ADOPTED RULES
An agency may take final action on a section 30 days after a proposal has been 
published in the Texas Register. The section becomes effective 20 days after the 
agency files the correct document with the Texas Register, unless a later date 
is specified or unless a federal statute or regulation requires implementation 
of the action on shorter notice.
If an agency adopts the section without any changes to the proposed text, only 
the preamble of the notice and statement of legal authority will be published. 
If an agency adopts the section with changes to the proposed text, the proposal 
will be republished with the changes.

TITLE 4. AGRICULTURE
PART II. Texas Animal Health Commission
CHAPTER 49.Equine
Equine Infectious Anemia
4 TAC sec.49.1
The Texas Animal Health Commission adopts an amendment to sec.49.1, concerning 
Equine Infectious Anemia testing requirements for change of ownership. The 
amendment is being adopted with changes to the proposed text as published in the 
May 6, 1997, issues of the Texas Register. The change exempts equine which are 
being sold to slaughter not to be required to be accompanied by a permit issued 
by the Commission. 
This rule is necessary to allow change of ownership without the required test 
under certain conditions at public auctions. 
The Texas Animal Health Commission Equine Infectious Anemia Ad Hoc Committee is 
in favor of this adoption. 
The amendment implements the Texas Agriculture Code, Texas Civil Statutes, 
Chapter 161, which provide the Commission with the authority to adopt rules to 
act to eradicate or control diseases that affect livestock.
The amendment implements the Agriculture Code, sec.161.041 and sec.161.046 which 
authorizes the Commission to adopt necessary rules to protect livestock from 
disease, including equine infectious anemia.  

sec. 49.1.Equine Infectious Anemia Identification and Handling of Infected 
Equine.
(a)-(k) (No change.) 
(l) Requirement for Change of Ownership. A negative EIA test within the previous 
12 months is required for all equine changing ownership in Texas including 
horses moving to slaughter, provided an equine may sell at public auction 
without proof of a negative test: 
(1) if the animal is sold to slaughter to be tested at the slaughter facility at 
Commission expense; or 
(2) if the animal is sold other than to slaughter, the auction market: 
(A) marks the buyer's sheet with a stamp provided by the Commission that has the 
following statement: "To the best of our knowledge, this horse(s) has not been 
tested for EIA and is being sold "as is", and 
(B) provides the buyer with an educational pamphlet supplied by the Commission. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on June 24, 1997.
TRD-9708197
Terry Beals, DVM
Executive Director
Texas Animal Health Commission
Effective date:July 1, 1997
Proposal publication date: May 6, 1997
For further information, please call: (512) 719-0714

TITLE 22. EXAMINING BOARDS
PART VIII. Texas Appraiser Licensing and Certification Board
CHAPTER 151.Rules Relating to Practice and Procedure
22 TAC sec.151.7
The Texas Appraiser Licensing and Certification Board adopts an amendment to 
sec.151.7, Denial of a License, without changes to the proposed text as 
published in the May 6, 1997, issue of the Texas Register (22 TexReg 3981). 
The rule is being amended to clarify the current wording by specifying that 
applicants have 30 days in which to request a hearing should they be denied a 
license or certification rather than the non-defined term, "timely." It 
eliminates ambiguity and places a time certain on requesting a hearing. No 
written comments were received regarding the adoption of the amendment. No oral 
comments were made at the June 19, 1997, meeting of the Texas Appraiser 
Licensing and Certification Board at which this amendment was considered and 
public comments were solicited. 
The amendment was adopted under the Texas Appraiser Licensing and Certification 
Act, sec.5 (Article 6573a.2, V.T.C.S.) which provides the Texas Appraiser 
Licensing and Certification Board with authority to adopt rules for the 
licensing and certification of real estate appraisers and for standards of 
practice.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on June 24, 1997.
TRD-9708230
Renil C. Liner
Commissioner
Texas Appraiser Licensing and Certification Board
Effective date: July 14, 1997
Proposal publication date: May 6, 1997
For further information, please call: (512) 465-3950

PART XXIII. Texas Real Estate Commission
CHAPTER 535.Provisions of the Real Estate License Act
Education, Experience, Educational Programs, Time Periods, and Type of License
22 TAC sec.535.61
The Texas Real Estate Commission adopts an amendment to sec.535.61, concerning 
acceptance of courses submitted by real estate license applicants, with changes 
to the proposed text as published in the April 1, 1997, issue of the Texas 
Register (22 TexReg 3200). The amendment authorizes the commission to accept 
courses offered by a school accredited by the real estate regulatory body of 
another state. The amendment also permits the commission to accept real estate 
related courses from accredited colleges or universities for which credit was 
awarded on an examination only or because of other learning experience. Core 
real estate courses, those courses specifically required for original licensing 
or license renewal, would not be accepted by the commission if credit was given 
based only upon an examination or upon other learning experience. The caption of 
the section also has been broadened to include the acceptance of courses as well 
as examinations. Adoption of the amendment permits otherwise qualified 
applicants to rely upon education obtained in proprietary schools regulated by 
other states and to rely upon credits for real estate related courses obtained 
by examination or for other learning experience from an accredited college or 
university. 
Three comments were received from individuals in support of the amendment. Two 
of the comments focused on the standards followed by colleges and universities 
in awarding credits based upon on-the-job training or other experience. On final 
adoption, the commission determined that the acceptance of course credits based 
on examination only or for other learning should be restricted to accredited 
colleges or universities, whose accreditation standards ensure the application 
of guidelines for the awarding of credits in this fashion. The commission also 
made nonsubstantive changes to make the section easier to read. 
The amendment is adopted under Texas Civil Statutes, Article 6573a, sec.5(h), 
which authorize the Texas Real Estate Commission to make and enforce all rules 
and regulations necessary for the performance of its duties. 

sec.535.61.Examinations and Acceptance of Courses. 
(a)-(o) (No change.) 
(p) Educational programs or courses of study in real estate offered after the 
effective date of this section by schools accredited by the commission, by a 
school accredited by a real estate regulatory agency of another state or by 
accredited colleges and universities, as defined by these sections, will be 
accepted as meeting the requirements of the Act for the successful completion of 
educational prerequisites for a license upon a determination by the commission 
that: 
(1)-(5) (No change.)
(q)-(dd) (No change.) 
(ee) The commission may accept experiential learning credits or credits awarded 
by final course examination only for real estate related courses from an 
accredited college or university. The commission may not accept experiential 
learning credits or credits awarded by final course examination only for core 
real courses from any source. Credits obtained from alternative delivery methods 
may be accepted by the commission if the course satisfies the requirements for 
such a course contained in sec.535.71 of this title (relating to Mandatory 
Continuing Education). 
(ff)-(hh) (No change.)
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on June 24, 1997.
TRD-9708213
Mark A. Moseley
General Counsel
Texas Real Estate Commission
Effective date: July 14, 1997
Proposal publication date: April 1, 1997
For further information, please call: (512) 465-3900

