act--provider fees) to read as set forth in Annex A. The proposed rulemaking is made under the general authority of sections 205, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S. §§ 66, 186, 411 and 412) and section 306(f.1)(3)(i) of the Workers' Compensation Act (act) (77 P. S. § 531(3)(i)).
Purpose
The purpose of this proposed rulemaking is to add Chapter 167, setting the allowance for anesthesia services provided to patients under the act when the allowance utilizes the anesthesia conversion factor. The rate established by § 167.2 (relating to payment for anesthesia services) shall be used for the period from the effective date of adoption of this proposed rulemaking and updated annually thereafter in accordance with 34 Pa. Code § 127.162 (relating to medical fee updates on and after January 1, 1995--new allowances adopted by Commissioner) and section 306(f.1)(3)(ii) of the act.
Section 306(f.1)(3)(i) of the act establishes that compensation to providers of medical services, including anesthesiologists, shall be 113% of the Medicare reimbursement for the medical service or treatment, with the amounts to be modified by annual updates made under a formula in the act. Section 306(f.1)(3)(i) of the act also provides that when the Insurance Commissioner (Commissioner) determines that use of the Medicare reimbursement for a particular provider group or service is not reasonable, the Commissioner may adopt, by regulation, a new allowance. Section 306(f.1)(3)(v) of the act further provides that a Medicare allowance for a particular provider group shall be reviewed for reasonableness whenever the Commissioner determines that the use of the allowance would result in payments that are more than 10% lower than the average level of reimbursement the provider would receive from coordinated care insurers (CCOs), a classification that includes health maintenance organizations (HMOs) and preferred provider organizations under the act. In making the determination as to the reasonableness of an allowance under section 306(f.1)(3)(v) of the act, the Commissioner must consider the extent to which allowances applicable to other providers under Workers' Compensation deviate from the reimbursement those other providers receive from CCOs. In sum, to have an allowance reviewed for reasonableness, a provider group must demonstrate to the Commissioner's satisfaction that the allowance under the Medicare fee schedule is more than 10% lower than the average level of reimbursement that provider specialty receives from the private managed care market, and an allowance will not be found to be unreasonable unless that provider group can clearly demonstrate to the Commissioner's satisfaction through sufficient credible data that this disparity is substantially disproportionate to existing disparities in the allowances for other providers between the Workers' Compensation and private managed care markets.
Preexposure comments from the Insurance Federation of Pennsylvania, Inc. and the Department of Labor and Industry were taken into consideration in the drafting of this proposed rulemaking.
Explanation of the Proposed Rulemaking
In August 1995, the Pennsylvania Society of Anesthesiologists (PSA) filed a petition with the Department seeking to have the Department review the Workers' Compensation anesthesia conversion factor for reasonableness and, ultimately, to have the anesthesia conversion factor adjusted through the issuance of a regulation. The anesthesia conversion factor is an integral part of the formula under which surgical anesthesia services are reimbursed, typically multiplied by a time factor (number of units) and sometimes by other factors to determine compensation for an anesthesia procedure under the Workers' Compensation system.
Over the course of the past 8 years, the PSA submitted substantial amounts of data, including expert reports, and, through counsel, participated in a multitude of meetings with the Department to carry its initial burden of having the anesthesia conversion factor reviewed for reasonableness and to ultimately carry its burden of persuasion to convince the Department that this allowance for anesthesia services was unreasonable. Although the information and data submitted to the Department is confidential under the act, counsel for the PSA has agreed to provide an aggregate summary of the data upon request.
Based on the extensive, credible and persuasive nature of the data and expert reports submitted by the PSA, the Department eventually concluded that the PSA had met the standard required to have the anesthesia conversion factor reviewed for reasonableness. After an extensive and lengthy review process, the Department ultimately determined, based on the quantity and quality of the data presented, that the anesthesia conversion factor under Workers' Compensation was not reasonable in light of the fact that the disparity between anesthesia allowances under the Workers' Compensation and private managed care systems was substantially and patently disproportionate to disparities for other providers.
Among the data and materials considered by the Department in reaching this conclusion were four reports submitted by the PSA providing data and analysis in support of its assertion that the Workers' Compensation allowance for anesthesiologists is not reasonable compared to allowances for other medical specialties. The four reports are:
* Survey of Anesthesia Reimbursement by Private Managed Care Payors and Comparison to Workers' Compensation Reimbursement (January, 2001).
