Workers

1
Workers Compensation Claim and Professional
Medical Service Denials An Examination of
1998-2004 Trends

• Texas Department of Insurance
• Workers Compensation Research and Evaluation
  Group
• June 2006

2
This Presentation Will Highlight

• Initial Claim Denials/Dispute Trends
• Have the of reportable claims (i.e., claims
  with more than one day of lost time) that are
  initially denied or disputed remained stable,
  decreased, or increased from injury year
  1998-2004 for the top 25 insurance carriers in
  Texas? 1
• Is there significant variation in initial claim
  denial/dispute rates among individual insurance
  carriers?
• Do initial claim denial/dispute rates vary by
  geographic region and injury type?

1 The top 25 workers compensation insurance
carriers represent the 25 insurance
carriers/carrier groups that account for over 90
percent of the workers compensation premiums in
2003 and 2004 and account for 60-70 percent of
the total amount of medical payments made during
1998-2004. For the purpose of this analysis, the
same 25 insurance carriers were used in each year
to calculate both the claim and medical billing
denial rates.
3
This Presentation Will Highlight (contd)

• Professional Medical Service Denials Trends
• Have professional medical service denials
  remained stable, decreased, or increased during
  service year 1998-2004 for the top 25 insurance
  carriers in Texas? 1
• Is there significant variation in professional
  medical service denial rates among individual
  insurance carriers?
• Have professional medical service claim denials
  remained stable, decreased, or increased for the
  most frequently billed and most costly services
  in the Texas workers compensation system?
• Do professional medical service denials vary by
  injury type?
• What are the most frequent reasons insurance
  carriers give for professional medical service
  denials?

1 The Top 25 Workers Compensation Insurance
Carriers represent the 25 insurance
carriers/carrier groups that account for over 90
percent of the workers compensation premiums in
2003 and 2004 and account for 60-70 percent of
the total amount of medical payments made during
1998-2004. For the purpose of this analysis, the
same 25 insurance carriers were used in each year
to calculate both the claim and medical billing
denial rates.
4
Data, Methods, and Caveats

• Initial Claim Denial/Dispute Trends
• Reportable claim denials/disputes were calculated
  using a combination of data collected by the
  Texas Department of Insurance, Division of
  Workers Compensation and its predecessor, the
  Texas Workers Compensation Commission
• Claim denial/dispute rates can only be calculated
  for claims that are reported to the Texas
  Department of Insurance, Division of Workers
  Compensation. As a result, claim denial/dispute
  rates cannot be calculated for medical only
  claims.
• Claim denial/dispute rates shown in this
  presentation represent the percentage of claims
  that were initially denied or disputed because of
  compensability and/or extent of injury issues
  generally. These denial/dispute rates do not
  take into account denials/disputes that were
  later adjudicated in favor of the injured worker
  or mutually resolved by the injured worker and
  the insurance carrier.
• Initial claim denials/disputes were identified
  using an Electronic Data Interchange (EDI) 148 or
  A49 transaction with a maintenance reason code
  '04' (denial) or a TWCC/DWC 21 form with box 43
  of that form (notice of refused or disputed
  claim) containing at least one of the following
  words deny, scope, disput, denial,
  non-co, denies, compen, liabil, liable,
  extent, course, contest, CS or C/S.

5
Data, Methods, and Caveats

• Initial Claim Denial/Dispute Trends
• However, the data currently collected on claim
  denials is currently inadequate because
• some of the data is coming in electronically and
  some of the data is coming in on paper forms and
• there is not a single field on any of the DWC
  claim forms to indicate whether a claim is being
  denied and as a result, TDI must look for key
  words in a text box to determine whether a claim
  has been denied/disputed this method is
  extremely imprecise.
• TDI attempted to validate individual claim
  denial/dispute rates with four insurance
  carriers. The results of this validation showed
  that the claim denial/dispute rates calculated by
  TDI for individual insurance carriers are
  generally overestimated by as little as 10 and
  as much as 30-40. However, using the data
  collected by TDI, it is possible to observe
  general claim denial trends over time.

6
Data, Methods, and Caveats

• Professional Medical Service Denials Trends
• Professional medical service denials were
  calculated using data collected by the Texas
  Workers Compensation Commission through February
  2005 (the most recent medical data available for
  research purposes)
• The medical service denial rates shown in this
  presentation represent the percentage of
  individual medical billing lines that had an
  exception code indicating that the billing line
  was denied, not the of medical bills that were
  denied each billing line corresponds to one
  medical service billed by a health care provider
• These medical service denial rates do not take
  into account denials that were later adjudicated
  in favor of the health care provider during
  medical dispute resolution
• The medical service denial rates shown in this
  presentation do not take into account medical
  services that were billed, but not processed by
  the insurance carrier because the bills were
  incomplete or medical services that were denied
  because the health care provider submitted
  duplicate bills.