TITLE 28. INSURANCE
PART Texas Workers' Compensation Commission 
CHAPTER 134.Guidelines for Medical Services, Charges, and Payments
SUBCHAPTER E.Health Facility Fees
28 TAC sec.134.400
The Texas Workers' Compensation Commission (The Commission or TWCC) adopts the 
repeal of sec.134.400 and new sec.134.401, concerning guidelines for acute care 
inpatient hospital fees and the simultaneous repeal of existing sec.134.400, 
concerning the same subject, with changes to the proposed text as published in 
the February 11, 1997, issue of the Texas Register (22 TexReg 1579).  
The new rule will establish presumptively fair and reasonable payments for acute 
care inpatient hospital services provided after the effective date of the rule 
to workers' compensation claimants who were injured on or after January 1, 1991. 
Subsection (a) of the rule sets out the services to which the rule applies. 
Subsection (b) contains applicable definitions and general information related 
to billing for acute care inpatient hospital services. Subsection (c) sets out 
reimbursement amounts and methods, including reimbursement calculation examples, 
diagnoses and items which are carved out of the per diem reimbursement, stop-
loss reimbursement method, and reimbursement for professional and pharmacy 
services. 
As required by the Government Code sec.2001.033(1), the Commission's reasoned 
justification for this rule is set out in this order which includes the 
preamble, which in turn includes the rule. The reasoned justification is 
contained in this preamble, and throughout this preamble, including how and why 
the Commission reached the conclusions it did, why the rule is appropriate, the 
factual, policy, and legal bases for the rule, a restatement of the factual 
basis for the rule, a summary of comments received from interested parties, 
names of those groups and associations who commented and whether they were for 
or against adoption of the rule, and the reasons why the Commission disagrees 
with some of the comments and proposals. 
In formulating the Acute Care Inpatient Hospital Fee Guideline (ACIHFG), the 
Commission carefully and fully analyzed all of the statutory and policy 
standards and objectives and all the data and information the Commission has or 
which was submitted to it. The Commission utilized all of this, and its 
expertise and experience, to formulate the hospital fee guideline which balances 
the statutory standards to ensure that injured workers receive the quality 
health care reasonably required by the nature of their injury as and when 
needed; to ensure that the fee guidelines are fair and reasonable; to meet the 
statutory objective to achieve effective medical cost control; to ensure that 
the fee paid for a workers' compensation patient would not be in excess of the 
fee charged for similar treatment of an injured individual of an equivalent 
standard of living and paid by that individual or someone acting on that 
individual's behalf; and to take into consideration increased security of 
payment under the Texas Workers' Compensation Act (the Act). Full and objective 
analysis and consideration was given to all comments received, as evidenced by 
the revisions made to the rule as initially proposed and reproposed and the 
Commission's responses to comments in this preamble. 
Some commenters advocated that the ACIHFG not be adopted. It is important that a 
guideline for acute care inpatient hospital services be adopted so the statutory 
standards discussed at the beginning of and throughout this preamble are 
complied with and it is of particular importance because of the invalidation of 
the previous ACIHFG by the courts. As a result, there has been no ACIHFG in 
place since the Texas Supreme Court's ruling on February 13, 1997, leaving the 
initial determination of what is a fair and reasonable rate to workers' 
compensation participants. This new ACIHFG will reduce the number of disputes 
and decrease costs by providing guidance to the participants in the system 
regarding fair and reasonable reimbursements for acute inpatient hospital care. 
The fee guideline also should be adopted because of the facts discussed in this 
preamble which support the Commission's conclusion that the previous fee 
guideline rates should be revised. 
The provisions of new sec.134.401 become effective on August 1, 1997 for all 
reasonable and medically necessary medical and/or surgical inpatient services 
rendered after that date to injured workers in an acute care hospital. This will 
allow a sufficient period of time for participants to make necessary changes in 
the billing process to implement the provisions of the new rule. Beginning in 
early 1996, the TWCC Medical Advisory Committee (MAC) provided input regarding 
revision of the 1992 ACIHFG. The MAC, by statute (Texas Labor Code, 
sec.413.005), is to advise the Medical Review Division in developing and 
administering the medical policies, fee guidelines, and utilization guidelines 
established under the Texas Labor Code, sec.413.011. The MAC advises the Medical 
Review Division of the TWCC in the review and revision of medical policies and 
fee guidelines required under the Texas Labor Code, sec.413.012. The MAC is 
composed of representative members appointed by the Commission as follows: a 
representative of a public health care facility, a representative of a private 
health care facility, a doctor of medicine, a doctor of osteopathic medicine, a 
chiropractor, a dentist, a physical therapist, a pharmacist, a podiatrist, an 
occupational therapist, a medical equipment supplier, a registered nurse, a 
representative of employers, a representative of employees, and two 
representatives of the general public. In April of 1996 the MAC recommended to 
the Commission the proposal of the ACIHFG as eventually published in the July 
26, 1996, Texas Register (21 TexReg 6939). That proposal was based on the same 
methodology (use of hospital contract rates) as in this adopted ACIHFG. This 
July 26, 1996, proposal was modified pursuant to information obtained from the 
TWCC Medical Advisory Committee, a Commission-appointed ACIHFG Task Force, and 
numerous public comments. In developing the rule proposal published here, the 
Commission utilized the information gathered during the development of the July 
26, 1996 proposal and the information gathered following that proposal. 
Following a public hearing on the proposed rule as published in the July 26, 
1996 Texas Register (which was held on September 12, 1996), the Chairman of the 
Commission appointed an ACIHFG Task Force (the Task Force) as authorized by the 
Act, sec.413.006 composed of Charles Bailey, Texas Hospital Association; Becky 
Monroe, Houston Memorial Northwest Medical Center; Robert Kamm, Texas 
Association of Business and Chambers of Commerce; Pam Beachley, Business 
Insurance Consumers Association; and Todd Brown, Executive Director, TWCC. 
Anthony Heep of Spohn Memorial Hospital was added to the Task Force later. The 
Chairman appointed Todd Brown as Chair of the Task Force and directed Mr. Brown 
to establish the scope and objective of the Task Force. Mr. Brown asked the Task 
Force to examine the issues of tiered per diems for surgical admissions, 
exemption of certain items and/or services from the per diem fees, and the stop 
loss threshold. The Task Force met on six occasions to exchange information and 
discuss the issues. After Plaintiffs THA et al. sued Mr. Brown in his 
individual, rather than official capacity, Robert Marquette, Director of the 
Medical Review Division, replaced Mr. Brown as the Chair of the Task Force. (See 
discussion of lawsuit elsewhere in this preamble.) The Commission staff took the 
ideas and information provided by the Task Force into consideration in 
developing its recommendation to the Commission. The Task Force was useful in 
presenting various views which were considered in establishing the ACIHFG and, 
for example, carve outs were incorporated due, in part, to Task Force input. 
However, there was no consensus in the Task Force on certain main aspects of 
reimbursement and the Commission believes there would be no further benefit in 
the creation of another Task Force because there was no indication of any 
ability of the different interest groups in reaching any consensus on basic 
areas of disagreement in the rate setting process within a reasonable time 
period. At the conclusion of the Task Force meetings on January 6, 1997, the 
members of the Task Force were invited to submit statements to the Commission 
regarding staff recommendations. The statements submitted illustrated the 
divergent views regarding the appropriate methods for determining fair and 
reasonable hospital reimbursements. 
Public comment on the ACIHFG proposed in the July 26, 1996, issue of the  Texas 
Register raised many issues including the carve out or exclusion of certain 
items and services from the guideline, changes in the stop-loss threshold, 
exemption of small/rural hospitals from the guideline, inclusion of outpatient 
services in the guideline, tiering of the surgical reimbursement rates, regional 
variation in reimbursement rates, and the effect of inflation on hospital 
reimbursement. Some commenters also questioned the validity of using managed 
care contracts as a basis for workers' compensation reimbursements, raising 
issues such as differences in case mix, differences in case complexity, and use 
of steerage in managed care contracts. 
As a result of analysis of the information obtained by the Commission from these 
various sources and additional information gathered by the Commission staff, 
changes were made to the rule as proposed in the July 26, 1996 Texas Register. 
The knowledge which has been accumulated by the Commission since the July 26, 
1996, proposal of the ACIHFG was used in formulating the second proposal 
(published on February 11, 1997). 
Changes made to the February 11, 1997 proposal of the rule are in response to 
public comment received in writing and through public comment received at a 
public hearing held on March 6, 1997 and are described in the summary of 
comments and responses section of this preamble. Other changes were made for 
consistency or clarity. Commenters were invited to comment on all aspects of the 
rule, including, fee amounts, regional variations in fees, 100-bed or less 
hospital exemption, and tiered per diems, and were encouraged to submit data to 
support their positions. The changes from the rule as proposed do not affect any 
subject or person other than those subjects and persons included as potential or 
actual affected persons or subjects in the proposed rule preamble. The rule as 
proposed affected all regulated parties and subjects of regulation that are 
affected by the adopted rule. The public and affected persons were given 
sufficient advance notice of the ruleþs content to permit them to 
ascertain whether protection of their interests required them to request a 
hearing and participate therein. The Commissioners exercised their discretion 
and judgment, experience, and expertise, to balance the statutory standards and 
the interests of all those affected. 
This new rule will fulfill the requirements of the Texas Labor Code, sec.413.011 
that the Commission by rule establish medical policies and guidelines, and the 
Texas Labor Code, sec.413.012 that the Commission periodically review and revise 
its fee guidelines. The new rule will revise provisions in the previous 
guideline including: increasing the per diem reimbursement for hospital services 
related to a medical admission from $600 to $870; increasing the per diem 
reimbursement for services related to a surgical admission from $1,100 to 
$1,118; decreasing the per diem reimbursement for intensive or cardiac care 
units services from $1,600 to $1,560; redefining the exemption for "small/rural" 
hospitals as an exemption for "hospitals which are located in a population 
center of less than 50,000 persons and have 100 or less licensed beds"; revising 
the basic reimbursement method to require the payment of the lesser of billed 
charges, contract rates or the per diem in the guideline; exempting from the per 
diem reimbursement provisions of the guideline certain high-cost services, 
supplies, and diagnoses in addition to MRIs, CAT scans and implantables; 
eliminating the requirement that an invoice be submitted for reimbursement of 
implantables; and lowering the stop-loss threshold to $40,000 and the stop-loss 
reimbursement factor to 75%. 
Changes from the rule as proposed and published in the February 11, 1997 Texas 
Register are found in the following subsections of new sec.134.401: in 
subsection (a)(1) the effective date of the rule has been changed from June 1, 
1997 to August 1, 1997, the sentence "Medical and/or surgical inpatient services 
rendered prior to the effective date of this rule shall be subject to the ACIHFG 
in effect at the time the services were rendered." has been deleted and the 
words "which are located in a population center of less than 50,000 persons and 
have" have been added to the last sentence; in subsection (b)(1)(B) the words 
"as defined by the Texas Labor Code sec.401.011(19), provided by an acute care 
hospital and" have been added; in subsections (b)(2)(D) and (c)(7)(A) the term 
"health care provider" has been changed to "health care practitioner" to provide 
consistency with the terms as defined in the Texas Labor Code; in subsection 
(c)(1) the per diem reimbursement for acute care inpatient surgical cases has 
been changed from $1,045 to $1,118; in subsection (c)(3)(C)(ii) the example has 
been recalculated using a surgical per diem rate of $1,118; in subsection 
(c)(4)(C) the word "charged" has been added to indicate that the $250 threshold 
is determined by charges and the sentence "Dose is the amount of a drug or other 
substance to be administered at one time" has been added to define the term 
"dose". The effective date of the rule has been changed from June 1, 1997 to 
August 1, 1997 to provide a period of time after adoption of the rule for 
insurance carriers and acute care inpatient hospitals to make necessary changes 
to systems and procedures for implementation of the new ACIHFG. The sentence 
"Medical and/or surgical inpatient services rendered prior to the effective date 
of this rule shall be subject to the ACIHFG in effect at the time the services 
were rendered." has been deleted from subsection (a)(1) in response to public 
comment (see specific response later in this preamble) to avoid confusion 
regarding the application of the previous ACIHFG (sec.134.400) to services 
rendered after that guideline was declared invalid by the courts. In that same 
subsection, the small hospital exemption has been changed by the addition of 
exemption criteria that the hospital be located in a population center of less 
than 50,000 persons. This addition means a hospital must be small (100 or less 
licensed beds in size) and be located in a population center of less than 50,000 
people to be exempt from the provisions of the ACIHFG. In subsection (b)(1)(B) 
the language addition clarifies that the term "health care" is used as it is 
defined in the Texas Labor Code and that inpatient services as used in the rule 
refers to health care provided by an acute care hospital. In subsection 
(b)(2)(D) and (c)(7)(A) the term "health care provider" was changed to "health 
care practitioner" because, as these terms are defined in the Texas Labor Code, 
"health care practitioner" (an individual who is licensed to provide or render 
and provides or renders health care or a non-licensed individual who provides or 
renders health care under the direction or supervision of a doctor) expresses 
the meaning intended in these subsections. The Commissioners changed the per 
diem reimbursement for acute care inpatient surgical cases from $1,045 to $1,118 
in subsection (c)(1) to ensure access to quality health care and as an 
additional protection to ensure fair and reasonable rates for surgical cases. 
The change takes into account the number of surgical cases as compared to 
medical cases in the workers' compensation system and inflation (see the 
detailed discussion of per diem rates chosen elsewhere in this preamble). The 
example in subsection (c)(3)(C)(ii) was recalculated to reflect the change in 
the surgical per diem rate. The changes to subsection (c)(4)(C) were made to 
clarify that the $250 threshold is determined by hospital charges and to define 
the term "dose". Although the term "durable medical equipment" is not contained 
in the rule as proposed or adopted, the terminology was inadvertently used in 
the draft preamble, but has been deleted in the adopted preamble and the more 
specific words "orthotics and prosthetics" substituted as appropriate. The 
Commission considered all relevant statutory and policy standards and objectives 
and designed this new rule to achieve those standards and objectives, including 
the following: 
(1) establish guidelines relating to fees charged or paid for medical services 
for employees who suffer compensable injuries, including guidelines relating to 
payment of fees for specific medical treatments or services; 
(2) ensure that injured workers receive the health care reasonably required by 
the nature of their injury, as and when needed; 
(3) ensure guidelines for medical services fees are fair and reasonable;
(4) design fee guidelines to ensure quality health care to the injured workers 
of Texas; 
(5) design fee guidelines to achieve effective medical cost control;  
(6) ensure guidelines for medical services fees do not provide for payment of a 
fee in excess of the fee charged for similar treatment of an injured individual 
of an equivalent standard of living and paid by that individual or someone 
acting on that individual's behalf; 
(7) consider the increased security of payment afforded by the Act in 
establishing the fee guidelines; 
(8) maintain a statewide database of medical charges, actual payments, and 
treatment protocols that may be used by the Commission in adopting medical fee 
guidelines; 
(9) ensure the Commission's database contains information necessary to detect 
practices and patterns in medical charges and actual payments; and
(10) ensure the Commission's database can be used in a meaningful way to allow 
the Commission to control medical costs as provided by the Act. 
This new rule achieves these standards and objectives by its provisions, 
including but not limited to the following: 
(1) specifying the fees to be paid for acute care inpatient hospital services 
provided under the Texas Workers' Compensation Act; 
(2) considering the amounts currently accepted by hospitals as payment in full 
under contracts for acute care inpatient services and for Medicare patients when 
setting the per diem rates, to avoid any adverse effect on the access to or 
quality of medical care, to ensure the per diem rates are fair and reasonable, 
to achieve effective medical cost control, and to ensure the workers' 
compensation rate is not in excess of the amount that would be paid for similar 
treatment of non-workers' compensation patients of an equivalent standard of 
living; 
(3) requiring that payment to a hospital be the lesser of the amount specified 
in the fee guideline, the amount specified in a prenegotiated contract with the 
carrier, or billed charges to ensure that hospitals are not reimbursed for 
workers' compensation patients in excess of the amount that would be paid for 
similar treatment of non-workers' compensation patients of an equivalent 
standard of living, and to achieve effective medical cost control; 
(4) including non-workers' compensation data in the data reviewed and utilized 
by the Commission to allow the Commission to detect practices and patterns in 
medical charges and actual payments,to determine fair and reasonable rates, to 
ensure access to quality medical care, to ensure that hospitals are not 
reimbursed for workers' compensation patients in excess of the amount that would 
be paid for similar treatment of non-workers' compensation patients of an 
equivalent standard of living, and to achieve effective cost control;
(5) considering the security of payment in the workers' compensation system 
resulting from the absence of co-payments and deductibles which are included in 
some managed care contracts, when setting rates and ensuring fees that are not 
in excess of the amount that would be paid for similar treatment of non-workers' 
compensation patients of an equivalent standard of living;
(6) providing for reimbursement to acute care hospitals which is sufficient to 
induce a sufficient number of hospitals to continue in the system to ensure 
access to quality medical care for injured workers in Texas; and 
(7) exempting certain hospitals with 100 or less licensed beds in subsection 
(a)(1), lowering the stop-loss threshold, and including substantial carve outs 
from the per diem fees to ensure that reimbursement to hospitals is fair and 
reasonable and is sufficient to avoid any adverse effect on the access to or 
quality of medical care. 
(8) adding approximately 7.0% additional to the average surgical rate found in 
the 1994-1995 per diem contracts to ensure access to quality health care and as 
an additional protection to ensure fair and reasonable rates for surgical cases 
while still achieving effective cost control. 
These statutory and policy standards require the Commission to establish 
guidelines which balance the various interests in the workers' compensation 
system by ensuring that medical services fees are fair and reasonable, that 
injured workers receive quality health care, and that effective medical cost 
control is achieved. In addition to balancing these interests, and considering 
the increased security of payment in workers' compensation, the Texas Labor Code 
in sec.413.011 states that the Commission shall ensure guidelines for medical 
services fees do not provide for payment in excess of the fee charged for 
similar treatment of an injured individual of an equivalent standard of living 
and paid by that individual or someone acting on that individual's behalf. To 
comply with this statutory standard, the Commission, in reviewing and revising 
sec.134.400, sought to analyze the hospital reimbursements contained in that 
rule in relation to reimbursements hospitals were accepting from Medicare and 
under contracts as payment in full for persons of an equivalent standard of 
living outside the workers' compensation system for treatment similar to that 
provided to injured workers. 
The Commission reviewed and analyzed a tremendous amount of data in determining 
the reimbursement rate set by this new rule for acute care inpatient hospital 
services, including the Commission's database of electronically filed bills and 
payments for the period October 1, 1994 through June 30, 1996 (representing over 
12,000 hospital bills and in excess of 153 million dollars in hospital charges), 
2564 managed care contracts or summaries of managed care contracts (from the 
hospitals receiving approximately 80% of the total workers' compensation 
reimbursement paid to hospitals in 1994 for acute care hospital inpatient 
services), analysis of Medicare rates, and state and federal agency information 
related to hospital health care. Contracts have been obtained from some of these 
same hospitals for the period October 1995 through October 1996. Public 
comments, public hearings, the Medical Advisory Committee, and a Commission-
appointed Task Force provided extensive input that was thoroughly analyzed. 
Texas acute care hospitals in 1995 received 33.3% of their gross patient revenue 
from third party payors and 40% from Medicare. Because these sources account for 
the vast majority of hospital patient revenue, the reimbursements paid by these 
payors is relevant to determining what fees are paid for similar treatment of 
persons of an equivalent standard of living, for establishing fair and 
reasonable fees, and for establishing fees at which hospitals will continue to 
provide quality health care while the Commission still achieves cost control. 
Voluntary participation in managed care contracts and in Medicare shows that 
reimbursements received from those payors are sufficient to cover the hospitals' 
costs. 
The Commission obtained contracts or other agreements reflecting rates accepted 
as payment in full by Texas hospitals that were in effect for any dates of 
services on or after January 1, 1994 through October 1, 1995 (hereinafter 
referred to as "1994-1995 hospital contracts"). Per diem fees is the most 
commonly used (51.5%) method in the 1994-1995 hospital contracts, is the method 
used in the 1992 ACIHFG, and is administratively convenient. The 1994-1995 
hospital per diem contracts set separate rates for medical services, surgical 
services, and intensive care unit services or for combined medical/surgical. The 
per diem 1994-1995 hospital contracts do not break the fees down into smaller 
segments of treatments and services, or into a larger number of categories. 
Rather, the one inclusive fee for each of the medical, surgical, and ICU 
categories of service in the 1994-1995 hospital contracts shows that it is 
appropriate to have one fee for medical, one fee for surgical, and one fee for 
ICU/CCU. The more recent managed care contracts reviewed by the Commission 
indicate that use of per diem rates is increasing in the industry. This shows 
that per diem rates established for what may be a broad category of services do 
result in fair and reasonable rates without different fees for smaller 
categories of services. 
The per diem amounts in this rule for medical ($870), surgical ($1,118), and 
ICU/CCU ($1,560) services are the average of the per diem 1994-1995 hospital 
contracts for each category, with the addition of approximately 7.0% to the 
average surgical rate found in the 1994-1995 per diem contracts. This increase 
will provide additional reimbursement for those hospitals which experienced 
increases in payment from the rates contained in the 1994-1995 hospital 
contracts and summaries due to inflation. This increase is approximately 7.0% of 
the $1,045 rate and brings the surgical per diem rate to approximately 130% of 
the medical per diem rate of $870. This 130% difference between the surgical and 
medical per diem rates is equal to or greater than the corresponding 
differential in more than 80% of the managed care contracts obtained and 
considered by the Commission in setting the ACIHFG per diem rates. Just as the 
increases which result from the carve outs and the stop-loss provision, this 
increase in the surgical per diem rate will ensure injured workers' access to 
acute care inpatient services and serve as an additional protection to ensure 
fair and reasonable rates for surgical cases. Just as the increases which result 
from the carve outs and the stop-loss provision, this increase in the surgical 
per diem rate will ensure injured workers' access to acute care inpatient 
services and serve as an additional protection to ensure fair and reasonable 
rates for surgical cases. The Commission utilized its expertise and experience 
to increase the surgical rate from the amount in the proposed rule to achieve a 
proper balance of the statutory standards discussed elsewhere in this preamble. 
Other provisions in the rule serve to increase actual reimbursement, so this 
rule actually reimburses in excess of the contract averages. (See relevant 
discussions elsewhere in this preamble, including discussions regarding the 
exemption of certain small hospitals in subsection (a)(1), stop loss, outpatient 
services, case mix, inflation, and carve outs.) Alternate methods of 
reimbursement were considered by the Commission and rejected because they use 
hospital charges as their basis and allow the hospitals to affect their 
reimbursement by inflating their charges, or are difficult to use because of the 
limited diagnosis groups applicable to workers' compensation cases and lack of 
data in billing. 
The diagnostic-related groups (DRGs) method of reimbursement involves paying the 
hospital a predetermined fee based upon the patient's diagnosis rather than for 
example the length of stay or specific services provided. DRGs were not used as 
the methodology for this ACIHFG for several reasons. First, while Medicare 
utilizes DRGs, Medicare reimbursement rates for those DRGs are not based upon 
market-driven forces and largely involve non-working elderly patients who 
require longer lengths of stay and a higher percentage of co-morbidity. Second, 
the percentage of the managed care contracts utilizing DRG methodologies was 
10.8% and, therefore, would not be as representative of the reimbursements as 
per diem contracts which comprised 51.5% of the managed care contracts. Third, 
only about five out of the approximately 494 DRGs used by other payors make up 
an estimated 60% of inpatient hospital workers± compensation cases. No 
data was received or could be located which would indicate how the 
workers± compensation cases within these five DRGs would be comparable to 
the typical Medicare cases in terms of complexity and intensity of care. Without 
such data, setting reimbursement rates within the statutory criteria would be 
extremely difficult, if not impossible. The per diem rate methodology plus the 
carve outs result in a more careful consideration of factors. In addition, the 
Commission has not received data from hospitals based upon DRGs because DRG 
designations are not reported on bills received by the Commission and no 
additional adequate data was received from commenters or other sources to assess 
the propriety of utilizing a DRG-type methodology. 
The cost calculation on which cost-based models are derived, uses hospital 
charges as its basis. Each hospital determines its own charges. The hospital 
charge data in the Commission's database, as with all hospital charge data, 
shows that it is well above the actual fees paid for most hospital services. A 
study by Commission staff indicated that charges for surgical hospital 
admissions (per TWCC billing database) increased by 107.0% from 1992 to 1996 and 
by 65% from 1993 through 1996, whereas for those same periods of time the 
Consumer Price Index (CPI) reflected an inflation rate of 16% and 12% 
respectively, and the Medical Care Services group of the CPI reflected an 
inflation rate of 29% and 18% respectively. For these reasons, hospital charges 
are not a valid indicator of a hospitalþs costs of providing services nor 
of what is being paid by other payors. Therefore, under a so-called cost based 
system a hospital can independently affect its reimbursement without its costs 
being verified. The cost-based methodology is therefore questionable and 
difficult to utilize considering the statutory mandate of achieving effective 
medical cost control and the mandate not to pay more than for similar treatment 
to an injured individual of an equivalent standard of living contained in Texas 
Labor Code sec.413.011. There is little incentive in this type of cost-based 
methodology for hospitals to contain medical costs. 
In recognition of the type of cases which may occur more frequently in workers' 
compensation than in other systems, the ACIHFG carves out the majority of the 
highest cost cases (eg. trauma and burns) from the per diem reimbursement amount 
and provides stop-loss reimbursement for cases with total audited charges which 
exceed $40,000. This should compensate for any alleged additional reimbursement 
due for cases requiring a high level of services. 
All carved out items and services ("carve outs") that are in any of the 1994-
1995 hospital contracts (even those in less than 1.0%) and are applicable to 
typical workers' compensation cases are included as carve outs in this rule and 
increase reimbursement. The carve-outs are based on the 1994-1995 hospital 
contracts. Other provisions which serve to increase reimbursement include a stop 
loss provision, the threshold for which and the percentage reimbursement for 
which was determined from the 1994-1995 hospital contracts, and the addition of 
approximately 7.0% to the average surgical rate found in the 1994-1995 per diem 
contracts. 
The rule exempts from its provisions hospitals with 100 beds or less which are 
located in a population center of less than 50,000. With the exception of 
several small hospitals (each in population centers of 50,000 or more people) in 
the list of hospitals receiving the top 80% of workers' compensation 
reimbursement in 1994, contracts were not requested from hospitals which 
included the remaining 20% of workers' compensation reimbursement due to the 
small number of workers' compensation cases handled by such hospitals. The 
hospitals which received the top 80% of workers' compensation reimbursement did 
not include hospitals in population centers of less than 50,000 people. The 
Commission had insufficient data regarding the differing circumstances of 
hospitals in population centers of less than 50,000 people and the effect of 
these circumstances on the costs and payment rates of such hospitals. The 
Commissioners wished to protect and preserve the access to local hospitals for 
an injured worker who lives or works in a population center of less than 50,000 
people. In addition, the Commissioners sought to avoid encouraging hospitals in 
population centers of 50,000 or more people to reorganize into smaller entities 
to seek exemption from the per diem reimbursements in the ACIHFG based upon the 
100 or less licensed beds exemption. Finally, while hospital payment data was 
utilized to determine average payments and to reflect competition in the 
hospital marketplace in population centers of 50,000 or more people, such data 
was not obtained for population centers of less than 50,000 people. 
Commenters opposing use of managed care contracts as a basis for workers' 
compensation reimbursements allege that payments for workers' compensation 
patients should be higher than managed care rates because of differences in case 
complexity, case mix and length of stay. During the meeting of the ACIHFG Task 
Force, information was provided that indicated hospitals consider utilization 
when negotiating contract terms, and, as a result, utilization has already been 
accounted for in the contract rates. An actuarial study, described in detail 
elsewhere in this preamble, using two methods, including one that adjusted for 
typical length of stay, shows that workers' compensation cases are not more 
complex than managed care cases. Commission data shows that over 80% of possible 
emergency room inpatient admissions will be reimbursed at a fair and reasonable 
rate rather than the per diem rate, because of the carve outs in the rule. If 
any additional reimbursement is appropriate for any of the alleged reasons, the 
extensive carve outs, increase in the surgical per diem rate, and other items of 
the rule that increase reimbursement would compensate. Information received from 
the Texas Hospital Association in response to the Commission's 1994 Request for 
Information stated that it was unaware of any adverse impact on access to care 
as a result of the 1992 per diem rates, and the Commission has no data or 
information which would indicate that a hospital(s) has refused to treat 
workers' compensation patients because of the fees provided in the 1992 ACIHFG. 
Therefore, there should be no decrease in access to care for injured workers 
under this new rule. The per diem fees in this rule are higher than the workers' 
compensation reimbursements voluntarily contracted for by the hospitals which 
contracted for workers' compensation in their managed care contracts, and other 
provisions of the rule serve to increase reimbursement above the amount stated 
as the per diem rate. Testimony by hospital representatives at the public 
hearing on the previous proposal of this rule revealed that generally hospitals 
do not knowingly negotiate contract rates where the hospitals lose money in 
providing a specific service. Because very few of the 1994-1995 hospital 
contracts contain steerage guarantees or exclusivity clauses, and because of 
statutory standards, these issues were not addressed in this rule. Additionally, 
workersþ compensation does not rely on co-payments or deductibles which 
are key components in managed care. The absence of the necessity to collect such 
co-payments or deductibles increases the security of payments in the workers' 
compensation system which would argue for setting workers' compensation rates 
lower than managed care rates. The Commission has, however, chosen not to do so 
because the quantifiable effect of the security of payment on rates is unclear. 
In addition, 'steerage' of patients to a particular hospital has markedly 
decreased as an important factor in the determination of hospital contract rates 
as managed care contracts are updated. Typically managed care organizations 
contract with every hospital in an area. In the current market hospitals are 
rarely given an exclusive contract because most hospitals cannot offer all the 
services necessary, most contracts do not guarantee a particular level of 
patient days or business, and contracting with a particular plan is increasingly 
driven by the fact that a hospital does not want to be excluded as one of the 
provider hospitals in a plan rather than any probable increase in the number of 
patients. 
The Commission cannot at this time confirm or dispute the contention that the 
costs of outpatient services are different when provided in a hospital. Because 
reimbursement for typical outpatient services at the TWCC Medical Fee Guideline 
rates could affect access to services and quality of care for injured workers, 
outpatient services will be reimbursed at fair and reasonable rates for 
hospitals. This will ensure access to quality health care for injured workers by 
ensuring that hospitals will continue to provide outpatient services to workers' 
compensation patients. Outpatient emergency services are not subject to this 
guideline. However, emergency room services associated with a hospital inpatient 
admission are subject to the guideline. Emergency professional services are not 
subject to this ACIHFG and are reimbursed in accordance with the Medical Fee 
Guideline in effect at the time the services are provided. Emergency 
transportation, other than air ambulance, will continue to be reimbursed in 
accordance with the TWCC Medical Fee Guideline in effect at the time the 
services are rendered.  
Tiered surgical rates are not necessary for a rate to be fair and reasonable, or 
to ensure access to quality health care. Tiering of per diem rates was not the 
predominant method of utilizing per diem reimbursements; only 7.0% of the 1994-
1995 hospital per diem contracts contained some form of tiered per diem for 
surgical admissions. Therefore, consideration of front loaded expense and 
severity must have been factors in negotiating the contract rates; to the extent 
they were not, other provisions in this rule will compensate, as they serve to 
increase actual reimbursement. Because the average length of stay for surgical 
cases has declined on the average to be similar to surgical lengths of stay for 
managed care contracts, there was no need for a tiered per diem as a device to 
limit the lengths of stay. 
Regional rate variation is not necessary for a rate to be fair and reasonable, 
or to ensure access to quality health care. There is no correlation, and in some 
regions a negative correlation, between the areas with higher labor costs and 
those with the higher per diem contract rates. Commission analysis of the 
contracts entered into by hospitals within the same chain of hospitals reveals 
no consistency by hospital, by metropolitan statistical area (MSA), or by 
carrier. There is also no correlation between hospital type or hospital bed 
size. Differences which may be attributable to hospital and community size have 
been recognized and accounted for by the exemption for hospitals with 100 or 
less licensed beds in population centers of less than 50,000 people from the per 
diem reimbursement rates in the new ACIHFG. Differences in levels of care 
provided by some hospitals have been recognized and accounted for by the carve 
outs. Averaging minimizes the effect of outliers in the data because most rates 
were closer to the average than to either the higher or lower rates, because the 
lowest rates may not accurately reflect hospital economic factors for all the 
hospitals with greater rates and because a reimbursement based on an average 
rate will be a greater incentive for maintaining access to quality health care 
than use of the lowest rates. 
A rise in the Medical Care Services (MCS) CPI does not necessarily indicate that 
hospitals should receive greater reimbursements and the Commission did not 
directly use it to determine hospital reimbursement rates. However, when 
compared to inflation, the fees in this rule are sufficient to account for the 
inflation of 12% reflected in the CPI for the period from 1993 to 1996, and the 
estimated 17.4% increase over previous rates (which percentage does not account 
for any possible increased reimbursement due to the exemption of small hospitals 
located in population centers of less than 50,000 persons) is just under the MCS 
CPI of 18% for the period 1993 to 1996. 
Preliminary analysis of the contracts for the period October 1995 through 
October 1996 shows little or no change in the average per diem reimbursement 
rates and shows that the total number of contracts that have per diem rates is 
increasing. 52.6% of the hospitals have more per diem contracts than before and 
84.96% of the per diem rates for the same hospital were either reduced, stayed 
the same, or increased by less than 10%. Action by the federal advisory panel on 
Medicare, and a report on hospital performance for the past five years reinforce 
the Commission's conclusion regarding adjustments for inflation. The Commission 
also compared the per diem rates derived from the 1994-1995 hospital contracts 
to Medicare rates. Studies show that Medicare patients are of an equivalent 
standard of living to workers' compensation patients. The studies were performed 
by Research and Planning Consultants, Inc. and by Dr. Ronald T. Luke, Ph.D. J.D. 
who provide economic and public policy analyses to numerous public and private 
sector clients in health care matters including managed care organizations and 
who provide health cost management services with special attention to 
workersþ compensation medical care cost. The most recent study noted that 
managed care has become the dominant form of health care coverage for U.S. 
workers. That study, also, noted that many low skilled and low paying jobs do 
not carry health insurance benefits and, therefore, workers covered by managed 
care plans have an equal or higher living standard than workers in general. The 
study utilized extensive health care literature and information. An actuarial 
study, described in detail elsewhere in this preamble, adjusted for length of 
stay, calculated the estimated Medicare per diem rates for the five Diagnostic 
Related Groups (DRG's) that would account for 60% of workers' compensation 
inpatient hospital payments if a DRG system were in place. This study concludes 
that for these five DRG's, hospitals will receive higher reimbursement for 
workers' compensation patients than they do for Medicare patients. This 
reinforces the Commission's conclusion that the per diem rates from the 1994-
1995 hospital contracts are fair and reasonable, will ensure access to quality 
medical care, will achieve effective cost control, and will not pay in excess of 
the amount that would be paid for similar treatment of non-workers' compensation 
patients of an equivalent standard of living.  
Some comparisons between managed care and workers' compensation may support an 
argument that the workers' compensation rate should be a reduction from the 
managed care rates. Comparisons consider the fact that workers' compensation 
cases are less complex than managed care cases, the inclusion of carve outs in 
this rule that are carved out in very few of the 1994-1995 hospital contracts, 
the lowering of the stop loss threshold even though hospital charges have been 
inflated, the exemption of small hospitals located in a population center of 
less than 50,000 people, and increased security of payment in workers' 
compensation. The Commission believes that these are all factors that should be 
watched and analyzed as experience with any new rule is gained. Data, 
information, and input will be obtained and reviewed, and action taken to adjust 
the fees and other aspects of the rule as appropriate. 
The Commission is faced with the difficult task of meeting numerous, often 
seemingly contradictory, statutory standards and objectives. The legislature 
called for the Commission to balance the statutory standards and the interests 
of all those affected. This necessarily involves the exercise of the 
Commission's discretion and judgment which rests in part on the agency's 
experience and expertise. After thorough analysis of alternatives and all data 
and information the Commission has or which was submitted to the Commission, the 
Commission determined what data would be relevant and how to secure reliable 
data, secured that data, analyzed the data, examined it again to determine if it 
was indeed reliable and relevant, received and analyzed all input from affected 
persons, and considered alternatives. The result of the Commission's full and 
objective analysis is the rule adopted by this Commission order. As described 
and explained in more detail throughout this preamble, based upon a review of 
the applicable factual, legal, and policy concerns, the Commission concludes 
that this rule meets all statutory standards and objectives and is the 
appropriate and rational response to those standards and objectives and to the 
facts and data before the Commission. 
In developing this new rule, the Commission utilized its database of workers' 
compensation hospital charges and payments. This database contains reliable 
information submitted electronically by hospitals on UB92 reporting forms. 
Information from this database for the period October 1, 1994 through June 30, 
1996 was used. This data represents over 12,000 hospital bills and in excess of 
153 million dollars in hospital charges. This Commission data was useful in 
determining the average length of stay for hospitalized workers' compensation 
patients, types of cases which utilize hospital services in the workers' 
compensation system, the amount of reimbursement hospitals receive under the 
workers' compensation system and substantial and non-uniform differences between 
hospital charges and what is being accepted by hospitals as payment for the same 
or similar services. Although this Commission data was useful in these respects, 
it was determined that additional data would be useful in determining fair and 
reasonable reimbursements for acute care inpatient hospital services in workers' 
compensation, ensuring access to quality health care, and in obtaining 
information relevant to effective cost control and to the statutory standard of 
fees not in excess of the amount that would be paid for similar treatment of 
non-workers' compensation patients of an equivalent standard of living. The 
consideration and analysis of these statutory factors with regard to various 
types of data is described later in this preamble. The hospital charge data in 
the Commission's database, as with all hospital charge data, shows that it is 
well above the actual fees paid for most hospital services. A study by 
Commission staff indicated that during the years 1994 through 1996, hospital 
charges for surgical cases significantly increased while charges for medical 
cases have remained approximately the same based upon the Commission's data base 
of workers' compensation hospital charges for those years. Charges for ICU cases 
could not be analyzed because the Commission's data on such charges were not 
segregated from surgical and medical case bills. Charges for surgical hospital 
admissions increased by 107.0% from 1992 through 1996 and by 65% from 1993 
through 1996, whereas for those same periods of time the Consumer Price Index 
(CPI) reflected an inflation rate of 16% and 12% respectively, and the Medical 
Care Services group of the CPI reflected an inflation rate of 29% and 18% 
respectively. For these reasons, hospital charges are not a valid indicator of a 
hospital's costs of providing services nor of what is being paid by other 
payors. The hospital payment data contained in the Commission's database, for 
the most part, simply reflects the reimbursement schedule contained in previous 
rule sec.134.400 and does not provide information regarding the current payments 
accepted in the largest segments of the marketplace for hospital services. 
An additional source of information on hospitals was the Texas Department of 
Health, Bureau of State Health Data and Policy Analysis Annual Survey of 
Hospitals which provides aggregate financial information, utilization and other 
data from all licensed hospitals in Texas. This information was useful in 
determining the bed-size of hospitals in Texas and revenue sources of Texas 
hospitals e.g. Medicare, managed care. 
In order to determine what reimbursements were being paid to hospitals outside 
the workers' compensation system, the Commission sought a source of accurate, 
verifiable data. The Texas Department of Health, Bureau of State Health Data and 
Policy Analysis' 1996 report from its annual survey of hospitals, revealed that 
in 1995 Texas acute care hospitals received 40% of their gross patient revenue 
from Medicare, and 33.3% from third party payors. Because these sources account 
for the vast majority of hospital patient revenue, the reimbursements paid by 
these payors is a relevant basis for comparison between workers' compensation 
reimbursements and these other major reimbursement systems for similar hospital 
services for persons of an equivalent standard of living, and for establishing 
fair and reasonable fees for workers' compensation. The fact that hospitals on 
average receive over 70% of their gross patient revenue from choosing to 
participate in Medicare and managed care, indicates that reimbursements received 
from those payors are sufficient to cover the hospitals' costs. Workers' 
compensation inpatient hospital payments constitute less than 1.0% of total 
inpatient hospital business. (See also, relevant discussions regarding managed 
care contract data, Medicare rates comparison, case complexity, and data used in 
studies performed by Milliman and Robertson.) Prior to the enactment of the 
current workers' compensation law, the legislative Joint Select Committee on 
Workers' Compensation undertook an extensive study of the existing Texas 
workers' compensation law. In its report to the 71st Legislature, the Committee 
found that workers' compensation medical costs were high in relation to those in 
other states and had increased faster than medical costs outside the system and 
faster than indemnity costs. (Joint Select Committee on Workers' Compensation 
Insurance, A Report to the 71st Texas Legislature, p. 3). 
To address this problem, the legislature included provisions in the new Texas 
Workers' Compensation Act which make clear its intent that the Commission 
consider fees paid for health care services outside the workers' compensation 
system when adopting fee guidelines. These statutory provisions, in turn, 
demonstrate the relevance of the managed care contracts to the hospital fee 
guideline rulemaking proceeding. Consideration of managed care contract fees 
addresses the policy that workers' compensation should no longer be subsidizing 
the provision of non-workers' compensation medical care, including that which is 
subject to managed care. (Research Papers of the Joint Select Committee 
(September 1988, Chapter 6)). 
The relevance of the managed care contracts to the hospital fee guideline 
rulemaking proceeding is further demonstrated by the Texas Department of 
Health's 1995 report, Reporting and Collection Systems for Texas Hospitals, 
1996. As noted elsewhere in this preamble, the report shows that 40% of gross 
patient revenue for Texas hospitals came from Medicare and 33.3% came from third 
party payors, including payments made pursuant to managed care contracts. 
Because third party payors are the second largest payor group in terms of gross 
patient revenue, the amounts paid to hospitals by third party payors are 
relevant to determining fair and reasonable workers' compensation reimbursements 
to hospitals. This is particularly true because the payments are made pursuant 
to managed care contracts which the hospitals voluntarily entered into. 
More specifically, Texas Labor Code sec.413.011, which provides that the 
Commission establish fee guidelines, specifies that those guidelines may not 
provide for payment of a fee in excess of the fee charged and paid for similar 
treatment of an injured individual of an equivalent standard of living or by 
someone acting on that individual's behalf. To comply with this legislative 
standard, the Commission reviewed the payments made for health care services 
outside the workers' compensation system. The managed care contracts are 
directly relevant to the hospital fee guideline rulemaking proceeding. 
Managed care contracts are relevant to what fair and reasonable reimbursement 
(sec.413.011(b)) is - they are a market price negotiated voluntarily. They show 
rates a business (a hospital), which voluntarily accepts patients, is willing to 
accept for provision of services. 
Managed care contracts are relevant to achieving cost control (sec.413.011(b)) 
because they are the lowest rates negotiated for the working age population, 
which is also the population of workers' compensation injured workers. 
Managed care contracts are relevant to ensuring access to quality care 
(sec.413.011(b)), because as voluntarily negotiated rates, they reflect rates at 
which a hospital will continue to take patients. 
Managed care contracts are relevant to the statewide database (sec.413.007) the 
Commission is required to maintain: a database of charges, actual payments, and 
treatment protocols that is sufficient to detect practices and patterns in 
charges and payments and can be used in a meaningful way to control costs. The 
managed care contract information is highly reliable; it was obtained directly 
from the hospitals. Either copies of the actual contracts were provided or 
certified summaries of information from the contracts were provided by the 
hospitals. 
A commenter suggested that using the managed care contracts for setting per diem 
rates in the ACIHFG is inconsistent with the reasoning used in the development 
of the Medical Fee Guideline (MFG). The MFG establishes maximum allowable 
reimbursements for services provided by health care providers. Managed care 
contract reimbursement rates for primary care health care providers often are 
based on a capitation type reimbursement method which usually does not provide 
specific amounts for specific services. In addition, unlike acute care inpatient 
hospital reimbursement data, the data utilized for the MFG (sec.134.201) did not 
reveal that Medicare plus managed care reimbursements constituted a majority of 
total reimbursements for non-workers' compensation cases. Because of this, data 
from managed care contracts with health care providers was not utilized for 
development of sec.134.201 (MFG). Instead, fee for service data was utilized as 
the basis for deriving the maximum allowable reimbursement amounts for the MFG 
(sec.134.201). On the other hand, as described in detail previously in this 
preamble, managed care contracts with hospitals were determined to be the best 
indication of a market price voluntarily negotiated for hospital services. The 
development of fee guidelines which comply with statutory mandates requires the 
careful analysis of available data and reimbursement options for the services to 
be covered by the guideline. The same methodology may not be appropriate for 
every guideline. 
During the meeting of the ACIHFG Task Force information was provided that 
indicated hospitals consider utilization when negotiating contract terms, as a 
result, utilization has already been accounted for in the contract rates. To 
gather data regarding the amounts being accepted from third party payors as 
payment in full for acute care inpatient hospital services in Texas, the 
Commission ordered and obtained from hospitals copies of contracts or summaries 
of contracts reflecting rates accepted by selected Texas hospitals as payment in 
full from third party payors, including managed care organizations, for 
inpatient hospital services, both workers' compensation and non-workers' 
compensation.  
To determine which hospitals would be required to provide contract information, 
the Commission's database was used to rank hospitals by the dollar amount of 
reimbursement each hospital received for workers' compensation cases for 
calendar year 1994. The year 1994 was chosen because it was the most recent full 
year of data available at the time the ranking was done. After ranking the 
hospitals, it was determined that the top 80 hospitals received approximately 
80% of the total workers' compensation reimbursement paid to hospitals in 1994 
for acute care hospital inpatient services. None of the hospitals which received 
the remaining 20% of the total 1994 hospital reimbursement for acute care 
inpatient services were reimbursed a significant portion of the total workers' 
compensation reimbursement for such services. As a result, the Commission 
determined that obtaining contracts from the top 80 hospitals would provide 
relevant information to determine fair and reasonable rates, access to quality 
health care, cost control, and payments for similar treatments of persons of an 
equivalent standard of living. 
The Commission sent letters to these 80 hospitals requesting copies of all 
contracts or other agreements reflecting rates accepted as payment in full by 
each hospital that were in effect for any dates of services on or after January 
1, 1994 through October 1, 1995 (1994-1995 hospital contracts). Almost all of 
the hospitals refused to voluntarily produce the contracts and, as a result, the 
Commission issued orders on January 26, 1996 requiring the production of the 
1994- 95 hospital contracts. The Texas Hospital Association, as well as almost 
all of the hospitals from whom contracts were sought filed suit. The parties 
reached an agreement for issuance of a permanent protective order which 
prohibits the Commission from disclosing these contracts and summaries and 
certain information in those contracts and summaries (generally described as 
certain hospital identifying information related to those contracts and 
summaries). 
Because of mergers, acquisitions, corporate buyouts and other similar ownership 
changes, all of the 80 hospitals originally identified did not individually 
respond to the Commission orders. However, none of the hospitals ordered to 
produce contracts reported that they had no such contracts. The hospitals 
producing contracts were located throughout the state. With the exception of 
one, all of the following hospitals producing contracts are 100 or more licensed 
beds in size, ranging in size from 118 beds to over 900 beds. 
TOP 80 HOSPITALS (Calendar Year 1994, Sorted Alphabetically): 
All Saints Episcopal Hospital, Fort Worth 
AMI Twelve Oaks Hospital, Houston 
AMI Park Plaza Hospital, Houston 
Arlington Memorial Hospital, Arlington 
Baptist Memorial Hospital System, San Antonio 
Baptist Hospital of Southeast Texas, Beaumont 
Baylor University Medical Center, Dallas 
Bethania Regional Health Care Center, Wichita Falls 
Bexar County Hospital District, San Antonio 
Brackenridge Hospital, Austin 
Brownsville Medical Center, Brownsville 
Citizens Medical Center, Victoria 
Cypress Fairbanks Medical Center Hospital, Houston 
Doctors Hospital East Loop, Houston 
Garland Community Hospital, Garland 
Good Shepard Medical Center, Longview 
Harris Methodist-Fort Worth, Fort Worth 
Harris Methodist H E B, Bedford 
HCA Medical Center Hospital, Houston 
HCA Medical Plaza Hospital, Ft Worth 
HCA North Hills Medical Center, North Richland Hills 
HCA West Houston Medical Center, Houston 
HCA Medical Center-Plano, Plano 
HCX South Arlington Medical Center, Arlington 
Hendrick Medical Center, Abilene 
Hermann Hospital, Houston 
High Plains Baptist Hospital, Amarillo 
Hillcrest Baptist Medical Center, Waco 
Houston NW Medical Center, Houston 
Humana Hospital-Clear Lake, Webster 
Humana Hospital Metro, San Antonio 
Humana Hospital-San Antonio, San Antonio 
Humana Hospital Medical City-Dallas, Dallas 
McAllen Medical Center, Mc Allen 
Medical Arts Hospital, Dallas 
Medical Center Hospital, Tyler 
Medical Center Hospital, Odessa 
Memorial City Medical Center, Houston 
Memorial Medical Center, Corpus Christi 
Memorial Hospital System, Houston 
Methodist Hospital Lubbock, Lubbock 
Methodist Medical Center, Dallas 
Midland Memorial Hospital, Midland 
Mother Frances Hospital Regional Healthcare Center, Tyler 
Nix Medical Center, San Antonio 
Northeast Medical Center Hospital, Humble 
Northwest Texas Hospital, Amarillo 
Osteopathic Medical Center of Texas, Fort Worth 
Park Place Hospital, Port Arthur 
Parkland Memorial Hospital, Dallas 
Presbyterian Hospital, Dallas 
Providence Memorial Hospital, El Paso 
RHD Memorial Medical Center, Dallas 
Rio Grande Regional Hospital, Mc Allen 
Rosewood Medical Center, Houston 
Santa Rosa Hospital, San Antonio 
Scott and White Memorial Hospital, Temple 
Seton Medical Center, Austin 
Shannon West Texas Memorial Hospital, San Angelo 
Sierra Medical Center, El Paso 
Southwest Texas Methodist Hospital, San Antonio 
Spohn Hospital, Corpus Christi 
St. Joseph Hospital of Houston, Houston 
St. Lukes Episcopal Hospital, Houston 
St. Davids Community Hospital, Austin 
St. Joseph Hospital, Fort Worth 
St. Elizabeth Hospital, Beaumont
St. Anthonys Hospital, Amarillo 
St. Lukes Lutheran Hospital, San Antonio 
Sun Belt Regional Medical Center, Houston 
Sun Towers Hospital, El Paso 
The Methodist Hospital, Houston 
University Medical Center, Lubbock 
University of Texas-Medical Center, Galveston 
Valley Baptist Medical Center, Harlingen 
Vista Hills Medical Center, El Paso 
Westbury Hospital, Houston
Zale Lipshy University Hospital, Dallas 
Two of these hospitals had closed and did not submit contracts or summaries of 
contract information. A total of 2,564 contracts or summaries of contracts were 
received. Of these, 1,320 were actual contract documents and 1,244 were detailed 
summaries, prepared by the hospitals, of information from contracts. For the 
calendar year 1995 the Commission has identified Texas hospitals which received 
approximately 80% of the total workers' compensation reimbursement paid to 
hospitals in that year for acute care inpatient hospital services. The 
Commission on November 13, 1996, sent letters to these hospitals requesting 
copies of all their contracts or other agreements (or certified summaries) 
reflecting rates accepted as payment in full for acute care inpatient hospital 
services, that were in effect for any dates of services on or after October 2, 
1995 through October 1, 1996. In addition, the Commission requested copies of 
contracts from hospitals which were on the list of top 80 hospitals for the 
calendar year 1994 but were not on the list for 1995. The Commission has 
performed some preliminary analysis of these contracts, and will continue to 
analyze them. 
The Commission does not believe that the fluctuation in the number of hospitals 
in the top 80% indicates a decline in the number of hospitals accepting workers' 
compensation cases. The Commission has no data or information that any injured 
worker has been denied access to hospital care and has seen no trend in this 
direction. The fluctuation between the number of hospitals receiving 80% of 
workers' compensation reimbursement is attributed to normal, expected 
fluctuation in cases from one year to another. This fluctuation is insignificant 
because for example, the difference in reimbursement received by a hospital 
ranked 80 and a hospital ranked 81 is so small that one additional admission 
that amounts to a few thousand dollars may be enough to change the hospitals' 
ranking and potentially reduce the number of hospitals that represent the top 
80% of total workersþ compensation reimbursement. Change in the number of 
hospitals in the top 80% does not indicate hospitals are not accepting 
workersþ compensation cases. 
HOSPITALS RECEIVING TOP 80% OF TOTAL REIMBURSEMENT FOR WORKERS' COMPENSATION 
ACUTE INPATIENT HOSPITAL CARE (Calendar Year 1995, Sorted Alphabetically):
All Saints Episcopal Hospital, Fort Worth 
AMI Twelve Oaks Hospital, Houston 
AMI Park Plaza Hospital, Houston 
Arlington Memorial Hospital, Arlington 
Baptist Memorial Hospital System, San Antonio 
Baylor University Medical Center, Dallas 
Bayshore Medical Center, Pasadena 
Bethania Regional Health Care Center, Wichita Falls 
Brackenridge Hospital, Austin 
Brownsville Medical Center, Brownsville 
Clear Lake Regional Medical Center, Webster 
Columbia Bay Area Medical Center, Corpus Christi 
Columbia Medical Center West, El Paso 
Columbia Medical Center East, El Paso 
Conroe Regional Medical Center, Conroe 
Doctors Regional Medical Center, Corpus Christi 
Doctors Hospital East Loop, Houston 
East TX Medical Center, Tyler 
Garland Community Hospital, Garland 
Good Shepherd Medical Center, Longview 
Harris County Hospital District, Houston 
Harris Methodist H E B, Bedford 
Harris Methodist-Fort Worth, Fort Worth 
HCA Arlington Medical Center, Arlington 
Healthsouth Medical Center, Dallas 
Healthsouth Rehab Institute of San Antonio, San Antonio 
Hendrick Medical Center, Abilene 
Hermann Hospital, Houston 
High Plains Baptist Hospital, Amarillo 
Hillcrest Baptist Medical Center, Waco 
Houston NW Medical Center, West Houston 
John Peter Smith Hospital, Fort Worth
McAllen Medical Center, McAllen 
Medical Center Hospital, Odessa 
Medical Center of Plano, Plano 
Medical Arts Hospital, Dallas 
Memorial Hospital and Medical Center, Midland 
Memorial Hospital Memorial City, Houston 
Memorial Health Care, Houston 
Memorial Medical Center, Corpus Christi 
Mercy Regional Medical Center, Laredo 
Methodist Medical Center, Dallas 
Methodist Hospital Lubbock, Lubbock 
Metropolitan Hospital, San Antonio 
Mother Frances Hospital Regional Healthcare Center, Tyler 
Northwest TX Health Care System, Amarillo 
Osteopathic Medical Center of TX, Fort Worth 
Park Place Hospital, Port Arthur 
Parkland Memorial Hospital, Dallas 
Plaza Medical Center, Fort Worth 
Presbyterian Hospital, Dallas 
Presbyterian Hospital of Plano, Plano 
Providence Health Center, Waco 
R.E. Thomason General Hospital, El Paso 
RHD Memorial Medical Center, Dallas 
Rio Grande Regional Hospital, McAllen 
Rosewood Medical Center, Houston 
San Antonio Regional Hospital, San Antonio 
San Jacinto Methodist Hospital, Baytown 
Santa Rosa Health Care Corporation, San Antonio 
Scott and White Memorial Hospital, Temple 
Seton Medical Center, Austin 
Shannon Medical Center, San Angelo 
Sierra Medical Center, El Paso 
Southwest TX Methodist Hospital, San Antonio 
Spohn Health System, Corpus Christi 
Spring Branch Medical Center, Houston 
St Joseph Regional Medical Center, Bryan 
St. Davids Rehab Center, Austin 
St. Mary Hospital of Port Arthur, Port Arthur 
St. Joseph Hospital of Houston, Houston 
St. Mary of the Plains Hospital & Rehab Center, Lubbock 
St. Paul Medical Center, Dallas 
St. Lukes Episcopal Hospital, Houston 
St. Elizabeth Hospital, Beaumont 
St. Davids Community Hospital, Austin 
St. Anthonys Hospital, Amarillo 
Sun Belt Regional Medical Center, Houston 
Texas Orthopedic Hospital, Houston 
The Methodist Hospital, Houston 
University Health Care System, San Antonio 
University of TX-Medical Branch, Galveston 
University Medical Center, Lubbock 
Victoria Regional Medical Center, Victoria 
Wadley Regional Medical Center, Texarkana 
West Houston Medical Center, Houston 
Wichita General Hospital, Wichita Falls
Zale Lipshy University Hospital, Dallas 
HOSPITALS WHICH WERE INCLUDED IN THE TOP 80 HOSPITALS FOR CALENDAR YEAR 1994, 
BUT NOT INCLUDED IN TOP 80% FOR CALENDAR YEAR 1995 (Sorted Alphabetically):
Baptist Health Care System, Beaumont 
Citizens Medical Center, Victoria 
Cypress Fairbanks Medical Center Hospital, Houston 
HCA North Hills Medical Center, North Richland Hills 
Nix Medical Center, San Antonio 
Northeast Medical Center Hospital, Humble 
Providence Memorial Hospital, El Paso 
St. Lukes Baptist Hospital, San Antonio
Valley Baptist Medical Center, Harlingen 
In reviewing sec.134.400, the previous Acute Care Inpatient Hospital Fee 
Guideline, the Commission considered alternate methods of reimbursement for 
acute care inpatient hospital services. Cost-based methods of reimbursement 
which estimate the cost of treating a case by multiplying the hospital charges 
by the cost-to-charge ratio (obtained by dividing the hospital's total reported 
expenses by total reported revenue for the same period) were considered. To 
determine the reimbursement for a particular service, the billed charge is 
multiplied by the cost- to-charge ratio for that hospital. This method seeks to 
produce reimbursements which take into consideration the hospital's cost to 
deliver the service. 
The Commission chose not to adopt a cost-based reimbursement methodology. The 
cost calculation on which cost-based models (including that submitted by the 
Texas Hospital Association) are derived typically use hospital charges as a 
basis. Each hospital determines its own charges. In addition, a hospital's 
charges cannot be verified as a valid indicator of its costs. This is 
exemplified by the substantial and non-uniform differences between these charges 
and what is being accepted by hospitals as payment, and by the 107.0% increase 
in surgical hospital admission charges in the same time period in which the CPI 
inflation rate was 16% and the MCS of the CPI inflation rate was 29%. Therefore, 
under a so-called cost-based system a hospital can independently affect its 
reimbursement without its costs being verified. The cost- based methodology is 
therefore questionable and difficult to utilize considering the statutory 
objective of achieving effective medical cost control and the standard not to 
pay more than for similar treatment to an injured individual of an equivalent 
standard of living contained in Texas Labor Code sec.413.011. There is little 
incentive in this type of cost-based methodology for hospitals to contain 
medical costs. In addition, setting individual ratios or negotiating with each 
hospital would be administratively burdensome for the Commission and for 
workers' compensation system participants and would require additional 
Commission resources. 
A discount from billed charges was another method of reimbursement which was 
considered. Again, this method was found unacceptable because it leaves the 
ultimate reimbursement in the control of the hospital, thus defeating the 
statutory objective of effective cost control and the statutory standard not to 
pay more than for similar treatment of an injured individual of an equivalent 
standard of living. It also provides no incentive to contain medical costs, 
would be administratively burdensome for the Commission and system participants, 
and would require additional Commission resources. 
Prospective payment methods, in addition to the per diem method ultimately 
chosen, were considered. Prospective payment amounts can be determined by using 
diagnostic-related groups (DRGs). The DRG method of reimbursement involves 
paying the hospital a predetermined fee based upon the patient's diagnosis 
rather than, for example, the length of stay or specific services provided. DRGs 
were not used as the methodology for this ACIHFG for several reasons. First, 
while Medicare utilizes DRGs, Medicare reimbursement rates for those DRGs are 
not based upon market-driven forces and largely involve non-working elderly 
patients who require longer lengths of stay and a higher percentage of co-
morbidity. Second, the percentage of the managed care contracts utilizing DRG 
methodologies was 10.8% and, therefore, would not be as representative of the 
reimbursements as per diem contracts which comprised 51.5% of the managed care 
contracts. Third, only about five out of the approximately 494 DRGs used by 
other payors make up an estimated 60% of inpatient hospital workers' 
compensation cases. No data was received or could be located which would 
indicate how the workersþ compensation cases within these 5 DRGs would be 
comparable to the typical Medicare cases in terms of complexity and intensity of 
care. Without such data, setting reimbursement rates within the statutory 
standards would be extremely difficult, if not impossible. The per diem rate 
methodology plus the carve outs result in a more careful consideration of 
standards. In addition, the Commission has not received data from hospitals 
based upon DRGs because DRG designations are not reported on bills received by 
the Commission and no additional adequate data was received from commenters or 
other sources to assess the propriety of utilizing a DRG-type methodology. The 
Commission has insufficient data at this time to determine whether use of DRG 
weights with a per diem system would be feasible or appropriate, especially 
given probable differences in complexity of case questions in the Medicare 
population where DRG reimbursement is used. 
The Commission notes that hospitals have sued to invalidate each and every 
hospital fee guideline adopted by the Industrial Accident Board or the 
Commission. These have included challenges to a cost-based ratio rule, a DRG 
rule and a per diem rule. 
After careful analysis of relevance (discussed elsewhere in this preamble) 
regarding the use of the hospital contracts in determining a guideline for fair 
and reasonable workers' compensation inpatient hospital reimbursements, the 
Commission concluded that the hospital contracts provided the most accurate, 
verifiable information of the current hospital service market and thus the most 
relevant information regarding fair and reasonable rates, access to quality 
health care, cost control, and fees paid for similar treatment by persons of an 
equivalent standard of living. Hospitals are voluntarily participating at these 
negotiated rates for what constitutes 33.3% of their gross revenue. In addition, 
testimony at the public hearing on the previous proposal of this rule by 
hospital representatives revealed that generally hospitals do not knowingly 
negotiate contract rates where hospitals lose money. 
The 1994-1995 hospital contracts and contract summaries were analyzed by 
comparing the rates for medical services, surgical services, and intensive care 
unit services in each contract. Data on approximately 2,564 contracts was 
received and analyzed. Of these 2,564 contracts, approximately 10.8% based fees 
on diagnostic related groups (DRGs); approximately 30.5% based fees on a 
discount from charge; approximately 51.5% based fees on a per diem rate; and 
approximately 7.2% based fees on some other method (such as capitation, case by 
case, or some combination of methods). 
Some of the 1994-1995 hospital contracts included hospital rates for workers' 
compensation cases and approximately 1.3% of the contracts were for workers' 
compensation cases only. The average workers' compensation per diem rate in the 
1994-1995 hospital contracts was $610 for medical cases, $1,030 for surgery 
cases, and $1,514 for ICU cases. The commenters assertion that the discount from 
the previous TWCC fee schedule applies to a limited patient population is 
incorrect in that these discounts apply to all workers' compensation patients. 
Workersþ compensation patients have access to all hospital services and 
utilization is not limited. 
The per diem method was chosen for new sec.134.401 because (as discussed 
elsewhere in this preamble) the per diem method of reimbursement was the most 
commonly used (51.5%) method for inpatient hospital reimbursement in the 1994-
1995 hospital contracts, because of the disadvantages of other payment methods 
(described elsewhere in this preamble), because this is the method used in 
previous rule sec.134.400 for workers' compensation inpatient hospital 
reimbursement and therefore allows greater continuity in administrative billing 
procedures, and because the per diem method has advantages in administrative 
convenience in billing and reviewing of bills. Although initial administrative 
set up costs for this guideline will be necessary for both insurance carriers 
and hospitals, carve outs should not significantly impact the administrative 
costs to the system. The Commission expects that most of the information 
necessary to determine reimbursement for carve outs will come directly from the 
UB-92 form because ICD-9 codes which cover the trauma, burn, and HIV carve outs, 
are listed directly on the UB-92. Revenue codes are also directly listed on the 
UB-92 for MRI, CAT scans, hyperbaric oxygen, blood and air ambulance. Review of 
the itemized billing will only be necessary for a small number of carve outs. 
To arrive at the per diem reimbursement rates for the new ACIHFG, the per diem 
contract amounts for medical, surgical, and ICU/CCU services were averaged for 
each category on a state-wide basis. These averages revealed that the 
Commission's previous per diem reimbursement rate for acute care inpatient 
medical services is low ($600) when compared to the state-wide average per diem 
amount derived from the 1994-1995 hospital contracts and summaries ($870). The 
contract data also revealed that the Commission's previous per diem 
reimbursement rate for acute care inpatient surgical services ($1,100) is high 
when compared to the state-wide average per diem amount derived from the 1994-
1995 hospital contracts and summaries ($1,045). Data analysis showed that the 
Commission's previous per diem reimbursement rate for intensive care unit 
services ($1,600) is high when compared to the state- wide average per diem 
derived from the 1994-1995 hospital contracts and summaries ($1,560). With the 
exception of the surgery rate, the rates in the new rule are the average per 
diem amounts by category derived from the 1994-1995 hospital contracts and 
summaries. Because hospitals have voluntarily contracted at these rates, these 
rates will provide fair and reasonable rates for workers' compensation, ensure 
access to quality care while achieving effective cost control and ensure 
workers' compensation fees are not in excess of the amount that would be paid 
for similar treatment of non-workers' compensation patients of an equivalent 
standard of living. Workers' compensation has significantly more acute care 
inpatient surgical cases as compared to medical or ICU cases. For the calendar 
year 1995, Commission data shows a total of 2,236 medical cases (representing 
reimbursements of $6,509,531) as compared to 5,632 surgical cases (representing 
reimbursements of $30,462,189) in the workers' compensation system. Total ICU 
cases could not be determined because this data is not segregated from the 
medical and surgical data. The Consumer Price Index (CPI) for the period from 
October 1, 1995 through December 31, 1996 and the estimated CPI for the year 
1997 (the beginning of the time period covered by the hospital contracts 
requested by the Commission through the effective date of the new rule) 
increased approximately 7.0%. 
Public comment received generally supported the proposed ACIHFG reimbursement 
rate of $870 for medical cases. Commenters did not express concern regarding the 
proposed ICU rate of $1,560 in the ACIHFG. However, these same commenters 
generally objected to the ACIHFG's proposed surgical rate of $1,045 as too low. 
Out of an abundance of caution to ensure access to quality surgical hospital 
care to injured workers and as an additional protection to ensure fair and 
reasonable rates for surgical cases, the Commissioners increased the surgical 
per diem reimbursement rate in the adopted ACIHFG from the per diem contract 
average surgical rate of $1,045 per day to $1,118 per day. This increase will 
provide additional reimbursement for those hospitals which experienced increases 
in payment from the rates contained in the 1994-1995 hospital contracts and 
summaries due to inflation. This increase is approximately 7.0% of the $1,045 
rate and brings the surgical per diem rate to approximately 130% of the medical 
per diem rate of $870. This 130% difference between the surgical and medical per 
diem rates is equal to or greater than the corresponding differential in more 
than 80% of the managed care contracts obtained and considered by the Commission 
in setting the ACIHFG per diem rates. Just as the increases which result from 
the carve outs and the stop-loss provision, this increase in the surgical per 
diem rate will ensure injured workers' access to acute care inpatient services. 
In addition, this change to the surgical rate increases reimbursement for those 
cases which do not receive additional reimbursement provided by carve outs and 
the stop- loss provisions and serves as an additional protection to ensure fair 
and reasonable rates for surgical cases. The Commission utilized its expertise 
and experience to increase the surgical rate from the amount in the proposed 
rule to achieve a proper balance of the statutory standards, including effective 
cost control, discussed elsewhere in this preamble.  
In recognition of the type of cases which may occur more frequently in workers' 
compensation than in other systems, the ACIHFG carves out the majority of the 
highest cost cases (eg. trauma and burns) from the reimbursement amount. This 
should compensate for any alleged reimbursement due for cases requiring a high 
level of services. The 1994-1995 hospital contracts and summaries were analyzed 
to determine what types of services and/or supplies were reimbursed outside or 
in addition to ("carved out of") the per diem rates in the contracts. A listing 
of the services and supplies carved out of the 1994-1995 hospital contracts was 
compiled and placed in order according to the frequency at which the carve out 
occurred in the contracts. All carved out items and services that are in any of 
the 1994-1995 hospital contracts (even those in less than 1.0%) and are 
applicable to typical workers' compensation cases are included as carve outs in 
this rule and increase reimbursement. The ACIHFG Task Force gave input regarding 
applicability to workers' compensation cases. Carve outs are based on the 1994-
1995 hospital contracts. The carved out services were identified by ICD-9 
diagnostic codes and carved out supplies and equipment were identified by 
revenue codes. The following services and/or supplies are reimbursed in addition 
to the per diem rates in the new rule: MRI's (revenue codes 610 - 619) and CAT 
scans (revenue codes 350 - 352, 359); implantables (revenue codes 275, 276, and 
278); hyperbaric oxygen (revenue code 413); blood (revenue codes 380 - 399); air 
ambulance (revenue code 545); and orthotics and prosthetics (revenue code 274). 
For the following ICD-9 codes, reimbursement for the entire admission shall be 
at a fair and reasonable rate: trauma (ICD-9 Codes 800.0 - 959.50); burns (ICD-9 
Codes 940 - 949.9); and HIV (ICD-9 Codes 042 - 044.9). Pharmaceuticals greater 
than $250 charged per dose are reimbursed at cost plus 10% in addition to the 
per diem rate. 
ICD-9 codes carved out of the ACIHFG are listed as a range of codes rather than 
by specific code because the number of codes which would need to be listed is so 
numerous it would create an undue administrative burden for all participants to 
list separately all codes which might be used as a primary diagnosis. Nearly all 
ICD-9 codes in the 800-900 series require fourth and fifth digit 
subclassification to fully identify the location and severity of trauma. This 
expands the actual number of codes in the series to more than a thousand, most 
of which clearly justify hospital admission. The listing of these carved out 
trauma and burn codes as a range rather than attempting to determine which codes 
should be included in a specific list is the most efficient method of 
identifying these carveouts for the Commission, hospitals, and insurance 
carriers and is also less administratively costly. 
Implantables, orthotics, and prosthetics are to be reimbursed at cost to the 
hospital plus 10% of the cost to ensure that the cost of the item and related 
overhead costs are covered by the reimbursement. This method of reimbursement 
for revenue code carve outs is the predominant method used in the 1994-1995 
hospital contracts. A ten percent addition was chosen because it was used in the 
previous ACIHFG, based on the recommendation of the Medical Advisory Committee 
that it would assure a reasonable return for the hospitals. In addition, 
commenters did not oppose the 10% add-on and the Commission has no data or 
information which would indicate that 10% is inadequate or excessive. Other 
carve outs are reimbursed at a fair and reasonable rate except pharmaceuticals 
with a charge greater than $250. 
In addition to the ICD-9 codes and revenue codes carved out of the ACIHFG, 
pharmaceuticals with a charge greater than $250 per dose are also carved out of 
the per diem reimbursements. A dose is defined as the amount of a drug or other 
substance to be administered at one time. An analysis of the 1994-1995 per diem 
hospital contracts revealed that 119 (24%) of those contracts contained a carve 
out for pharmaceuticals. Fifty-three of those contracts used a monetary 
threshold per dose to determine the carved out pharmaceuticals. The majority of 
the 1994-1995 hospital contracts did not contain a dollar threshold, rather they 
listed specific drugs to be carved out of the contract rates. Because the 
Commission's intent was to exempt from the ACIHFG high cost drugs, a monetary 
threshold was the most efficient method of accomplishing that intent. Listing 
specific drugs as carve outs has the disadvantage of quickly becoming outdated 
as new drugs are introduced on the market. A monetary threshold avoids this 
problem. The threshold of $250 is chosen because it represents the 50th 
percentile of the array of monetary thresholds used in the 1994-1995 hospital 
contracts. In addition, $250 was the most commonly used threshold amount for 
pharmaceutical carve outs contained in the 1994-1995 hospital contracts. Carved 
out pharmaceuticals are reimbursed at cost to the hospital plus 10% of the cost 
to ensure that the cost of the drug and related overhead costs are covered by 
the reimbursement. The reasons for using a 10% add-on for pharmaceuticals are 
the same as explained previously for implantables, orthotics, and prosthetics. 
The carve outs increase hospital reimbursement and will ensure fair and 
reasonable rates for hospitals and ensure access to quality health care for 
injured workers by ensuring that hospitals will continue to treat workers' 
compensation patients. Auditing bills for pharmaceuticals greater than $250 per 
dose could increase administrative costs. However, cases where pharmaceuticals 
are greater than $250 per dose are anticipated to occur infrequently. Based on 
an analysis conducted by staff of the 1994-1995 hospital contracts, the 
pharmaceuticals carved out by name from those contracts are generally prescribed 
for cases of oncology, HIV, cardiac, neonatal, pregnancy, and infant care, which 
rarely occur in workers' compensation. Therefore, staff anticipates that since 
the occurrence of pharmaceuticals greater than $250 will be infrequent, any 
additional administrative costs will have little or no effect on the system. 
The new ACIHFG does not require that an invoice be submitted for reimbursement 
of implantables, orthotics, and prosthetics to avoid an unnecessary 
administrative burden for hospitals and carriers. In most situations, insurance 
carriers will know the usual cost of such items without examining the invoice 
for a particular item. Even though invoices are not required by this ACIHFG, the 
insurance carrier still has the option of auditing the bill from a hospital and 
requesting additional documentation, records, or information related to the 
treatments, services, or the charges billed. Attaching invoices to the bill for 
implantables, orthotics, and prosthetics requires additional time and expense 
for hospitals. TWCC believes there is a need for a determination of cost for 
implantables, orthotics, and prosthetics to a hospital. This need however, is 
outweighed by the significant burden to hospitals to continue this requirement. 
Therefore, this is no longer a requirement. Alternative ways for determining 
costs are available for insurance carriers. Hospitals and insurance carriers may 
develop a cooperative arrangement to obtain cost data when necessary for 
implantables, orthotics, and prosthetics. Insurance carriers are expected to not 
require these for all implantables, orthotics, and prosthetics and to confine it 
to those situations where the insurance carriers believe it is necessary to 
determine the cost from invoices. 
The services and supplies chosen for carve out increase hospital reimbursement 
and will ensure fair and reasonable rates for hospitals and ensure access to 
quality health care for injured workers by ensuring that hospitals will continue 
to treat workers' compensation patients. 
Review of the 1994-1995 hospital contracts and summaries received by the 
commission revealed that the average stop-loss threshold contained in those 
contracts is $39,524. Based on this average, the stop-loss threshold was set at 
$40,000. Because the basis of the per diem reimbursements were derived from the 
1994-1995 hospital contracts, it is appropriate to use the average stop-loss 
threshold from the contracts. In addition, the analysis of the 1994-1995 
hospital per diem contracts revealed that the average percentage reimbursement 
paid after the stop loss threshold is met is 72%. As a result, in the new rule, 
75% is set as the percentage of total audited charges to be paid after the stop 
loss threshold of $40,000 is reached. The reduction of the stop-loss threshold 
to $40,000 is more of a reduction than it first appears, given the huge increase 
in hospital charges, such that a charge that was $50,000 in 1992, might be over 
$100,000 now. The reduction should therefore be viewed as a reduction from 
today's equivalent of a 1992 $50,000 charge, rather than a $10,000 reduction 
from $50,000 to $40,000. The stop loss threshold chosen increases hospital 
reimbursement and will ensure fair and reasonable rates for hospitals and ensure 
access to quality health care for injured workers by providing higher 
reimbursement for very high cost cases, ensuring that hospitals will continue to 
treat workers' compensation patients. Stop-loss applies only to those ICD-9 
diagnosis cases that are not carved out. Therefore, this does not create an 
overlap and analysis will be possible for each factor. In the case of 
pharmaceuticals carve outs and carve outs identified by revenue codes, the whole 
bill is paid according to stop-loss provision if the stop-loss threshold is 
reached. Therefore there will be no overlap between carve outs identified by 
pharmaceuticals carve outs and carve outs identified by revenue codes and stop-
loss, allowing analysis of each factor. 
The new rule exempts from its provisions hospitals which have 100 or less 
licensed beds and which are located in a population center of less than 50,000 
people. These hospitals are to be reimbursed at a fair and reasonable rate. 
Previous sec.134.400 of this title exempted "small/rural" hospitals from the 
reimbursement provisions of the guideline. A "small/rural hospital" was defined 
in previous rule sec.134.400 as an acute care hospital having fewer than 100 
beds and less than $1,000,000 total annual revenue as determined by an audited 
financial statement from the prior fiscal year. Under this definition, so few 
hospitals qualified for the exemption that it was essentially meaningless. The 
exemption in new sec.134.401 is specific and definite and excludes from the per 
diem rates hospitals with 100 or fewer beds located in a population center of 
less than 50,000 people. With the exception of several small hospitals  (each in 
population centers of 50,000 or more people) in the list of hospitals receiving 
the top 80% of workers' compensation reimbursement in 1994, contracts were not 
requested from hospitals which included the remaining 20% of workers' 
compensation reimbursement due to the small number of workers' compensation 
cases handled by such hospitals. The hospitals in the top 80% of workers' 
compensation reimbursement for 1994 did not include hospitals in population 
centers of less than 50,000 people. The Commission had insufficient data 
regarding the differing circumstances of hospitals in population centers of less 
than 50,000 people and the effect of these circumstances on the costs and 
payment rates of such hospitals. The Commissioners wished to protect and 
preserve the access to local hospitals for an injured worker who lives or works 
in a population center of less than 50,000 people. In addition, the 
Commissioners sought to avoid encouraging hospitals in population centers of 
50,000 or more people to reorganize into smaller entities to seek exemption from 
the per diem reimbursements in the ACIHFG based upon the 100 or less licensed 
beds exemption. The list of hospitals which received approximately 80% of the 
total workers' compensation reimbursement paid to hospitals in 1994 included one 
hospital which had 100 or less licensed beds in a population center of 50,000 or 
more people. In 1995 the number of 100 or less bed hospitals in such population 
centers on this list increased to three. All of these hospitals on the list of 
top workers' compensation reimbursement recipients were located in population 
centers of greater than 50,000 people, and the average of their per diem 
contract rates was significantly less ($772 medical, $842 surgical in 1995; $822 
medical, $908 surgical in 1996) than the rates contained in the adopted ACIHFG. 
Hospitals with 100 or less beds located in population centers of 50,000 or more 
persons operate in the same competitive environment as larger hospitals in the 
same or adjacent population centers of 50,000 or more persons and therefore, to 
meet such competition, must adjust what they are willing to accept as payment 
for similar services accordingly. Finally, while hospital payment data was 
utilized to determine average payments and to reflect competition in the 
hospital marketplace in population centers of 50,000 or more people, such data 
was not obtained for population centers of less than 50,000. 
The exemption of hospitals with less than 100 licensed beds located in a 
population center less than 50,000 people allows these hospitals to be 
reimbursed on a case by case basis ensuring access to care regardless of where 
an injured worker lives or works in Texas. Commenters who commented on the small 
hospital exemption suggested that hospitals with 100 or less licensed beds 
located outside Metropolitan Statistical Areas (MSA's) be exempted. Because 
there are sparely populated counties within MSA's, the Commission opted for the 
"located in a population center of less than 50,000 people" criteria as a more 
precise description of the local hospitals in small communities that were of 
concern regarding access to care and which it intended to exempt from the 
ACIHFG. The size of a population center is to be determined from the most recent 
Decennial Census of Population by the Bureau of the Census, U.S. Department of 
Commerce. 
Reimbursement for these exempted hospitals is to be at a fair and reasonable 
rate. The exemption will ensure fair and reasonable rates for these hospitals 
and ensure access to quality health care for injured workers by ensuring that 
the exempted hospitals will continue to treat workers' compensation patients.  
Outpatient services provided in a hospital setting are to be reimbursed at a 
fair and reasonable rate. Hospitals are required to maintain certain outpatient 
services on a 24-hour basis and may have different personnel costs than non-
hospital sources of the same services. A Task Force member provided a list of 
charges from the member's hospital for typical outpatient services which 
suggested the costs of providing these services may be different in a hospital 
setting than in non-hospital settings. The Commission does not have its own cost 
data regarding outpatient services provided in a hospital setting and as a 
result, cannot at this time confirm or dispute the contention that the costs of 
outpatient services are indeed different when provided in a hospital. Because 
reimbursement for typical outpatient services at the TWCC Medical Fee Guideline 
rates could affect access to services and quality of care for injured workers, 
those rates were not adopted for outpatient services performed in hospitals. 
Reimbursement for outpatient services is planned to be addressed in a future 
outpatient fee guideline after further study. For now, outpatient services will 
be reimbursed at fair and reasonable rates for hospitals. This will ensure 
access to quality health care for injured workers by ensuring that hospitals 
will continue to treat workers' compensation patients. Outpatient emergency 
services are not subject to this guideline. However, emergency room services 
associated with a hospital inpatient admission are subject to the guideline. 
Emergency professional services are not subject to this ACIHFG and are 
reimbursed in accordance with the Medical Fee Guideline in effect at the time 
the services are provided. Emergency transportation other than air ambulance 
will continue to be reimbursed in accordance with the Texas Workers' 
Compensation Commission Medical Fee Guideline in effect at the time the services 
are rendered. 
During public comment, some commenters raised questions regarding the validity 
of using hospital managed care contracts as a basis for workers' compensation 
hospital reimbursements. The Texas Hospital Association (THA), among others, 
objected to the use of hospital contracts, alleging that workers' compensation 
cases were more complex and thus more costly than managed care cases. In an 
attempt to illustrate this alleged greater complexity, during the public comment 
on the previous proposal, THA submitted an analysis which compared the average 
Medicare relative weights for managed care cases to the average Medicare 
relative weights for Texas workers' compensation cases. Relative weights are 
assigned numerical indicators which reflect the relative resource consumption 
associated with each diagnostic related group. The Medicare relative weights are 
calculated by the Healthcare Financing Administration (HCFA) and published in 
the Federal Register. THA's analysis used an overall average of these relative 
weights to reach the conclusion that intensity of services for workers' 
compensation cases is 30% to 33% greater than managed care cases. 
In its review of the THA complexity analysis, the Commission enlisted the 
expertise of Milliman and Robertson, Inc., one of the largest actuarial and 
management consulting firms in the United States, to compare complexity of 
workers' compensation cases to managed care cases. An actuarial study was 
performed by two actuaries from Milliman and Robertson: an actuarial specialist 
in health-related issues, including Medicare, Medicaid, and managed care who has 
worked with insurance companies, health maintenance organizations (HMOs), 
preferred provider organizations (PPOs), hospitals, employers, and government, 
and an actuarial specialist with particular expertise in workers' compensation 
and professional liability lines of insurance. A copy of this actuarial study is 
available at the Commission offices. The actuaries from Milliman and Robertson 
used two methods to analyze the complexity of workers' compensation as compared 
to managed care cases. The first method was essentially identical to that used 
by THA, except that THA used overall average Medicare weights and in the 
Milliman and Robertson study weights were compared separately by category of 
service. The Milliman and Robertson analysis concluded that the more appropriate 
ratios are the separate ratios for medical and surgical; i.e. medical is 
compared to medical, and surgical is compared to surgical. The Commission agrees 
with this approach; the Commission has always adopted separate medical and 
surgical rates. 
Milliman and Robertson utilized categories of hospital services, and analyzed 
the number of workers' compensation cases for each category of service for 
January through June of 1995, and the Medicare relative weight assigned compared 
with a similar analysis of the number of cases for an HMO/PPO case mix provided 
by THA for the same period. When compared by category, none of the eleven 
categories are more complex for workers' compensation cases than for managed 
care cases as measured by Medicare weights. Milliman and Robertson concluded 
that the complexity of medical admissions for workers' compensation cases was 
just 79.9% of HMO/PPO cases unless rehabilitation cases were added to the 
medical cases in which case the workers' compensation cases would be 85.1.0% as 
complex as HMO/PPO cases. In addition, the analysis found that Texas workers' 
compensation surgical cases were 79% as complex as HMO/PPO surgical cases.
Milliman and Robertson also pointed out that Medicare weights represent not only 
the complexity of the particular DRG, but, in many cases, also the Medicare 
lengths of stay (LOS). For example, some DRGs have a higher relative weight, not 
because of complexity, but because the typical LOS is long. Thus, a higher 
weight does not necessarily mean the per day complexity would be at the same 
higher level. To correct for possible distortion because of Medicare length of 
stay (LOS), Milliman and Robertson used a second method to analyze the 
information. Medicare weights were divided by the average Medicare LOS. This 
calculation produces an average weight per day. For this analysis the LOSs for 
the managed care cases were estimated using Milliman and Robertson's hospital 
database for a managed care population in Texas. An overall LOS of 3.3 days was 
assumed with the average LOS of medical and surgical admissions at 3.9 days. The 
average LOS for workers' compensation cases was estimated using the overall LOS 
for 1995 based on the Commission's data (4.8 days for medical cases and 3.5 days 
for surgical cases). Milliman and Robertson adjusted their database to balance 
the average LOS to this experience. The results of the second analysis show that 
the complexity factor for medical admissions was .786 and the complexity factor 
for surgical admissions was .937. Both approaches clearly show, and Milliman and 
Robertson concluded that the complexity of workers' compensation cases for both 
medical and surgical stays is less than the complexity of typical managed care 
cases. In fact, the complexity factor of .786 was about identical to the .789 
factor found in the study on categories of services described previously. Also, 
the complexity factor of .973 for surgical cases based upon the LOS analysis 
suggested to Milliman and Robertson that the low Medicare weights were partially 
due to lower length of stays for surgical admissions of workers' compensation 
claimants. 
To determine whether the number of workers' compensation patients admitted to 
the hospital through the emergency room affects the validity of using managed 
care contracts in determining workers' compensation reimbursements, the 
Commission analyzed its data for the year 1995 by comparing the date of 
admission to the date of injury from hospital bills received by the Commission. 
A hospital admission on the same day of injury would tend to indicate an 
emergency room case. Only approximately 18.5% of the cases were hospital 
admissions occurring the same day of injury. It is likely that some of these 
cases are not cases which entered through the hospital emergency room, because 
for instance, there are some circumstances in which a treating doctor may 
examine an injured worker and then immediately refer the patient for hospital 
admission. Of the 18.5% of cases which possibly enter the hospital through the 
emergency room, 78% were trauma cases and 5.0% were burn cases. Both of these 
ICD-9 codes (trauma and burns) have been carved out of the per diem 
reimbursements set in the ACIHFG and are reimbursed at a fair and reasonable 
rate. Therefore, over 80% of the workers' compensation emergency room entries 
will not be governed by the per diem rates, but will be reimbursed on an 
individual basis at a fair and reasonable rate, and the validity of using 
managed care contracts in determining workers' compensation reimbursements is 
not affected by emergency admissions in the workers' compensation system. 
Another argument made by some commenters against the use of managed care 
contracts in determining workers compensation reimbursements was the inability 
of carriers to "steer" or require workers' compensation patients to obtain 
services at a particular hospital. The Workers' Compensation Act allows injured 
workers to choose their treating doctor, which necessarily leads to choice of 
hospital, because doctors are not automatically authorized to practice at every 
hospital. This means that carriers are unable to "steer' or require workers' 
compensation patients to obtain services at a particular hospital. Due to this 
aspect of the workers' compensation system, some commenters contend that 
workers' compensation is unlike managed care where hospitals allegedly negotiate 
contract rates in part based on the ability of carriers to assure certain 
numbers of patients, thus encouraging hospitals to lower rates in anticipation 
of increased patient volume. Commenters went on to contend that without this 
increased volume of patients (which workers' compensation could not guarantee) 
hospital contract rates were not applicable to workers' compensation and should 
not be used as a basis for workers' compensation reimbursement. However, in 
addition to these comments, other commenters pointed out that, in the current 
market hospitals are rarely given an exclusive contract because most hospitals 
cannot offer all the services necessary, most contracts do not guarantee a 
particular level of patient days or business, and contracting with a particular 
plan may be driven by the fact that the hospital does not want to be excluded as 
one of the provider hospitals in a plan. A review of the 1994-1995 hospital 
contracts received by the Commission supported these observations. Of the 1994-
1995 hospital contracts for which full contract language (rather than a summary 
of contract terms) was provided to the Commission, only rarely was exclusivity 
included. Some of these contracts did provide incentives for staying within a 
particular healthcare network and some provided incentives for increased patient 
referrals. Although "steerage" of patients to a particular hospital for services 
may have been an important factor in negotiating hospital contracts in the early 
period of managed care contracting, the contract provisions indicate that it is 
less of a factor in the determination of hospital contract rates in the current 
market. During the meeting of the ACIHFG Task Force information was provided 
that indicated hospitals consider utilization when negotiating contract terms, 
as a result, utilization has already been accounted for in the contract rates. 
Commenters opposed to the use of managed care contracts to determine workers' 
compensation reimbursement contend that managed care contracts were negotiated 
for a case mix different than workers' compensation and that workers' 
compensation reimbursement should therefore be greater than that in managed care 
contracts. The Legislature, in Texas Labor Code sec.413.011, provided that the 
Commission establish fees which do not provide for payment of a fee in excess of 
the fee charged and paid for similar treatment of an injured individual of an 
equivalent standard of living or by someone acting on that individual's behalf. 
This standard may not allow the Commission to consider whether the fee to be 
paid under the contract was established with reference to other fees set for the 
same payor. If the fee is paid for similar treatment for managed care patients, 
it may be argued that the fee paid for workers' compensation claimants should be 
no higher under this statutory standard. The Commission recognizes that absolute 
compliance with this statutory standard may not always be possible, but believes 
that the legislature intended it as a strong policy objective to which the 
Commission should apply its judgment and expertise when balancing all statutory 
standards and objectives. Strict adherence to this single provision could 
adversely affect access to quality health care and fair and reasonable fees 
which are also statutory standards and objectives. In recognition of the type of 
cases which may occur more frequently in workers' compensation than in some 
other systems, the new rule sets per diem reimbursement for surgical services 
7.0% above the average surgical per diem rate in the 1994-1995 hospital 
contracts and carves out some of the highest cost cases (eg. trauma and burns) 
from the per diem reimbursement amount. Workers' compensation has significantly 
more acute care inpatient surgical cases as compared to medical or ICU cases. 
For the calendar year 1995, Commission data shows a total of 2,236 medical cases 
(representing reimbursements of $6,509,531) as compared to 5,632 surgical cases 
(representing reimbursements of $30,462,189) in the workers' compensation 
system. Total ICU cases could not be determined because this data is not 
segregated from the medical and surgical data. The Consumer Price Index (CPI) 
for the period from October 1, 1995 through December 31, 1996, and the estimated 
CPI for the year 1997 (the beginning of the time period covered by the hospital 
contracts requested by the Commission through the effective date of the new 
rule) increased approximately 7.0%. The Commissioners increased the surgical per 
diem reimbursement rate in the adopted ACIHFG from the per diem contract average 
surgical rate of $1,045 per day to $1,118 per day. This increase will provide 
additional reimbursement for those hospitals which experienced increases in 
payment from the rates contained in the 1994-1995 hospital contracts and 
summaries due to inflation. This increase is approximately 7.0% of the $1,045 
rate and brings the surgical per diem rate to approximately 130% of the medical 
per diem rate of $870. This 130% difference between the surgical and medical per 
diem rates is equal to or greater than the corresponding differential in more 
than 80% of the managed care contracts obtained and considered by the Commission 
in setting the ACIHFG per diem rates. Just as the increases which result from 
the carve outs and the stop-loss provision, this increase in the surgical per 
diem rate will ensure injured workers' access to acute care inpatient services 
and serve as an additional protection to ensure fair and reasonable rates for 
surgical cases. This change to the surgical rate increases reimbursement for 
those cases which do not receive additional reimbursement provided by carve outs 
and the stop-loss provisions. The Commission utilized its expertise and 
experience to increase the surgical rate from the amount in the proposed rule to 
achieve a proper balance of the statutory standards, including effective cost 
control, discussed elsewhere in this preamble. In addition, the new rule carves 
out some of the highest cost cases (eg. trauma and burns) from the per diem 
reimbursement amount. The additional surgical reimbursement, the carve outs, and 
the stop-loss provision should compensate for any alleged need for additional 
reimbursement based on case mix, case complexity, or length of stay. 
Analysis of the 1994-1995 hospital contracts and summaries revealed that only 97 
of the 1,321 per diem contracts contained some form of tiered per diem for 
surgical admissions. A per diem rate is said to be "tiered" when there is a 
difference in reimbursement based on which day of the hospital stay is being 
reimbursed. Supporters of tiering of surgical per diem rates base the need for 
tiering on the contention that more hospital resources are expended on the day 
of surgery than on the following days. The Commission chose not to use tiered 
per diems in this ACIHFG because, in the 1994-1995 hospital contracts and 
summaries received by the Commission, tiering was not the predominant method of 
utilizing per diem reimbursements. The Commission has no information to indicate 
that the per diem rates in the non-tiered managed care contracts do not 
represent services with various lengths of stay and various types and severity 
of injury/illness, and, in fact, believes that they do. As only 4.0% of the 
1994-1995 hospital contracts carve out trauma, consideration of front loaded 
expense and severity must have been factors in negotiating the contract and thus 
in their negotiated per diem rates, and thus in the per diem rates adopted by 
the Commission. However, if there is front loaded expense and severity not 
accounted for in the hospital contracts, other provisions in the rule as adopted 
by the Commission will compensate for this, as they increase actual 
reimbursement. (See discussions elsewhere in this preamble regarding the 
exemption of certain small hospitals, stop-loss, carveouts, an addition of 
approximately 7.0% to the average surgical rate found in the 1994-1995 per diem 
contracts, and outpatient services.) The Commission concludes that tiered 
surgical rates are not necessary for a rate to be fair and reasonable, or to 
ensure access to quality health care. Because the average length of stay for 
surgical cases has declined on the average to be similar to surgical lengths of 
stay for managed care contracts, there is no need for a tiered per diem as a 
device to limit the lengths of stay. 
The review of the information from the 1994-1995 hospital contracts and 
summaries received by the Commission revealed a variance in per diem 
reimbursements among hospitals. It has been suggested to the Commission that 
variations among contract rates is linked to hospital labor expenses, due to the 
fact that such expenses make up a major portion of total hospital expenses. 
Labor costs across regions as set out in the Bureau of Labor Statistics average 
hourly wage index for Texas metropolitan statistical areas (MSAs) were compared 
with the average hospital per diem rates contained in 1994-1995 hospital 
contracts for hospitals in the same region. No correlation between higher labor 
costs and higher per diem contract rates was observed; i.e. the higher per diem 
rates were not in the areas with higher labor costs. In fact, in some regions, 
there was a negative correlation-a region with a low wage index and very high 
managed care contract rates. 
To further evaluate the variances in managed care contract rates, the Commission 
identified hospitals that are in the same chain, and looked at the contract 
rates for different hospitals contracting with the same company in the same MSA; 
for the same hospital contracting with the same company in different MSA's; and 
for the same hospital contracting with different companies in the same MSA. The 
analysis revealed that there is no consistency among hospitals in the same chain 
of hospitals which are contracting with the same company in the same MSA; there 
is no consistency among a specific hospital's contracts with the same company in 
different MSA's; and there is no consistency among a specific hospital's 
contracts with different companies in the same MSA. While there may be some 
basis or explanation for the variation in contract rates across the state, it is 
not differences in geographic location. 
Hospital type and hospital bed size were also compared with the hospital per 
diem rates contained in the 1994-1995 hospital contracts. No factor was found 
which explained the reason for the differences in per diem contract rates. 
Differences which may be attributable to hospital and community size have been 
recognized and accounted for by the exemption for hospitals with 100 or less 
licensed beds located in a population center of less than 50,000 people from the 
per diem reimbursement rates in the new ACIHFG. (See discussion of exemption 
elsewhere in this preamble.) Differences in levels of care provided by some 
hospitals have been recognized and accounted for in the new ACIHFG by "carving 
out" or exempting from the per diem reimbursement rates, ICD-9 codes for trauma, 
burn and HIV cases. Other provisions in the new rule also serve to increase 
actual reimbursement. (See also, relevant discussion elsewhere in this preamble 
regarding increased reimbursement for surgical cases, stop-loss, carve outs, and 
outpatient services.) The Commission therefore concludes that regional rate 
variation is not necessary for the adopted rates to be fair and reasonable, or 
to ensure access to quality health care. Averaging minimizes the effect of 
outliers in the data because most rates were closer to the average than to 
either the higher or lower rates, because the lowest rates may not accurately 
reflect hospital economic factors for all the hospitals with greater rates and 
because a reimbursement based on an average rate will be a greater incentive for 
maintaining access to quality health care than use of the lowest rates. 
Some commenters questioned how the new rule accounted for inflation in its 
reimbursement rates and advocated that an automatic adjustment be built into the 
ACIHFG. Inflation factors are not the same each year, and in fact they can 
indicate decreases as well as increases in costs. Such factors cannot be 
accurately predicted into the future, and the Commission has not included an 
automatic predetermined future adjustment in the reimbursement rates provided in 
the ACIHFG. 
A number of commenters advocated use of the Bureau of Labor Statistics' (BLS) 
Consumer Price Index (CPI) for Medical Care Services as the basis for measuring 
appropriate changes in hospital reimbursement rates from year to year. THA used 
the CPI in its models to adjust what it contended are hospital charges and 
costs. According to the BLS the Medical Care Services CPI is a reflection of 
household expenditures for health insurance premiums as well as for out-of-
pocket medical expenses. The Medical Care Services CPI does not include 
employer- paid health insurance premiums nor government-paid health care 
services such as Medicare. Whereas the Medical Care Services CPI may be a valid 
indicator of price change for some consumer expenditures, it is not necessarily 
indicative of hospital costs. As a result, the application of the Medical Care 
Services CPI as a measure of inflation in what it costs a hospital to provide 
services is suspect. A rise in consumers' out-of-pocket expenditures for health 
insurance premiums and medical expenses may be an indication of things such as a 
change in the way health care is paid for, a transfer of certain costs to the 
consumer, or the influence of managed care on the health care market. However, a 
rise in the Medical Care Services CPI does not necessarily indicate that 
hospitals should receive greater reimbursements. In view of this, the Commission 
did not directly use the Medical Care Services CPI to determine hospital 
reimbursement rates in the ACIHFG. 
Nonetheless, the Medical Care Services CPI is commonly used as an indicator of 
inflation in costs to provide medical services and if applied, the hospital 
reimbursements in the new ACIHFG are sufficient to account for the inflation of 
12% reflected in the CPI for the period from 1993 to 1996, and the new ACIHFG's 
estimated 17.4% increase over rates contained in the previous ACIHFG (which 
percentage does not account for any possible increased reimbursement due to the 
exemption of small hospitals located in a population center of less than 50,000 
people) is just under the Medical Care Services CPI of 18% for the period 1993 
to 1996. 
In addition, preliminary analysis of the approximately 300 per diem managed care 
contracts for the period October 1995 through October 1996, which have been 
received by the Commission indicates that with the exception of a few contracts, 
there was little or no change in the average per diem reimbursement rates ($863 
medical per diem, $1,015 surgical per diem, and $1,537 ICU per diem) when 
compared to the average per diem rate of the contracts and summaries obtained 
earlier by the Commission. This preliminary analysis also indicates the total 
number of newer contracts that have per diem rates is increasing. In addition, a 
comparison of the averages of the newer contracts to the earlier contracts for 
the same hospital(s) indicates that 52.6% of these hospitals have more per diem 
contracts than before. A comparison of the newer contract rates to the earlier 
contract rates for the same hospital(s) shows that of the 692 per diem rates in 
the newer contracts 84.96% of the per diem rates were either reduced, stayed the 
same, or increased by less than 10%. Based on the comparison to inflation rates 
and the rates in the more recent contracts that have been analyzed, the 
Commission concluded that an overall future inflation adjustment is not 
necessary for the adopted rates to be fair and reasonable rates for these 
hospitals or to ensure access to quality health care for injured workers by 
ensuring that hospitals will continue to treat workers' compensation patients. 
However, out of an abundance of caution to ensure access to quality surgical 
hospital care to injured workers, and as an additional protection to ensure fair 
and reasonable rates for surgical cases, the Commission increased the surgical 
per diem reimbursement rate in the adopted ACIHFG from the per diem contract 
average surgical rate of $1,045 per day to $1,118 per day. The Commission 
utilized its expertise and experience to increase the surgical rate from the 
amount in the proposed rule to achieve a proper balance of the statutory 
standards, including effective cost control, discussed elsewhere in this 
preamble. 
The Center for Health Care Industry Performance Studies' 1996-1997 Almanac of 
Hospital Financial and Operating Indicators (as reported in Medical Benefits, 
October 30, 1996) reports that U. S. hospitals in high managed care markets 
realized significant improvements in profitability during 1995 and are more 
profitable than hospitals that operate in lower managed care markets. In 
addition, the Almanac reports that profitability in the hospital industry 
reached a five-year high in 1995. This publication presents information on 
hospital performance in 1995 and reviews performance measures for the past five-
year period. 
The U.S. Prospective Payment Assessment Commission, a federal advisory panel, 
voted in January of 1997 to recommend no change in Medicare payment rates for 
hospitals (Times, January 19, 1997) The Commission concluded that hospitals had 
effectively controlled their costs, so that existing Medicare rates were 
generally adequate. Spokesmen for the advisory panel indicated that its 
recommendation would not harm the quality of health care or access to care for 
beneficiaries in the Medicare program. They indicated that Medicare hospital 
costs have been declining while Medicare payments have increased at a moderate 
rate, favorably affecting the profitability of the hospitals' Medicare business. 
In fact, the advisory panel's figures show that the operating expense for each 
Medicare patient has actually declined in the three year period of 1993 through 
1995. The article states that the cost of medical care, as measured by the CPI, 
rose last year by just 3.0%, the smallest amount in three decades, and the first 
time since 1980 that medical prices rose less than the overall index. In 
addition, the article reports that economists told Congress last month that the 
CPI tends to overstate inflation. The advisory panel's recommendations and data 
and the statements regarding CPI inflation figures and medical care inflation 
provide additional indicators of why an overall future inflation factor is not 
justified for the adopted rates. 
After determining what the per diem rates would be, based on the 1994-1995 
hospital contracts, the Commission wanted to compare those rates to Medicare 
rates. Because hospitals do a large volume of Medicare services and accept 
Medicare payment rates, the Commission believes that Medicare rates are fair and 
reasonable payment for Medicare patients, and ensure Medicare patients access to 
quality health care. The Medicare fee program is also designed to achieve 
effective cost control, another statutory objective the Commission must try to 
meet in its own fee guidelines. Finally, the Commission believes that Medicare 
patients are persons of an equivalent standard of living to workers' 
compensation patients. Studies show that Medicare patients are of an equivalent 
standard of living to workers' compensation patients. The studies were performed 
by Research and Planning Consultants, Inc. and by Dr. Ronald T. Luke, Ph.D. J.D. 
who provide economic and public policy analyses to numerous public and private 
sector clients in health care matters including managed care organizations and 
who provide health cost management services with special attention to 
workersþ compensation medical care cost. The most recent study noted that 
managed care has become the dominant form of health care coverage for U.S. 
workers. That study, also, noted that many low skilled and low paying jobs do 
not carry health insurance benefits and, therefore, workers covered by managed 
care plans have an equal or higher living standard than workers in general. The 
study utilized extensive health care literature and information. Therefore, the 
Medicare population is at least of an equivalent standard of living, and rates 
paid on their behalf for medical services are relevant to fair and reasonable 
rates for workers' compensation patients. For these reasons, it is relevant to 
consider estimated Medicare per diem rates. No hospital is required to 
participate in the Medicare program. The fact that hospitals accept Medicare 
rates (particularly for-profit hospitals), and the fact that Medicare 
reimbursements make up 40% of the gross patient revenue for Texas hospitals also 
indicates that Medicare rates are fair and reasonable. 
To compare the ACIHFG rates proposed in the July 26, 1996 Texas Register with 
Medicare rates, the Commission again enlisted the expertise of Milliman and 
Robertson, Inc. A copy of this actuarial report is available for inspection at 
the Commission offices. Milliman and Robertson performed an actuarial study 
which calculated the estimated per diem rates at 1996 Medicare payment levels 
for five Medicare diagnostic related groups (DRGs 214 Back and Neck Procedures 
with complications, 215 Back and Neck Procedures without complications, 219 
Lower Extremity and Humerus Procedure except Hip, Foot, Femur Age >17 without 
complications, 231 Local Excision and Removal of Internal Fixation Devices 
except Hip and Femur, and 243 Medical Back Problems). An analysis of TWCC's 
database shows that these five DRGs would have been the top five DRGs and would 
have accounted for approximately 60% of workers' compensation inpatient hospital 
payments in calendar year 1995 if a DRG descriptor were applied to Texas 
workers' compensation cases that year. The Milliman and Robertson study 
calculated Medicare per diem equivalent rates by starting with the 1996 Medicare 
base rate for each of 21 selected Texas cities representing the major 
metropolitan areas within the Texas Department of Health regions (Abilene, 
Amarillo, Austin, Beaumont, Brownsville, Corpus Christi, Dallas, El Paso, Fort 
Worth, Galveston, Houston, Longview, Lubbock, McAllen, Odessa/Midland, San 
Angelo, San Antonio, Tyler, Victoria, Waco, and Wichita Falls) and multiplying 
this base rate by the 1996 Medicare weight that is published in the Federal 
Register for each of the five chosen DRGs. The product of the Medicare weight 
and the base rate is the case rate. The case rate is divided by the Medicare 
average length of stay as published in the Federal Register to arrive at the 
estimated Medicare-based per diem amounts. This study concluded that the July 
26, 1996 proposed ACIHFG per diem rates for surgical cases of $1,026 (with the 
carve out of implantables and a stop-loss threshold of $50,000) is similar to 
the Medicare reimbursement rates for DRGs 214 and 215 and consistently higher 
than Medicare reimbursement for DRGs 219 and 231. The medical per diem of $857 
in the July 26, 1996 proposal of the ACIHFG averages about 80% higher than the 
calculated Medicare equivalent per diem for DRG 243. 
For DRG 214, the estimated Medicare per diems ranged from $924 to $1,123, with 
the average being $1,014. Only two of the twenty-one estimated rates for DRG 214 
were slightly higher than the $1,118 surgical rate adopted by this rule. 
For DRG 215, the estimated Medicare rates ranged from $927 to $1,127, with the 
average being $1,017. Again, only two of the 21 estimated rates for DRG 215 were 
slightly higher than the $1,118 surgical rate adopted by this rule. For DRG's 
219 and 231, none of the estimated Medicare per diem rates was greater than 
$1,118. The average estimated rate for DRG 219 was $876, with the highest 
estimated rate being $148 less than $1,118. The average estimated rate for DRG 
231 was $863, with the highest estimated rate being $162 less than the $1,118 
rate adopted by this rule. 
For DRG 243, none of the estimated Medicare per diem rates was greater than 
$870. The average estimated rate was $465, with the highest estimated rate being 
$355 less than the $870 adopted by this rule for medical cases. The rates 
adopted in this rule are greater than the rates contained in the July 26, 1996 
proposal of the ACIHFG. The estimated Medicare per diem rates should not be 
compared with the reimbursement provided solely by the per diem rates in the 
adopted ACIHFG. The carve outs provided in the rule allow receipt of 
reimbursement additional to the per diem rate, and should serve to make hospital 
reimbursement for workers' compensation in all instances higher than the 
estimated Medicare per diem rates for the five DRG's. 
The Milliman and Robertson actuarial study concluded that the $50,000 stop loss 
threshold to a large extent offsets any possible additional Medicare 
reimbursement for outliers. The study also noted that in certain cases Medicare 
has additional payment rates for disproportionate share and indirect medical 
education. No adjustment to Milliman and Robertson's estimated Medicare 
equivalent per diem was made for these. The study concludes that the Medicare 
per diem amounts are probably overestimated because Medicare-age patients may 
have more complexity of care than similar cases. The methodology did adjust for 
Medicare length of stay. The actuaries conclude that, if both LOS and the 
Medicare Index were adjusted to reflect Texas workers' compensation cases, the 
per diems would be similar to those calculated. In addition, since the July 26, 
1996 proposal, numerous "carve outs" or exemptions from the per diem rates have 
been added, the surgical per diem rate has been increased, and the stop-loss 
threshold has been lowered, which increases the ACIHFG reimbursements. This 
study shows that, for the five DRGs studied, under the per diem reimbursements 
contained in the July 26, 1996 proposed ACIHFG (and therefore in the adopted 
rule which increased the rates and decreased the stop loss threshold from the 
July 26, 1996 proposal), hospitals will receive higher reimbursement for 
workers' compensation patients than they do for Medicare patients. This 
reinforces the Commission's conclusion that the per diem rates derived from the 
managed care contracts are fair and reasonable, will ensure access to quality 
medical care, will achieve effective cost control, and will not pay in excess of 
the amount that would be paid for similar treatment of non-workers' compensation 
patients of an equivalent standard of living. No additional adequate data was 
received from commenters or other sources to assess the propriety of utilizing a 
DRG-type methodology. The Commission has insufficient data at this time to 
determine whether use of DRG weights with a per diem system would be feasible or 
appropriate, especially given probable differences in complexity of case 
questions in the Medicare population where DRG reimbursement is used. 
The public benefit expected as a result of adoption of the new rule is as 
follows. The Commission will comply with the statutory standards and objectives 
requiring the adoption of fair and reasonable rates. 
Persons required to pay for inpatient hospital services, including employers, 
insurance carriers, the State of Texas and local governments, will pay fair and 
reasonable amounts for workers' compensation claimants which are similar to that 
paid for other patients and provide effective medical cost control. Hospitals 
will receive a fair and reasonable amount in compliance with the statute for 
inpatient admissions. 
Claimants will have access to quality health care services. 
The guideline will be updated to provide for reimbursement amounts implementing 
medical cost containment measures designed to assure quality of medical care as 
required by the Texas Workers' Compensation Act. 
It is anticipated that clear, fair guidelines will minimize disputes and 
encourage prompt payments to hospitals. 
Concurrent with this adoption of sec.134.401, the Commission adopts the repeal 
of sec.134.400 of this title, the rule adopting the previous (1992) Acute Care 
Inpatient Hospital Fee Guideline (ACIHFG). Comments were received on the 
proposed new Acute Care Hospital Fee Guideline from: the Texas Hospital 
Association; Scott and White Hospital; Texas Association of Business & Chambers 
of Commerce; Patient Advocates of Texas; Business Insurance Consumers 
Association of Texas; Parkland Memorial Hospital; American Insurance 
Association; Resource Recovery Consultants; Alliance of American Insurers. 
Comments expressing general support for the new rule were received from the 
following groups: Business Insurance Consumers Association of Texas; the 
American Insurance Association; and the Alliance of American Insurers.
Comments expressing general opposition to the new rule were received from the 
following groups: the Texas Hospital Association; Scott & White Hospital; Texas 
Association of Business & Chambers of Commerce; Parkland Memorial Hospital; and 
Resource Recovery Consultants. 
Comments that did not specifically register a "for" or "against" position on the 
proposed rule were received from Patient Advocates of Texas. 
Documents were also received in the form of questions. The Commission responded 
to the questions to the extent that the issues raised were clear, although the 
Commission was not obligated to do so, as the questions do not constitute 
comment. 
Summaries of the comments and commission responses are as follows. 
COMMENT: Several commenters addressed the exemption of hospitals with 100 or 
less licensed beds from the rule. Several commenters recommended exempting from 
the ACIHFG acute care hospitals with 100 or less licensed beds located outside a 
Metropolitan Statistical Area (MSA) or located in a rural area with 
reimbursement to be at a fair and reasonable rate, discouraging urban hospitals 
from reorganizing into smaller entities. A commenter suggested that the 
Commission create a code to be placed on the UB-92 and require that exempt 
hospitals stamp or electronically print this identifier on bills. A commenter 
suggested publishing a list of hospitals with 100 beds or less. A commenter 
questioned the justification for the changes, the reference in the preamble to 
the exemption as "essentially meaningless," and the implication that the 
exemption will be removed when the rule is adopted. 
RESPONSE: The Commission agrees in part. The new rule exempts from its 
provisions hospitals which have 100 or less licensed beds and which are located 
in a population center of less than 50,000 people. These hospitals are to be 
reimbursed at a fair and reasonable rate. Previous sec.134.400 of this title 
exempted "small/rural" hospitals from the reimbursement provisions of the 
guideline. A "small/rural hospital" was defined in previous rule sec.134.400 as 
an acute care hospital having fewer than 100 beds and less than $1,000,000 total 
annual revenue as determined by an audited financial statement from the prior 
fiscal year. Under this definition, so few hospitals qualified for the exemption 
that it was essentially meaningless. The exemption in new sec.134.401 is 
specific and definite and excludes from the per diem rates hospitals with 100 or 
fewer beds located in a population center of less than 50,000 people. With the 
exception of several small hospitals (each in population centers of 50,000 or 
more people) in the list of hospitals receiving the top 80% of workers' 
compensation reimbursement in 1994, contracts were not requested from hospitals 
which included the remaining 20% of workers' compensation reimbursement due to 
the small number of workers' compensation cases handled by such hospitals. The 
hospitals in the top 80% of workers' compensation reimbursement for 1994 did not 
include hospitals in population centers of less than 50,000 people. The 
Commission had insufficient data regarding the differing circumstances of 
hospitals in population centers of less than 50,000 people and the effect of 
these circumstances on the costs and payment rates of such hospitals. The 
Commissioners wished to protect and preserve the access to local hospitals for 
an injured worker who lives or works in a population center of less than 50,000 
people. In addition, the Commissioners sought to avoid encouraging hospitals in 
population centers of 50,000 or more people to reorganize into smaller entities 
to seek exemption from the per diem reimbursements in the ACIHFG based upon the 
100 or less licensed beds exemption. Finally, while hospital payment data was 
utilized to determine average payment and to reflect competition in the hospital 
marketplace in population centers of 50,000 or more people, such data was not 
obtained for population centers of less than 50,000 people. The list of 
hospitals which received approximately 80% of the total workers' compensation 
reimbursement paid to hospitals in 1994 included one hospital which had 100 or 
less licensed beds in a population center of 50,000 or more people. In 1995 the 
number of 100 or less bed hospitals in such population centers on this list 
increased to three. All of these hospitals on the list of top workers' 
compensation reimbursement recipients were located in population centers of 
greater than 50,000 people, and the average of their per diem contract rates was 
significantly less ($772 medical, $842 surgical in 1995; $822 medical, $908 
surgical in 1996) than the rates contained in the adopted ACIHFG. Hospitals with 
100 or less beds located in population centers of 50,000 or more persons operate 
in the same competitive environment as larger hospitals in the same or adjacent 
population centers of 50,000 or more persons and therefore, to meet such 
competition, must adjust what they are willing to accept as payment for similar 
services accordingly. The exemption of hospitals with less than 100 licensed 
beds located in a population center less than 50,000 people allows these 
hospitals to be reimbursed on a case by case basis ensuring access to care 
regardless of where an injured worker lives or works in Texas. Because there are 
sparely populated counties within MSA's, the Commission opted for the "located 
in a population center of less than 50,000 people" criteria rather than "outside 
a Metropolitan Statistical Area," as a more precise description of the local 
hospitals in small communities that were of concern regarding access to care and 
which it intended to exempt from the ACIHFG. The size of a population center is 
to be determined from the most recent Decennial Census of Population by the 
Bureau of the Census, U.S. Department of Commerce. 
Reimbursement for these exempted hospitals is to be at a fair and reasonable 
rate. The exemption will ensure fair and reasonable rates for these hospitals 
and ensure access to quality health care for injured workers by ensuring that 
the exempted hospitals will continue to treat workers' compensation patients.  
The Commission disagrees that it should require carriers to annotate billing 
forms to designate hospitals with less than 100 beds, because this information 
is already available. In addition, stamping or electronic imprinting would be a 
burdensome requirement for providers that deviates from standard billing 
practices. A list of hospitals with 100 beds or less can be obtained from the 
Texas Department of Health, Bureau of State Health Data and Policy Analysis, 
1100 West 49th Street, Austin, Texas 78756-3199 (telephone number (512) 458-
7347). This list can be used by insurance carriers to program their computers to 
flag small hospitals while they are programming other modifications as a result 
of the new ACIHFG. Since the Texas Department of Health already has this list 
available, additional lists by the Commission would duplicate services and be an 
inefficient use of state resources. 
The Commission disagrees that there was an implication that the exemption would 
be removed, in fact it has been adopted with changes to the proposal.
COMMENT: A commenter felt that the statement in the guideline that services 
rendered prior to the effective date of the rule shall be subject to the ACIHFG 
in effect at the time services were performed, is contradictory to the Texas 
Supreme Court decision voiding the rule and voids the hospital's opportunity to 
appeal the determination of fair and reasonable reimbursement of claims 
processed under sec.134.400. 
RESPONSE: The Commission agrees that the sentence "Medical and/or surgical 
inpatient services rendered prior to the effective date of this rule shall be 
subject to the ACIHFG in effect at the time the services were rendered should be 
deleted from subsection (a)(1)." 
COMMENT: A commenter supported use of the Medical Fee Guideline (MFG) for 
reimbursement of outpatient services such as physical therapy, radiological 
studies and laboratory studies and suggested defining fair and reasonable to 
include the application of the MFG to outpatient services The commenter stated 
that application of the MFG to outpatient services would encourage hospitals to 
provide these services consistent with the statutory standards to ensure that 
the fee guidelines are fair and reasonable, and encourage effective and 
efficient medical cost control in order to ensure the injured workers receive 
quality health care. Another commenter supported hospital reimbursement for 
outpatient services outside the MFG at a fair and reasonable rate because 
hospitals encounter higher expense in providing these services (due partly to 
state and federal requirements, staff educational requirements, safety and fire 
requirements, hours of operation, on-call requirement and similar hospital 
unique needs that are required to meet national accreditation standards) than 
physicians' offices or outpatient clinics. A commenter suggested reimbursement 
for MRI/CAT scans to be in accordance with the Medical Fee Guideline except in 
cases of emergency services that do not result in an inpatient admission.  
RESPONSE: The Commission disagrees that outpatient services should be included 
in this Acute Care Inpatient Hospital Fee Guideline. The Commission also 
disagrees that outpatient services and MRI/CAT scans should be reimbursed at 
Medical Fee Guideline rates. The Commission agrees that outpatient services and 
MRI/CAT scans should be reimbursed at fair and reasonable. The Commission does 
not at this time have sufficient data to set reimbursements regarding outpatient 
services provided in a hospital setting and as a result, cannot at this time 
confirm or dispute the contention that the costs of outpatient services are 
indeed different when provided in a hospital. Because reimbursement for typical 
outpatient services at the Medical Fee Guideline rates could affect access to 
services and quality of care for injured workers, the suggestion that such 
services be reimbursed at the Medical Fee Guideline rates has not been 
incorporated into the ACIHFG. These services are to be reimbursed at a fair and 
reasonable rate. This will ensure access to quality health care for injured 
workers by providing that hospitals receive fair and reasonable reimbursement 
for outpatient workers' compensation patients. Reimbursement for outpatient 
services is planned to be addressed in a future outpatient fee guideline after 
further study.  
See also, relevant discussions elsewhere in this preamble, including discussion 
of outpatient services. 
COMMENT: A commenter suggested the rule specifically define why other facilities 
are not subject to the rule and state that the guideline is not to be applied 
except where the rule intended. 
RESPONSE: The Commission disagrees that further definition of the ACIHFG's 
application is necessary. The ACIHFG specifically states in subsection (a)(1) 
that it applies to acute care inpatient hospital stays. The Commission has other 
guidelines in development that will apply to other facilities. The rule is 
specific regarding the exemption of hospitals located in a population center of 
less than 50,000 persons and which have 100 beds or less and subsections (a)(2)-
(5) specifically address reimbursement for other facilities/services until such 
time as specific guidelines are developed for those facilities/services which 
provide for fair and reasonable reimbursement according to the statutory 
standard set out in the Texas Labor Code. Insurance carriers are to provide 
reimbursement for those other facilities/services in accordance with those 
standards. Providers who disagree with the amount they are reimbursed may seek 
dispute resolution through the Medical Review Division of the Commission. Only 
acute care inpatient hospital services will be reimbursed within the per diem 
rate structure in the ACIHFG because this guideline was developed to regulate 
only acute care inpatient stays and the research performed only pertained to 
acute care inpatient hospital stays. Therefore, this guideline does not apply to 
other types of facility services. The rule itself does not need to explain why 
certain facilities are not subject to the rule. 
COMMENT: A commenter supported the requirement that payment be the lesser of the 
per diem, the amount billed, or the contracted amount. 
RESPONSE: The Commission agrees. 
COMMENT: Commenter disagrees with the elimination of the requirement for 
hospitals to attach a copy of the invoice for durable medical equipment and 
implantables. The commenter states it is difficult for carriers to determine the 
cost to the facility without the invoice. 
RESPONSE: The Commission disagrees. Attaching invoices to the bill for 
implantables, orthotics, and prosthetics requires additional time and expense 
for hospitals. TWCC believes there is a need for a determination of cost for 
implantables, orthotics, and prosthetics to a hospital. This need however, is 
outweighed by the significant burden to hospitals to continue this requirement. 
Therefore, this is no longer a requirement. Alternative ways for determining 
costs are available for insurance carriers. Hospitals and insurance carriers may 
develop a cooperative arrangement to obtain cost data when necessary for 
implantables, orthotics, and prosthetics. Even though invoices are not required 
by this guideline, the insurance carrier still has the option of auditing the 
bill from a health care provider and requesting additional documentation, 
records or information related to the treatments, services, or the charges 
billed. Insurance carriers are expected to not require these for all 
implantables, orthotics, and prosthetics and to confine it to those situations 
where the insurance carriers believe it is necessary to determine the cost from 
invoices.
COMMENT: Commenter questioned the definition of "per dose" as used in subsection 
(c)(4)(C). Commenter stated that a detailed audit of the sometimes lengthy bill 
would be required to identify a drug billed at greater than $250, as lengthy, 
itemized hospital bills are generally sorted by date of service rather than by 
type of service and frequently includes a charge for a drug on one day and a 
credit for the drug of a subsequent day. A detailed audit may increase 
administrative costs and in turn increase the overall cost impact of these carve 
outs. 
RESPONSE: The Commission agrees that subsection (c)(4)(C) should be clarified. 
The subsection has been revised to read "$250 charged per dose". This change 
clarifies that it is the charged amount that determines the carved out 
applicability. The following sentence will also be added to further clarify the 
subsection. "Dose is the amount of a drug or other substance to be administered 
at one time." The $250 charged per dose would be reflected as a line item charge 
on the detailed bill by the hospital. The Commission agrees that auditing bills 
for pharmaceuticals greater than $250 per dose could increase administrative 
costs. However, cases where pharmaceuticals are greater than $250 per dose are 
anticipated to occur infrequently. Based on an analysis conducted by staff of 
1994-1995 hospital contracts and summaries received by the Commission, the 
pharmaceuticals carved out by name from those contracts are generally prescribed 
for cases of oncology, HIV, cardiac, neonatal, pregnancy, and infant care, which 
rarely occur in workers' compensation. Therefore, staff anticipates that since 
the occurrence of pharmaceuticals greater than $250 will be infrequent, any 
additional administrative costs will have little or no effect on the system.  
COMMENT: Commenter expressed concern that the ICD-9 diagnosis codes listed in 
subsection (c)(5)(A) and (B) include diagnosis codes that do not require 
specialized care or services of increased intensity. The identified trauma codes 
include diagnoses such as finger or toe fractures, dislocations, sprain/strains, 
simple contusions, and superficial injuries. The burn codes include all 
severities of burns, including those involving limited body surface areas or 
those of little more severity than to cause erythema. The commenter suggested 
that a clear definition be provided and that the list contain only ICD-9 codes 
that require specialized care or services of increased intensity. 
RESPONSE: The Commission agrees that the span of ICD-9 diagnosis codes indicated 
in subsection (c)(5)(A) and (B) includes codes for relatively minor injuries, 
but disagrees that carved out ICD-9 codes should be specifically listed. It 
would create an undue administrative burden to list separately all codes which 
might be used as a primary diagnosis. Nearly all ICD-9 codes in the 800-19959 
series require fourth or fifth digit subclassification to fully identify the 
location and severity of trauma. This expands the actual number of codes in the 
series to more than a thousand, most of which clearly justify hospital 
admission. The listing of these carved out trauma and burn codes as a range 
rather than attempting to determine which codes should be included in a specific 
list is the most efficient method of identifying these carve outs for the 
Commission, hospitals, and carriers and is also less administratively costly. 
The inclusion of codes for less severe injuries in this range of codes 
identifying carve outs will not present a problem because these codes represent 
conditions which, by themselves, probably would not require admission for 
inpatient hospital treatment. While these codes could be used appropriately to 
classify adjunct or secondary diagnoses, they would be inappropriate to use for 
coding a primary diagnosis, that is, the condition responsible for the greatest 
portion of the overall length of stay. Consequently, codes for less severe 
injuries should not appear as the primary diagnosis on a properly prepared UB-92 
submitted for payment of inpatient expenses and therefore, would not be confused 
as a case which is carved out of the ACIHFG. 
In addition, the incidence of miscoding a less severe injury as the primary 
diagnosis occurs infrequently. A review of calendar year 1995 payment data 
showed that UB-92s with a minor injury code in first position comprised only 
2.4% of trauma- related (ICD-9 codes 800-19959) cases. These cases accounted for 
only 1.05% of reimbursements for trauma-related hospitalizations and for only 
0.09% of payments for all inpatient reimbursements during the year. After 
further review of selected bills with minor injury codes listed as the primary 
ICD-9 diagnosis code, additional ICD-9 codes for more severe conditions (type-
name="italic">e.g., first position: 942.14, first degree burn of trunk; second 
position: 945.24, second degree burn of lower leg; third position: 948.00, third 
degree burn covering less than 10% of the body surface) were specified on those 
same bills. 
COMMENT: Commenters disagreed with the lowering of the stop-loss threshold at 
this time and suggested that it be set at $50,000 and be reassessed when the 
impact of carve outs is determined. Both the stop-loss and the carve outs are 
designed to identify unusually expensive treatments and services and the two 
will overlap to some degree. If both are changed at one time, it will be 
difficult to know the impact of either change on its own. 
RESPONSE: The Commission disagrees that the stop-loss threshold should be raised 
to $50,000. Review of the 1994-1995 hospital contracts and summaries received 
and analyzed by the Commission revealed that the average stop-loss threshold 
contained in those contracts was $39,524. Based on this average, the stop-loss 
threshold amount in subsection (c)(6)(A)(i) has been set at $40,000. 
Insufficient data exists to determine what changes, if any, would need to be 
made to the per diem rates if the stop-loss was set based on something other 
than the average market based amount in the managed care contracts. The 
Commission disagrees that the effects of stop-loss and carve outs in the ACIHFG 
will overlap. Stop-loss applies only to those ICD-9 diagnosis cases that are not 
carved out. Therefore, this does not create an overlap and analysis will be 
possible for each factor. In the case of pharmaceuticals carve outs and carve 
outs identified by revenue codes, the whole bill is paid according to stop-loss 
provision if the stop-loss threshold is reached. Therefore there will be no 
overlap between carve outs identified by pharmaceuticals carve outs and carve 
outs identified by revenue codes and stop-loss, allowing analysis of each 
factor. 
See also, relevant discussions elsewhere in this preamble, including discussion 
of stop-loss provision. 
COMMENT: A commenter supported the carve outs included in the ACIHFG. Another 
commenter agreed with the carve out reimbursement as long as administrative 
costs do not significantly increase when determining when the threshold is met. 
In addition, this commenter suggested if a tiered per diem rate for surgery was 
included in the guideline then carve outs should be limited to the most 
difficult problems such as burn and trauma. There may be some simple changes in 
the way hospitals bill for these codes that the TWCC could require to facilitate 
the administration of this carve out. 
RESPONSE: The Commission agrees that carve outs should be included in ACIHFG. 
Although initial administrative set up costs for this guideline will be 
necessary for both insurance carriers and hospitals, carve outs should not 
significantly impact the administrative costs to the system. The Commission 
expects that most of the information necessary to determine reimbursement for 
carve outs will come directly from the UB-92 form because ICD-9 codes which 
cover the trauma, burn, and HIV carve outs, are listed directly on the UB-92. 
Revenue codes are also directly listed on the UB-92 for MRI, CAT scans, 
hyperbaric oxygen, blood and air ambulance. Review of the itemized billing will 
only be necessary for a small number of carve outs. A tiered reimbursement for 
surgery was not adopted so review of carve outs in that context was not an 
issue. 
COMMENT: Commenter stated that managed care contracts are appropriate for 
determining workers' compensation reimbursement and arguably required by the 
statute. Commenter supported the use of managed care contracts as a measure of 
acceptable reimbursement to ensure both quality of care and to ensure that 
workers' compensation does not pay more than other payors. Another commenter 
expressed the opinion that the justification set out in the preamble to the rule 
for using the managed care contracts in setting rates is inadequate and 
inconsistent with the reasoning stated in the Medical Fee Guideline preamble (21 
TexReg 2388), representing a conflict in policy and questioned the Commission's 
motive to use a basis which resulted in the lowest reimbursement to different 
segments of health care providers. The commenter questioned why utilization data 
was excluded from managed care contracts. 
RESPONSE: The Commission agrees that managed care contracts are appropriate for 
determining workers' compensation reimbursement for acute care inpatient 
hospital services. Discussion of use of managed care contracts and the addition 
of approximately 7.0% to the average surgical per diem rate in the 1994-1995 per 
diem contracts is presented in this preamble. The Commission disagrees that 
using the managed care contracts for setting per diem rates is inconsistent with 
the reasoning used in the development of the Medical Fee Guideline (MFG). The 
MFG establishes maximum allowable reimbursements for services provided by health 
care practitioners. Managed care contract reimbursement rates for primary care 
health care practitioners often are based on a capitation type reimbursement 
method which usually does not provide specific amounts for specific services. In 
addition, unlike acute care inpatient hospital reimbursement data, the data 
utilized for the MFG (sec.134.201) for the early 1990's did not reveal that 
Medicare plus managed care reimbursements constituted a majority of total 
reimbursements for non-workers' compensation cases. Because of this, data from 
managed care contracts with health care practitioners was not utilized for 
development of sec.134.201 (MFG). Instead, fee for service data was utilized as 
the basis for deriving the maximum allowable reimbursement amounts for the MFG 
(sec.134.201). On the other hand, as described in detail previously in this 
preamble, managed care contracts with hospitals were determined to be the best 
indication of a market price voluntarily negotiated for hospital services. The 
development of fee guidelines which comply with statutory standards requires the 
careful analysis of available data and reimbursement options for the services to 
be covered by the guideline. The same methodology may not be appropriate for 
every guideline. In analyzing the managed care contract data it was observed 
that managed care contracts included contracts for workers' compensation acute 
care, inpatient hospital stays where rates were set at or below the lower per 
diem rates in the Commission's previous ACIHFG. Utilization data was not 
specified on any consistent basis in the 1994-1995 hospital contracts and was 
not included at all in some of those contracts. In addition, the across-the-
board inclusion of fair and reasonable reimbursement rates for carved out 
services in the guideline plus the stop-loss provision provides substantial 
protection for a hospital with lesser numbers of workers' compensation patients. 
COMMENT: Commenters contend that because by statute workers' compensation 
carriers cannot direct injured workers to a particular hospital, the managed 
care contract rates are not applicable to workers' compensation. Commenters 
objected to the use of managed care contract rates to set rates for the ACIHFG 
because they contend that hospitals enter into contract agreements with the 
expectation that payors will generate additional admissions for the hospitals. 
Commenters stated that these additional admissions would come as a result of 
financial incentives or penalties encouraging selection of providers inside the 
network and not through specific managed care contract clauses. In addition, a 
commenter contends that hospitals evaluate their HMO/PPO contracts on a regular 
basis and will either modify or terminate those contracts that have not brought 
a sufficient volume of business to the hospital to justify the price discount in 
the contract. 
RESPONSE: The Commission disagrees that the managed care contracts are not 
applicable for determining Workers' Compensation reimbursement. Managed care 
contracts constitute a valid base rate that reflects the marketplace for 
inpatient hospital services as described in detail elsewhere in this preamble.  
For those 1994-1995 hospital contracts for which full contract language (rather 
than a summary of contract terms) was provided to the Commission (1,320 actual 
contracts), only rarely was any type of exclusivity language included which 
would have required a patient to use the hospital(s) specified in a contract. In 
addition, "steerage" of patients to a particular hospital has markedly decreased 
as an important factor in the determination of hospital contract rates as 
managed care contracts are updated. Typically managed care organizations 
contract with every hospital in an area. In response to a previous proposal of 
this guideline, commenters pointed out that, in the current market hospitals are 
rarely given an exclusive contract because most hospitals cannot offer all the 
services necessary, most contracts do not guarantee a particular level of 
patient days or business, and contracting with a particular plan is increasingly 
driven by the fact that a hospital does not want to be excluded as one of the 
provider hospitals in a plan rather than any probable increase in the number of 
patients. The Commission's experience and review of 1994-1995 hospital contracts 
supports this. As the Commission periodically reviews its guidelines, in the 
future, trends in hospital reimbursement including changes in provisions in more 
recent hospital contracts will be evaluated. If changes are observed which 
reflect any reversal of the lessening importance of "steerage" of patients to 
particular hospitals, that factor will be evaluated and taken into consideration 
in revising the ACIHFG. 
In addition, the fair and reasonable reimbursement provisions for the "carve 
out" services and stop-loss provisions both provide substantial protection to 
hospitals which need to provide substantially greater than normal services to a 
smaller number of patients. 
COMMENT: Commenters objected to the Commission's use of managed care contract 
rates to set rates for the ACIHFG because they contend that workers' 
compensation patients do not receive similar treatment to patients enrolled in 
an HMO/PPO plan. The commenters state that approximately 73% of workers' 
compensation patient admissions are surgical as opposed to 28% of HMO/PPO 
admissions and therefore contend that workers' compensation patients receive, on 
average, more intensive and more costly hospital services. Commenter stated that 
the surgical per diem rates in many managed care contracts are below the 
hospitals' usual price for surgical services because it is anticipated that any 
losses on the surgical admissions will be more than offset by the payments 
received on medical admissions. Commenter stated that hospitals consider their 
aggregate costs and payments for services provided to enrollees of the plan. 
Commenter believed that when the hospitals treat HMO/PPO patients the hospitals 
probably will cover their cost and make a small profit because of the money made 
on the medical cases offsets the losses on the surgical side, and this is not 
possible with workers' compensation patients because the majority of the 
admissions are surgical. The commenters recommend that the Commission establish 
rates that reflect the type and complexity of services provided to workers' 
compensation patients. Commenter stated that because many managed care contracts 
may be for large groups or employees, hospitals may accept certain contracts 
based upon member utilization of lower cost surgeries, medical admissions and 
intensive care or cardiac care services. Commenter felt that the managed care 
data complicates the issue because most managed care admissions are medical, 
pediatric, and obstetrical. Another commenter stated that managed care contracts 
are negotiated on a basis of a totally different population of patients. 
Commenter asked if hospitals were questioned about this or if any data was 
reviewed, requested or analyzed relative to this possibility and to determine 
utilization patterns, although commenter did not state whether this should have 
been done and if so why he believes that. 
RESPONSE: The Commission disagrees that workers' compensation patients receive 
more intensive and more costly hospital services than HMO/PPO patients. An 
actuarial study was performed by the nationally recognized firm of Milliman and 
Robertson, Inc. and by actuaries with extensive experience in the typical case 
mix for workers' compensation claimants and for managed care payors. The study 
utilized case mix comparisons provided by the Texas Hospital Association (THA) 
to the Commission in support of the commenters' position. However, Milliman and 
Robertson found that the commenter's position was not only insupportable but 
that workers' compensation patients received, on the average, substantially less 
intensive and costly service than the average managed care patient. Therefore 
the rates in the new ACIHFG do reflect the type and complexity of services 
provided to workers' compensation patients. See the description of this study 
elsewhere in this preamble. Milliman and Robertson utilized categories of 
hospital services, including four maternity categories, three mental health and 
psychoactive substance abuse categories, and four other hospital admission 
categories which were subdivided into medical, surgical, rehabilitation and 
unclassified admissions. The Milliman and Robertson analysis utilized the number 
of workers' compensation cases for each category of service for January through 
June of 1995 and the Medicare relative weight assigned compared with a similar 
analysis of the number of cases for a THA-supplied HMO/PPO case mix for the same 
period. When compared by category, all eleven categories were less complex for 
workers' compensation cases than for managed care cases as measured by Medicare 
weights. Milliman and Robertson noted that there were very few workers' 
compensation cases in categories other than medical and surgical and concluded 
that the complexity of medical admissions for workers' compensation cases was 
just 79.9% of HMO/PPO cases unless rehabilitation cases were added to the 
medical cases in which case the workers' compensation cases would be 85.1.0% as 
complex as HMO/PPO cases. In addition, the analysis found that Texas workers' 
compensation surgical cases were 79% as complex as HMO/PPO surgical cases. 
Testimony by hospital representatives at the public hearing on the previous 
proposal of this rule revealed that generally hospitals do not knowingly 
negotiate contract rates for any type of service where the hospitals lose money 
in providing that service. 
The Legislature in Texas Labor Code sec.413.011 mandated that the Commission 
establish fees which do not provide for payment of a fee in excess of the fee 
charged and paid for similar treatment of an injured individual of an equivalent 
standard of living or by someone acting on that individual's behalf. This 
standard may not allow the Commission to consider whether a fee to be paid under 
a contract was established with reference to other fees set for the same payor. 
If the fee is paid for similar treatment for managed care patients, arguably the 
fee paid for workers' compensation claimants should be no higher under this 
statutory standard. The Commission recognizes that absolute compliance with this 
statutory standard may not always be possible, but believes that the legislature 
intended it as a strong policy objective to which the Commission should apply 
its judgement and expertise when balancing all statutory standards and 
objectives. The Commission has used its judgment and expertise in making its 
decision to use averages of the per diem hospital rates in the 1994-1995 
hospital contracts (with the addition of approximately 7.0% to the surgical per 
diem average) as a basis of the rates in this ACIHFG. In recognition of the 
types of cases which may occur more frequently at one hospital than at another, 
the ACIHFG carves out the majority of the highest cost cases (e.g. trauma and 
burns) from the per diem reimbursement amount. These carved out cases, the 
increased surgical per diem rate, and the stop-loss provisions provide adequate 
compensation for any additional reimbursement due for workers' compensation 
patients based upon a particular hospital's possibility of a disproportionate 
case mix, case complexity, or length of stay. 
Hospitals were not questioned or surveyed regarding their acceptance of 
contracts due to member utilization of low cost surgeries, medical admissions 
and intensive care or cardiac care services, because these factors are part of 
the private negotiation process and would not normally be documented. During the 
meeting of the ACIHFG Task Force information was provided that indicated 
hospitals consider utilization when negotiating contract terms, as a result, 
utilization has already been accounted for in the contract rates.
COMMENT: Commenter questioned whether the Commission made adjustments to managed 
care contracts rates for those hospitals that provide a high level of services 
to injured workers. The commenter also questioned the relevance of managed care 
contracts to workers' compensation if these contracts do not provide for 
services to injured workers. 
RESPONSE: The Commission agrees that cases which require a high level of 
services should be taken into consideration in setting rates and the adopted 
rule does so. In recognition of the type of cases which may occur more 
frequently in workers' compensation than in the other systems, the ACIHFG carves 
out the majority of the highest cost cases (e.g. trauma and burns) from the per 
diem reimbursement amount and provides stop-loss reimbursement for cases with 
total audited charges of which exceed $40,000. This, plus the addition to the 
surgical per diem rate, should compensate for any alleged additional 
reimbursement due for cases requiring a high level of services. 
Some of the 1994-1995 hospital contracts included worker's compensation cases 
and approximately 1.3% of the contracts were for workers' compensation cases 
only. The reimbursement rates specified for workers' compensation cases in the 
managed care contracts were at rates either at or below the previous ACIHFG 
(i.e., at rates significantly less than the adopted new ACIHFG rates). The 
relevance of the managed care contracts to the ACIHFG, whether the contracts 
included workers' compensation cases or not, is demonstrated by the Texas 
Department of Health's 1995 report. The report shows that 40% of gross patient 
revenue for Texas hospitals came from Medicare and 33.3% came from third party 
payors, including payments made pursuant to managed care contracts. Because 
third party payors are the second largest payor group in terms of gross patient 
revenue, the amounts paid to hospitals by third party payors are relevant to 
determining fair and reasonable workers' compensation reimbursements to 
hospitals. 
Texas Labor Code sec.413.011, which provides that the Commission establish fee 
guidelines, specifies that those guidelines may not provide for payment of a fee 
in excess of the fee charged and paid for similar treatment of an injured 
individual of an equivalent standard of living or by someone acting on that 
individual's behalf. To comply with this legislative standard, the Commission 
reviewed the payments made for health care services outside the workers' 
compensation system. The managed care contracts are directly relevant to the 
hospital fee guideline rule-making proceeding. 
Managed care contracts, which reflect voluntarily negotiated market prices, are 
relevant to ensuring fair and reasonable reimbursement [sec.413.011(b)]. They 
show rates a business (a hospital) which voluntarily accepts patients is willing 
to accept for provision of services. 
Managed care contracts are relevant to achieving cost control [sec.413.011(b)] 
because they offer negotiated services at lower rates for the working age 
population, which is also the population of workers' compensation injured 
workers, as described elsewhere in this preamble. 
Managed care contracts are relevant to ensuring access to quality care 
[sec.413.011(b)], because as voluntarily negotiated rates, they reflect rates at 
which a hospital will continue to take patients. 
Managed care contracts are relevant to the statewide database [sec.413.007] the 
Commission is required to maintain: a database of charges, actual payments, and 
treatment protocols that is sufficient to detect practices and patterns in 
charges and payments and can be used in a meaningful way to control costs. The 
managed care contract information is highly reliable; it was obtained directly 
from the hospitals. Either copies of the actual contracts were provided or 
certified summaries of information from the contracts were provided by the 
hospitals. 
COMMENT: Commenter questioned why the Commission did not use diagnostically 
related groups (DRGs) as the basis for reimbursement in the proposed ACIHFG and 
questioned if there is an inherent flaw in using only broad categories of 
services for per diem rates. 
RESPONSE: Prospective payment methods, in addition to the per diem method 
ultimately chosen, were among the alternative reimbursement methods considered. 
Prospective payment amounts can be determined by using diagnostic-related groups 
(DRGs). The DRG method of reimbursement involves paying the hospital a 
predetermined fee based upon the patient's diagnosis rather than for example the 
length of stay or specific services provided. DRGs were not used as the 
methodology for this ACIHFG for several reasons. First, while Medicare utilizes 
DRGs, Medicare reimbursement rates for those DRGs are not based upon market-
driven forces and largely involve non-working elderly patients who may require 
longer lengths of stay and a higher percentage of co-morbidity. Second, the 
percentage of the 1994-1995 hospital contracts utilizing DRG methodologies was 
10.8% and, therefore, would not be as representative of the reimbursements as 
per diem contracts which comprised 51.5% of the 1994-1995 hospital contracts. 
Third, only about five out of the approximately 494 DRGs used by other payors 
make up an estimated 60% of inpatient hospital workers' compensation cases. No 
data was received or could be located which would indicate how the workers' 
compensation cases within these five DRG'S would be comparable to the typical 
Medicare cases in terms of complexity and intensity of care. Without such data, 
setting reimbursement rates within the statutory standard would be extremely 
difficult, if not impossible. The per diem rate methodology plus the carve out 
services results in a more careful consideration of factors. In addition, the 
Commission has not received data from hospitals based upon DRGs because DRG 
designations are not reported on bills received by the Commission and no 
additional adequate data was received from commenters or other sources to 
further assess the propriety of utilizing a DRG-type methodology. The Commission 
has insufficient data at this time to determine whether use of DRG weights with 
a per diem system would be feasible or appropriate, especially given probable 
differences in complexity of case questions in the Medicare population where DRG 
reimbursement is used. 
COMMENT: Commenter challenged the method used in the actuarial study to compare 
Medicare reimbursement to workers' compensation reimbursements. The commenter 
thought that Medicare patients within the five DRGs mentioned in the study would 
probably have an average length of stay in excess of that for an injured worker. 
The commenter thought that any conclusion in the study derived from a comparison 
of DRG payments made by lump sum with the proposed per diem amounts for the 
ACIHFG would have little meaning. The commenter concluded that dividing a DRG 
payment by the average length of stay for a Medicare patient, which is higher, 
and then multiplying the result by the average length of stay for an injured 
worker, which is lower, would seem to be inappropriate. The commenter questioned 
the relevancy of the study. The commenter also questioned how Medicare payments 
can be compared only by considering the average per diem and why the DRG data 
was not adjusted for diagnosis and procedure codes and why Medicare grouper and 
pricer models were excluded from those comparisons.  
RESPONSE: The Commission disagrees that the methodologies used and the 
conclusions reached in the actuarial study are faulty. The actuarial study was 
performed by the nationally recognized actuarial firm of Milliman & Robertson, 
Inc. and by actuaries with extensive experience in hospital reimbursements for 
both workers' compensation claimants as well as many other purchasers of health 
care; in the typical case mix for workers' compensation claimants and for 
patients of other payors; and in hospital stays by DRG mix. The study compared 
Medicare payment rates for 21 Texas cities with the previous proposed ACIHFG per 
diem rates utilizing the 1996 Medicare base rate for each of those cities which 
was multiplied by the 1996 Medicare weight published for each of the five DRGs. 
The product of the Medicare weight and the base rate was the case rate. The case 
rate was divided by the Medicare average length of stay published in the Federal 
Register to determine the implied Medicare per diem rate. No adjustment was made 
for the fact that Medicare- age patients may have more complexity for back and 
neck problems than the typical workers' compensation cases. Any such adjustment 
would have decreased the amount of the implied Medicare per diem rates and 
therefore demonstrated that the previous proposed ACIHFG rates were at an even 
higher percentage of comparable Medicare rates. The study concluded that, for 
the five DRGs, hospitals will receive higher reimbursement for workers' 
compensation patients in Texas than they do from Medicare patients in the same 
DRGs. The studies utilized data showing that the Medicare average length of stay 
was greater than for injured workers. Therefore, the payments made by Medicare 
and the payments previously proposed for the ACIHFG were compared only after 
being divided by the corresponding average length of stay for Medicare patients 
and for injured workers hospitalized in Texas. The study, therefore, was able to 
convert two different payment systems to provide an equivalent per diem rate 
comparison of payment amounts between the two systems for the most common 
inpatient, acute care hospital services rendered to Texas injured workers. 
The study is particularly relevant because Medicare is the largest payor for 
Texas hospitals (e.g., approximately 40% for 1995 year) and because of the 
statutory requirement that the Commission's fee guideline not pay more than what 
is paid for similar services for persons with an equivalent standard of living. 
While the commenter is generally correct in assuming that the methodology of the 
study included dividing a DRG payment by the average length of stay, the 
commenter incorrectly assumed that the study multiplied the result by the 
average length of stay for an injured worker because such multiplication was not 
done. The methodology of each study was clearly indicated in each report and 
those reports were and are available to the public. 
Because the Medicare price comparison study utilized Medicare DRG payment 
amounts when comparing with the previously proposed ACIHFG per diem amounts to 
be paid in the medical, surgical, and ICU categories for all procedures and 
diagnoses in those categories, no further adjustments for individual codes or 
procedures were necessary and, therefore, consideration of Medicare grouper 
models was not appropriate. 
In addition, the study did consider other possible adjustments to the Medicare 
reimbursement rate. No adjustments for outlier rates for the 5 DRGs in the 
comparison were made because the incidence of outlier claims for these DRGs 
would be relatively infrequent and would have a minor impact and because the 
previous proposed ACIHFG's stop-loss provisions would largely offset the 
additional Medicare reimbursement. No adjustment was made for Medicare 
disproportionate share and for indirect medical education because not all 
hospitals receive payments for these amounts and such payments are usually 
relatively minor. No adjustment was made for hospitals paid on a cost basis 
because this basis for payment is being phased out in favor of the Medicare 
conventional payment basis. Another reason for the decision on these possible 
adjustments was the countervailing lack of adjustment for the fact that the 
Medicare population may have more complexity for back and neck problems than the 
typical workers' compensation cases. 
Finally, after the study was completed based on the previously proposed ACIHFG, 
the Commission issued its revised proposed ACIHFG which contained increased per-
diem rates, carve outs which increases reimbursement, and lowered stop-loss 
thresholds which increases reimbursement. Therefore, inclusion of these 
additional reimbursement areas and the addition to the adopted surgical per diem 
rate has the impact of demonstrating that the ACIHFG rates are at a 
significantly higher percentage of comparable Medicare rates than indicated in 
the study. 
COMMENT: Several commenters questioned the standard of "fair and reasonable." A 
commenter expressed appreciation for recognition through carve outs of unique 
care required for some types of care but was skeptical that comparative data 
used to arrive at a reimbursement rate for cases carved out of the guideline 
will consider the increased expenses of other large teaching institutions in 
maintaining equipment and having trained staff available. Another commenter 
stated that "fair and reasonable" is most often the lowest rate of reimbursement 
that will be tolerated. A commenter questioned whether the "old guideline" now 
represents "fair and reasonable" even though this guideline was ruled invalid by 
the courts. A commenter stated that per diem rates in the "old guideline" 
(sec.134.400) are "fair and reasonable" as required by statute, stating that 
hospitals currently serve injured workers because it is in their best interests 
to do so and this meets the economic definition of "fair and reasonable" because 
no hospital has decided to refuse workers' compensation patients even though 
they are free to do so under the law. Commenter went on to state if the 
hospitals failed to accept workers' compensation inpatients, they would be 
economically worse off than if they accepted such patients. The commenter also 
stated that per diem payments, with carve outs and stop-loss, cover the 
hospitals' incremental costs of serving workers' compensation patients and make 
a reasonable contribution to the hospitals' fixed costs. 
RESPONSE: The Commission agrees that hospitals serve injured workers' because it 
is their best interest to do so and that is an indication that workers' 
compensation reimbursement is fair and reasonable. Hospital contracts reviewed 
included those of large teaching institutions. The determination of what is a 
fair and reasonable reimbursement for services which are to be reimbursed 
outside of the ACIHFG or for which a guideline provides for reimbursement at a 
fair and reasonable rate are determined on a case by case basis. Although the 
fees contained in the previous ACIHFG (sec.134.400) are not relevant to this 
rule, the Commission will respond to the commenter's question regarding that 
rule. In instances where a health care provider disagrees that the reimbursement 
paid for a service is fair and reasonable, and an applicable guideline does not 
provide for a more specific reimbursement, the health care provider can use the 
Commission's dispute resolution procedures to challenge the amount reimbursed. 
These statutory standards and objectives do not support commenter's contending 
that fair and reasonable is the "lowest rate of reimbursement" that will be 
tolerated. Fair and reasonable reimbursement takes into consideration the 
interests of all participants in the workers' compensation system by balancing 
the statutory standards to ensure injured workers receive the quality health 
care reasonably required by the nature of their injury as and when needed, to 
achieve effective medical cost control, and to ensure that the fee paid for a 
workers' compensation patient would not be in excess of the fee charged for 
similar treatment of an injured individual of an equivalent standard of living 
and paid by that individual or someone acting on that individual's behalf. Fair 
and reasonable reimbursement also takes into consideration increased security of 
payment under the Texas Workers' Compensation Act. The reimbursement amounts 
contained in the previous ACIHFG (sec.134.400) may be determined to be fair and 
reasonable on a case by case basis based upon an examination of the statutory 
standards specified for such cases. Fees in the previous ACIHFG (sec.134.400) 
were not specifically found by the Court to violate the fair and reasonable 
standard. 
The special considerations addressed by carve outs are discussed elsewhere in 
this preamble. Finally, as discussed in the preamble elsewhere, the 
consideration of hospital charges for rate-setting purposes was not utilized 
because hospital charges do not have a consistent, and rational relationship to 
either payments accepted by hospitals for services or to hospital costs. 
COMMENT: Commenters felt the establishment of the Task Force was a positive step 
forward. A commenter stated that the Task Force was not given enough time to 
develop a complete solution. Another commenter recommended the Commission 
continue the Task Force meetings to attempt to resolve disputes and questions 
specific to the ACIHFG. 
RESPONSE: The Commission agrees that the establishment of the ACIHFG Task Force 
was helpful in development of the ACIHFG. The Task Force was useful in 
presenting various views which were considered in establishing the ACIHFG and, 
for example, carve outs were incorporated due, in part, to Task Force input. 
However, there was no consensus in the Task Force on certain main aspects of 
reimbursement and the Commission believes there would be no further benefit in 
the creation of another Task Force because there was no indication of any 
ability of the different interest groups in reaching any consensus on basic 
areas of disagreement in the rate setting process within a reasonable time 
period. The Commission has applied its experience and expertise to fair and 
reasonable reimbursement for the ACIHFG. 
COMMENT: Commenter expressed surprise that only 80 hospitals receive 80% of the 
total workers' compensation reimbursements for acute care inpatient services and 
questioned whether hospitals may cease taking workers' compensation cases 
because they are such an insignificant (1.0%) portion of their business. The 
commenter also stated that the use of managed care contracts is self-defeating 
in nature, and cannot help but contribute to a further reduction in the access 
to care for injured workers. 
Commenter observed that the hospitals receiving 80% of workers' compensation 
reimbursement equated to 80 hospitals in 1994 and 77 hospitals in 1995. Twenty-
one hospitals present in the list for 1994 were no longer in the list for 1995. 
Commenter theorized that this demonstrates a decline in the number of hospitals 
willing to accept workers' compensation patients and questioned whether the 
reasons for the change had been determined. 
A commenter felt that it is reasonable to assume that the fees negotiated by 
hospitals in managed care contracts will not lead to poorer quality of care, and 
because the per diem reimbursements are based on those contracted fees, the 
quality of care should not suffer under the proposed reimbursement rates. 
Another commenter referred to a survey conducted by The Texas Orthopaedic 
Association which according to the commenter indicated that 23% of the 
physicians planned to curtail their workers' compensation services, and 
questioned what percentage of physicians accept workers' compensation patients 
and whether this percentage is applicable to hospitals without giving an 
opinion. Commenter questioned, again without commenting, how many years before 
this trend compromises care and what would be the impact on the system when 
fewer facilities and physicians are available and how this would affect injured 
workers. Commenter questioned but did not comment on what is considered a 
sufficient number of hospitals to continue providing care to injured workers in 
Texas and whether a survey was performed to determine if hospitals would curtail 
or decline injured workers as patients. 
RESPONSE: The Commission disagrees that the rates in the ACIHFG will reduce 
access to quality care for injured workers. The ACIHFG rates must balance the 
statutory standard that guidelines ensure adequate access to care and quality of 
care with the statutory standard to achieve effective medical cost control. To 
do this, the Commission has determined what reimbursements hospitals are 
contracting for in the open market of managed care. Reimbursement rates which, 
on the average, will exceed the rates negotiated in these contracts negotiated 
and voluntarily entered into by the hospitals themselves, and comprising 33.3% 
of gross hospital revenue, will provide assurance of reasonable and adequate 
compensation for workers' compensation patients. The managed care rates in the 
1994-1995 hospital contracts, on average, significantly exceed, Medicare rates 
voluntarily accepted by the hospitals and comprising 40% of gross hospital 
revenue. Therefore, hospitals will be receiving rates, on the average in excess 
of both Medicare and managed care. Therefore, access to care should not be 
affected in a negative manner by the ACIHFG. In addition, approximately 7.0% has 
been added to the average surgical per diem rate in the 1994-1995 per diem 
contracts, carve outs from the per diem amount have been added to the guideline 
and the stop-loss threshold has been lowered, increasing reimbursements to 
hospitals under the rule. 
See relevant discussions elsewhere in this preamble, including discussions of 
relevance and use of managed care contracts, rates adopted, statutory and policy 
standards, objectives, carve outs, and stop-loss threshold.
The Commission disagrees that the fluctuation in the number of hospitals in the 
top 80% indicates a decline in the number of hospitals accepting workers' 
compensation cases. The Commission has no information that any injured worker 
has been denied access to hospital care and has seen no trend in this direction. 
The fluctuation between the number of hospitals receiving 80% of workers' 
compensation reimbursement is attributed to normal, expected fluctuation in 
cases from one year to another. This fluctuation is insignificant because for 
example, the difference in reimbursement received by a hospital ranked 80 and a 
hospital ranked 81 is so small that one additional admission that amounts to a 
few thousand dollars may be enough to change the hospitals' ranking and 
potentially reduce the number of hospitals that represent the top 80% of total 
workers' compensation reimbursement. Change in the number of hospitals in the 
top 80% does not indicate hospitals are not accepting workers' compensation 
cases. Commenters question whether workers' compensation is at that point, but 
does not say whether commenter believes this is so, and why. 
In response to the commenter who questioned continued access to hospital care 
based on a Texas Orthopaedic Association survey, no connection has been made 
between a survey of orthopaedic doctors who say they will curtail their care of 
workers' compensation patients and hospitals denying care to injured workers. No 
data or information has been provided that indicates injured workers have been 
denied access to hospital care, or have been unable to obtain quality hospital 
care when needed. No information was provided that the survey was indicative of 
any access to care problems concerning orthopedic surgeons and the Commission 
has no credible or verifiable information indicating any such problem. Rather, 
information indicates an adequate number of orthopedic surgeons for workers' 
compensation patients. Additionally, no credible or verifiable information in 
the survey or otherwise was provided or is known to exist that would correlate 
the survey results with any access to care issues for hospitals.  
COMMENT: Commenters recommended that the ACIHFG be amended to require hospitals 
to complete box 18 (hour of admission) and box 21 (hour of discharge) on Form 
UB-92. Commenters felt this information would help carriers make an accurate 
determination of type of services performed. A commenter also encouraged the 
Commission to monitor hospital billing to ensure proper completion of the form 
to the same extent carrier compliance is monitored by TWCC. In addition, another 
commenter recommended that the Commission mandate that this data be 
electronically submitted to facilitate monitoring of hospital billing and 
hospital compliance with completion of these fields. 
RESPONSE: The Commission agrees in part. TWCC does monitor forms for proper 
completion of required fields. Submission of the information in box 18 and box 
21 is not currently required for proper completion of the UB-92 form for 
workers' compensation services because the type of service performed can be 
determined by the information provided in box 4 "type of service" and box 6 
"statement covers period. The TWCC Electronic Data Interface (EDI) section 
determines which fields of the UB-92 are required to be completed. Commenters 
suggestion will be forwarded to the EDI section for review. TWCC requires that 
fields 4 and 6 be completed. The information provided in these fields can 
determine whether the services performed are inpatient services or outpatient 
services. In the event that the information in these required fields does not in 
particular bills, determine the type of services performed, the carrier may 
request a bill audit to determine admission and discharge times. If the hospital 
does include this information on the UB-92, the carrier may use the data when 
auditing the bill. The carriers' bill audit review may include review of 
admission and discharge times. 
COMMENT: Commenter strongly urged that the level of inpatient reimbursement not 
be increased from reimbursement provided in the previous ACIHFG (sec.134.400). 
Another commenter recommended the proposed hospital fee guideline be withdrawn 
from further consideration. 
RESPONSE: The Commission disagrees. See relevant discussion elsewhere in this 
preamble regarding reasons for adoption of this rule and for the rates and 
provisions in this rule. 
COMMENT: One commenter suggested the rule development process costs money that 
could be spent on injured workers and has put everyone involved in the position 
of choosing sides and questioned whether the process has become so adversarial 
that everyone can no longer work together. 
RESPONSE: The Commission agrees in part. The rule development process may be 
costly, time consuming and at times adversarial; however the Commission is by 
law to follow the rule development procedures provided in the Administrative 
Procedure Act. The APA rule development procedures allow the opportunity for all 
viewpoints to be expressed and evaluated in the rulemaking process. In addition, 
the Commission appointed a Task Force to obtain additional information and to 
see if agreement or consensus could be reached by representatives of major 
participants in the workers' compensation system. However, the task force 
representatives were unable to reach a consensus on major issues concerning the 
establishment of reimbursement rates. 
The Commission notes that the rulemaking process is costly and time consuming 
for TWCC as well as for other participants. TWCC does not consider its role, its 
position on the statute and rules, or the rule as adopted to be adversarial, but 
notes that many participants appear to have adopted an adversarial position to 
TWCC as demonstrated, in part, by one or more commenters from an organization 
who have referred to obtaining authority to file suit to challenge the rule even 
before the rule is adopted. The Commission notes that hospitals have sued to 
invalidate Industrial Accident Board and Commission adopted hospital fee 
guidelines based on a variety of methodologies (cost-based ratio rate, DRG rule 
and a per diem rule). 
COMMENT: Commenter encouraged the Commission to utilize the Medical Advisory 
Committee (MAC) or another task force to make recommendations for an alternative 
payment mechanism for inpatient hospital services, due to complexity of the 
issues. 
RESPONSE: The Commission disagrees an alternative payment mechanism is 
necessary. Beginning in early 1996, the TWCC Medical Advisory Committee (MAC) 
provided input regarding the revision of the ACIHFG. In April of 1996 the MAC 
recommended to the Commission a version of the ACIHFG which was proposed in the 
July 26, 1996 Texas Register (21 TexReg 6939). This version, although modified 
later, was based on the same methodology (use of managed care contract rates) to 
develop the reimbursement rates adopted in this ACIHFG. 
The MAC by statute (Texas Labor Code sec.413.005) is to advise the Medical 
Review Division in developing and administering the medical policies, fee 
guidelines, and utilization guidelines established under the Texas Labor Code, 
sec.413.011. The MAC advises the Medical Review Division of the TWCC in the 
review and revision of medical policies and fee guidelines required under Texas 
Labor Code sec.413.012.  
In addition, following the public hearing on the previously proposed rule which 
was held on September 12, 1996, the Chairman of the Commission appointed an 
ACIHFG Task Force (the Task Force) as authorized by sec.413.006 and sec.402.067 
of the Act. The Task Force met on six occasions to exchange information and 
discuss the issues. The Commission staff took the ideas and information provided 
by the Task Force into consideration in developing its recommendation to the 
Commission. At the conclusion of the Task Force meetings on January 6, 1996, the 
members of the Task Force were invited to submit statements to the Commission 
regarding Commission staff recommendations. The statements submitted illustrated 
the divergent views regarding the appropriate methods for determining fair and 
reasonable hospital reimbursements. One Task Force member who has generally been 
in support of the proposed rule, later in a statement advocated that the per 
diem rates in the previous ACIHFG should be maintained or lowered. The 
Commission believes there would be no further benefit to creation of another 
task force. In developing this adopted new ACIHFG the Commission considered 
alternate methods of reimbursement for acute care hospital services. See 
detailed discussion of alternative payment methods considered elsewhere in this 
preamble.  
The Commission notes that hospitals have sued to invalidate Industrial Accident 
Board and Commission adopted hospital fee guidelines based on a variety of 
methodologies (cost-based ratio rate, DRG rule and a per diem rule).  
COMMENT: Commenter referred to the proposed ACIHFG and the letter from the TWCC 
executive director dated February 24, 1997 and contended that these documents 
indicate that the determination of fair and reasonable fees would be based upon 
the historical payments under a guideline ruled to be invalid and the commenter 
questioned if this was the position of the Commission. The commenter also 
questioned what the position of the Commission is regarding what constitutes a 
determination by Medical Review as to an order for reimbursement, and whether 
that means reimbursement in accordance with the now invalid guideline and if 
this would bar any collection for any re-billing of hospital claims. The 
commenter also questioned what constitutes a Medical Review order of payment.  
RESPONSE: Although the reimbursements based upon the previous sec.134.400 are 
not related to the adopted new sec.134.401, the Commission will respond to the 
commenter's inquiry. The Commission disagrees that the TWCC Executive Director's 
letter of February 24, 1997 indicated that the determination of fair and 
reasonable reimbursement would be based on the previous ACIHFG (sec.134.400). 
Neither the adopted ACIHFG nor the Executive Director's February 24, 1997 letter 
provides that inpatient, acute care hospital services rendered before the 
effective date of the new rule (134.401), will be reimbursed at the fees 
specified in the previous ACIHFG (sec.134.400). For acute care, inpatient 
hospital services provided prior to the effective date of this adopted guideline 
(sec.134.401), the Executive Director's February 24, 1997 letter indicated that 
reimbursement should be determined in accordance with the following statutory 
standards described by the term "fair and reasonable. 
Since the provisions of the Texas Workers' Compensation Act became effective, 
the Commission has utilized the term "fair and reasonable" to refer to the 
following statutory standards specified in sec.413.011(b) of the Texas Labor 
Code: medical services fees must be fair and reasonable; must be designed to 
ensure the quality of medical care and to achieve effective medical cost 
control; may not provide for a fee in excess of the fee charged for similar 
treatment of an injured individual of an equivalent standard of living and paid 
by that individual or by someone acting on that individual's behalf; and shall 
consider the increased security of payment afforded by the Workers' Compensation 
Act. These statutory standards were utilized by the Commission when proposing 
and adopting this ACIHFG and are utilized by the Commission's staff in issuing 
decisions in medical dispute resolutions under sec.413.031 of the Texas Labor 
Code when the particular medical services either are not specified in a fee 
guideline of the Commission or the particular guideline indicates that 
reimbursement shall be at a fair and reasonable rate. 
An order of the Medical Review division of the Commission concerning refunds and 
reimbursements is identified as an order when sent and is issued pursuant to 
statutory authority such as that found in sec.413.016 of the Labor Code. Any 
rebilling by hospital providers as a result of the invalidation of the previous 
ACIHFG (sec.134.400) is to be done in accordance with the rules of the 
Commission, and in accordance with the February 24, 1997 and April 25, 1997 
letters of the Executive Director and in accordance with any additional guidance 
issued. The Executive Director's February 24, 1997 letter does not bar any 
requested additional reimbursements for resubmitted hospital bills. COMMENT: 
Commenter questioned what the likelihood is of any hospital receiving 
adjustments of reimbursement paid under the ACIHFG declared invalid since the 
letter from the Executive Director excludes claims which should have been timely 
presented, including those claims for a deviation based upon medical 
justification. The commenter questioned whether this is expected to have any 
impact on access to care for injured workers. 
RESPONSE: Although the reimbursements based upon the previous rule 134.400 are 
not related to the adopted new sec.134.401, the Commission will respond to the 
commenter's inquiry. The Commission disagrees that resubmission of hospital 
bills as a result of the February 13, 1997 Texas Supreme Court ruling regarding 
the previous ACIHFG will have any affect on access to care by injured workers. 
These resubmissions deal with services which have already been rendered. In 
addition, receipt of fair and reasonable for past services should not affect a 
hospital's willingness to treat injured workers in the future. The Commission 
cannot predict what the likelihood is of a hospital receiving adjustments of 
reimbursements. Each resubmitted case will be considered on its own merits in 
accordance with the Texas Workers' Compensation Act. Claims for additional 
reimbursement to hospitals based on medical justification should have been filed 
within one year from the date of service just as any other such claim, because 
the Supreme Court ruling did not affect medical justification issues. Hospitals 
may submit bills for services provided on data beginning with the date previous 
guideline was declared invalid and the one year period for submitting bills has 
been extended to allow requests for Medical Dispute Resolution to be filed 
within a reasonable period of time. 
COMMENT: Several commenters indicated general support of the proposed ACIHFG. A 
commenter stated that this appears be one of the better written rules, that it 
explained the basis used to develop the rule, the factors considered, conclusion 
reached and anticipated and responded to several potential questions. Another 
commenter generally supported the proposed guideline in tracking the mechanisms 
most commonly used in contracts that are freely negotiated between hospitals and 
payors. 
RESPONSE: The Commission has worked hard to achieve an excellent ACIHFG and 
appreciates these comments. The Commission agrees. 
COMMENT: Several commenters expressed support for the methodology used in 
developing the ACIHFG. Comments included that the methodology is sound; that 
commenter agreed with much of the methodology set forth in the preamble and the 
approach taken; that staff did an outstanding job in putting the guideline 
together; and that staff should be complimented on the dedication and 
persistence taken to balance all the interests in a complex issue such as this 
one.  
RESPONSE: The Commission agrees. 
COMMENT: Commenters expressed different views of the statutory standard that 
TWCC guidelines may not provide for payment of a fee in excess of the fee 
charged for similar treatment of an injured individual of an equivalent standard 
of living and paid by that individual or by someone acting on that individual's 
behalf. A commenter questioned how and who makes this determination, questioned 
if this is why averages were used in the development of fees, and if this means 
the system establishes fees based upon the relative wealth, poverty or economic 
data of a geographic location. Another commenter believes the proposed rates 
violate the legislative mandate because: basing fees on the average per diem 
amounts requires employers to pay rates higher than are being demanded in the 
market for these services; the 1992 guideline overcompensated the hospitals by a 
significant amount (medical: 79% of charge; surgical: 60% of charge) and would 
take several more years of inflation before those amounts require an increase to 
satisfy the statutory standard; the preamble states the proposed per diem fees 
are higher than the workers' compensation reimbursements voluntarily contracted 
for by the hospitals that have workers' compensation clauses in their contracts 
and therefore violates the statute; when compared with Medicare rates, hospitals 
receive higher reimbursements for workers' compensation patients than they do 
for Medicare patients; and the carve outs should have resulted in a lower per 
diem rate, however there has been no calculation corresponding to the reduction 
to the average per diem rates that should have occurred when including these 
carve outs and commenter believed this violated the statute. 
RESPONSE: The Commission disagrees that the adopted ACIHFG violates the 
statutory standard of sec.413.011. In formulating the hospital fee guideline, 
the Commission carefully and fully analyzed all of the statutory and policy 
standards and objectives and all the data and information available and 
submitted, as well as all comments received. The Commission utilized all of 
this, and its expertise and experience, to formulate the hospital fee guideline 
which balances the statutory standards and objectives to ensure injured workers 
receive the quality health care reasonably required by the nature of their 
injury as and when needed and to ensure the fee guidelines are fair and 
reasonable, with the statutory standard to achieve effective medical cost 
control. The Commission obtained, analyzed and used data relevant to ensuring 
that the fee paid for a workers' compensation patient would not be in excess of 
the fee charged for similar treatment of an injured individual of an equivalent 
standard of living and paid by that individual or someone acting on that 
individual's behalf, and also took into consideration increased security of 
payment under the Texas Workers' Compensation Act (Act). If a fee is paid for 
similar treatment for managed care patients, arguably the fee paid for workers' 
compensation claimants should be no higher. A recent study provided to the 
Commission revealed that the standard of living for person's covered by managed 
care plans is equal to or greater than workers' compensation claimants. The 
study was performed by Research and Planning Consultants, Inc. and by Dr. Ronald 
T. Luke, Ph.D. J.D. who provide economic and public policy analyses to numerous 
public and private sector clients in health care matters including managed care 
organizations and who provide health cost management services with special 
attention to workers' compensation medical care cost. The study noted that 
managed care has become the dominant form of health care coverage for U.S. 
workers. The study, also, noted that many low skilled and low paying jobs do not 
carry health insurance benefits and, therefore, workers covered by managed care 
plans have an equal or higher living standard than workers in general. The study 
utilized extensive health care literature and information. The Commission 
recognizes that absolute compliance with this statutory standard is not 
possible, and believes that the legislature intended sec.413.011 as a strong 
policy objective to which the Commission should apply its judgement and 
expertise when balancing statutory standards and objectives. Absolute adherence 
to this single provision could adversely affect access to quality health care 
and fair and reasonable fees which are also statutory criterion. The Commission 
chose to average the 1994- 95 hospital contract rates in order to balance the 
statutory and policy standards and objectives of the workers' compensation Act. 
This guideline is based on managed care contract rates for the year 1994 through 
September 1995, with an approximate 7.0% addition to the average surgical per 
diem rate found in the 1994-1995 per diem contracts. It is not based on the 
previous ACIHFG (sec.134.400) rates. The comparison of rates in the previous 
ACIHFG (sec.134.400) to inflation rates is not relevant to this guideline 
methodology because the previous ACIHFG was not based on managed care contract 
rates. (See discussion of inflation elsewhere in this preamble as to how 
inflation information was considered.) 
The inclusion of carve outs in the ACIHFG is part of the balancing of statutory 
standards and objectives. Carve outs are a method of acknowledging services that 
are particularly costly in order to ensure fair and reasonable rates for 
hospitals and to ensure access to quality medical care for injured workers by 
ensuring that hospitals will continue to treat workers' compensation patients. 
(See discussion on cost methods of reimbursements and variations of hospital 
contract fees for why different fees were not set based upon the relative wealth 
poverty or economic data of a geographic location.) This ACIHFG was not based 
upon the 1992 ACIHFG and therefore, any over compensation resulting from that 
guideline was not used as a basis for this new ACIHFG. 
COMMENT: Commenter questioned whether the Commissions's conclusion was that 
since 73.3% of patient revenue comes from third party payors and Medicare, that 
these revenues are sufficient to cover hospital costs. Commenter questioned 
whether it was determined how many of these hospitals were nonprofit and if 
payments to nonprofit hospitals were adjusted to account for endowments, grants, 
charitable contributions, disproportionate share payments and/or additional 
federal and state grants. Commenter did not state whether, and why, the 
Commission should have done so. 
RESPONSE: No attempt was made to adjust rates in the contracts based on whether 
a hospital was nonprofit or not. A hospital's receipt of special subsidies such 
as disproportionate share payments, charitable contributions, government support 
and educational subsidies is already accounted for in their contract rates. 
These special subsidies are all present in the business environment in which 
hospitals operate and therefore are accounted for in negotiations of managed 
care contracts. The Texas Labor Code in sec.413.011 states that the Commission 
should ensure guidelines for medical services fees do not provide for payment in 
excess of the fee charged for similar treatment of an injured individual of an 
equivalent standard of living and paid by that individual or someone acting on 
that individual's behalf. To comply with this statutory standard, the 
Commission, in reviewing and revising sec.134.400, sought to analyze the 
hospital reimbursements contained in that rule in relation to reimbursements 
hospitals were accepting from Medicare and under contracts as payment in full 
for persons of an equivalent standard of living outside the workers' 
compensation system for treatment similar to that provided to injured workers. 
Acute care inpatient hospital services to an injured worker in an HMO/PPO would 
be paid at these contract rates if the person was injured other than at work. 
A commenter from the hospital industry who testified at the hearing on the 
previous proposed rule sec.134.400 indicated that hospitals don't contract for 
rates expecting to lose money. 
Because Medicare and third party payor sources account for the vast majority of 
hospital patient revenue, the reimbursement paid by those payors is a relevant 
basis for comparison for workers' compensation reimbursement for similar 
hospital services for persons of an equivalent standard of living. The fact that 
hospitals on average receive more than 70% of their gross patient revenue from 
choosing to participate in Medicare and managed care, indicates that the greater 
of these two rates (i.e., generally managed care rates) certainly achieves 
compliance with the statutory standards and objectives specified above and 
elsewhere in this preamble (and the Commission added approximately 7.0% to the 
average surgical per diem rate found in the 1994-1995 per diem contracts). In 
addition, the study of Milliman and Robertson, Inc. concerning the comparison of 
Medicare reimbursements to the previous proposed ACIHFG rates noted why Medicare 
payments such as a disproportionate share were not considered in that 
comparison. See detailed discussion regarding case complexity, the Milliman and 
Robertson study, and the standard of living study elsewhere in this preamble. 
COMMENT: Commenter believed a statement from the preamble that "94.8% of the per 
diem rates for the same hospital were either reduced, stayed the same, or 
increased by less than 10%" was ambiguous, and questioned what percent stayed 
the same, declined and increased less than 10%. 
RESPONSE: The Commission agrees that the figures could be clarified. The 94.8% 
figure includes a few contracts that appeared in either the 1995 group or the 
partial 1996 group of contracts received but not both. These few contracts have 
no means of comparison and should have been excluded from the 94.8% statistic. 
With this correction, the percentages are as follows: 12.5% remained the same; 
35.4% decreased; 36.99% increased less than 10%; 9.82% had no means for 
comparison; and 5.2% increased more than 10% (total is slightly less than 100% 
due to rounding).  
COMMENT: Some commenters felt the proposed per diem rates were too low, do not 
cover costs, and are grossly inadequate. While some commenters felt all the per 
diem rates were inadequate, some expressed the opinion that the surgical rates 
which according to the commenter comprise 80% of the workers' compensation 
admissions and/or the ICU rates were particularly low to cover the complexities 
associated with a workers' compensation admission. Commenters stated that 
surgical admissions comprise a high percentage of the workers' compensation 
admissions and that the proposed surgical rates do not cover the expenses for 
treating injured workers. THA submitted a financial analysis and stated that the 
analysis showed the proposed per diem rates will not cover the estimated costs 
of providing inpatient services to workers' compensation patients, with most of 
the losses occurring on surgical admissions. THA also expressed the view that 
the stop-loss provision and carve outs included in the proposed rule will reduce 
but does not eliminate losses on workers' compensation surgical cases and that 
decreased lengths of stay resulted in the costs of services being compressed 
into a shorter period of time. THA also contended that hospitals will make a 
small gain on medical admissions but because medical constitutes only 27.0% of 
workers' compensation admissions, those gains do not off set the loss on 
surgical admissions. Commenter stated that based on a TWCC analysis the average 
length of stay has decreased from 4.4 in 1993 to 3.2 in 1996 and therefore, 
hospital payment rates will be set too low.
RESPONSE: The Commission disagrees that the proposed per diem rates are too low 
and will not cover hospital costs. The Commission considered alternative methods 
for reimbursement and found cost-based methodologies to be questionable as 
explained in the following sentences. The Texas Hospital Association's financial 
analysis which shows the proposed per diem rates will not cover hospital costs 
is based on the use of a cost-based reimbursement system. This system is based 
upon data from THA's own proprietary data base and the TWCC database. The cost 
calculation on which THA's model, as well as other cost-based models, was 
derived, use hospital charges as its basis. Each hospital determines its own 
charges. The hospital charge data in the Commission's database, as with all 
hospital charge data, shows that it is well above the actual fees paid for most 
hospital services. A study by Commission staff indicated that charges for 
surgical hospital admissions (per TWCC billing database) increased by 107.0% 
from 1992 to 1996 and by 65% from 1993 through 1996, whereas for those same 
periods of time the Consumer Price Index (CPI) reflected an inflation rate of 
16% and 12% respectively, and the Medical Care Services group of the CPI 
reflected an inflation rate of 29% and 18% respectively. For these reasons, 
hospital charges are not a valid indicator of a hospital's costs of providing 
services nor of what is being paid by other payors. Therefore, under a so-called 
cost based system a hospital can independently affect its reimbursement without 
its costs being verified. The cost-based methodology is therefore questionable 
and difficult to utilize considering the statutory objective of achieving 
effective medical cost control and the standard not to pay more than for similar 
treatment to an injured individual of an equivalent standard of living contained 
in Texas Labor Code sec.413.011. There is little incentive in this type of cost-
based methodology for hospitals to contain medical costs. 
In order to determine what reimbursements were being paid to hospitals outside 
the workers' compensation system, the Commission sought a source of accurate, 
verifiable data. The Texas Department of Health, Bureau of State Health Data and 
Policy Analysis' 1996 report from its annual survey of hospitals, revealed that 
in 1995 Texas acute care hospitals received 40% of their gross patient revenue 
from Medicare, and 33.3% from third party payors. Because these sources account 
for the vast majority of hospital patient revenue, the reimbursements paid by 
these payors is a relevant basis for comparison between workers' compensation 
reimbursements and these other major reimbursement systems for similar hospital 
services for persons of an equivalent standard of living, and for establishing 
fair and reasonable fees for workers' compensation. The fact that hospitals on 
average receive more than 70% of their gross patient revenue from choosing to 
participate in Medicare and managed care, indicates that the greater of these 
two rates (i.e., generally managed care rates) certainly achieves compliance 
with the statutory standards and objectives specified above and elsewhere in 
this preamble. In addition, at the public hearing on the previous proposal of 
the ACIHFG, testimony by hospital representatives admitted that hospitals do not 
knowingly negotiate contract rates for any type of service which will cause the 
hospitals to lose money in providing that service. 
The hospital contracts and summaries were analyzed to determine what types of 
services and/or supplies were reimbursed outside ("carved out of") the per diem 
rates in the contracts. All carved out items and services that are in any of the 
1994- 95 hospital contracts (even those in less than 1.0%) and are applicable to 
typical workers' compensation cases are included as carve outs in this rule, and 
this increases reimbursement. 
Other provisions which serve to increase reimbursement include a stop-loss 
provision, the threshold for which and the percentage reimbursement for which 
was determined from the 1994-1995 hospital contracts. 
In response to the commenter's suggestion that decreased lengths of stay be 
considered in the reimbursement methodology, a study by actuaries of Milliman 
and Robertson, Inc. utilizing data maintained by that national actuarial firm 
for managed care hospital stays, incorporated assumptions of an overall average 
length of stay of 3.3 days with an average length of stay for medical and 
surgical admissions of 3.9 days. These lengths of stay compare with 1995 data of 
the Commission of an overall length of stay of 4.8 days for medical cases and 
3.5 days for surgical cases. Therefore, unlike Medicare patients with 
significantly longer lengths of stay, any differences in lengths of stay between 
managed care patients and workers' compensation patients were not substantial as 
reviewed in the Milliman and Robertson study. Hospital contracts and summaries 
of those contracts reviewed by the Commission did not include average lengths of 
stay for cases under such contracts, but the Commission has not received or been 
able to locate any source indicating that the lengths of stay are substantially 
different for the managed care patients. Therefore, it can be assumed that 
managed care contracts are negotiated with this factor in mind and that the 
rates in the managed care contracts are sufficient reimbursement.  
See also, relevant discussions elsewhere in this preamble, including discussions 
of data, Medicare rates comparison, use of managed care contracts, complexity of 
cases, steerage, methods of reimbursement, per diem chosen, per diem rates 
adopted, tiered per diems, stop-loss, carve outs, inflation and THA's 
alternative proposal. 
COMMENT: Commenter expressed the opinion that using an average of the 
reimbursements found in managed care contracts to establish workers' 
compensation reimbursements is not in keeping with the statute that mandates the 
guidelines may not provide payment of a fee in excess of the fee charged for 
similar treatment of an injured individual of an equivalent standard of living. 
Commenter stated the results of the proposed guideline exclusion of carve outs 
and other provisions would be reimbursements even above the median or average 
rate and recommended lowering the percentile or using the bottom 25 percentile 
rather than the median. Commenter felt that the Commission should focus on the 
lowest rates offered in the managed care contracts, not on the average and have 
a much lower rate of in reimbursement. 
RESPONSE: The Commission disagrees that the lowest rates offered in the managed 
care contracts must be or should be used as a basis for the ACIHFG. The 
Legislature in Texas Labor Code sec.413.011 states that the Commission establish 
fees which do not provide for payment of a fee in excess of the fee charged and 
paid for similar treatment of an injured individual of an equivalent standard of 
living or by someone acting on that individual's behalf. This standard does not 
stand alone. The Commission is additionally required to establish guidelines 
which balance the various interests in the workers' compensation system by 
ensuring that medical services fees are fair and reasonable, that injured 
workers receive quality health care reasonably required by the nature of their 
injury as and when needed, and that effective medical cost control is achieved. 
Average per diem rates in the 1994-1995 hospital contracts were utilized rather 
than the lowest per diem rates because most rates were closer to the average 
than to either the higher or lower rates, because averaging minimizes the 
effects of outliers, because the lowest rates may not accurately reflect 
hospitals economic factors for all the hospitals with greater rates and because 
a reimbursement based on an average rate will be a greater incentive for 
maintaining access to quality health care than use of the lowest rates. An 
additional approximate 7.0% was added to the average surgical per diem found in 
the 1994-1995 per diem contracts, to ensure access to quality health care and as 
an additional protection to ensure fair and reasonable rates for surgical cases. 
In formulating the hospital fee guideline, the Commission carefully and fully 
analyzed all of the statutory and policy standards and objectives and all the 
data and information available and submitted, as well as all comments received. 
The Commission obtained, analyzed and used data relevant to ensuring that the 
fee paid for a workers' compensation patient would not be in excess of the fee 
charged for similar treatment of an injured individual's behalf, and also took 
into consideration increased security of payment under the Texas Workers' 
Compensation Act (Act). If the fee is paid for similar treatment for managed 
care patients, arguably the fee paid for workers' compensation claimants should 
be no higher, as argued by commenter. However, the Commission recognizes that 
absolute compliance with this statutory standard is not possible, and believes 
that the legislature intended sec.413.011 as a strong policy objective to which 
the Commission should apply its judgment and expertise when balancing statutory 
standards and objectives. Strict adherence to this single provision could 
adversely affect access to quality health care and fair and reasonable fees 
which are also statutory criterion. 
COMMENT: Some commenters suggested using a tiered per diem reimbursement scheme 
for surgical cases. Commenter suggested in the alternative, a case payment 
method. Commenter supported a tiered per diem as long as it did not result in 
workers' compensation paying more for a surgical admission than other payors. 
Recommendations related to using a tiered per diem scheme include: ensuring that 
the entire payout for the hospital stay does not exceed the cost of an 
equivalent stay under the managed care contracts; if the new guideline includes 
a tiered per diem, the proposed carve outs, which are based on the most common 
carve outs in the 1994-1995 hospital contracts should be narrowed; and that 
reimbursement for surgical services for the first two days be slightly higher 
than $1,045, and slightly less than that amount for subsequent days to encourage 
shorter lengths of stay where medically appropriate while still ensuring fair 
and reasonable reimbursement. A commenter expressed the opinion that using a 
tiered per diem is not consistent with the goal of basing the new guideline on 
the most common practice in negotiated contracts as a majority of contracts with 
per diem do not have tiering. Another commenter felt that tiered per diem rates 
is a way to deal with losses hospitals would incur for surgical admissions under 
the proposal. Commenter suggested that the Commission would not consider using a 
tiered per diem approach because it is not in the managed care contracts. 
RESPONSE: The Commission agrees that using a tiered per diem is not consistent 
with the methodology of basing the new guideline on the most common practice in 
negotiated contracts. 
The Commission disagrees that using a tiered per diem for surgical cases or a 
case payment method should be used for the ACIHFG. The Commission carefully and 
fully considered tiers. All data and information the Commission has or which was 
submitted to the Commission were considered. Analysis of the 1994-1995 hospital 
contracts and summaries received by the Commission revealed that only 97 of the 
1,321 per diem contracts contained some form of tiered per diem for surgical 
admissions. A per diem rate is said to be "tiered" when there is a difference in 
reimbursement based on which day of the hospital stay is being reimbursed. 
Although tiering surgical per diem rates may have some merit based on the 
allegation of THA and others that more hospital resources may be expended on the 
day of surgery than on the following days, the Commission chose not to use 
tiered per diems in this ACIHFG because, in the 1994-1995 hospital contracts and 
summaries, tiering was not the predominant method of utilizing per diem 
reimbursements. The Commission has no information to indicate that the per diem 
rates in the non-tiered managed care contracts do not represent services with 
various lengths of stay and various types and severity of injury/illness, and, 
in fact, believes that they do. As only 4.0% of the 1994- 95 hospital contracts 
carve out trauma, consideration of front loaded expense and severity should have 
been factors in negotiating the contract and thus in their negotiated and agreed 
per diem rates, and thus in the per diem rates adopted by the Commission. 
However, if there is front loaded expense and severity not accounted for in the 
managed care contracts, other provisions in the ACIHFG as adopted by the 
Commission will compensate for this, as they increase actual reimbursement. (See 
discussions elsewhere in this preamble regarding the exemption of certain small 
hospitals in subsection (a)(1), stop-loss, carve outs, and outpatient services.) 
In addition, any need for greater reimbursement for the first day for additional 
services is balanced by any need for lesser reimbursement for fewer services 
during the later part of a length of stay. In other words, the uniform per diem 
averages reimbursement needs for each day of the length of stay. The vast 
majority of 1994- 95 hospital contracts utilize a uniform per diem rate for each 
day of a surgical admission. Finally, because the average length of stay for 
surgical cases has declined on the average to be similar to surgical lengths of 
stay for managed care contracts, there was no need for a tiered per diem as a 
device to limit the lengths of stay. Case payment methods such as using DRGs 
were rejected as a method of reimbursement in the ACIHFG. See the detailed 
discussion of the reasons for this elsewhere in this preamble. The Commission 
therefore concluded that tiered surgical rates are not necessary for a rate to 
be fair and reasonable, or to ensure access to quality health care. 
COMMENT: A commenter gave an example as to why the proposed reimbursement for a 
surgical admission is not enough to cover the costs of a workers' compensation 
patient. Commenter stated the first day of a hospitalization could easily result 
in charges of $5,000 or more. 
RESPONSE: The Commission agrees the situation described by the commenter is 
plausible. However, the commenter's example, is just as plausible for patients 
under managed care. Therefore, this would have been taken into consideration 
when negotiating reimbursements for managed care contracts. Because the 
Commission utilized managed care contracts to establish workers' compensation 
rates, this situation has been accounted for. In addition, the guideline adds 
approximately 7.0% to the average surgical per diem found in the 1994-1995 per 
diem contracts, and includes provisions which carve out very high cost cases and 
allow reimbursement at a fair and reasonable rate. 
The Commission considered alternative methods for reimbursement and found cost-
based methodologies to be questionable. The Texas Hospital Association's 
financial analysis which shows the proposed per diem rates will not cover 
hospital costs is based on the use of a cost-based reimbursement system. This 
system is based upon data from THA's own proprietary data base and the TWCC 
database. If the commenter was implying that charges are closely related to 
costs, the Commission notes that the cost calculation on which THA's model, as 
well as other cost-based models, was derived utilized hospital charges as its 
basis. Each hospital determines its own charges. In addition, a hospital's 
charges cannot be verified as a valid indicator of its costs. A study by 
Commission staff comparing hospital charges and payment amounts revealed 
substantial and non-uniform differences between charges and what is being 
accepted by hospitals as payment, and a 107.0% increase in surgical hospital 
admission charges per the TWCC billing database in the same time period in which 
the Consumer Price Index (CPI) inflation rate was 16% and the Medical Care 
Services section of the CPI inflation rate was 29%. Therefore, under a so-called 
cost based system a hospital can independently affect its reimbursement without 
its costs being verified. The cost-based methodology is therefore questionable 
and difficult to utilize considering the statutory standards and objectives of 
achieving effective medical cost control and not to pay more than for similar 
treatment to an injured individual of an equivalent standard of living contained 
in Texas Labor Code sec.413.011. Finally, as explained in response to other 
comments and elsewhere in this preamble, the per diem rates (which include an 
additional 7.0% for surgical cases), balance any more costly services the first 
day with any less costly services during the additional days of the length of 
stay for patients. 
See also, relevant discussions elsewhere in this preamble, including discussions 
of data, Medicare rates comparison, use of managed care contracts, complexity of 
cases, steerage, methods of reimbursement, per diem chosen, per diem rates 
adopted, tiered per diems, stop-loss, carve outs, inflation and THA's 
alternative proposal. 
COMMENT: One commenter felt that since 80 hospitals received 80% of the 
admissions for injured workers, that these hospitals are facing a far greater 
financial penalty by handling these cases than the other 400 plus hospital 
facilities. 
RESPONSE: The Commission disagrees that the top 80 hospitals are penalized 
because they handle 80% of workers' compensation cases. The hospitals that 
received 80% of the workers' compensation dollars in 1995 were the hospitals 
that submitted managed care contracts. The analysis of their managed care 
contracts reflects what acute care hospitals that receive the largest total 
reimbursement from the workers' compensation system are willing to accept for 
payment of care in non- workers compensation health care systems. Some of these 
hospitals are entering into managed care contracts for rates lower than those 
proposed in this guideline; this illustrates that these hospitals are not being 
financially penalized by the adopted rates. Establishing the reimbursement in 
the ACIHFG based on the average of what these hospitals are voluntarily 
negotiating in the open market for similar services (plus approximately 7.0% for 
surgical cases) cannot be viewed as penalizing these hospitals, especially when 
carve outs, and stop-loss increase reimbursement. Participation in the workers' 
compensation system is voluntary. Finally, the fair and reasonable rates for 
certain small hospitals exempted under subsection (a)(1) may or may not result 
in greater or lesser reimbursement than the per diem amounts. This is due to the 
case by case decisions made by insurance carriers and, when appealed, the 
medical dispute resolution process. See, also, relevant discussion elsewhere in 
this preamble, including discussion of data, Medicare rate comparison, use of 
managed care contracts, complexity of cases, steerage, methods of reimbursement, 
per diem chosen, tiered per diem, stop-loss, carve outs, and inflation. 
COMMENT: Commenter stated that there is a significant surplus (less than half of 
the licensed beds in the state are filled on any given day) of inpatient 
hospital capacity in Texas and that hospitals are therefore willing to provide 
services as long as the incremental revenue is expected to cover the incremental 
costs of the patient and make some contribution toward fixed costs. Commenter 
believes that hospital overbuilding is not a valid reason for TWCC to set fee 
schedules that result in employers paying for this overinvestment.
RESPONSE: The Commission disagrees that ACIHFG per diem rates have been set so 
as to pay for any over investment by hospitals as the result of overbuilding. 
The Commission has not utilized a cost-based system for the reasons specified 
elsewhere in this preamble. Rather, the Commission has used the average per diem 
rates in managed care contracts negotiated between hospitals and payors (plus 
approximately 7.0% for surgical cases). Per diem rates reflect economic forces 
in the market place, including but not limited, investments by the various 
hospitals in buildings. The Commission feels the use of these market-determined 
rates will not artificially encourage or discourage building investments by 
hospitals. The Commission agrees the significant number of empty hospital 
licensed beds in Texas is a factor that has been considered in negotiating 
managed care contracts and contributes to hospitals' willingness to provide 
services to beneficiaries of managed care contracts as well as injured workers 
in the workers' compensation system at competitive rates. 
COMMENT: Commenter questioned whether any comparisons were performed to 
determine if the reimbursement inducements in the ACIHFG are related to existing 
contracts the hospitals may have with insurance companies or employer groups. 
Commenter did not comment on whether or why the Commission should have done such 
comparison. 
RESPONSE: It is unclear what the commenter meant by "existing contracts". 
Managed care contracts were received from hospitals which came in effect for 
dates of services on or after January 1, 1994 through October 1, 1995. When the 
contracts were reviewed, an effort was made to determine, based on the language 
in the contracts, what factors influence the rates hospitals were willing to 
accept. All carved out items and services that are in any of the managed care 
contracts (even those in less than 1.0%) and are applicable to typical workers' 
compensation case are included as carve outs in this rule and increase 
reimbursement. Reimbursement methods for the carve outs are based on the 1994-
1995 hospital contracts. Other provisions which serve to increase reimbursement 
include the addition of approximately 7.0% to the surgical per diem rate, a 
stop-loss provision, the threshold for which and the percentage reimbursement 
for which was determined from the managed care contracts. If "existing 
contracts" refers to more recent contracts, the Commission notes that many of 
the contracts for the period of October 2, 1995 through October 1, 1996 
maintained the same provisions including the same rates. See also, elsewhere in 
this preamble discussion on carve outs and stop-loss provision. 
COMMENT: Commenter challenged the conclusion in the preamble to the proposal 
that the utilization of per diem contracts is increasing and that this is 
sufficient reason to conclude that per diem reimbursements are sufficient when 
based on broad categories of services. Commenter asked if managed care contracts 
were compared to hospital admissions to determine utilization patterns without 
commenting on whether or why the Commission should have done so.
RESPONSE: The Commission disagrees that the utilization of per diem contracts by 
hospitals is not sufficient reason to set per diem reimbursements in the ACIHFG. 
The per diem method was chosen for sec.134.401 because the per diem method of 
reimbursement was the most commonly used (51.5%) method for inpatient hospital 
reimbursement in the hospital contracts, because of the disadvantages of other 
payment methods, because this is the method used in rule sec.134.400 for 
workers' compensation inpatient hospital reimbursement and therefore allows 
greater continuity in administrative billing procedures, and because the per 
diem method has advantages in administrative convenience in billing and review 
of bills. The Commission's analysis of managed care contracts indicates that in 
the open market where hospitals have a choice, per diem contracts constitute the 
majority of negotiated reimbursement methodologies. Industry wide acceptance of 
per diem rates is evidence that per diem methodology is appropriate for the 
ACIHFG. Preliminary analysis of the contracts for the period October 1995 
through October 1996 shows little or no change in the average per diem 
reimbursement rates and shows that the total number of contracts that have per 
diem rates is increasing. 52.6% of the hospitals have more per diem contracts 
than before. The managed care per diem contracts set separate rates for medical 
services, surgical services, and intensive care unit services or for combined 
medical/surgical. The per diem managed care contracts do not break the fees down 
into smaller segments of treatments and services, or into a larger number of 
categories. Rather, the one inclusive fee for each of the medical, surgical, and 
ICU categories of service in the managed care contracts shows that it is 
appropriate to have one fee for medical, one fee for surgical, and one fee for 
ICU/CCU for workers' compensation. See elsewhere in this preamble for further 
detail of the Commission's analysis of managed care contracts and use of per 
diem reimbursement. The Commission lacks the resources to compare managed care 
contracts to hospital admissions to determine utilization patterns, and does not 
think this comparison is necessary because as indicated by hospital members of 
the ACIHFG Task Force, utilization patterns are considered in the negotiation of 
managed care contracts.
COMMENT: Commenter stated there appears to be no effort on the part of the 
Commission to consider, analyze, or recognize the discounts or deviations 
applied to workers compensation fee schedules in the managed care contracts 
applicable at the time these managed care contracts were entered into by the 
hospitals; and since many of these discounts from fee schedules are for a 
limited patient population, which the may or may not be related to workers' 
compensation, and may only present a limited utilization of a specific 
hospital's services, the Commission appears to be recommending fees below what 
is termed fair and reasonable. 
RESPONSE: The Commission disagrees. The presence of hospital contracts that 
include discounts from the previous TWCC fee schedule indicates that hospitals 
are willing to accept as fair and reasonable reimbursement rates below the 1992 
ACIHFG. This further supports the sufficiency of the adopted rates which overall 
provides an increase in reimbursements for acute care inpatient services. In 
addition, the overall use of managed care contracts in Texas (i.e., 33.3% of 
total gross patient revenue from third party payors in 1995 with an additional 
40% being for Medicare patients) indicates that most of the working population 
in Texas are covered by such contracts. See, also, relevant discussions 
elsewhere in this preamble, including discussion of data, Medicare rate 
comparisons, use of managed care contracts, complexity of cases, steerage, 
methods of reimbursement, per diem chosen, rates, stop-loss, carve outs, and 
inflation. Furthermore, the suggestion to consider, analyze or recognize 
discounts or deviations is irrelevant to the development of the adopted ACIHFG 
since those discounted rates not specified as per diem rates, were not included 
in the calculation of average managed care contracts per diem rates. 
The commenters assertion that the discount from the previous TWCC fee schedule 
applies to a limited patient population is incorrect in that these discounts 
apply to all workers' compensation patients. Workers' compensation patients have 
access to all hospital services and utilization is not limited. 
COMMENT: Commenter believed that by using reimbursements set in the managed care 
contracts the ultimate reimbursement is left in the control of the hospitals, a 
strategy rejected in the preamble. Commenter questioned why discount from fees 
is appropriate in a managed care contract but not appropriate in developing fees 
based upon managed care contracts. 
RESPONSE: The Commission disagrees that basing the ACIHFG on fees in managed 
care contracts places the ultimate reimbursement in the hands of the hospital in 
the same way a discount from charge methodology would. Managed care contracts 
are a result of negotiations between the provider and the insurance carrier. 
These contracts therefore take into consideration the market conditions from the 
view points of both parties to the contract. The hospitals are not in full 
control of contract rates as they are in control of charges. The discount from 
charge method was found unacceptable for workers' compensation because it leaves 
the ultimate reimbursement in the control of the hospital, thus defeating the 
statutory objective of effective cost control and the statutory standard not to 
pay more than for similar treatment of an injured individual of an equivalent 
standard of living. In addition it provides no incentive to contain medical 
costs. The per diem method was chosen for the ACIHFG because of the 
disadvantages of other payment methods (discussed elsewhere in this preamble), 
because the per diem method was the most common method used in the hospital 
contracts, because per diem reimbursement was the method used in the previous 
ACIHFG (which allows greater continuity in administrative billing procedures), 
and because the per diem method has advantages in administrative convenience in 
billing and review of bills. 
See, also, relevant discussion elsewhere in this preamble, including discussion 
of use of managed care contracts, cost-based methodologies, and choice of per 
diem method. 
COMMENT: Commenter questioned whether it is appropriate to average contract 
rates and per diem rates for Medicare but to discount and not consider nor give 
any weight to other essential elements critical to any comparison of the data. 
RESPONSE: Medicare rates were considered but were not utilized as the principal 
basis of per diem rates in this ACIHFG. Medicare rates were used for comparison 
purposes and indicate that reimbursements for Medicare patients paid at rates 
often lower than these ACIHFG rates, have been accepted by hospitals even when 
more complex and costly services may be required. It is unclear what "essential 
elements" the commenter is referring to. The Commission has expended extensive 
efforts in considering other elements including those presented in the Hospital 
Task Force. The Task Force discussion resulted in the inclusion of substantial 
carve outs, and the lowering of the stop-loss threshold from the previous ACIHFG 
(sec.134.400). Other elements considered included: 1) the amounts currently 
accepted by hospitals as payment in full under contracts for acute care 
inpatient services and for Medicare patients when setting the per diem rates; 2) 
non-workers' compensation data; 3) the security of payment in the workers' 
compensation system resulting from the absence of co-payments and deductibles 
which are included in some managed care contracts; 4) reimbursement to acute 
care hospitals which is sufficient to induce a sufficient number of hospitals to 
continue in the system to ensure access to quality medical care for injured 
workers in Texas. The Commission is to establish guidelines which balance the 
various interests in the workers' compensation system by ensuring that medical 
services fees are fair and reasonable, that injured workers receive quality 
health care reasonably required by the nature of their injury as and when 
needed, and that effective medical cost control is achieved and this rule does 
that based on Commission expertise and experience. 
The Commission chose to average the per diem managed care contract rates in 
arriving at the rates in the ACIHFG to balance the statutory and policy 
standards and objectives of the Workers' Compensation Act. Averaging minimizes 
the effect of outliers in the data because most rates were closer to the average 
than to either the higher or lower rates, because the lowest rates may not 
accurately reflect hospital economic factors for all the hospitals with greater 
rates and because a reimbursement based on an average rate will be a greater 
incentive for maintaining access to quality health care than use of the lowest 
rates. However, out of an abundance of caution to ensure access to quality 
health care and as an additional protection to ensure fair and reasonable rates 
for surgical cases, the Commission increased the surgical reimbursement rate in 
the adopted ACIHFG from the per diem contract average rate of $1,045 per day to 
$1,118 per day. See detailed discussion elsewhere in this preamble.  
COMMENT: Commenter questioned why weighted averages and median charges were not 
considered for this guideline, but they were utilized in other fee guidelines. 
Commenter did not comment on whether and why the Commission should have used 
these methodologies. 
RESPONSE: Charges, including median charges, were not utilized in development of 
the ACIHFG because each hospital determines its own charges. In addition, a 
hospital's charges cannot be verified as a valid indicator of its costs. This is 
exemplified by a study by Commission staff which indicated that charges for 
surgical hospital admissions (per TWCC billing database) increased by 107.0% 
from 1992 to 1996 and by 65% from 1993 through 1996, whereas for those same 
periods of time the Consumer Price Index (CPI) reflected an inflation rate of 
16% and 12% respectively, and the Medical Care Services group of the CPI 
reflected an inflation rate of 29% and 18% respectively. For these reasons, 
hospital charges are not a valid indicator of a hospital's costs of providing 
services nor of what is being paid by other payors. 
Weighted averages were not used because of the difficulty in establishing 
appropriate weighting methodologies. Weighted averages were not necessary 
because the distribution of contract per diem rates was concentrated around the 
average rate. Similar methodologies are not necessarily appropriate for every 
guideline. Considerations must be given to many factors when developing 
guideline methodology including data available to be analyzed, market practices 
and trends, as well as statutory standards and objectives. 
COMMENT: Commenter expressed concern that the rule does not make a provision for 
increasing rates over time to account for the effects of inflation on hospital 
costs. 
RESPONSE: The Commission disagrees that an inflation factor should be included. 
Inflation factors are not the same each year, and in fact they can indicate 
decreases as well as increases in costs. Such factors cannot be accurately 
predicted into the future. It would therefore be unwise to try to predict future 
inflation factors and provide for an automatic predetermined future adjustment 
in the reimbursement rates provided in the ACIHFG. 
The hospital reimbursements in the new ACIHFG are sufficient to account for the 
inflation of 12% reflected in the CPI for the period from 1993 to 1996, and the 
new ACIHFG's estimated 17.4% increase over rates contained in the previous 
ACIHFG (which percentage does not account for any possible increased 
reimbursement due to the exemption of certain small hospitals under subsection 
(a)(1)) is just under the Medical Care Services CPI of 18% for the period 1993 
to 1996. 
In addition, preliminary analysis of approximately 300 newer per diem managed 
care contracts for the period October 1995 through October 1996, which have been 
reviewed by the Commission indicates that with the exception of a few contracts, 
there was little or no change in the average per diem reimbursement rates ($863 
medical per diem, $1,015 surgical per diem, and $1,537 ICU per diem) when 
compared to the average per diem rate of the contracts and summaries obtained 
earlier by the Commission. This preliminary analysis also indicates the total 
number of contracts that have per diem rates is increasing. In addition, a 
comparison of the newer contracts to the earlier contracts for the same 
hospital(s) indicates that 52.6% of these hospitals have more per diem contracts 
than before. A comparison of the averages of the newer contract rates to the 
earlier contract rates for the same hospital(s) shows that of the 692 per diem 
rates in the newer contracts 84.96% of the per diem rates were either reduced, 
stayed the same, or increased by less than 10%. Based on the comparison to 
inflation rates and the rates in the more recent contracts, the Commission 
concluded that an overall future inflation adjustment for the adopted rates is 
not necessary to ensure fair and reasonable rates for these hospitals or to 
ensure access to quality health care for injured workers by ensuring that 
hospitals will continue to treat workers' compensation patients. However, out of 
an abundance of caution to ensure access to quality health care and as an 
additional protection to ensure fair and reasonable rates for surgical cases, 
the Commission increased the surgical reimbursement rate in the adopted ACIHFG 
from the per diem contract average rate of $1,045 per day to $1,118 per day. See 
detailed discussion elsewhere in this preamble. The Center for Health Care 
Industry Performance Studies' 1996-1997 Almanac of Hospital Financial and 
Operating Indicators (as reported in Medical Benefits, October 30, 1996) reports 
that U. S. hospitals in high managed care markets realized significant 
improvements in profitability during 1995 and are more profitable than hospitals 
that operate in lower managed care markets. In addition, the Almanac reports 
that profitability in the hospital industry reached a five-year high in 1995. 
This publication presents information on hospital performance in 1995 and 
reviews performance measures for the past five-year period.
The U.S. Prospective Payment Assessment Commission, a federal advisory panel, 
voted in January of 1997 to recommend no change in Medicare payment rates for 
hospitals. N.Y. Times, January 19, 1997. The panel concluded that hospitals had 
effectively controlled their costs, so that existing Medicare rates were 
generally adequate. Spokesmen for the advisory panel indicated that its 
recommendation would not harm the quality of health care or access to care for 
beneficiaries in the Medicare program. They indicated that Medicare hospital 
costs have been declining while Medicare payments have increased at a moderate 
rate, favorably affecting the profitability of the hospitals' Medicare business. 
In fact, the advisory panel's figures show that the operating expense for each 
Medicare patient has actually declined in the three year period of 1993 through 
1995. The article states that the cost of medical care, as measured by the CPI, 
rose last year by just 3%, the smallest amount in three decades, and the first 
time since 1980 that medical prices rose less than the overall index. In 
addition, the article reports that economists told Congress last month that the 
CPI tends to overstate inflation. The advisory panel's recommendations and data 
and the statements regarding CPI inflation figures and medical care inflation 
provide additional indicators of why an inflation factor is not justified for 
the average, managed care contract rates existing in Texas through October of 
1995. 
All of these indicators support not including an overall future inflation factor 
in the adopted rates of the ACIHFG. 
COMMENT: Commenter questioned the Commission's conclusion that because the 
consumer price index (CPI) and hospital charge data were not comparable, 
hospital charges were not valid indicators of hospital costs. Commenter asks if 
this is a clear indicator of the need for hospitals to try and cost shift 
through increased charges because 73.3% of their business may well be at or 
below costs. Commenter asks if this is a factor in the increased consolidations, 
mergers, acquisitions, and the reduction in the number of non-profit hospitals. 
Commenter did not state a position on the subject or comment on whether or why 
the information requested would be relevant to the proposed ACIHFG .
RESPONSE: The Commission disagrees the workers' compensation system should 
compensate for inadequate or lower reimbursements in other systems. In addition, 
the workers' compensation system should not compensate for hospitals that are 
inefficient or poorly managed. The Workers' Compensation Act provides that 
guidelines for medical service fees may not provide for a payment of a fee in 
excess of the fee charged for similar treatment of an injured individual of an 
equivalent standard of living and paid by that individual or someone acting on 
that individual's behalf. Workers' compensation fees are not to subsidize the 
provision of non- workers' compensation medical care, including that which is 
subject to managed care. (Research Papers of the Joint Select Committee, 
September 1988, Chapter 6). The Commission disagrees with the commenters 
conclusion that 73.3% of hospital business is at or below cost. The fact that 
hospitals receive the vast majority of their gross patient revenue from choosing 
to participate in Medicare and managed care indicates that reimbursements 
received from those payors are sufficient to cover the hospitals' costs.  At a 
recent hearing for the Texas Healthcare Information Council regarding the 
Hospital Discharge Data Rule, representatives from Columbia Mainland Medical 
Center, Columbia Doctor's Regional Medical Center and Park Plaza Hospital 
testified that hospital charges are basically meaningless in current managed 
care environment. Therefore the Commission is correct in not utilizing hospital 
charges when setting ACIHFG reimbursement rates. As discussed elsewhere in 
detail in this preamble, hospital charge data is not a valid indicator of 
hospital costs. In addition, as a commenter at the public hearing on the 
previous proposal of this guideline indicated, hospitals do not intentionally 
negotiate contract rates which would cause them to lose money on a per case 
basis. Therefore, basing hospital rates on negotiated contract rates takes into 
consideration hospital costs. 
The Commission has not reviewed data or information which would indicate that 
hospital consolidations, mergers, acquisitions, and reduction in number of non-
profit hospitals result from hospitals providing services at below cost. Rather, 
recent data in the Center for Health Care Industry Performance Studies' 1996-
1997 Almanac of Hospital Financial and Operating Indicators (as reported in 
Medical Benefits, October 30, 1996) indicates that U. S. hospitals in high 
managed care markets realized significant improvements in profitability during 
1995 and are more profitable than hospitals that operate in lower managed care 
markets. In addition, the Almanac reports that profitability in the hospital 
industry reached a five-year high in 1995. This publication presents information 
on hospital performance in 1995 and reviews performance measures for the past 
five-year period. 
If the Medical Care Services CPI is accepted as a valid indication of inflation 
in costs to provide medical services, then the fact that the charges for 
hospital admissions increased at a vastly greater rate than the CPI indicates 
that the increase in hospital charges is largely attributable to factors other 
than inflation in costs. See discussion elsewhere in this preamble regarding the 
comparison of inflation rates versus the increase in hospital charges  
See also, relevant discussions elsewhere in this preamble, including discussions 
of case complexity and case mix and of an additional approximate 7.0% in the 
surgical per diem rate. 
COMMENT: Commenter agreed with the recognition that the previous per diem rate 
for medical cases was inadequate and was accordingly raised from $600 to $870 
per day. 
RESPONSE: The Commission agrees that an increase in per diem rates for medical 
cases was warranted and has incorporated that increase into the ACIHFG. The 
Commission has been provided no data or information which would support that the 
per diem rates in the previous ACIHFG when it was adopted in 1992, were 
inadequate. 
COMMENT: Commenter agreed that managed care contracts are an appropriate guide 
to setting the fee schedule, but felt that a hospital's net revenue as a 
percentage of gross revenue on Medicare hospital bills should be used as an 
additional guide to setting the per diem rates. Commenter agreed with crafting a 
guideline that reflects as closely as possible what the hospitals are 
negotiating and accepting in the open market, but the commenter also believed 
that the more services carved out of the per diem rate, the lower the per diem 
rate must be and the commenter is not convinced the proposed guideline follows 
this principal. 
RESPONSE: The Commission disagrees with the commenter's recommendation that a 
hospitals' Medicare net and gross revenue be used as an additional guide to 
setting per diem rates. Hospital contracts provide the most accurate, verifiable 
information of the current hospital service market and thus the most relevant 
information regarding fair and reasonable rates, access to quality health care, 
cost control, and fees paid for similar treatment by persons of an equivalent 
standard of living. Medicare rates are not determined by voluntary negotiation 
and largely involve non-working elderly patients who require longer lengths of 
stay and a higher co- morbidity. 
The Commission disagrees with the commenter's recommendation to lower the per 
diem rates because of the carve outs that are included in the ACIHFG. The 
services and supplies chosen for carve out require significantly more costly and 
complex services which increase hospital reimbursement and will ensure fair and 
reasonable rates for hospitals and access to quality care for injured workers. 
Carved out services and supplies are based on managed care contracts. The 
statutory standards and objectives for cost control and that the guideline not 
pay in excess of the amount that would be paid for similar treatment of non-
workers' compensation patients of an equivalent standard of living must be 
balanced with the statutory standard for reasonable access to quality health 
care. Carve outs are a way of ensuring that this balance is maintained. The 
Commission believes that the effect of carve outs should be watched and analyzed 
as experience with the new ACIHFG is gained. Data, information, and input will 
be obtained and reviewed, and action taken to adjust the fees and other aspects 
of the rule as appropriate. 
COMMENT: Commenter questioned why the Medicare cost report adjustments were not 
included and why diagnosis and procedures provided to Medicare patients were 
excluded in the analysis for setting reimbursements in this guideline. Commenter 
did not comment on whether or why the Commission should have included such 
information. 
RESPONSE: Reimbursements in the ACIHFG were set using averages from per diem 
rates found in the 1994-1995 hospital contracts for each category of medical, 
surgical, and ICU, with the addition of approximately 7.0% to the average 
surgical per diem rate found in the 1994-1995 per diem contracts. For further 
discussion on the reasons why the Commission chose to look at managed care 
contracts and use per diem reimbursements from those contracts as a basis for 
the adopted rule see discussions in other parts of this preamble. The actuarial 
study described in the proposal preamble used Medicare rates for comparison 
purposes and to indicate that Medicare rates, which are often lower than rates 
in the ACIHFG, have been accepted by hospitals even when more complex and 
intensive services may be required. Rates were not set based on Medicare rates. 
Cost report adjustments are not relevant to managed care contracts because 
Medicare cost adjustments are part of the Medicare reimbursement system. As 
such, it applies only to Medicare rates and are not applicable to managed care 
contract rates. Therefore Medicare cost adjustments were not considered in the 
development of reimbursements set in this guideline. If the commenter's 
reference to "diagnosis and procedures provided to Medicare patients" is a 
comment on why a Medicare DRG methodology was not used, see the discussion 
elsewhere in this preamble on why the DRG methodology was not utilized. 
COMMENT: Commenter questioned why no inquiry was made to determine the causes of 
the variances in the managed care contracts and the commenter questioned why the 
Commission did not research into this in greater depth. Commenter suggested that 
there are other motivating factors which must be given equal weight and that 
this wide variance indicates that any attempt to use an average would be flawed. 
However, commenter does not say what factors or how such factors should affect 
the rule. 
RESPONSE: The Commission disagrees with the commenter's contention that no 
inquiry was made to determine the causes of the variances in managed care 
contracts. It has been suggested to the Commission that variations among 
contract rates is linked to hospital labor expenses, due to the fact that such 
expenses make up a major portion of total hospital expenses. Labor costs across 
regions as set out in the Bureau of Labor Statistics average hourly wage index 
for Texas metropolitan statistical areas (MSAs) were compared with the average 
hospital per diem rates contained in contracts for hospitals in the same region. 
No correlation between higher labor costs and higher per diem rates was 
observed; i.e. the higher per diem rates were not in the areas with higher labor 
costs. In fact, in some regions, there was a negative correlation-a region with 
a low wage index and higher managed care contract rates. 
To further evaluate the variances in managed care contract rates, the Commission 
identified hospitals that are in the same chain, and looked at the contract 
rates for different hospitals contracting with the same carrier in the same MSA; 
for the same hospital contracting with the same carrier in different MSA's; and 
for the same hospital contracting with different carrier in the same MSA. The 
analysis revealed that there is no consistency among hospitals in the same chain 
of hospitals which are contracting with the same carrier in the same MSA; there 
is no consistency among a specific hospital's contracts with the same carrier in 
different MSA's; and there is no consistency among a specific hospital's 
contracts with different carrier in the same MSA. While there may be some basis 
or explanation for the variation in contract rates across the state, geographic 
location was not a major factor, if any. 
Hospital type and hospital bed size were also compared with the hospital per 
diem rates contained in the contracts. Differences which may be attributable to 
hospital size together with the size of the population served have been 
recognized and accounted for by the exemption of hospitals located in a 
population center of less than 50,000 persons and which have 100 or less 
licensed beds from the per diem reimbursement rates in the adopted ACIHFG. 
Differences in levels of care provided by some hospitals have been recognized 
and accounted for in the ACIHFG by "carving out", or exempting from the per diem 
reimbursement rates, ICD-9 codes for trauma, burn and HIV cases. Other 
provisions in the rule, including the addition of approximately 7.0% to the 
surgical per diem rate, also serve to increase actual reimbursement. The 
Commission therefore concludes that regional rate variation is not necessary for 
a rate to be fair and reasonable, or to ensure access to quality health care. 
Average contract rates were utilized because averaging minimizes the effect of 
outliers in the data because most rates were closer to the average than to 
either the higher or lower rates, because the lowest rates may not accurately 
reflect hospital economic factors for all the hospitals with greater rates and 
because a reimbursement based on an average rate will be a greater incentive for 
maintaining access to quality health care than use of the lowest rates. The 
repeal is adopted under the Texas Labor Code, sec.402.061 which requires the 
Commission to adopt rules necessary for the implementation and enforcement of 
the Texas Workers' Compensation Act; the Texas Labor Code, sec.408.021, which 
entitles injured employees to all health care reasonably required by the nature 
of the injury as and when needed; the Texas Labor Code, sec.413.002, which 
requires that the Commission's Medical Review Division monitor health care 
providers, insurance carriers and claimants to ensure compliance with Commission 
rules; the Texas Labor Code, sec.413.006, which authorizes the Commission to 
appoint advisory committees in addition to the Medical Advisory Committee as it 
considers necessary; the Texas Labor Code, sec.413.007, which sets out 
information to be maintained by the Commission's Medical Review Division; the 
Texas Labor Code, sec.413.011, which provides that the Commission by rule 
establish medical policies and guidelines; the Texas Labor Code, sec.413.012, 
which requires periodic review of the medical policies and fee guidelines; the 
Texas Labor Code, sec.413.013, which requires the Commission by rule to 
establish programs related to health care treatments and services for dispute 
resolution, monitoring, and review; the Texas Labor Code, sec.413.015, which 
requires insurance carriers to pay charges for medical services as provided in 
the statute and requires that the Commission ensure compliance with the medical 
policies and fee guidelines through audit and review; the Texas Labor Code, 
sec.413.016, which provides for refund of payments made in violation of the 
medical policies and fee guidelines; the Texas Labor Code, sec.413.017, which 
provides a presumption of reasonableness for medical services fees which are 
consistent with the medical policies and fee guidelines; the Texas Labor Code, 
sec.413.019, which provides for payment of interest on delayed payments, refunds 
or overpayments; and the Texas Labor Code, sec.413.031, which provides a 
procedure for medical dispute resolution.  
These statutory provisions clearly authorize and require the Commission to adopt 
a rule such as sec.134.401 which includes guidelines for fees paid to hospitals 
for inpatient medical services provided to injured workers. The statutes also 
state the standards and objectives the Commission is to consider in establishing 
fee guidelines. In proposing and adopting this Acute Care Inpatient Hospital Fee 
Guideline the Commission has considered all the standards and objectives 
established by the legislature, has not considered irrelevant factors, and has 
reached a reasonable conclusion after considering the relevant factors. The rule 
is a reasonable means to legitimate objectives.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on June 25, 1997.
TRD-9708256
Susan Cory
General Counsel
Texas Workers' Compensation Commission
Effective date: August 1, 1997
Proposal publication date: February 11, 1997
For further information, please call: (512) 440-3700