* Reimbursement by HMOs and Comparison to Workers' Compensation Reimbursement for Specialties Other Than Anesthesia (September 2001).
* Letter of August 26, 2002, from PSA counsel providing data on reimbursement for non-surgical procedures.
* A Comparison of Reimbursement to Anesthesiologists and Other Medical Specialties Under Pennsylvania's Workers' Compensation Program and Private Market Fee Schedules, prepared by Dennis Olmstead Chief Economist & Vice President of the Division of Practice Economics & Payer Relations for the Pennsylvania Medical Society (June, 2003).
In explaining the Department's decision, it is helpful to discuss the four reports individually.
1. Survey of Anesthesia Reimbursement by Private Managed Care Payors and Comparison to Workers' Compensation Reimbursement (January, 2001).
This report focused solely on reimbursements received by anesthesiologists under Workers' Compensation and from managed care payors looking at actual claims. The report included data from all four Workers' Compensation regions, for 27 different payors, from 12 anesthesia practices; 139 claims were reviewed and more than 55 distinct anesthesia conversion factors (by payor and practice) were identified. Only 2 of those 55 distinct conversion factors were less than that used in Workers' Compensation and both were from a single payor, a Medicaid HMO.
The data showed that Workers' Compensation was reimbursing anesthesiologists at about 50% of the level of most managed care payors. The overwhelming predominance of managed care conversion factors were between $30 and $55 and, within that, between $35 and $45, at a time when Worker's Compensation conversion factors ranged from $19.55 to $21.72. Based on this Report, the Department concluded that reimbursement to anesthesiologists satisfied the first statutory criteria--specifically, that the allowance be at least 10% less than the private managed care market--and that the PSA had met the required burden to have the allowance reviewed for reasonableness. Certain of the other reports subsequently submitted, while they focused on reimbursements received by other specialties under Workers' Compensation and from managed care payors, contained some additional (and consistent) data on reimbursement to anesthesiologists.
2. Reimbursement by HMOs and Comparison to Workers' Compensation Reimbursement for Specialties Other Than Anesthesia (September 2001).
This report analyzed claims data on 666 ''CPT Code data points'' for 4 specialties--namely, cardiology, general surgery, ophthalmology and orthopedics, in three of the four Workers' Compensation regions with data from 11 managed care payors, including the major payors in all areas. A ''CPT Code data point'' is reimbursement of a CPT code to a distinct provider by a distinct payor. The results for the nonanesthesia specialties were virtually the mirror image of the results for anesthesiologists. While the Workers' Compensation anesthesia conversion was about 50% lower than the common range of private managed care rates (around $35-$45), Workers' Compensation was consistently higher, with a range around 50% higher, than the private managed care rates for the four specialties. The data was consistent in every respect among those specialties and entirely inconsistent with the anesthesia data, as the following table summarizes, by region and across specialties.
Number of CPT Code Data Points for which Workers'
Compensation Allowance More than HMO
Reimbursement/Total Number Data Points and Percentage
Average Percentage, Workers'
Compensation versus HMO
Reimbursement
Region 1 Cardiology 110/133 82.7% 145.97% General Surgery 62/67 92.5% 165.86% Ophthalmology 78/103 75.7% 127.49% Orthopedics 127/144 88.79% 128.15% Regional Summary 377/447 83.4% 141.87% Region 2 Cardiology 46/47 97.87% 152.89% Ophthalmology 32/37 86.48% 159.70% Regional Summary 78/84 92.86 156.30% Region 3 Cardiology 44/50 88% 198.68% General Surgery 20/21 95.2% 155.42% Ophthalmology 18/21 85.7% 158.63% Orthopedics 40/43 93.02% 190.20% Regional Summary 122/135 90.37% 175.73%
The column entitled ''Average Percentage, Workers' Compensation versus HMO Reimbursement'' is calculated for a specialty within a region by summing the percentages from all pertinent claims and dividing by the total number of inputs. The lowest average percentage (by region and specialty) by which Workers' Compensation payments exceeded managed care payments was 28.15% (orthopedics, Region I), while the highest was 98.68% (cardiology, Region III). There were some CPT Code data points (89 out of 666, or 13.4%) for which the managed care rates exceeded Workers' Compensation allowances by 200% to 400%, and a comparable number (99 out of 666, or 14.86%) in which Workers' Compensation allowances exceed managed care rates by 400% or more. For the overwhelming majority of CPT Code data points, however, the ratio of Workers' Compensation allowances to managed care rates fell between 100% and 200% (478 out of 666 or 71.7%).