7
Claim Denials/Disputes
8
Figure 1 Percentage of Reportable Claims That
Are Initially Denied/Disputed, Injury Years
1998-20041, 2
Source Texas Department of Insurance, Workers
Compensation Research and Evaluation Group,
2006. 1 The 2004 figures should be interpreted
with caution since the data are incomplete. 2
House Bill (HB) 2600, a workers compensation
reform bill aimed at reducing medical costs was
passed in 2001.
9
Figure 1 Percentage of Reportable Claims That
Are Initially Denied/Disputed for the Top 25
Workers Compensation Carriers, Injury Years
1998-20041, 2
Source Texas Department of Insurance, Workers
Compensation Research and Evaluation Group,
2006. 1 The 2004 figures should be interpreted
with caution since the data are incomplete. 2
House Bill (HB) 2600, a workers compensation
reform bill aimed at reducing medical costs was
passed in 2001.
10
Table 1 Range and Classification of Reportable
Claim Denial Percentages for the Top 25 Workers
Compensation Carriers1, 4
Denial Level2 Injury Year 1998 Injury Year 1999 Injury Year 2000 Injury Year 2001 Injury Year 2002 Injury Year 2003 Injury Year 20043
Low 15-26 17-30 21-30 22-33 20-30 22-31 24-33
Medium 26-35 30-37 31-41 34-39 31-42 32-46 34-47
High 36-54 38-56 42-56 40-52 43-53 47-55 48-62
Source Texas Department of Insurance, Workers
Compensation Research and Evaluation Group,
2006. 1 The number of carriers in the low
denial level categories range from 6-8 for
1998-2004, the number of carriers in the
medium denial level categories range from 9-13
for 1998-2004 and the number of carriers in high
denial level categories range from 6-10
for 1998-2004. 2 The denial categories were
defined using the yearly denial rate
distributions for the top 25 workers
compensation carriers in 2003 2004. For
each service year, carriers whose denial rate
fell at or below the 25th percentile of the
denial rate distribution were assigned into
the low denial category, carriers whose denial
rate fell at the 26th-74th percentile of the
denial rate distribution were assigned into
the medium denial category, and carriers whose
denial rate fell at or above the 75th percentile
of the denial rate distribution were
assigned into the high denial category. Carriers
could fall into a different category each injury
year. 3 The 2004 figures should be interpreted
with caution since the data are incomplete. 4
House Bill (HB) 2600, a workers compensation
reform bill aimed at reducing medical costs, was
passed in 2001.
11
Table 2 Percent and Number of Reportable Claims
Initially Denied/Disputed by Injury Year and
Geographic Region1
Injury Year 1998 Injury Year 1999 Injury Year 2000 Injury Year 20013 Injury Year 2002 Injury Year 2003 Injury Year 20042
North 29 31 34 33 36 38 42
South 29 32 34 34 36 38 42
West 31 34 36 36 38 41 48
East 32 33 35 34 36 36 39
Central 29 32 33 33 33 36 40
Region Unknown 23 28 40 42 44 40 47
Source Texas Department of Insurance, Workers
Compensation Research and Evaluation Group,
2006. 1 The injury year or region could not be
identified for approximately 19 or 87,405 of
denied claims and are therefore not reflected in
the figures presented above. 2 The 2004 figures
should be interpreted with caution since the data
are incomplete. 3 House Bill (HB) 2600, a
workers compensation reform bill aimed at
reducing medical costs, was passed in 2001.
12
Table 3 Percentage of Reportable Claims
Initially Denied/Disputed By Injury Type and
Injury Year, One Year Post-Injury1
Injury Year 1998 Injury Year 1999 Injury Year 2000 Injury Year 20013 Injury Year 2002 Injury Year 2003 Injury Year 20042
Low Back Soft Tissue Injuries 25 27 30 28 29 31 32
Shoulder Soft Tissue Injury 26 28 30 29 30 32 32
Neck Soft Tissue Injuries 31 33 35 34 34 36 37
Hand Wrist Soft Tissue Injuries 24 26 28 28 30 33 34
Knee Internal Derangement 23 24 28 27 28 30 29
Hand Wrist Superficial Trauma 19 20 20 18 21 21 23
Musculoskeletal Soft Tissue Injuries 26 28 29 29 29 30 31
Lower Back Nerve Compression 38 39 43 40 40 40 41
Ankle Foot Soft Tissue Injuries 20 21 23 22 22 23 25
Hand and Wrist Nerve Compression 36 39 41 41 41 44 50
Other 23 25 26 25 27 27 28
Source Texas Department of Insurance, Workers
Compensation Research and Evaluation Group,
2006. 1 The injury year or type could not be
identified for approximately 19 or 87,405 of
denied claims and are therefore not reflected in
the figures presented above. 2 The 2004 figures
should be interpreted with caution since the data
are incomplete. 3 House Bill (HB) 2600, a
workers compensation reform bill aimed at
reducing medical costs, was passed in 2001.
13
Summary