28 TAC sec.134.401
The new rule is adopted under the Texas Labor Code, sec.402.061 which requires 
the Commission to adopt rules necessary for the implementation and enforcement 
of the Texas Workers' Compensation Act; the Texas Labor Code, sec.408.021, which 
entitles injured employees to all health care reasonably required by the nature 
of the injury as and when needed; the Texas Labor Code, sec.413.002, which 
requires that the Commission's Medical Review Division monitor health care 
providers, insurance carriers and claimants to ensure compliance with Commission 
rules; the Texas Labor Code, sec.413.006, which authorizes the Commission to 
appoint advisory committees in addition to the Medical Advisory Committee as it 
considers necessary; the Texas Labor Code, sec.413.007, which sets out 
information to be maintained by the Commission's Medical Review Division; the 
Texas Labor Code, sec.413.011, which provides that the Commission by rule 
establish medical policies and guidelines; the Texas Labor Code, sec.413.012, 
which requires periodic review of the medical policies and fee guidelines; the 
Texas Labor Code, sec.413.013, which requires the Commission by rule to 
establish programs related to health care treatments and services for dispute 
resolution, monitoring, and review; the Texas Labor Code, sec.413.015, which 
requires insurance carriers to pay charges for medical services as provided in 
the statute and requires that the Commission ensure compliance with the medical 
policies and fee guidelines through audit and review; the Texas Labor Code, 
sec.413.016, which provides for refund of payments made in violation of the 
medical policies and fee guidelines; the Texas Labor Code, sec.413.017, which 
provides a presumption of reasonableness for medical services fees which are 
consistent with the medical policies and fee guidelines; the Texas Labor Code, 
sec.413.019, which provides for payment of interest on delayed payments, refunds 
or overpayments; and the Texas Labor Code, sec.413.031, which provides a 
procedure for medical dispute resolution.  
These statutory provisions clearly authorize and require the Commission to adopt 
a rule such as sec.134.401 which includes guidelines for fees paid to hospitals 
for inpatient medical services provided to injured workers. The statutes also 
state the standards and objectives the Commission is to consider in establishing 
fee guidelines. In proposing and adopting this Acute Care Inpatient Hospital Fee 
Guideline the Commission has considered all the standards and objectives 
established by the legislature, has not considered irrelevant factors, and has 
reached a reasonable conclusion after considering the relevant factors. The rule 
is a reasonable means to legitimate objectives.