3. Letter of August 26, 2002 from PSA counsel providing data on reimbursement for non-surgical procedures.
At the Department's request, the PSA supplemented its analysis of the data it obtained for the second Report to examine nonsurgical procedures and nonprocedures. This included various Evaluation and Management (E & M) Codes, both generally and as to ophthalmology and cardiology, and pathology and radiology. The results were consistent with those for the four specialties reviewed in the second report. Workers' Compensation paid slightly more than 10% more than the HMOs for all E & M Codes at one large provider system and 58% more at another; approximately 22% more than the HMOs for E & M services provided by ophthalmologists and 11% more than the HMOs for E & M services provided by cardiologists. Regarding radiology, Workers' Compensation paid approximately 45% more than the HMOs, using data from ''chest codes'' and those for Diagnostic Ultrasound, head and neck. Analyzing data from the six basic pathology codes, 88300--88309, from all three major HMOs, Workers' Compensation paid approximately 50% more than the HMOs. E & M, radiology and pathology were also looked at in the fourth study with consistent results. This data established that Worker's Compensation payments consistently exceed payments of other payors for two additional ''nonsurgical'' specialties (radiology and pathology) as well as all medical specialties that rely heavily on E & M codes.
4. A Comparison of Reimbursement to Anesthesiologists and Other Medical Specialties Under Pennsylvania's Workers' Compensation and Private Market Fee Schedules.
This report compared reimbursements to anesthesiologists, radiologists, pathologists, E & M Codes, surgery in general and the surgical specialties of dermatology, ENT gastroenterology and OB-GYN for 86 heavily utilized CPT Codes (surgery--44 codes; radiology--20 codes; pathology--12 codes; and E & M--10 codes). The report compared Workers' Compensation reimbursements for these specialties with those of three Highmark fee schedules--the 5000S (poverty level fee schedule), UCR and Keystone Health Plan West (KHPW). 5000S is not a managed care plan but was included because it is a plan available only to persons whose incomes fall within established limitations and, as a consequence, has among the lowest reimbursement levels of Highmark fee schedules. The KHPW is a managed care network operated by Highmark that serves 29 counties in the western portion of this Commonwealth (Workers' Compensation Region II) and is the largest HMO in those counties by market share. The UCR schedule is also a nonmanaged care system and is considered to have relatively higher reimbursements.
The results confirmed the results of the first report that Workers' Compensation reimbursement to anesthesiologists was substantially less than that of managed care payors. The following chart summarizes the data with respect to anesthesiologists:
Region 1 Region II Region III Region IV Average Workers' Compensation $23.98 $23.83 $22.93 $21.37 $23.03 5000S $37 $37 $37 $37 $37 KHPW $42 UCR $42 $42 $42 $42 $42 Percentage Difference, WC and 5000S (35.2%) (35.6%) (38%) (42.2%) (37.8%) Percentage Difference, WC and KHPW (43.3%) Percentage Difference, WC and UCR (42.9%) (43.3%) (45.4%) (49.1%) (45.2%)
Even the 5000S low income fee schedule reimbursed anesthesiologists substantially better than did Workers' Compensation. The KHPW reimbursement was approximately 43% greater ($42 versus $23.83) than Workers' Compensation.
The findings as to nonanesthesia specialties, including those performing surgery, those being reimbursed under E & M Codes and those (pathologists and radiologists) who primarily perform nonsurgical procedures were entirely consistent with the findings of the second and third reports. Almost without exception, Workers' Compensation reimbursed those physician specialties at levels above the managed care rates. Specifically, Workers' Compensation on average paid 41.9% more than the KHPW fee schedule for nonanesthesia codes in Workers' Compensation Region II; 74.8% and 60.5% greater than the 5000S fee schedule in Regions I and IV, respectively; and 47.1% and 35% greater than the UCR rate in Regions I and IV, respectively.
To summarize the previous information, in reviewing the PSA's initial petition and conducting its ultimate review, the Department considered data that included major HMOs; numerous codes for nonanesthesia specialties (cardiology, orthopedics, ophthalmology and surgery); surgical specialties (general surgery, ENT, dermatology and OB-GYN); nonsurgical procedures (pathology and radiology); and evaluative care (E & M). The data was very consistent from specialty to specialty and region-to-region in showing a consistent relationship between Workers' Compensation and managed care payors--Workers' Compensation is the better payor--with the sole exception of anesthesiology, in which the relationship between payors is essentially reversed. While the Workers' Compensation anesthesia conversion factor was about 50% lower than the common range of private managed care rates (clustering between $35-$45 at a time when Worker's Compensation conversion factors ranged from $19.55 to $21.72), Workers' Compensation was consistently higher, with a range around 50% higher, than the private managed care rates for the other four specialties.