• Initial Claim Denials/Disputes
• Initial reportable claim denials/disputes have
  increased since the passage of HB 2600 in 2001
• There is significant variation in denial/dispute
  rates for reportable claims among the top 25
  workers compensation insurance carriers
• There is also variation in the denial/dispute
  rates for reportable claims by geographic region
  and injury type, with the highest denial/dispute
  rates in West Texas and for low back nerve
  compression and hand and wrist nerve compression
  injuries
• However, the data collected on claim denials is
  currently inadequate, and therefore, it is
  difficult to precisely calculate claim denial
  rates for individual insurance carriers, although
  it is possible to observe general trends over
  time
• In order to precisely calculate the denial rate
  for all claims in the system (including medical
  only claims) in the future and the denial rates
  for individual insurance carriers, new data
  collection requirements and methods are needed.

14
Professional Medical Service Denials
15
Figure 2 Total Number of Professional Medical
Services and Percentage of Medical Services
Denied for the Top 25 Workers Compensation
Carriers for Service Years 1998-2004 1, 2
Source Texas Department of Insurance, Workers
Compensation Research and Evaluation Group,
2006. 1 Denial rates and billing line counts for
2004 should be interpreted with caution since
these number are tentative and are current as of
February 2005. 2 House Bill (HB) 2600, a
workers compensation reform bill aimed at
reducing medical costs, was passed in 2001. In
August 2003, the most recent professional medical
fee guideline, which incorporated Medicares
payment policies, went into effect.
16
Table 4 Range and Classification of Professional
Medical Service Denial Percentages for the Top 25
Workers Compensation Carriers1
Denial Level 2 Service Year 1998 Service Year 1999 Service Year 2000 Service Year 20014 Service Year 2002 Service Year 2003 Service Year 2004 3
Low 4-11 4-12 5-14 5-13 4-15 7-16 15-19
Medium 12-19 13-25 15-23 15-24 15-22 17-29 20-28
High 19-26 26-44 24-50 25-32 23-43 31-50 29-50
Source Texas Department of Insurance, Workers
Compensation Research and Evaluation Group,
2006. 1 The number of carriers in the low denial
level categories range from 6-9 for 1998-2004,
the number of carriers in the medium
denial level categories range from 9-11 for
1998-2004 and the number of carriers in high
denial level categories range from 7-8
for 1998-2004. 2 The denial categories were
defined using the yearly denial rate
distributions for the top 25 workers
compensation carriers in 2003 2004. For
each service year, carriers whose denial rate
fell at or below the 25th percentile of the
denial rate distribution were assigned into
the low denial category, carriers whose denial
rate fell at the 26th-74th percentile of the
denial rate distribution were assigned into
the medium denial category, and carriers whose
denial rate fell at or above the 75th percentile
of the denial rate distribution were
assigned into the high denial category. Carriers
could fall into a different category each
professional medical service year. 3 The 2004
figures should be interpreted with caution since
these number are tentative and are current as of
February 2005. 4 House Bill (HB) 2600, a workers
compensation reform bill aimed at reducing
medical costs, was passed in 2001. In August
2003, the most recent professional medical fee
guideline, which incorporated Medicares payment
policies, went into effect.
17
Table 5 Percent and Number of Professional
Medical Service Denials for the Most Frequently
Billed Professional Medical Services in 2003 1,3
Type of Medical Service Service Year 1998 Service Year 1999 Service Year 2000 Service Year 2001 Service Year 2002 Service Year 2003 Service Year 2004 2
1 Therapeutic Procedure-97110 11 126,003 13 167,631 13 206,524 15 260,350 25 618,067 28 694,617 25 451,478
2 Office or Outpatient Visit -99213 13 177,448 14 189,081 15 216,150 15 232,221 24 406,711 24 332,585 21 155,857
3 Special Reports-99080 16 91,450 18 89,460 22 112,317 15 102,468 15 122,087 15 114,937 15 88,889
4 Hot or Cold Packs-97010 17 150,864 19 150,009 20 142,793 19 132,503 23 192,314 34 216,094 80 181,339
5 Therapeutic Activity-97530 12 57,248 13 59,658 14 64,793 16 69,570 25 153,471 29 174,482 28 109,750
6 Ultrasound-97035 12 60,450 13 61,639 15 69,104 15 72,722 21 121,934 24 124,320 25 89,721
7 Electrical Stimulation (unattended)-97014 18 104,112 19 104,578 20 107,397 19 105,533 23 157,434 25 114,082 49 20,647
8 Myofacial Release-97250 18 67,977 19 82,243 19 91,082 19 105,036 28 205,620 29 129,339 52 1,194
9 Neuromuscular Reeducation of Movement-97112 19 25,740 18 23,258 17 28,879 16 31,683 27 77,932 30 118,470 32 107,734
10 Electrical Stimulation (attended)-97032 16 39,491 19 47,753 19 50,580 18 52,263 26 100,849 30 115,455 32 92,128
Source Texas Department of Insurance, Workers
Compensation Research and Evaluation Group,
2006. 1 The most frequently billed medical
services are defined as the services most