sec.134.401.Acute Care Inpatient Hospital Fee Guideline. 
(a) Applicability. 
(1) This guideline shall become effective August 1, 1997. The Acute Care 
Inpatient Hospital Fee Guideline (ACIHFG) is applicable for all reasonable and 
medically necessary medical and/or surgical inpatient services rendered after 
the effective date of this rule in an acute care hospital to injured workers 
under the Texas Workers' Compensation Act. These rules shall not apply to acute 
care hospitals which are located in a population center of less than 50,000 
persons and have 100 or less licensed beds, which shall be reimbursed at a fair 
and reasonable rate. 
(2) Psychiatric and/or rehabilitative inpatient admissions are not covered by 
this guideline and shall be reimbursed at a fair and reasonable rate until the 
issuance of a fee guideline on these specific types of admissions. For these 
type of admissions, insurance carriers shall put one of the appropriate 
following codes on each bill to indicate the type of services performed: 
Type of Service-Code 
Rehabilitation - Inpatient-IR
Psychiatric - Inpatient-IP 
(3) Services such as outpatient physical therapy, radiological studies, and 
laboratory studies are not covered by this guideline and shall be reimbursed at 
a fair and reasonable rate until the issuance of a fee guideline addressing 
these specific services. For these type of admissions, insurance carriers shall 
put one of the appropriate following codes on each bill to indicate the type of 
services performed: 
Type of ServiceCode 
Hospital Surgical - Outpatient-HS 
Hospital Other - Outpatient-HO 
Ambulatory Surgical - Outpatient-AS
Ambulatory Other - Outpatient-AO 
(4) Ambulatory/outpatient surgical care is not covered by this guideline and 
shall be reimbursed at a fair and reasonable rate until the issuance of a fee 
guideline addressing these specific types of reimbursements. For these type of 
admissions, insurance carriers shall put one of the appropriate following codes 
on each bill to indicate the type of services performed: 
Type of Service-Code 
Ambulatory Surgical - Outpatient-AS
Ambulatory Other - Outpatient-AO 
(5) Emergency services that do not lead to an inpatient admission are not 
covered by this guideline and shall be reimbursed at a fair and reasonable rate 
until the issuance of a fee guideline addressing these specific services. Except 
as listed in subsection (c)(4)(B) of this section, emergency transportation 
shall be reimbursed in accordance with the Texas Workers' Compensation 
Commission Medical Fee Guideline in effect at the time the services are 
rendered. 
(b) General Ground Rules. 
(1) The following words and terms, when used in this section, shall have the 
following meanings, unless the context clearly indicates otherwise.  
(A) Acute Care Hospital - A health care facility that provides inpatient or 
outpatient services delivered to patients experiencing acute illness or trauma 
as licensed by the Texas Department of Health (TDH) as a General or Special 
Hospital Type. 
(B) Inpatient Services - Health care, as defined by the Texas Labor Code 
sec.401.011(19), provided by an acute care hospital and rendered to a person who 
is admitted to an acute care hospital and whose length of stay exceeds 23 hours 
in any unit of the acute care hospital. 
(C) Institutional Services - All non-physician services rendered within the 
hospital by an employee or agent of the hospital. 
(D) Length of Stay (LOS) - Number of calendar days from admission to discharge. 
In computing a patient's length of stay, the day of admission is counted, but 
the day of discharge is not. 
(E) Medical Admission - Any hospital admission where the primary services 
rendered are medical in nature. 
(F) Stop-Loss Payment - An independent method of payment for an unusually costly 
or lengthy stay. 
(G) Stop-Loss Reimbursement Factor (SLRF) - A factor established by the 
Commission to be used as a multiplier to establish a reimbursement amount when 
total hospital charges have exceeded specific stop-loss thresholds.
(H) Stop-Loss Threshold (SLT) - Threshold of total charges established by the 
Commission, beyond which reimbursement is calculated by multiplying the 
applicable Stop-Loss Reimbursement Factor by the total charges  identifying that 
particular threshold. 
(I) Surgical Admission - Any hospital admission where the primary services 
rendered are surgical in nature. The surgical nature of the service is indicated 
by the use of a surgical procedure code. 
(J) Standard Per Diem Amount (SPDA) - A standardized per diem amount established 
by the Commission as the maximum reimbursement for hospital services covered by 
this guideline. 
(2) General Information. 
(A) All hospitals shall bill their usual and customary charges. The basic 
reimbursement for acute care hospital inpatient services rendered shall be the 
lesser of: 
(i) a rate for worker's compensation cases pre-negotiated between the carrier 
and hospital; 
(ii) the hospital's usual and customary charges; or  (iii)reimbursement as set 
out in subsection (c) of this section for that admission. 
(B) Additional reimbursements as outlined in subsection (c)(4) of this section 
are determined on a case-by-case basis within the guidelines established for the 
specific services rendered. 
(C) All charges submitted are subject to audit as described in Commission rules. 
(D) All bills for professional services rendered by a health care practitioner 
shall be submitted on form TWCC-67, the standard HCFA 1500 form. 
(E) All bills for acute care hospital inpatient services shall be submitted on 
form TWCC-68a, the standard UB-92 (HCFA 1450) form. Depending upon the type of 
service(s) rendered, the appropriate code shall be included on each UB-92 (HCFA 
1450) submitted. One of the following codes shall be put on the bill by the 
insurance carrier: 
Type of Service-Code 
Acute Care - Inpatient (Medical)-IM 
Acute Care - Inpatient (Surgical)-IS 
(F) When a medical admission takes place, and surgery is subsequently performed 
during this stay, the entire stay is considered to be a surgical admission. 
(c) Reimbursement. 
(1) Standard Per Diem Amount . The workers' compensation standard per diem 
amounts to be used in calculating the reimbursement for acute care inpatient 
services are as follows: 
Medical-$ 870 
Surgical$ 1,118 
Intensive Care Unit (ICU)/Cardiac Care Unit (CCU)- $ 1,560 
(2) Method. All inpatient services provided by an acute care hospital for 
medical and/or surgical admissions will be reimbursed using a service related 
standard per diem amount. 
(A) The complete treatment of an injured worker is categorized into two 
admission types: medical or surgical. A per diem amount shall be determined by 
the admission category. 
(B) A per diem amount is also established for reimbursement of each specific 
ICU/CCU day independently. This special per diem rate is used for each ICU/CCU 
day in lieu of the specific (medical/surgical) per diem rate being used for 
normal services rendered during this admission.
(C) Independent reimbursement is allowed on a case-by-case basis if the 
particular case exceeds the stop-loss threshold as described in paragraph (6) of 
this subsection or if the ICD-9 primary diagnosis code is listed in paragraph 
(5) of this subsection.
(3) Reimbursement Calculation. 
(A) Explanation. 
(i) Each admission is assigned an admission category indicating the primary 
service(s) rendered (medical or surgical). 
(ii) The applicable Workers' Compensation Standard Per Diem Amount (SPDA) is 
multiplied by the length of stay (LOS) for admission.
(iii) If applicable, ICU/CCU days are subtracted from the total LOS and 
reimbursed the ICU/CCU per diem rate for those specific days of treatment in 
lieu of the assigned medical/surgical per diem rate. 
(iv) The Workers' Compensation Reimbursement Amount (WCRA) is the total amount 
of reimbursement to be made for that particular admission.
(B) Formula. LOS x SPDA = WCRA 
(C) Examples. 
(i) Without ICU/CCU days: admission category - medical; length of stay - eight 
days; per diem (medical) - $870; eight days at $870 equals $6,960. 
(ii) With ICU/CCU days: admission category-surgical; length of stay-15 days; 
ICU/CCU days-three days; per diem (surgical)-$1,118; per diem (ICU/CCU)$1,560. 
Fifteen total days minus three ICU/CCU days equals 12  surgical days. Twelve 
days at $1,118 plus three days at $1,560 equals $18,096.  
(4) Additional Reimbursements. All items listed in this paragraph shall be 
reimbursed in addition to the normal per diem based reimbursement system in 
accordance with the guidelines established by this section. Additional 
reimbursements apply only to bills that do not reach the stop-loss threshold 
described in subsection (c)(6) of this section.
(A) When medically necessary the following services indicated by revenue codes 
shall be reimbursed at cost to the hospital plus 10%: 
(i) Implantables (revenue codes 275, 276, and 278), and 
(ii) Orthotics and prosthetics (revenue code 274) 
(B) When medically necessary the following services indicated by revenue codes 
shall be reimbursed at a fair and reasonable rate: 
(i) Magnetic Resonance Imaging (MRIs) (revenue codes 610-619);
(ii) Computerized Axial Tomography (CAT scans) (revenue codes 350-352, 359); 
(iii) Hyperbaric oxygen (revenue code 413); 
(iv) Blood (revenue codes 380-399); and 
(v) Air ambulance (revenue code 545). 
(C) Pharmaceuticals administered during the admission and greater than $250 
charged per dose shall be reimbursed at cost to the hospital plus 10%. Dose is 
the amount of a drug or other substance to be administered at one time. 
(5) Reimbursement for Certain ICD-9 Codes. When the following ICD-9 diagnosis 
codes are listed as the primary diagnosis, reimbursement for the entire 
admission shall be at a fair and reasonable rate: 
(A) Trauma (ICD-9 codes 800.0-959.50); 
(B) Burns (ICD-9 codes 940-949.9); and 
(C) Human Immunodeficiency Virus (HIV) (ICD-9 codes 042-044.9).
(6) Stop-Loss Method. Stop-loss is an independent reimbursement methodology 
established to ensure fair and reasonable compensation to the hospital for 
unusually costly services rendered during treatment to an injured worker. This 
methodology shall be used in place of and not in addition to the per diem based 
reimbursement system. The diagnosis codes specified in (c)(5) are exempt from 
the stop-loss methodology and the entire admission shall be reimbursed at a fair 
and reasonable rate. 
(A) Explanation. 
(i) To be eligible for stop-loss payment the total audited charges for a 
hospital admission must exceed $40,000, the minimum stop-loss threshold. 
(ii) This stop-loss threshold is established to ensure compensation for 
unusually extensive services required during an admission. 
(iii) If audited charges exceed the stop-loss threshold, reimbursement for the 
entire admission shall be paid using a Stop-Loss Reimbursement Factor (SLRF) of 
75%. 
(iv) The Stop-Loss Reimbursement Factor is multiplied by the total audited 
charges to determine the Workers' Compensation Reimbursement Amount (WCRA) for 
the admission. 
(v) Audited charges are those charges which remain after a bill review by the 
insurance carrier has been performed. Those charges which may be deducted are 
personal items (e.g., telephone, television). If an on-site audit is performed, 
charges for services which are not documented as rendered during the admission 
may be deducted. Items and services which are not related to the compensable 
injury may be deducted. The formula to obtain audited charges is as follows:  
Total Charges - Deducted Charges = Audited Charges 
(B) Formula. Audited Charges x SLRF = WCRA 
(C) Example. 
Total Charges:-$108,000 
Deducted Charges:-$8,001 
Audited Charges:-$99,999 
$99,999 x .75 equals $74,999.25 (WCRA). 
(7) Reimbursement for Other Services. 
(A) Professional Services. All professional services performed by a health care 
practitioner shall be reimbursed in accordance with the Texas Workers' 
Compensation Commission Medical Fee Guideline currently in effect. 
(B) Pharmacy Services. Pharmaceutical services rendered as part of inpatient 
institutional services are included in the basic reimbursement established by 
subsection (c)(1) of this section. Pharmaceutical services shall not be 
reimbursed separately except as listed in subsection (c)(4)(C) of this section.  
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on June 25, 1997.
TRD-9708257
Susan Cory
General Counsel
Texas Workers' Compensation Commission
Effective date: August 1, 1997
Proposal publication date: February 11, 1997
For further information, please call: (512) 440-3700