Based on the data, the Department has concluded that the Workers' Compensation Program reimburses anesthesiologists at a rate that is substantially below the rates of managed care payors throughout this Commonwealth.
Based on the data, the Department has concluded that this substantial disparity does not exist with respect to other specialties. In general, Workers' Compensation reimbursement to these specialties exceeds the payments in managed care, often by substantial amounts. This includes surgical specialties, nonsurgical specialties and E & M codes that are used by surgical and nonsurgical specialists alike (although generally excluding anesthesiologists).
Accordingly, the Department determined that the standards of section 306(f.1)(3)(i) of the act have been met with respect to the anesthesia conversion factor. The Department is proposing regulations establishing a new allowance for the anesthesia conversion factor for use in the Workers' Compensation Program.
Fiscal Impact
There is minimal fiscal impact as a result of the proposed rulemaking. There is no specific data available identifying the precise costs associated with the cost of anesthesiology benefits under the Workers Compensations System. However, it is known that the expenses resulting from medical benefits are approximately 45% of total loss expenses. In addition, the loss expenses resulting from anesthesiology is a minor cost in comparison to the total costs of surgical expenses. Therefore, even though the proposed rulemaking will increase the reimbursement of anesthesiology expenses by 63%, it should affect the overall costs only minimally.
Paperwork
There is no anticipated additional paperwork expected as a result of this proposed rulemaking.
Affected Parties
The proposed rulemaking will affect all anesthesiologists who provide anesthesia services to persons whose care is reimbursed under the Workers' Compensation Program when the anesthesia conversion factor is a basis for reimbursement. It will also affect all insurers and others who directly or indirectly assume responsibility for the costs of medical care provided under the Workers' Compensation Program.
Effectiveness/Sunset Date
The proposed rulemaking will become effective upon final-form publication in the Pennsylvania Bulletin. The Department continues to monitor the effectiveness of regulations on a triennial basis; therefore, no sunset date has been assigned.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on June 16, 2004, the Department submitted a copy of this proposed rulemaking and a copy of a Regulatory Analysis Form to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the Senate Banking and Insurance Committee and the House Insurance Committee. A copy of this material is available to the public upon request.
Under section 5(g) of the Regulatory Review Act, IRRC may convey any comments, recommendations or objections to the proposed rulemaking within 30 days of the close of the public comment period. The comments, recommendations or objections shall specify the regulatory review criteria which have not been met. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the rulemaking, by the Department, the General Assembly and the Governor of comments, recommendations or objections raised.
Contact Person
Questions or comments regarding the proposed rulemaking should be addressed to Peter J. Salvatore, Regulatory Coordinator, Insurance Department, 1326 Strawberry Square, Harrisburg, PA 17120, fax (717) 772-1969, psalvatore@state.pa.us within 30 days following the publication of this notice in the Pennsylvania Bulletin.
Under the Regulatory Review Act, the Department is required to write to all commentators requesting whether or not they wish to receive a copy of the final-form rulemaking. To better serve stakeholders, the Department has made a determination that all commentators will receive a copy of the final-form rulemaking when it is made available to IRRC and the legislative standing committees.
M. DIANE KOKEN,
Insurance CommissionerFiscal Note: 11-222. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 31. INSURANCE
PART VIII. MISCELLANEOUS PROVISIONS
CHAPTER 167. WORKERS' COMPENSATION ACT--PROVIDER FEES Sec.
167.1. Purpose. 167.2. Payment for anesthesia services. § 167.1. Purpose.
The purpose of this chapter is to set the allowance for anesthesia services provided to patients under the Workers' Compensation Act (77 P. S. §§ 1--2626) when the allowance utilizes the anesthesia conversion factor.
§ 167.2. Payment for anesthesia services.
The Workers' Compensation Part B Fee Schedule shall be amended by multiplying the anesthesia conversion factor applicable to Codes 100-1999 by a multiplier of 1.632. The Fee Schedule, as amended, shall apply to anesthesia services provided in all regions after ______ . (Editor's Note: The blank refers to the effective date of adoption of this proposed rulemaking.)
[Pa.B. Doc. No. 04-1134. Filed for public inspection June 25, 2004, 9:00 a.m.]
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