frequently billed in 2003. 2 Denial rates for
2004 should be interpreted with caution since
these numbers are tentative and are current as of
February 2005. 3 House Bill (HB) 2600, a
workers compensation reform bill aimed at
reducing medical costs, was passed in 2001. In
August 2003, the most recent professional medical
fee guideline, which incorporated Medicares
payment policies, went into effect .
18
Table 6 Percent and Number of Professional
Medical Services Denials for the Most Costly
Professional Medical Services Rendered1
Type of Medical Service Service Year 1998 Service Year 1999 Service Year 2000 Service Year 20013 Service Year 2002 Service Year 2003 Service Year 2004 2
1 Therapeutic Procedure-97110 11 126,003 13 167,631 13 206,524 15 260,350 25 618,067 28 694,617 25 451,478
2 Unlisted Medicine/Rehabilitation Procedure-97799 13 10,758 15 13,117 16 16,995 12 17,359 14 29,114 19 39,707 17 20,172
3 Office or Outpatient Visit -99213 13 177,448 14 189,081 15 216,150 15 232,221 24 406,711 24 332,585 21 155,857
4 Disability Examination-99456 12 3,411 9 2,367 9 2,349 8 2,204 6 3,708 9 6,603 9 7,575
5 Additional Hour of Work Hardening/Conditioning-97546 17 57,716 20 80,648 23 107,300 24 131,442 21 89,204 24 84,459 20 35,203
6 Therapeutic Activity-97530 12 57,248 13 59,658 14 64,793 16 69,570 25 153,471 29 174,482 28 109,750
7 Office or Outpatient Visit -99214 11 23,369 13 25,747 15 30,600 14 30,367 20 51,618 20 50,134 18 32,921
8 Work Hardening/Conditioning-97545 19 41,110 19 46,391 21 56,345 21 63,051 23 50,217 23 42,674 20 22,576
9 Myofacial Release-97250, 18 67,977 19 82,243 19 91,082 19 105,036 28 205,620 29 129,339 52 1,194
10 Physical Performance Test-97750 20 14,605 21 16,626 21 16,651 19 18,079 21 25,008 21 25,248 18 14,749
Source Texas Department of Insurance, Workers
Compensation Research and Evaluation Group,
2006. 1 The most costly medical services are
defined as the services with the highest total
amount billed during 2003. 2 Denial rates for
2004 should be interpreted with caution since
these numbers are tentative and are current as of
February 2005. 3 House Bill (HB) 2600, a
workers compensation reform bill aimed at
reducing medical costs, was passed in 2001. In
August 2003, the most recent professional medical
fee guideline, which incorporated Medicares
payment policies, went into effect .
19
Table 7 Percentage and Number of Denied
Professional Medical Services By Injury Type and
Injury Year, One Year Post-Injury
Injury Type Injury Year 1998 Injury Year 1999 Injury Year 2000 Injury Year 20011 Injury Year 2002 Injury Year 2003
Low Back Soft Tissue Injuries 11 479,886 14 529,801 14 549,701 15 600,263 19 789,568 21 786,869
Shoulder Soft Tissue Injury 13 77,216 14 83,577 14 94,587 15 123,363 19 176,667 22 186,385
Neck Soft Tissue Injuries 17 149,172 20 168,201 19 167,842 21 199,372 27 257,931 30 239,252
Hand Wrist Soft Tissue Injuries 11 27,876 17 44,787 16 48,306 19 77,161 23 94,829 23 78,112
Knee Internal Derangement 12 32,613 14 42,449 13 40,027 16 54,888 19 75,900 21 79,333
Hand Wrist Superficial Trauma 10 13,596 12 16,262 13 18,397 14 22,376 17 31,566 19 32,186
Musculoskeletal Soft Tissue Injuries 17 33,879 19 39,204 20 40,568 24 60,848 30 86,888 29 63,123
Lower Back Nerve Compression 20 611,611 21 595,065 20 626,131 23 727,597 27 866,109 31 740,589
Ankle Foot Soft Tissue Injuries 12 21,653 14 25,185 14 26,199 15 34,021 20 45,976 23 50,907
Hand and Wrist Nerve Compression 16 56,522 19 68,321 20 83,891 21 97,988 27 103,469 29 78,431
Source Texas Department of Insurance, Workers
Compensation Research and Evaluation Group,
2006. 1 House Bill (HB) 2600, a workers
compensation reform bill aimed at reducing
medical costs, was passed in 2001.
20
Table 8 Percentage of Denied Professional
Medical Services by Top 10 Denial Reasons for
Service Years 1998-20041
Service Year 1998 Service Year 1999 Service Year 2000 Service Year 20013 Service Year 2002 Service Year 2003 Service Year 20041
Unnecessary Treatment (without peer review) 10 12 12 13 25 26 22
Unnecessary Treatment (with peer review) lt1 0.3 1.0 3.5 12.7 15.7 14.9
Inappropriate Documentation 36 42 39 26 21 14 10
Preauthorization Required But Not Requested 19 17 16 16 3 2 2
Not by Treatment Guidelines 13 7 8 10 4 -- --
Entitlement to Benefits 6 8 9 10 9 7 7
Extent of Injury 7 6 6 7 8 8 8
Final Adjudication lt1 lt1 lt1 lt1 lt1 lt1 1.6
Unbundling 5 4 4 5 4 7 13
Payment Policy lt1 -- lt1 lt1 lt1 3.7 10.5
Other reasons2 4 4 5 9 13 16 11
Source Texas Department of Insurance, Workers
Compensation Research and Evaluation Group,
2006. 1 The 2004 figures should be interpreted
with caution since these numbers are tentative
and are current as of February 2005. 2 Other
reasons include not timely filed, not
treating doctor, inappropriate health care
provider, final adjudication, preauthorization
requested, but denied, etc. 3 House Bill
(HB) 2600, a workers compensation reform bill
aimed at reducing medical costs, was passed in
2001. In August 2003, the most recent
professional medical fee guideline, which
incorporated Medicares payment policies, went
into effect .
21
Summary