TITLE 31. NATURAL RESOURCES AND CONSERVATION
PART II. Texas Parks and Wildlife Department
CHAPTER 65.Wildlife
SUBCHAPTER A.Statewide Hunting and Fishing Proclamation
General Provisions
31 TAC sec.sec.65.1, 65.3, 65.5, 65.9, 65.11, 65.24, 65.26, 65.27
The Texas Parks and Wildlife Commission adopts the repeal of sec.sec.65.11, 
65.13, 65.15, 65.21, 65.42, 65.46, 65.58, and 65.64; amendments to sec.sec.65.1, 
65.3, 65.5, 65.9, 65.24, 65.26, 65.27, 65.44, 65.48, 65.50, 65.52, 65.56, 65.71, 
65.72, and 65.78; and new sec.sec.65.11, 65.42, 65.46, and 65.64, concerning the 
Statewide Hunting and Fishing Proclamation. The amendments to sec.sec.65.3, 
65.5, and 65.72 and new sec.sec.65.11, 65.42, and 65.64 are adopted with changes 
to the proposed text as published in the March 11, 1997, issue of the Texas 
Register (22 TexReg 2965). The repeals and amendments to sec.sec.65.1, 65.9, 
65.24, 65.26, 65.27, 65.44, 65.48, 65.50, 65.52, 65.56, 65.58, 65.71, and 65.78, 
and new sec.65.46 are adopted without changes and will not be republished. The 
change to sec.65.3 adjusts the definition of 'coastal waters boundary' to 
exclude two ponds in Corpus Christi and two ponds in Port Lavaca from status as 
coastal waters. The change to sec.65.5 is a nonsubstantive clarification of the 
section title. The change to sec.65.11, concerning means and methods, separates 
the provisions concerning crossbows from those concerning other archery 
equipment in order to eliminate confusion. The change to sec.65.42, concerning 
deer, removes Galveston County from the group of counties having an archery-only 
white-tail season; eliminates Andrews, Gaines, and Cochran counties from the 
list of counties having an open season for mule deer; and adds clarifying 
language to specify that longbow, compound, bow, and recurved bow are the only 
lawful means during an archery-only season, except as provided in sec.65.11. The 
change to sec.65.64, concerning turkey, removes provisions prohibiting the use 
of crossbows during the spring seasons for Rio Grande birds and adjusts the fall 
season in Willacy County to run concurrently with that county's general open 
deer season. The change to sec.65.72, concerning fish, eliminates proposed 
provisions restricting the use of live bait on certain reservoirs. 
The repeals, amendments, and new sections are necessary to implement the 
statutory duty of the department to regulate the commercial and recreational 
harvest of the wildlife resources of this state. The repeals, amendments, and 
new sections will function to eliminate duplication and unnecessary regulations, 
restructure and reorganize regulatory provisions in the interest of promoting 
user-friendliness, and implement regulatory changes which advance the Commission 
policy of increasing recreational opportunity within the tenets of sound 
biological management practices. 
The amendment to sec.65.1, concerning Application, rewords the provisions of 
subsection (a) to make it clear that the proclamation applies to all wildlife 
resources in the state except as specifically provided for elsewhere in Chapter 
65. The amendment to sec.65.3, concerning Definitions, contains housekeeping-
type revisions intended to clarify existing provisions, and adds definitions of 
'artificial lure' and 'permanent residence.' The amendment to sec.65.5, 
concerning Importation of a Wildlife Resource, adds new subsection (c) to 
establish that the possession of wildlife lawfully taken in another state, 
including species listed as threatened or endangered in Texas, is not a 
violation, so long as the person in possession of that wildlife can prove that 
it was lawfully taken. The amendment to sec.65.9, concerning Open Seasons; 
General Rules, makes a nonsubstantive grammatical change. New sec.65.11, 
concerning Means and Methods, combines the provisions of existing sec.65.11 with 
those of sec.65.13, concerning Firearms; 65.15, concerning Archery; and 65.21, 
concerning Falconry, which are being repealed, so as to consolidate regulations 
concerning means and methods. The amendment to sec.65.24, concerning Permits, 
contains nonsubstantive changes that clarify the intent of the regulation and 
eliminate unnecessary verbiage. The amendment to sec.65.26, concerning Managed 
Lands Deer Permits, relocates existing provisions from sec.65.42, concerning 
Deer, to consolidate provisions applicable to the harvest of deer under the MLD 
program. The amendment to sec.65.27, concerning Antlerless and Spike-buck 
Control Permits, consists of nonsubstantive grammatical changes and a 
clarification of the time periods that control permits are valid. New sec.65.42, 
concerning Deer, sets out the open seasons, bag limits, and harvest restrictions 
for the take of white-tailed and mule deer in this state. New sec.65.46, 
concerning Squirrel, sets out the open seasons, bag limits, and harvest 
restrictions for the take of squirrels in this state. New sec.65.64, concerning 
Turkey, sets out the open seasons, bag limits, and harvest restrictions for the 
take of turkey in this state. The amendments to sec.65.44, concerning Javelina; 
sec.65.48, concerning Desert Bighorn Sheep; sec.65.50, concerning Elk; and 
sec.65.52, concerning aoudad, consist of minor nonsubstantive wording changes to 
eliminate redundancy. The amendment to sec.65.56, concerning Prairie Chicken, 
establishes a free permit that will be required for all persons hunting prairie 
chicken. The amendment to sec.65.71, concerning Reservoir Boundaries, eliminates 
an erroneous reference to Robertson County. The amendment to sec.65.72, 
concerning Fish: changes largemouth bass harvest regulations on Lakes Gilmer, 
Bryan, and Athens; changes harvest regulations for smallmouth bass and spotted 
bass on Lake Alan Henry; changes harvest regulations for rainbow and brown trout 
on the Guadalupe River below Canyon dam; modifies harvest regulations for 
striped bass, blue catfish, and channel catfish in the area immediately 
downstream from the Lake Livingston dam; standardizes harvest regulations with 
Oklahoma and Louisiana on Lake Texoma and Toledo Bend Reservoir; establishes the 
commercial season for king mackerel in Texas waters to run concurrently with the 
commercial king mackerel season set by the National Marine Fisheries Service 
under guidelines established by the Fishery Management Plan for Coastal 
Migratory Pelagic Resources of the Gulf of Mexico and South Atlantic; decreases 
the bag limit of greater amberjack from 3 to 1 fish; and removes the regulations 
concerning shrimp trawls, which will be relocated in another chapter. The 
amendment to sec.65.78, concerning Crabs and Ghost Shrimp, establishes that all 
crab traps fished in Texas waters must be equipped with a degradable panel and 
adds clarifying language to existing provisions. 
The department received a total of 10,101 comments concerning adoption of the 
proposed regulations. The department received 116 comments in opposition to the 
proposed expansion of the muzzleloader season and the proposed designation of 
the crossbow as a lawful means. The department disagrees with the commenters and 
responds that the muzzleloader season results in an annual harvest that is well 
below what is biologically sustainable by the resource, and that crossbows and 
muzzleloading weapons are effective devices for the take of deer. No changes 
were made as a result of the comments. The department received eight comments in 
favor of the proposed rules. 
The department's proposal to implement a 'swing tag' for 11 counties in 
southeast Texas was opposed by eight commenters. The department disagrees with 
the commenters and responds that biological data indicate that the deer 
population in that area can sustain additional harvest in the near term without 
harming the resource. No changes were made as a result of the comments. The 
department received 212 comments in favor of the proposed regulation. The 
department also received 23 comments requesting the 'swing tag' in additional 
counties. The department disagrees with the commenters and responds that  
biological justification for the increased harvest did not exist outside the 11 
counties included in the proposal. No changes were made as a result of the 
comments. 
Concerning the department's proposal to open a mule deer season in nine counties 
in West Texas, nineteen commenters opposed the proposal for Andrews County, four 
commenters opposed the same for Gaines County, and 52 opposed it for Cochran 
County. The department agrees with the commenters and has added a change to 
eliminate those three counties from the proposal. The department received six 
comments favoring the Andrews County proposal and four comments in favor of the 
Cochran County proposal. 
The department received six comments against the proposal to restrict the take 
of antlerless deer in Karnes and Wilson counties. The department disagrees with 
the commenters and responds that habitat and population trends dictate a 
conservative harvest of antlerless deer in those counties. No changes were made 
as a result of the comments. The department received 62 comments in favor of the 
proposed regulation. 
Concerning the department's proposal for regulations governing the hunting of 
Eastern wild turkeys, one commenter opposed the opening date and six commenters 
opposed restricting the lawful means to shotguns only. The department disagrees 
with comments and responds that the opening day of the season was set according 
to a breeding chronology that is used to predict when the greatest number of 
hens have probably been bred, and the shotgun-only restriction is a tool to 
maintain a conservative harvest while the department is still in the process of 
evaluating restocking efforts in East Texas. No changes were made as a result of 
the comments. The department received six comments in favor of the proposal. 
The department received four comments requesting a lengthened squirrel season. 
The department responds that it is in the process of evaluating squirrel seasons 
statewide and will have recommendations at a future date. No changes were made 
as a result of the comments. 
One commenter requested the implementation of a gun season for deer in Grayson 
County. The department responds that such a season was proposed last year and 
met with overwhelming disapproval by residents and landowners in the county. No 
changes were made as a result of the comment. 
One commenter requested that spring turkey season open on a Saturday. Since the 
spring season for Rio Grande birds does open on a Saturday, the department 
assumes the comment references Eastern birds, and responds that because the 
restocking of Eastern birds is still being monitored to assess its impact, a 
conservative harvest is prudent; therefore, in order to moderate hunting 
pressure, only one weekend is being offered. The department made no changes as a 
result of the comments. 
One commenter opposed the use of electronic calls for hunting turkey. The 
department disagrees, responding that seasons and bag limits are set such that 
even if there were 100% hunter success, the resource would not be adversely 
impacted, and that therefore it is unnecessary to restrict the use of electronic 
calling devices. No changes were made as a result of the comment. 
Five commenters opposed the dates of the archery-only season, saying that it 
ended too soon. The department disagrees, responding that with the present 
scheme there are always four full weekends of opportunity and that archery is a 
legal means during the entirety of the general season. No changes were made as a 
result of the comments. 
Two commenters requested that archery season remain restricted to lawful archery 
equipment only. The department agrees. No changes were made as a result of the 
comments. 
Four commenters requested that the muzzleloader season be moved to run prior to 
the general season. The department disagrees, responding that time period in 
question is presently occupied by the archery season. No changes were made as a 
result of the comments. 
Three commenters requested muzzleloader seasons in East Texas counties. The 
department disagrees and responds that the muzzleloading seasons in place were 
designed for use in counties where the harvest of antlerless deer is not as high 
as the department recommends for optimum management. The department further 
notes that muzzleloading weapons are lawful means during the general open season 
statewide. No changes were made as a result of the comments. 
Three commenters opposed including crossbows in the definition of lawful archery 
equipment. The department agrees, but regrets that the actual definition cannot 
be amended at this time. Language has been inserted in sec.65.42, concerning 
deer, and in sec.65.64, concerning turkey, to make the distinction clear, and 
the definition will be amended at a later date. 
Three commenters were in favor of the proposed squirrel regulations. 
Two commenters were opposed to the proposed prairie chicken season, stating that 
populations have dwindled to unsustainable levels. The department disagrees, 
responding that the extremely short season and almost no hunting pressure mean 
that hunting has a negligible impact on populations, which are more impacted by 
rainfall patterns and habitat fragmentation than anything else. No changes were 
made as a result of the comments. 
Three commenters requested a special extended squirrel season for falconry. The 
department disagrees only because it wishes to investigate the request further 
before taking any action. No changes were made as a result of the comments. 
One commenter opposed the 14-day antlerless season on properties under the 
Managed Lands Deer System. The department disagrees, responding that the harvest 
on such properties is under a quota stipulated in a management plan, rendering 
moot the question of when the animals are taken. 
One commenter opposed the squirrel regulations as proposed, stating that the 
department in setting the regulations had failed to take the squirrels into 
account as individuals. The department disagrees with the commenter, responding 
that its statutory duty is to manage the population, not individual animals. No 
change was made as a result of the comment. 
The department received 127 comments requesting one or more of the following 
with respect to the proposed regulations for white-tailed deer: higher bag 
limits, lower bag limits, more does in the bag composition, less does in the bag 
composition, no does in the bag composition, more doe days, less doe days, no 
doe days, earlier opening day, later opening day, bucks by permit only, does by 
permit only, acreage-based permits for bucks and/or does, and an eight-point 
limit for legal bucks. The department responds that harvest  regulations are the 
result of the agency's statutory duty to conduct scientific investigations and 
equitably distribute harvest opportunity and are predicated upon continuous 
assessments of habitat type and quality, hunter density and success, deer 
density, fawn survival rates, and buck/doe ratios, among other things. The 
commission considers public comment in the context of the commission policy of 
providing the greatest opportunity possible within the dictates of sound 
biological management, and, therefore, the regulations finally adopted represent 
the wisest use of the resource. The department disagrees with the  comments and 
no changes were made as a result of them. 
The department received six comments opposing the proposal to require a 
biodegradable panel on crab traps. The commenters opposed the proposed rule for 
the following reasons: crab traps could be brought to shore for disposal; vents 
provide enough opportunity for escape and abandoned traps don't continue to trap 
crabs; the proposed regulation means more work for crabbers and has been 
unsuccessful in Florida; the panel would be just one more thing to catch in a 
shrimp trawl; most crab pot loss is due to theft and shrimp trawls; traps remain 
in the bays, but not to the extent presented by TPWD; scientific studies are 
flawed because they don't account for shedding crabs, do not include escape 
rings, do not take fish predation into account, and don't allow for small-size 
steel wires that would degrade relatively quickly and provide the desired 
results. The department disagrees with the comments and responds that 
conscientious crabbers do bring worn out traps to shore, but the issue is 
abandoned traps; the Florida Department of Natural Resources has had very few 
complaints about the tie-down strap option, and they reported longevity of the 
jute twine averaged 35-70 days; scientific evidence documents that abandoned 
traps do continue to fish and both the Texas Blue Crab Fishery Management Plan 
and the Gulf States Marine Fisheries Management Plan for blue crabs indicate the 
need for degradable panels in traps to minimize mortality of crabs in lost and 
abandoned traps; the proposed panel size of 3-in x 6-in will probably not fall 
far from the trap if at all, and with a tie-down strap there will be no pieces 
falling from the trap; trap loss due to theft and shrimp trawls certainly occurs 
but traps are also lost due to the loss of buoys and float lines, storms, and 
deliberate abandonment; values used by staff come from interviews conducted with 
crab fishermen during 1993 and even if the minimum number of lost traps is used, 
and taking the use of escape rings into account, the potential annual mortality 
of blue crabs is almost 850,000 crabs, but the exact magnitude of the amount of 
truly lost and abandoned traps is unknown; and crabs do have the ability to exit 
the trap when they find the entry funnel, but a newly-shed crab is incapable of 
movement, and until its shell has hardened, it is vulnerable to cannibalism from 
hard crabs present in the trap; a new study estimated mortality in traps with 
escape vents at approximately 16 crabs/trap/year, fish are caught in lost and 
abandoned traps, and may prey on trapped crabs but regardless of the cause, 
trapped crabs are still dead; and wire was rejected as an option due to 
difficulties inherent in determining the metal content of the hook and 
measurement of wire gauge diameter. Two commenters were in favor of adoption of 
the regulation.
No changes were made as a result of the comments. 
The department received five comments on opposition to the proposed regulations 
concerning rainbow trout. The department disagrees with the comments and 
responds that the regulation enjoys a consensus of support. No change was made 
as a result of the comments. The department received 28 comments in favor of 
adoption. 
Six comments opposed to the proposed regulations for striped bass and blue and 
channel catfish below Livingston Dam were received by the department. The 
department disagrees with the comments and responds that data from broodfish 
collections in this area point to the need to reduce harvest of large striped 
bass and blue catfish. No changes were made as a result of the comments. The 
department received 15 comments in favor of adoption. 
The department received one comment opposing the proposed standardization of 
fishing regulations on waters shared with Louisiana and Oklahoma. The department 
disagrees with the comment and responds that the changes will reduce confusion 
caused by regulations differing between Texas and bordering states. No changes 
were made as a result of the comments. The department received 3 comments in 
favor of the proposal. 
The department received 6,392 comments opposing the proposed restrictions on the 
use of live bait on Lakes Fork and Ray Roberts. The proposal was made as a 
result of a petition for rulemaking, which has been withdrawn. The department 
accordingly has withdrawn the proposed regulation. The department received 3,148 
comments in favor of the proposal. 
The department received one comment opposing the take of game fish except 
channel and blue catfish by trotlines. The department disagrees with the comment 
and responds that the prohibition is in place to prevent trotline anglers from 
targeting game species such as bass that have minimum length limits. No change 
was made as a result of the comment. 
Five commenters were in favor of adoption of the regulations as proposed. Texas 
Wildlife Forever, Texas Sportsman's Association, Texas Wildlife Association, 
Lone Star Bow Hunters Association, Wild Turkey Federation (Pineywoods Chapter), 
and Action for Animals commented on the proposed rules. 
The amendments and new sections are adopted under Parks and Wildlife Code, 
Chapter 61, Uniform Wildlife Regulatory Act (Wildlife Conservation Act of 1983), 
and Chapter 67, which provides the Commission with authority to establish 
wildlife resource regulations for this state.

sec.65.3.Definitions.
The following words and terms, when used in this chapter, shall have the 
following meanings, unless the context clearly indicates otherwise. All other 
words and terms in this chapter shall have the meanings assigned in the Texas 
Parks and Wildlife Code.
Artificial lure-Any lure (including flies) with hook or hooks attached that is 
man-made and is used as a bait while fishing.
Baited area-Any area where minerals, vegetative material or any other food 
substances are placed so as to lure a wildlife resource to, on, or over that 
area. 
Coastal waters boundary-All public waters east and south of the following 
boundary are considered coastal waters: Beginning at the International Toll 
Bridge in Brownsville, thence northward along U.S. Highway 77 to the junction of 
Paredes Lines Road (F.M. Road 1847) in Brownsville, thence northward along F.M. 
Road 1847 to the junction of F.M. Road 106 east of Rio Hondo, thence westward 
along F.M. Road 106 to the junction of F.M. Road 508 in Rio Hondo, thence 
northward along F.M. Road 508 to the junction of F.M. Road 420, thence northward 
along F.M. Road 1420 to the junction of State Highway 186 east of Raymondville, 
thence westward along State Highway 186 to the junction of U.S. Highway 77 near 
Raymondville, thence northward along U.S. Highway 77 to the junction of the 
Aransas River south of Woodsboro, thence eastward along the south shore of the 
Aransas River to the junction of the Aransas River Road at the Bonnie View boat 
ramp; thence northward along the Aransas River Road to the junction of F.M. Road 
629; thence northward along F.M. Road 629 to the junction of F.M. Road 136; 
thence eastward along F.M. Road 136 to the junction of F.M. Road 2678; then 
northward along F.M. Road 2678 to the junction of F.M. Road 774 in Refugio, 
thence eastward along F.M. Road 774 to the junction of State Highway 35 south of 
Tivoli, thence northward along State Highway 35 to the junction of State Highway 
185 between Bloomington and Seadrift, thence northwestward along State Highway 
185 to the junction of F.M. Road 616 in Bloomington, thence northeastward along 
F.M. Road 616 to the junction of State Highway 35 east of Blessing, thence 
southward along State Highway 35 to the junction of F.M. Road 521 north of 
Palacios, thence northeastward along F.M. Road 521 to the junction of State 
Highway 36 south of Brazoria, thence southward along State Highway 36 to the 
junction of F.M. Road 2004, thence northward along F.M. Road 2004 to the 
junction of Interstate Highway 45 between Dickinson and La Marque, thence 
northwestward along Interstate Highway 45 to the junction of Interstate Highway 
610 in Houston, thence east and northward along Interstate Highway 610 to the 
junction of Interstate Highway 10 in Houston, thence eastward along Interstate 
Highway 10 to the junction of State Highway 73 in Winnie, thence eastward along 
State Highway 73 to the junction of U.S. Highway 287 in Port Arthur, thence 
northwestward along U.S. Highway 287 to the junction of Interstate Highway 10 in 
Beaumont, thence eastward along Interstate Highway 10 to the Louisiana State 
Line. The waters of Spindletop Bayou inland from the concrete dam at Russels 
Landing on Spindletop Bayou in Jefferson County; public waters north of the dam 
on Lake Anahuac in Chambers County; the waters of Taylor Bayou and Big Hill 
Bayou inland from the saltwater locks on Taylor Bayou in Jefferson County; 
Lakeview City Park Lake, West Guth Park Pond, and Waldron Park Pond in Nueces 
County; Galveston County Reservoir and Galveston State Park ponds #1-7 in 
Galveston County; Lake Burke-Crenshaw and Lake Nassau in Harris County; Fort 
Brown Resaca, Resaca de la Guerra, Resaca de la Palma, Resaca de los Cuates, 
Resaca de los Fresnos, Resaca Rancho Viejo, and Town Resaca in Cameron County; 
and Little Chocolate Bayou Park Ponds #1 and #2 in Calhoun County are not 
considered coastal waters for purposes of this subchapter. 
Daily bag limit-The quantity of a species of a wildlife resource that may be 
lawfully taken in one day. 
Final destination for all wildlife resources-The permanent residence of a person 
possessing or receiving a wildlife resource or part of a wildlife resource; or a 
cold storage/processing facility, after the carcass of a wildlife resource has 
been finally processed. 
Fully automatic firearm-Any firearm that is capable of firing more than one 
cartridge in succession by a single function of the trigger.
Gear tag-A tag constructed of material as durable as the device to which it is 
attached. The gear tag must be legible, contain the name and address of the 
person using the device, and, except for saltwater trotlines, the date the 
device was set out. 
Gig-Any hand-held shaft with single or multiple points.
License year-The period of time for which an annual hunting or fishing license 
is valid. 
Muzzleloader-Any firearm that is loaded only through the muzzle.
Permanent residence-One's principal or ordinary home or dwelling place. This 
does not include a temporary abode or dwelling such as a hunting/fishing club, 
or any club house, cabin, tent, or trailer house used as a hunting/fishing club, 
or any hotel, motel, or rooming house used during a hunting, fishing, pleasure, 
or business trip. 
Possession limit-The maximum number of a wildlife resource that may be lawfully 
possessed at one time. 
Wildlife resources-All game animals, game birds, and aquatic animal life.