• Professional Medical Service Denials
• Professional medical service denials have
  increased since the passage of HB 2600 in 2001
• There is significant variation in denial rates
  for professional medical services among the top
  25 workers compensation insurance carriers, with
  the lowest denial rates ranging from 7-16 to the
  highest denial rates ranging from 31-50 for
  service year 2003 (the last injury year with
  complete year medical data available)
• Denial rates have also significantly increased
  for the top 10 most frequently billed and most
  costly individual medical services over time
  these services consist of mostly evaluation and
  management and physical medicine services

22
Summary, cont.

• Professional Medical Service Denials, cont.
• In particular, denial trends increased first in
  2001 and then changed again in 2003 based on the
  adoption of the professional services fee
  guideline
• Reasons insurance carriers used to classify
  denials of professional medical services have
  also changed significantly over time.
• Prior to 2001, the two most common reasons for
  denying medical services were inappropriate
  documentation and preauthorization required but
  not requested
• Since 2001, the two most common reasons for
  denying medical services have been unnecessary
  treatment either with or without a peer
  review
• Additionally, since the fee guideline change in
  2003, more professional medical services are
  being denied because of Medicare payment policies
  and unbundling edits that were adopted by
  reference in the rule as a result of HB 2600
  (77th Legislature, 2001).

23
Summary, cont.

• Professional Medical Service Denials, cont.
• Without individual reviews of insurance carrier
  claims processing practices, it is impossible to
  say whether these denial rates are appropriate
  just by looking at the data
• However, the data does confirm that insurance
  carriers have become more aggressive in reviewing
  the medical necessity of services billed by
  health care providers since 2001, most likely in
  response to increasing average medical costs per
  claim during the same time.
• Additionally, since the adoption of the
  professional services fee guideline in August
  2003, an increasing number of medical billing
  line denials appear to be due to issues relating
  to health care providers not billing in
  accordance with Medicare rules.