sec.65.5.Importation of Wildlife.
(a)-(b) (No change.) 
(c) Any person may possess an animal or bird killed outside this state that is 
listed in this state as threatened or endangered, provided the person possesses 
proof that the animal or bird was lawfully killed.

sec.65.11.Means and Methods.
It is unlawful to hunt or fish for any of the wildlife resources of this state 
except by the means and methods authorized by this chapter. 
(1) Firearms. 
(A) It is lawful to hunt game animals and game birds with any legal firearm, 
including muzzleloading weapons, except as specifically restricted in this 
chapter. 
(B) Special muzzleloader-only antlerless deer seasons are restricted to 
muzzleloading firearms only. 
(C) It is unlawful to use rimfire ammunition to hunt deer, antelope, desert 
bighorn sheep, and elk or aoudad sheep (in counties where elk or aoudad sheep 
are game animals). 
(D) It is unlawful to hunt game animals or game birds with a fully automatic 
firearm or any firearm equipped with a silencer or sound-suppressing device. 
(2) Archery. 
(A) A person may hunt by means of longbow, compound bow, or recurved bow during 
any open season except a special muzzleloader-only antlerless deer season or 
spring Eastern turkey season. 
(B) Arrows that are treated with poisons or drugs, or that contain explosives 
are not lawful devices for hunting any species of wildlife resource in this 
state. 
(C) While hunting turkey and all game animals other than squirrels by means of 
longbow, compound bow, or recurved bow: 
(i) the bow must have a minimum peak draw weight of 40 pounds at the time of 
hunting; and 
(ii) the arrow must be equipped with a broadhead hunting point at least 7/8-inch 
in width upon impact, with a minimum of two cutting edges. A mechanical 
broadhead must begin to open upon impact and when open must be a minimum of 7/8-
inch in width. 
(D) It is unlawful to hunt deer or turkey with a broadhead hunting point while 
in possession of a firearm during an archery-only season.
(3) Crossbow. Crossbows are lawful during any general open season except Eastern 
turkey seasons. A person having an upper-limb handicap may use a crossbow to 
hunt deer and turkey during an archery-only season, provided the person has in 
their immediate possession a physician's statement certifying the extent of the 
disability. When hunting turkey and all game animals other than squirrels by 
means of crossbow: 
(A) the crossbow must have a minimum of 125 pounds of pull;
(B) the crossbow must have a mechanical safety; 
(C) the crossbow stock must be not less than 25 inches in length; and 
(D) the bolt must conform with paragraphs (2)(B) and (2)(C)(ii) of this section. 
(4) Falconry. 
(A) It is lawful to hunt any game bird or game animal by means of falconry, but 
the hunting is limited to persons holding valid permits issued by the 
department. 
(B) It is lawful to hunt game birds other than migratory game birds during the 
period from September 1 to March 1 of each year. Other wildlife resources may be 
hunted only during the regular open seasons as provided in this chapter. 
(C) The daily bag limit for game birds (except migratory game birds) is one, 
either sex, per raptor, and the possession limit is two, either sex, per raptor. 
The daily bag and possession limits for other wildlife resources are as provided 
under the regular seasons, bag, and possession limits for those resources. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on June 24, 1997.
TRD-9708223
Bill Harvey
Regulatory Coordinator
Texas Parks and Wildlife Department
Effective date: July 14, 1997
Proposal publication date: March 11, 1997
For further information, please call: (512) 389-4642

31 TAC sec.sec.65.11, 65.13, 65.15, 65.21
The repeals are adopted under Parks and Wildlife Code, Chapter 61, Uniform 
Wildlife Regulatory Act (Wildlife Conservation Act of 1983) and Chapter 67, 
which provides the Commission with authority to establish wildlife resource 
regulations for this state. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on June 24, 1997.
TRD-9708224
Bill Harvey
Regulatory Coordinator
Texas Parks and Wildlife Department
Effective date: July 14, 1997
Proposal publication date: March 11, 1997
For further information, please call: (512) 389-4642

Seasons and Bag Limits-Hunting Provisions
31 TAC sec.sec.65.42, 65.46, 65.58, 65.64
The repeals are adopted under Parks and Wildlife Code, Chapter 61, Uniform 
Wildlife Regulatory Act (Wildlife Conservation Act of 1983), which provides the 
Commission with authority to establish wildlife resource regulations for this 
state. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on June 24, 1997.
TRD-9708222
Bill Harvey
Regulatory Coordinator
Texas Parks and Wildlife Department
Effective date: July 14, 1997
Proposal publication date: March 11, 1997
For further information, please call: (512) 389-4642

31 TAC sec.sec.65.42, 65.44, 65.46, 65.48, 65.50, 65.52, 65.56, 65.64 
The amendments and new sections are adopted under Parks and Wildlife Code, 
Chapter 61, Uniform Wildlife Regulatory Act (Wildlife Conservation Act of 1983), 
which provides the Commission with authority to establish wildlife resource 
regulations for this state.

sec.65.42.Deer.
(a) Except as provided in sec.65.27 of this title (relating to Antlerless and 
Spike-Buck Deer Control Permits), no person may exceed the annual bag limit of 
five white-tailed deer (no more than three bucks) and two mule deer (no more 
than one buck). 
(b) White-tailed deer. The open seasons and annual bag limits for white-tailed 
deer shall be as follows. 
(1) In Bandera, Bexar, Blanco, Brewster, Brown, Burnet, Coke, Coleman, Comal 
(west of Interstate 35), Concho, Crockett, Culberson, Edwards, Gillespie, 
Glasscock, Hays (west of Interstate 35), Howard, Irion, Jeff Davis, Kendall, 
Kerr, Kimble, Kinney (north of U.S. Highway 90), Llano, Mason, McCulloch, Medina 
(north of U.S. Highway 90), Menard, Mills, Mitchell, Nolan, Pecos, Presidio, 
Reagan, Real, Reeves, Runnels, San Saba, Schleicher, Sterling, Sutton, Terrell, 
Tom Green, Travis (west of Interstate 35), Upton (that southeastern portion 
located both south of U.S. Highway 67 and east of State Highway 349), Uvalde 
(north of U.S. Highway 90), and Val Verde (north of U.S. Highway 90; and that 
portion located both south of U.S. 90 and west of Spur 239) counties, there is a 
general open season. 
(A) Open season: first Saturday in November through the first Sunday in January. 
(B) Bag limit: four deer, no more than two bucks. 
(2) In Aransas, Atascosa, Bee, Calhoun, Cameron, Hidalgo, Live Oak, Nueces, 
Refugio, San Patricio, Starr, and Willacy counties, there is a general open 
season. 
(A) Open season: second Saturday in November through the third Sunday in 
January. 
(B) Bag limit: four deer, no more than two bucks. 
(C) General Late Antlerless-Only Season. In the counties listed in this 
paragraph there is a general late antlerless-only season. 
(i) Open season: 14 consecutive days starting the first Monday following the 
third Sunday in January. 
(ii) Bag limit: four antlerless deer. 
(3) In Brooks, Dimmit, Duval, Frio, Jim Hogg, Jim Wells, Kenedy, Kinney (south 
of U.S. Highway 90), Kleberg, LaSalle, Maverick, McMullen, Medina (south of U.S. 
Highway 90), Uvalde (south of U.S. Highway 90), Val Verde (that southeastern 
portion located both south of U.S. Highway 90 and east of Spur 239), Webb, 
Zapata, and Zavala counties, there is a general open season. 
(A) Open season: Second Saturday in November through the third Sunday in 
January. 
(B) Bag limit: five deer, no more than three bucks. 
(C) General Late Antlerless-Only Season. In the counties listed in this 
paragraph there is a general late antlerless-only season. 
(i) Open season: 14 consecutive days starting the first Monday following the 
third Sunday in January. 
(ii) Bag limit: five antlerless deer. 
(4) No person may take or attempt to take more than one buck deer per license 
year from the counties, in the aggregate, listed within this paragraph, except 
as authorized under the provisions of sec.65.26 of this title (relating to 
Managed Land Deer Permits). 
(A) In Bell (west of Interstate 35), Bosque, Callahan, Comanche, Coryell, 
Eastland, Erath, Grayson (Hagerman National Wildlife Refuge only), Hamilton, 
Hood, Jack, Lampasas, McLennan, Palo Pinto, Parker, Shackelford, Somervell, 
Stephens, Taylor, Throckmorton, Williamson (west of Interstate 35), and Young 
counties, there is a general open season. 
(i) Open season: first Saturday in November through the first Sunday in January. 
(ii) Bag limit: three deer, no more than one buck and no more than two 
antlerless. 
(B) In Brazoria, Fort Bend, Goliad (south of U.S. Highway 59), Harris, Jackson 
(south of U.S. Highway 59), Matagorda, Victoria (south of U.S. Highway 59), and 
Wharton (south of U.S. Highway 59) counties, there is a general open season. 
(i) Open season: first Saturday in November through the first Sunday in January. 
(ii) Bag limit: three deer, no more than one buck and no more than two 
antlerless. 
(iii) During the first 23 days of the general season, antlerless deer may be 
taken without antlerless deer permits unless MLD or LAMPS permits have been 
issued for the tract of land. If MLD or LAMPS permits have been issued, they 
must be attached to all antlerless deer harvested on the tract of land. After 
the first 23 days, antlerless deer may be taken only by MLD antlerless permits 
or LAMPS permits. 
(C) In Armstrong, Borden, Briscoe, Carson, Childress, Collingsworth, Cottle, 
Crosby, Dickens, Donley, Fisher, Floyd, Foard, Garza, Gray, Hall, Hansford, 
Hardeman, Haskell, Hemphill, Hutchinson, Jones, Kent, King, Knox, Lipscomb, 
Motley, Ochiltree, Randall, Roberts, Scurry, Stonewall, Swisher, Wheeler, 
Wichita, and Wilbarger counties, there is a general open season.
(i) Open season: first Saturday in November through the first Sunday in January. 
(ii) Bag limit: three deer, no more than one buck and no more than two 
antlerless. 
(iii) During the first six days of the general season, antlerless deer may be 
taken without antlerless deer permits unless MLD permits have been issued for 
the tract of land. After the first six days, antlerless deer may be taken only 
by MLD antlerless permits. 
(D) In Archer, Baylor, Clay, Cooke, Denton, Hill, Johnson, Montague, Tarrant, 
and Wise counties, there is a general open season. 
(i) Open season: first Saturday in November through the first Sunday in January. 
(ii) Bag limit: three deer, no more than one buck and no more than two 
antlerless. 
(iii) During the first nine days of the general season, antlerless deer may be 
taken without antlerless deer permits unless MLD permits have been issued for 
the tract of land. After the first nine days, antlerless deer may be taken only 
by MLD antlerless permits. 
(E) In Anderson, Bowie, Brazos, Burleson, Camp, Cass, Cherokee, Delta, Franklin, 
Freestone, Gregg, Grimes, Harrison, Henderson, Hopkins, Houston, Lamar, Leon, 
Limestone, Madison, Marion, Morris, Navarro, Red River, Robertson, Rusk, San 
Jacinto, Smith, Titus, Trinity, Upshur, Van Zandt, Walker, and Wood counties, 
there is a general open season. 
(i) Open season: first Saturday in November through the first Sunday in January. 
(ii) Bag limit: three deer, no more than one buck and no more than two 
antlerless. 
(iii) Antlerless deer may be taken only by MLD antlerless permits or LAMPS 
permits. 
(iv) Special Requirement: In that portion of Henderson County bounded on the 
north by the county line, on the east by U.S. Highway 175 and Tin Can Alley 
Road, on the south by State Highway 31, and on the west by State Highway 274, 
hunting of deer is restricted to shotguns with buckshot, longbow, compound bow, 
recurved bow, or crossbow. Other game animals or game birds may be taken only 
with shotgun, longbow, compound bow, recurved bow, or crossbow. 
(F) In Hartley, Moore, Oldham and Potter counties, there is a general open 
season.
(i) Open season: Saturday before Thanksgiving for 16 consecutive days. 
(ii) Bag limit: three deer, no more than one buck and no more than two 
antlerless. 
(iii) Antlerless deer may be taken only by MLD antlerless permits.
(G) In Nacogdoches, Panola, Sabine, San Augustine and Shelby counties, there is 
a general open season. 
(i) Open season: first Saturday in November through the first Sunday in January. 
(ii) Bag limit: three deer, no more than one buck and no more than two 
antlerless. 
(iii) During the first two days of the general season, antlerless deer may be 
taken without antlerless deer permits unless MLD or LAMPS permits have been 
issued for the tract of land. If MLD or LAMPS permits have been issued, they 
must be attached to all antlerless deer harvested on the tract of land. After 
the first two days, antlerless deer may be taken only by MLD antlerless deer 
permits or LAMPS permits. On National Forest, Corps of Engineers, Sabine River 
Authority and Trinity River Authority lands, antlerless deer may be taken only 
by MLD antlerless permits. 
(H) In Austin, Bastrop, Bell (east of Interstate 35), Caldwell, Colorado, Comal 
(east of Interstate 35), Crane, De Witt, Ector, Ellis, Falls, Fannin, Fayette, 
Goliad (north of U.S. Highway 59), Gonzales, Guadalupe, Hays (east of Interstate 
35), Hunt, Jackson (north of U.S. Highway 59), Karnes, Kaufman, Lavaca, Lee, 
Loving, Midland, Milam, Rains, Travis (east of Interstate 35), Upton (that 
portion located north of U.S. Highway 67; and that area located both south of 
U.S. Highway 67 and west of state highway 349), Victoria (north of U.S. Highway 
59), Waller, Ward, Washington, Wharton (north of U.S. Highway 59), Williamson 
(east of Interstate 35), and Wilson counties, there is a general open season. 
(i) Open season: first Saturday in November through the first Sunday in January. 
(ii) Bag limit: three deer, no more than one buck and no more than two 
antlerless. 
(iii) Antlerless deer may be taken only by MLD antlerless permits.
(5) In Angelina, Chambers, Hardin, Jasper, Jefferson, Liberty, Montgomery, 
Newton, Orange, Polk, and Tyler counties, there is a general open season. 
(A) Open season: first Saturday in November through the first Sunday in January. 
(B) Bag limit: three deer, no more than two bucks and no more than two 
antlerless. 
(C) During the first 23 days of the general season, antlerless deer may be taken 
without antlerless deer permits unless MLD or LAMPS permits have been issued for 
the tract of land. If MLD or LAMPS permits have been issued, they must be 
attached to all antlerless deer harvested on the tract of land. After the first 
23 days, antlerless deer may be taken only by MLD antlerless permits or LAMPS 
permits. On National Forest, Corps of Engineers, Sabine River Authority and 
Trinity River Authority lands, antlerless deer may be taken only by MLD 
antlerless permits. 
(6) In Andrews, Bailey, Castro, Cochran, Collin, Dallam, Dallas, Dawson, Deaf 
Smith, El Paso, Gaines, Galveston, Grayson (except on the Hagerman National 
Wildlife Refuge), Hale, Hockley, Hudspeth, Lamb, Lubbock, Lynn, Martin, Parmer, 
Rockwall, Sherman, Terry, Winkler, and Yoakum counties, there is no general open 
season. 
(7) Archery-only open seasons. In all counties where there is a general open 
season for white- tailed deer, and in Grayson County, there is an archery-only 
open season during which either sex of white-tailed deer may be taken as 
provided for in sec.65.11(2) and (3) of this title (relating to Means and 
Methods). 
(A) Open season: the Saturday closest to September 30 for 30 consecutive days. 
(B) Bag limit: Except for Grayson County, the bag limit in any given county is 
as provided for that county during the general open season. In Grayson County, 
the bag limit is three deer, no more than one buck and no more than two 
antlerless. 
(8) Muzzleloader-only open seasons, and bag and possession limits shall be as 
follows. 
(A) In Bandera, Bexar, Blanco, Brewster, Brown, Burnet, Coke, Coleman, Comal 
(west of Interstate 35), Concho, Crockett, Culberson, Edwards, Gillespie, 
Glasscock, Hays (west of Interstate 35), Howard, Irion, Jeff Davis, Kendall, 
Kerr, Kimble, Kinney (north of U.S. Highway 90), Llano, Mason, Medina (north of 
U.S. Highway 90), Menard, McCulloch, Mills, Mitchell, Nolan, Pecos, Presidio, 
Reagan, Real, Reeves, Runnels, San Saba, Schleicher, Sterling, Sutton, Terrell, 
Tom Green, Travis (west of Interstate 35), Upton (that portion located both 
south of U.S. Highway 67 and east of state highway 349), Uvalde (north of U.S. 
Highway 90), and Val Verde (north of U.S. Highway 90; and that portion located 
both south of U.S. Highway 90 and west of Spur 239) counties, there is an open 
season during which only antlerless deer may be taken only with a muzzleloader. 
(B) Open Season: from the first Saturday following the closing of the general 
open season for nine consecutive days. 
(C) Bag limit: four antlerless deer. 
(c) Mule deer. The open seasons and annual bag limits for mule deer shall be as 
follows. 
(1) In Armstrong, Borden, Briscoe, Carson, Childress, Coke, Collingsworth, 
Cottle, Crosby, Dallam, Deaf Smith, Dickens, Donley, Fisher, Floyd, Foard, 
Garza, Gray, Hall, Hardeman, Hartley, Hemphill, Hutchinson, Kent, King, 
Lipscomb, Moore, Motley, Ochiltree, Oldham, Potter, Randall, Roberts, Scurry, 
Stonewall, and Swisher counties, there is a general open season. 
(A) Open season: Saturday before Thanksgiving for 16 consecutive days. 
(B) Bag limit: two deer, no more than one buck. 
(C) Antlerless deer may be taken only by Antlerless Mule Deer or MLD Permits. 
(2) In Brewster, Crane, Crockett, Culberson, Ector, El Paso, Hudspeth, Jeff 
Davis, Loving, Midland, Pecos, Presidio, Reagan, Reeves, Terrell, Upton, Val 
Verde, Ward, and Winkler counties, there is a general open season. 
(A) Open season: last Saturday in November for 16 consecutive days. 
(B) Bag limit: two deer, no more than one buck. 
(C) Antlerless deer may be taken only by Antlerless Mule Deer or MLD Permits. 
(3) In Bailey, Hockley, Lamb, Terry, and Yoakum counties, there is a general 
open season. 
(A) Open season: Saturday before Thanksgiving for five consecutive days. 
(B) Bag limit: two deer, no more than one buck. 
(C) Antlerless deer may be taken only by Antlerless Mule Deer or MLD Permits. 
(4) In all other counties, there is no general open season for mule deer. 
(5) Archery-only open seasons and bag and possession limits shall be as follows. 
During an archery-only open season, deer may be taken only as provided for in 
sec.65.11(2) and (3) of this title (relating to Means and Methods). 
(A) In Armstrong, Borden, Briscoe, Carson, Childress, Coke, Collingsworth, 
Cottle, Crane, Crockett, Crosby, Culberson, Dallam, Deaf Smith, Dickens, Donley, 
Ector, El Paso, Fisher, Floyd, Foard, Garza, Gray, Hall, Hardeman, Hartley, 
Hemphill, Hudspeth, Hutchinson, Jeff Davis, Kent, King, Lipscomb, Loving, 
Midland, Moore, Motley, Ochiltree, Oldham, Potter, Presidio, Randall, Reagan, 
Reeves, Roberts, Scurry, Stonewall, Swisher, Upton, Val Verde, Ward, and Winkler 
counties, there is an open season. 
(i) Open season: from the Saturday closest to September 30 for 30 consecutive 
days. 
(ii) Bag limit: one buck deer. 
(B) In Brewster, Pecos, and Terrell counties, there is an open season. 
(i) Open season: from the Saturday closest to September 30 for 30 consecutive 
days. 
(ii) Bag limit: two deer, no more than one buck. 
(C) In all other counties, there is no archery-only open season for mule deer. 

sec.65.64.Turkey.
(a) The annual bag limit for Rio Grande and Eastern turkey, in the aggregate, is 
four. 
(b) Rio Grande turkey. The open seasons and bag limits for Rio Grande turkey 
shall be as follows. 
(1) Fall seasons and bag limits: 
(A) In Archer, Bandera, Bell, Bexar, Blanco, Bosque, Burnet, Clay, Comal, 
Comanche, Cooke, Coryell, Erath, Gillespie, Goliad, Gonzales, Hamilton, Hays, 
Hood, Jack, Karnes, Kendall, Kerr, Lampasas, Llano, McLennan, Medina (only north 
of U.S. Highway 90), Montague, Palo Pinto, Parker, Real, Somervell, Stephens, 
Travis, Wichita, Williamson, Wilson, Wise, and Young counties, there is a fall 
general open season. 
(i) Open season: first Saturday in November through the first Sunday in January. 
(ii) Bag limit: four turkeys, gobblers or bearded hens. 
(B) In Aransas, Atascosa, Bee, Calhoun, Dimmit, Duval, Frio, Hidalgo, Jim Hogg, 
Jim Wells, LaSalle, Live Oak, Maverick, McMullen, Medina (south of U.S. Highway 
90), Nueces, Refugio, San Patricio, Starr, Webb, and Zavala counties, there is a 
fall general open season. 
(i) Open season: second Saturday in November through the third Sunday in 
January. 
(ii) Bag limit: four turkeys, gobblers or bearded hens. 
(C) In Kinney (south of U.S. Highway 90) and Uvalde (south of U.S. Highway 90), 
and Val Verde (in that southeastern portion located both south of U.S. Highway 
90 and east of Spur 239) counties, there is a fall general open season. 
(i) Open season: second Saturday in November through the third Sunday in 
January. 
(ii) Bag limit: four turkeys, either sex. 
(D) In Brooks, Kenedy and Kleberg counties, there is a fall general open season. 
(i) Open season: second Saturday in November through the last Sunday in 
February. 
(ii) Bag limit: four turkeys, either sex. 
(E) In Armstrong, Baylor, Borden, Briscoe, Brown, Callahan, Carson, Childress, 
Coke, Coleman, Collingsworth, Concho, Cottle, Crane, Crockett, Crosby, Dawson, 
Dickens, Donley, Eastland, Ector, Edwards, Fisher, Floyd, Foard, Garza, 
Glasscock, Gray, Hall, Hardeman, Hartley, Haskell, Hemphill, Howard, Hutchinson, 
Irion, Jones, Kent, Kimble, King, Kinney (north of U.S. Highway 90), Knox, 
Lipscomb, Lynn, Martin, Mason, McCulloch, Menard, Midland, Mills, Mitchell, 
Moore, Motley, Nolan, Ochiltree, Oldham, Pecos, Potter, Randall, Reagan, 
Roberts, Runnels, Sutton, San Saba, Schleicher, Scurry, Shackelford, Sterling, 
Stonewall, Swisher, Taylor, Terrell, Throckmorton, Tom Green, Upton, Uvalde 
(north of U.S. Highway 90), Ward, Wheeler, Wilbarger, and Val Verde (that 
portion located north of U.S. Highway 90; and that portion located both south of 
U.S. 90 and west of Spur 239) counties, there is a fall general open season. 
(i) Open season: first Saturday in November through the first Sunday in January. 
(ii) Bag limit: four turkeys, either sex. 
(F) In Willacy County, there is a fall general open season for turkeys. 
(i) Open season: second Saturday in November through the third Sunday in 
January. 
(ii) Bag limit: four turkeys, either sex. 
(2) Archery-only season and bag limits. In all counties where there is a general 
fall season for turkey there is an open season during which turkey may be taken 
only as provided for in sec.65.11(2) and (3) of this title (relating to Means 
and Methods). 
(A) Open season: from the Saturday closest to September 30 for 30 consecutive 
days. 
(B) Bag limit: in any given county, the annual bag limit is as provided by this 
section for the fall general season in that county. 
(3) Spring season and bag limits. 
(A) In Archer, Armstrong, Bandera, Baylor, Bell, Blanco, Borden, Bosque, 
Brewster, Briscoe, Brown, Burnet, Callahan, Carson, Childress, Clay, Coke, 
Coleman, Collingsworth, Comal, Comanche, Concho, Cooke, Coryell, Cottle, Crane, 
Crockett, Crosby, Dawson, Denton, Dickens, Donley, Eastland, Ector, Edwards, 
Ellis, Erath, Fisher, Floyd, Foard, Garza, Gillespie, Glasscock, Gray, Hall, 
Hamilton, Hardeman, Hartley, Haskell, Hays, Hemphill, Hill, Hood, Howard, 
Hutchinson, Irion, Jack, Jeff Davis, Johnson, Jones, Kendall, Kent, Kerr, 
Kimble, King, Knox, Lampasas, Lipscomb, Llano, Lynn, Martin, Mason, McCulloch, 
McLennan, Menard, Midland, Mills, Mitchell, Montague, Moore, Motley, Nolan, 
Ochiltree, Oldham, Palo Pinto, Parker, Pecos, Potter, Randall, Reagan, Real, 
Roberts, Runnels, San Saba, Schleicher, Scurry, Shackelford, Somervell, 
Stephens, Sterling, Stonewall, Sutton, Swisher, Tarrant, Taylor, Terrell, 
Throckmorton, Tom Green, Travis, Upton, Val Verde, Ward, Wheeler, Wichita, 
Wilbarger, Williamson, Wise, and Young counties, there is a spring general open 
season. 
(i) Open season: first Saturday in April for 37 consecutive days. 
(ii) Bag limit: four turkeys, gobblers only. 
(B) In Bastrop, Caldwell, Colorado, De Witt, Fayette, Guadalupe, Jackson, 
Lavaca, Lee, Milam, and Victoria counties, there is a spring general open 
season. 
(i) Open season: first Saturday in April for 37 consecutive days. 
(ii) Bag limit: one turkey, gobblers only. 
(C) In Aransas, Atascosa, Bee, Bexar, Brooks, Calhoun, Dimmit, Duval, Frio, 
Goliad, Gonzales, Hidalgo, Jim Hogg, Jim Wells, Karnes, Kenedy, Kinney, Kleberg, 
LaSalle, Live Oak, Maverick, McMullen, Medina, Nueces, Refugio, San Patricio, 
Starr, Uvalde, Webb, Willacy, Wilson, and Zavala counties, there is a spring 
general open season. 
(i) Open season: last Saturday in March for 37 consecutive days. 
(ii) Bag limit: four turkeys, gobblers only. 
(c) Eastern turkey. The open seasons and bag limits for Eastern turkey shall be 
as follows. In Angelina, Bowie, Cass, Cherokee, Delta, Gregg, Harrison, Hopkins, 
Jasper, Lamar, Marion, Nacogdoches, Newton, Red River, Sabine, San Augustine, 
and Trinity counties there is a spring season. 
(1) Open season: the Monday nearest April 14 for 14 consecutive days. 
(2) Bag limit: one turkey, gobbler only. 
(3) In the counties listed in this subsection: 
(A) it is unlawful to hunt turkey by any means other than a shotgun; 
(B) it is unlawful for any person to take or attempt to take turkeys by the aid 
of baiting, or on or over a baited area; and 
(C) all turkeys harvested during the open season must be registered at 
designated check stations within 24 hours of the time of kill. Harvested turkeys 
may be field dressed but must otherwise remain intact. 
(d) In all counties not listed in subsections (b) or (c) of this section, the 
season is closed for hunting turkey. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on June 24, 1997.
TRD-9708221
Bill Harvey
Regulatory Coordinator
Texas Parks and Wildlife Department
Effective date: July 14, 1997
Proposal publication date: March 11, 1997
For further information, please call: (512) 389-4642

Seasons and Bag Limits-Fishing Provisions
31 TAC sec.sec.65.71, 65.72, 65.78
The amendments are adopted under Parks and Wildlife Code, Chapter 61, Uniform 
Wildlife Regulatory Act (Wildlife Conservation Act of 1983), which provides the 
Commission with authority to establish wildlife resource regulations for this 
state.

sec.65.72.Fish.
(a) General rules. 
(1)-(3) (No change.) 
(4) Finfish tags: Prohibited Acts. 
(A) (No change.) 
(B) It is unlawful to: 
(i)-(iii) (No change.) 
(iv) catch and retain a finfish required to be tagged and fail to immediately 
attach and secure a tag, with the day and month of catch cut out, to the finfish 
at the narrowest part of the finfish tail, just ahead of the tail fin; 
(v) have in possession both a Red Drum Tag and a Duplicate Red Drum Tag issued 
to the same license or salt water stamp holder; 
(vi) have in possession both a Red Drum Tag or a Duplicate Red Drum Tag and a 
Bonus Red Drum Tag issued to the same license or salt water stamp holder; 
(vii) have in possession both an Exempt Red Drum Tag and a Duplicate Exempt Red 
Drum Tag issued to the same license holder; or 
(viii) have in possession both an Exempt Red Drum Tag or a Duplicate Exempt Red 
Drum Tag and a Bonus Red Drum Tag issued to the same holder. 
(5) Commercial fishing seasons. 
(A) The commercial seasons for finfish species listed in this paragraph and 
caught in Texas waters shall run concurrently with commercial seasons 
established for the same species caught in federal waters of the Exclusive 
Economic Zone (EEZ). 
(B) The commercial fishing season in the EEZ will be set by the National Marine 
Fisheries Service for: 
(i) red snapper under guidelines established by the Fishery Management Plan for 
Reef Fish Resources of the Gulf of Mexico; and 
(ii) king mackerel under guidelines established by the Fishery Management Plan 
for Coastal Migratory Pelagic Resources of the Gulf of Mexico and South 
Atlantic. 
(C) When federal and/or state waters are closed, it will be unlawful to: 
(i) purchase, barter, trade or sell finfish species listed in this paragraph 
landed in this state; 
(ii) transfer at sea finfish species listed in this paragraph caught or 
possessed in the waters of this state; and 
(iii) possess finfish species listed in this paragraph in excess of the current 
recreational bag or possession limit in or on the waters of this state. 
(b) Bag, possession, and length limits. 
(1) (No change.) 
(2) There are no bag, possession, or length limits on game or non-game fish, 
except as provided in these rules. 
(A) (No change.) 
(B) Statewide daily bag and length limits shall be as follows:
Figure 1: 31 TAC sec.65.72(b)(2)(B) 
(C) Exceptions to statewide daily bag, possession, and length limits shall be as 
follows: 
(i) The following is a figure:
Figure 2: 31 TAC sec.65.72(b)(2)(C)(i) 
(ii) (No change.) 
(c) Devices, means and methods. 
(1)-(3) (No change.) 
(4) In salt water only, it is unlawful to fish with any device that is marked 
with a buoy made of a plastic bottle(s) of any color or size. 
(5) Device restrictions. 
(A) Cast net. It is unlawful to use a cast net exceeding 14 feet in diameter. 
(i) Only non-game fish may be taken with a cast net. 
(ii) In salt water, non-game fish may be taken for bait purposes only. 
(B) Dip net. 
(i) It is unlawful to use a dip net except: 
(I) to aid in the landing of fish caught on other legal devices; and 
(II) to take non-game fish. 
(ii) In salt water, non-game fish may be taken for bait purposes only. 
(C) Gaff. 
(i) It is unlawful to use a gaff except to aid in landing fish caught by other 
legal devices, means or methods. 
(ii) Fish landed with a gaff may not be below the minimum, above the maximum, or 
within a protected length limit. 
(D) Gig. Only non-game fish may be taken with a gig. 
(E) Jugline. For use in fresh water only. Non-game fish, channel catfish, blue 
catfish and flathead catfish may be taken with a jugline. It is unlawful to use 
a jugline: 
(i) with invalid gear tags. Gear tags must be attached within six inches of the 
free-floating device, are valid for 30 days after the date set out, and must 
include the number of the permit to sell non-game fish taken from freshwater, if 
applicable; 
(ii) for commercial purposes that is not marked with an orange free-floating 
device; 
(iii) for non-commercial purposes that is not marked with a white free-floating 
device; 
(iv) in Lake Bastrop in Bastrop County, Bell Street Lake in Tom Green County, 
Bellwood Lake in Smith County, Lake Bryan in Brazos County, Boerne City Park 
Lake in Kendall County, Dixieland Reservoir in Cameron County, and Gibbons Creek 
Reservoir in Grimes County. 
(F) Lawful archery equipment. Only non-game fish may be taken with lawful 
archery equipment. 
(G) Minnow trap. For use in fresh water only 
(i) Only non-game fish may be taken with a minnow trap. 
(ii) It is unlawful to use a minnow trap that exceeds 24 inches in length or 
with a throat larger than one by three inches. 
(H) Perch traps. For use in salt water only. 
(i) Perch traps may be used only for taking non-game fish.
(ii) Perch traps may not exceed 18 cubic feet. 
(iii) Perch traps must be marked with floating visible orange buoy not less than 
six inches in height and six inches in width. The buoy must have a gear tag 
attached. Gear tags are valid for 30 days after date set out. 
(I) Pole and line. 
(i) Game and non-game fish may be taken by pole and line. It is unlawful to take 
or attempt to take fish with one or more hooks attached to a line or artificial 
lure used in a manner to foul-hook a fish (snagging or jerking). A fish is foul-
hooked when caught by a hook in an area other than the fish's mouth. 
(ii) Game and non-game fish may be taken by pole and line, except that in the 
Guadalupe River in Comal County from the second bridge crossing on River Road 
upstream to the easternmost bridge crossing on F.M. Road 306, rainbow and brown 
trout may not be retained when taken by any method except artificial lures. 
Artificial lures cannot contain or have attached either whole or portions, 
living or dead, of organisms such as fish, crayfish,  insects (grubs, larvae, or 
adults), or worms, or any other animal or vegetable material, or synthetic 
scented materials. It is an offense to possess rainbow and brown trout while 
fishing with any other device in that part of the Guadalupe River defined in 
this paragraph. 
(J) Purse seine (net). 
(i) Purse seines may be used only for taking menhaden, only from that portion of 
the Gulf of Mexico within the jurisdiction of this state extending from one-half 
mile offshore to nine nautical miles offshore, and only during the period of 
time beginning the third Monday in April through the first day in November each 
year. 
(ii) Purse seines used for taking menhaden may not be used within one mile of 
any jetty or pass. 
(iii) The purse seine, not including the bag, shall not be less than three-
fourths inch square mesh. 
(K) Sail line. For use in salt water only. 
(i) Non-game fish, red drum, spotted seatrout, and sharks may be taken with a 
sail line. 
(ii) Line length shall not exceed 1,800 feet from the reel to the sail. 
(iii) The sail and most shoreward float must be a highly visible orange or red 
color. 
(iv) No float on the line may be more than 200 feet from the sail. 
(v) A weight of not less than one ounce shall be attached to the line not less 
than four feet or more than six feet shoreward of the last shoreward float. 
(vi) Reflectors of not less than two square inches shall be affixed to the sail 
and floats and shall be visible from all directions for sail lines operated from 
30 minutes after sunset to 30 minutes before sunrise.
(vii) There is no hook spacing requirement for sail lines.
(viii) No more than one sail line may be used per fisherman.
(ix) Sail lines may not be used by the holder of a commercial fishing license. 
(x) Sail lines must be attended at all times the line is fishing.
(xi) Sail lines may not have more than 30 hooks and no hook may be placed more 
than 200 feet from the sail. 
(L) Seine. 
(i) Only non-game fish may be taken with a seine. 
(ii) It is unlawful to use a seine: 
(I) which is not manually operated. 
(II) with mesh exceeding 1/2-inch square. 
(III) that exceeds 20 feet in length. 
(iii) In salt water, non-game fish may taken by seine for bait purposes only. 
(M) Shad trawl. For use in fresh water only. 
(i) Only non-game fish may be taken with a shad trawl. 
(ii) It is unlawful to use a shad trawl longer than six feet or with a mouth 
larger than 36 inches in diameter. 
(iii) A shad trawl may be equipped with a funnel or throat and must be towed by 
boat or by hand. 
(N) Spear. Only non-game fish may be taken with a spear. 
(O) Spear gun. Only non-game fish may be taken with spear gun. 
(P) Throwline. For use in fresh water only. 
(i) Non-game fish, channel catfish, blue catfish and flathead catfish may be 
taken with a throwline. 
(ii) It is unlawful to use a throwline in Lake Bastrop in Bastrop County, Bell 
Street Lake in Tom Green County, Bellwood Lake in Smith County, Lake Bryan in 
Brazos County, Boerne City Park Lake in Kendall County, Dixieland Reservoir in 
Cameron County, and Gibbons Creek Reservoir in Grimes County.
(Q) Trotline. 
(i) Non-game fish, channel catfish, blue catfish, and flathead catfish may be 
taken by trotline. 
(ii) It is unlawful to use a trotline: 
(I) with a mainline length exceeding 600 feet; 
(II) with invalid gear tags. Gear tags must be attached within three feet of the 
first hook at each end of the trotline and are valid for 30 days after date set 
out, except on saltwater trotlines, a gear tag is not required to be dated; 
(III) with hook interval less than three horizontal feet; 
(IV) with metallic stakes; or 
(V) with the main fishing line and attached hooks and stagings above the water's 
surface. 
(iii) In fresh water, it is unlawful to use a trotline: 
(I) with more than 50 hooks; 
(II) in Gibbons Creek Reservoir in Grimes County, Lake Bastrop in Bastrop 
County, Fayette County Reservoir in Fayette County, Pinkston Reservoir in Shelby 
County, Lake Bryan in Brazos County, Bellwood Lake in Smith County, Dixieland 
Reservoir in Cameron County, Bell Street Lake in Tom Green County, and Boerne 
City Park Lake in Kendall County. 
(iv) In salt water: 
(I) it is unlawful to use a trotline: 
(-a-) in or on the waters of the Gulf of Mexico within the jurisdiction of this 
state; 
(-b-) from which red drum, sharks or spotted seatrout caught on the trotline are 
retained or possessed; 
(-c-) not marked with yellow flagging attached to stakes or with a yellow 
floating buoy not less than six inches in height and six inches in width 
attached to end fixtures. All trotline floats must be yellow.
(-d-) placed closer than 50 feet from any other trotline, or set within 200 feet 
of the edge of the Intracoastal Waterway or its tributary channels. No trotline 
may be fished with the main fishing line and attached hooks and stagings above 
the water's surface; 
(-e-) baited with other than natural bait, except sail lines; 
(-f-) with hooks other than circle-type hook with point curved in and having a 
gap (distance from point to shank) of no more than one-half inch, and with the 
diameter of the circle not less than five-eighths inch. Sail lines are excluded 
from the restrictions imposed by this clause; or 
(-g-) in Aransas County in Little Bay and the water area of Aransas Bay within 
one-half mile of a line from Hail Point on the Lamar Peninsula, then direct to 
the eastern end of Goose Island, then along the southern shore of Goose Island, 
then along the causeway between Lamar Peninsula and Live Oak Peninsula, then 
along the eastern shoreline of the Live Oak Peninsula past the town of Fulton, 
past Nine-Mile Point, past the town of Rockport to a point at the east end of 
Talley Island, including that part of Copano Bay within 1,000 feet of the 
causeway between Lamar Peninsula and Live Oak Peninsula. 
(II) No trotline or trotline components, including lines and hooks, but 
excluding poles, may be left in or on coastal waters between the hours of 1 p.m. 
on Friday through 1:00 p.m. on Sunday of each week, except that attended sail 
lines are excluded from the restrictions imposed by this clause. Under the 
authority of the Texas Parks and Wildlife Code, sec.66.206(b), in the event 
small craft advisories or higher marine weather advisories issued by the 
National Weather Service are in place at 8:00 a.m. on Friday, trotlines may 
remain in the water until 6:00 p.m. on Friday. If small craft advisories are in 
place at 1:00 p.m. on Friday, trotlines may remain in the water until Saturday. 
When small craft advisories are lifted by 8:00 a.m. on Saturday, trotlines must 
be removed by 1:00 p.m. on Saturday. When small craft advisories are lifted by 
1:00 p.m. on Saturday, trotlines must be removed by 6:00 p.m. on Saturday. When 
small craft advisories or higher marine weather advisories are still in place at 
1:00 p.m. on Saturday, trotlines may remain in the water through 1:00 p.m. on 
Sunday. It is a violation to tend, bait, or harvest fish or any other aquatic 
life from trotlines during the period that trotline removal requirements are 
suspended under this provision for adverse weather conditions. For purposes of 
enforcement, the geographic area customarily covered by marine weather 
advisories will be delineated by department policy; 
(R) Umbrella net. 
(i) Only non-game fish may be taken with an umbrella net. 
(ii) It is unlawful to use an umbrella net with the area within the frame 
exceeding 16 square feet. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on June 24, 1997.
TRD-9708220
Bill Harvey
Regulatory Coordinator
Texas Parks and Wildlife Department
Effective date: July 14, 1997
Proposal publication date: March 11, 1997
For further information, please call: (512) 389-4642

TITLE 37. PUBLIC SAFETY AND CORRECTIONS
PART VII. Texas Commission on Law Enforcement Officer
Standards and Education
CHAPTER 211. Administration Division
37 TAC sec.211.65
The Texas Commission on Law Enforcement Officer Standards and Education adopts 
the repeal of sec.211.65, concerning academy licensing, operations and 
evaluation, without changes to the proposed text as published in the April 25, 
1997, issue of the Texas Register (22 TexReg 3700). 
Section 211.65 will be repealed and replaced by sec.sec.215.10, 215.20, 215.30, 
and 215.40, which were developed pursuant to an ongoing reorganization of the 
commission's rules. The reorganization plan was developed by staff and 
considered by the commission's Ad Hoc Rules Committee in response to concerns 
that the commission's Administrative Code had become outdated, too complex and 
difficult to understand. Included in this ongoing reorganization is a schedule 
developed by staff for renumbering certain sections of the rules as a way to 
more clearly label specific topics and to more fully utilize the chapter numbers 
available in the Administrative Code for the commission's rules. 
No comments were received regarding the adoption of this repeal. 
The repeal is adopted under Texas Government Code Annotated, Chapter 415, 
sec.415.010, which authorizes the commission to promulgate rules for the 
administration of Chapter 415.  
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on June 24, 1997.
TRD-9708250
Edward T. Laine
Chief, Professional Standards and Administrative Operations
Texas Commission on Law Enforcement Officer Standards and Education
Effective date: September 1, 1997
Proposal publication date: April 25, 1997
For further information, please call: (512) 450-0188

37 TAC sec.211.82, sec.211.99
The Texas Commission on Law Enforcement Officer Standards and Education adopts 
the repeal of sec.211.82 and sec.211.99, regarding issuance of licenses, without 
changes to the proposed text as published in the April 25, 1997, issue of the 
Texas Register (22 TexReg 3700). 
The sections will be repealed and replaced by sec.217.5, which was developed 
pursuant to an ongoing reorganization of the commission's rules. The 
reorganization plan was developed by staff and considered by the commission's Ad 
Hoc Rules Committee in response to concerns that the commission's Administrative 
Code had become outdated, too complex and difficult to understand. Included in 
this ongoing reorganization is a schedule developed by staff for renumbering 
certain sections of the rules as a way to more clearly label specific topics and 
to more fully utilize the chapter numbers available in the Administrative Code 
for the commission's rules. 
No comments were received regarding the adoption of these repeals. 
The repeals are proposed under Texas Government Code Annotated, Chapter 415, 
sec.415.010, which authorizes the commission to promulgate rules for the 
administration of Chapter 415.  
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on June 24, 1997.
TRD-9708248
Edward T. Laine
Chief, Professional Standards and Administrative Operations
Texas Commission on Law Enforcement Officer Standards and Education
Effective date: September 1, 1997
Proposal publication date: April 25, 1997
For further information, please call: (512) 450-0188

CHAPTER 215. Training and Educational Providers and Related Matters Division
37 TAC sec.sec.215.10, 215.20, 215.30, 215.40
The Texas Commission on Law Enforcement Officer Standards and Education adopts 
new sec.sec.215.10, 215.20, 215.30 and 215.40, concerning academy licensing, 
evaluations and enrollment, without changes to the proposed text as published in 
the April 25, 1997, issue of the Texas Register (22 TexReg 3701). 
These sections were developed pursuant to an ongoing reorganization of the 
commission's rules. The reorganization plan was developed by staff and 
considered by the commission's Ad Hoc Rules Committee in response to concerns 
that the commission's Administrative Code had become outdated, too complex and 
difficult to understand. Included in this ongoing reorganization is a schedule 
for renumbering certain sections of the rules as a way to more clearly label 
specific topics and to more fully utilize the chapter numbers available in the 
Administrative Code for the commission's rules. These new sections will replace 
current sec.211.65, concerning academy licensing, operations and evaluation, 
which will be repealed. 
The new sections contain a number of new provisions. Section 215.10 requires 
that, in order to pass a pre-licensing inspection, an academy license applicant 
must have "a proprietary interest in, or a contractual or written agreement 
providing for" an all-weather firing range, as well as a driving range for 
criminal justice driver training. These provisions were inserted to ensure that 
new academy applicants have the appropriate facilities to teach all portions of 
the Basic Peace Officer Course, including learning objectives concerning both 
firearms and driving. In addition, sec.215.20 requires the training coordinator 
to distribute a copy of the commission's rules and law, and ensure that a review 
of applicable rules is part of any course that results in the issuance of a 
license. Staff reasoned, and the commissioners concurred, that a review of 
commission rules and law would allow trainees to more easily comply with the 
commission's requirements. 
Finally, sec.215.40 was developed in response to an amendment to sec.415.031 of 
the Government Code, adopted during the 74th Legislative Session, which required 
the commission to establish by rule minimum standards for a person to enroll in 
certain training courses. Staff reasoned, and the commissioners concurred, that 
in order to comply with the requirements of sec.415.031, which states that "a 
person who is disqualified by law to be an officer or county jailer may not 
enroll" in law enforcement training, training providers must ensure that a 
training applicant does not have a felony criminal history. Therefore, the 
section requires training providers to have evidence, obtained through 
computerized criminal history and fingerprint checks, that trainees are not 
convicted felons. In addition, the commissioners reasoned that, because the 
Basic Peace Officer Course contains learning objectives having to do with 
driving and with firearms, trainees should not be prohibited by law from driving 
a car or possessing a firearm. 
Comments were received from San Antonio College's Law Enforcement Training 
Center regarding provisions of sec.215.40 that concern criminal background 
checks for people who wish to enroll in law enforcement training programs. The 
commenter recommended that a computer check of training applicants be 
substituted for a fingerprint check, noting that many students will be required 
to obtain their own criminal histories from the Department of Public Safety and 
the Federal Bureau of Investigation, a process which costs between $33 and $45 
and may take as long as nine weeks. In response, however, the commission notes 
that there are a number of states that do not participate in the NCIC system. 
Fingerprint checks through the Department of Public Safety and the Federal 
Bureau of Investigation should reveal the most complete criminal history 
possible, and thus allow training coordinators to fully comply with the law. 
Comments were received from the Mesquite Police Department regarding a provision 
of sec.215.20 regarding academy coordinators which was included in a previous 
proposed version of this rule, but has since been eliminated. Comments were also 
received from Texas A&M University's Engineering Extension Service, Law 
Enforcement & Security Training Division regarding sec.215.40. These comments 
concerned whether the enrollment standards applied only to law enforcement 
trainees, or whether they applied to out-of-state students and private security 
trainees as well. In response, staff notes that commission rules apply only to 
training received pursuant to licensing or certification by the commission, not 
to training provided in areas or to individuals not governed by commission 
rules. 
The new sections are adopted under Texas Government Code Annotated, Chapter 415, 
sec.415.010, which authorizes the commission to promulgate rules for the 
administration of Chapter 415, and sec.415.031, which authorizes the commission 
to establish and maintain training programs for officers and county jailers.  
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on June 24, 1997.
TRD-9708246
Edward T. Laine
Chief, Professional Standards and Administrative Operations
Texas Commission on Law Enforcement Officer Standards and Education
Effective date: September 1, 1997
Proposal publication date: April 25, 1997
For further information, please call: (512) 450-0188

CHAPTER 217. Licensing Requirements Division
37 TAC sec.217.5
The Texas Commission on Law Enforcement Officer Standards and Education adopts 
new sec.217.5, regarding issuance of a license, without changes to the proposed 
text as published in the April 25, 1997, issue of the Texas Register (22 TexReg 
3704). 
This new section was developed pursuant to an ongoing reorganization of the 
commission's rules. The reorganization plan was developed by staff and 
considered by the commission's Ad Hoc Rules Committee in response to concerns 
that the commission's Administrative Code had become outdated, too complex and 
difficult to understand. Included in this ongoing reorganization is a schedule 
for renumbering certain sections of the rules as a way to more clearly label 
specific topics and to more fully utilize the chapter numbers available in the 
Administrative Code for the commission's rules. This new section will replace 
current sec.211.82 and sec.211.99, concerning issuance of licenses and 
provisional licenses. 
Staff reasoned, and the commissioners concurred, that it would be easier for 
readers to understand and comply with the similar provisions concerning these 
two issues if they were combined under one title. In addition, out-of-date 
language concerning training course topics was deleted from the rules to 
simplify and update them. Staff reasoned, and the commissioners agreed, that 
because learning objectives for each course are updated frequently, they should 
not be included in the rules. The rule revision process is lengthy and labor-
intensive, and updated curricula for each of the commission's courses is readily 
available to the public. At the suggestion of a member of the commission, staff 
developed and the commissioners approved the addition of a new set of provisions 
under which a temporary jailer license may be issued. The new provision allows 
such a license to be issued to a person who meets all the minimum standards for 
licensing as a jailer except for training, testing, age and education; is at 
least 17 years of age; is currently enrolled in or has successfully completed an 
approved pre-law enforcement/criminal justice program in high school; and who is 
in good standing academically and eligible to graduate from high school at the 
end of the current academic year. The commissioners reasoned that the new 
provisions would allow county corrections facilities to take advantage of the 
trained personnel participating in high school "Tech Prep" programs, and that 
professional development of these individuals who would otherwise be ineligible 
for licensing would be to the benefit of county governments.  
No comments were received regarding the adoption of this new section. 
The new section is adopted under Texas Government Code annotated, Chapter 415, 
sec.415.010, which authorizes the commission to promulgate rules for the 
administration of Chapter 415; sec.415.051, which requires that a license be 
issued by the commission before appointment; sec.415.052, which outlines the 
requirements for obtaining such a license; sec.415.054, which sets out 
requirements for temporary jailers; and under sec.415.055, which establishes 
requirements for provisional licenses.  
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on June 24, 1997.
TRD-9708249
Edward T. Laine
Chief, Professional Standards and Administrative Operations
Texas Commission on Law Enforcement Officer Standards and Education
Effective date: September 1, 1997
Proposal publication date: April 25, 1997
For further information, please call: (512) 450-0188

CHAPTER 223. Enforcement and Compliance Matters Division 
37 TAC sec.223.7
The Texas Commission on Law Enforcement Officer Standards and Education adopts 
an amendment to sec.223.7, concerning revocation of licenses, without changes to 
the proposed text as published in the April 25, 1997, issue of the Texas 
Register (22 TexReg 3705).  
A new section was added in subsection (e) of sec.223.7 in response to the recent 
discovery that the security of the commission's Basic Peace Officer Examination 
had been compromised. As a part of the commission's response to that situation, 
the section provides for the revocation of any commission license as a penalty 
for unauthorized possession of the exam. Staff reasoned, and the commissioners 
concurred, that such a penalty would be a deterrent to a person who might 
distribute copies of the examination or portions of the examination to potential 
examinees, and thus would allow the commission to avoid frequent and expensive 
revisions of the examination caused by its widespread distribution. 
No comments were received regarding these amendments. 
The amendment is proposed under Texas Government Code Annotated, Chapter 415, 
sec.415.010, which authorizes the commission to promulgate rules for the 
administration of Chapter 415; under sec.415.056, which sets out requirements 
for licensing examinations; and under sec.415.060, which allows the commission 
to revoke licenses for violations of commission rules.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on June 24, 1997.
TRD-9708247
Edward T. Laine
Chief, Professional Standards and Administrative Operations
Texas Commission on Law Enforcement Officer Standards and Education
Effective date: September 1, 1997
Proposal publication date: April 25, 1997
For further information, please call: (512) 450-0188