Procedural History

This hearing was held on January 25, 2001, at the Department of Banking and Insurance ("Department") to receive public comment from interested parties on Proposed New Rule: N.J.A.C. 11:3-29 Appendix, Exhibits 1-5; Proposed Repeal: N.J.A.C. 11:3-29.6; and Proposed Amendments: N.J.A.C. 11:3-29.1, 29.2., 29.3, 29.4 and 29.5, published in the New Jersey Register at 32 N.J.R. 4332(a).

The proposal implements N.J.A.C. 39:6A-4.6, which requires the Commissioner of Banking and Insurance ("Commissioner") to promulgate medical fee schedules for the reimbursement of health care providers providing services or equipment for which reimbursement is made under the medical expense benefit of the Personal Injury Protection ("PIP") coverage and medical expense benefits by motorbus insurers.

The statute requires that the fee schedules "incorporate the reasonable and prevailing fees of 75% of the practitioners" within a region. The medical fee schedules regulate insurers by setting the maximum reimbursement permitted for medically necessary services provided under PIP. In 1998, the New Jersey State Legislature amended N.J.S.A. 39:6A-4.6a to permit the Commissioner to "contract with a proprietary purveyor of fee schedules" to maintain New Jersey's fee schedules. The proposed new fee schedules implement the requirement of N.J.S.A. 39:6A-4.6.

Notice of the hearing was published in the January 16, 2001 issue of the New Jersey Register at 33 N.J.R. 226(a), which also advised that the Department was extending the public comment period until the day of the hearing, January 25, 2001. In addition, the proposal was mailed to an extensive Department mailing list, which included insurers, medical providers and associations, and other known interested parties.

N.J.S.A. 52:14B-4(g) provides that when an agency elects or is required to conduct a public hearing in a rulemaking matter, the hearing shall be conducted by a hearing officer appointed by the agency, which shall have the responsibility to make recommendations to the agency head concerning the contemplated rulemaking. At the hearing, the agency is to present a summary of the factual information upon which its proposed action is based, and is to respond to questions posed by interested parties. A verbatim transcript is to be maintained and made available to the public at cost. Since the hearing is part of the larger activity of adopting an agency rule, written public comments may also be submitted and considered with the oral testimony received at the hearing.

As required by N.J.S.A. 52:14B-4, the Department staff presented a summary of the factual basis upon which the Department proposed its rules.

Based on a review of the testimony and transcript, as set forth more fully below, I recommend that the majority of the proposal be adopted and make the following recommendations:

1. The definition of "emergency care" should be clarified by deleting the last sentence, which creates a presumption of emergency care when the care is performed within 120 hours of the accident. Testimony at the hearing indicated that this provision is confusing and does not serve to clarify the term.

2. The adoption should clarify that the application of hot and cold packs is not separately reimbursable because it is part of other procedures.

3. The dental fee schedule should be repealed because it was the subject of recent litigation and requires revision. Since dental costs are a small fraction of PIP costs, it is consistent with the legislative mandate to repeal the schedule at this time.

4. The $90 daily cap on physical medicine and rehabilitation procedures should be adopted for chiropractors and physical therapists. However, the exclusion of osteopathic manipulation treatment from the $90 cap for physical medicine and rehabilitation procedures should be amended to include medical doctors as well as osteopaths. Contrary to the manner in which this treatment is provided by chiropractors and physical therapists, testimony and documentation provided at the hearing indicate that this is a stand-alone treatment when performed by medical doctors and osteopaths, and thus should be treated differently.

5. The fee schedules for physicians, home care services, ambulance services, and durable medical equipment and prosthetic devices found in Exhibits 1-5 in the Appendix should not be adopted at this time so that further study can occur to address the comments regarding specific fee amounts, disparity in reimbursement by regions, and the types of data used by the vendor for developing the fees.

6. I recommend that the following issues should be monitored although not part of the adoption:

The Department should complete its review of the issues outstanding within 60 days of the date of the Hearing Officer's Report and Recommendations.

Hearing testimony

In the public comment portion of the hearing, representatives from the New Jersey State Legislature, the State Board of Chiropractic Examiners, health care providers, physicians, osteopaths, chiropractors, attorneys, medical and chiropractic associations, and other interested members of the public, either testified or submitted written comments with respect to the hearing. The following is a list of individuals who testified at the hearing, followed by a brief synopsis of their testimony.

Senator John Adler, State Senator, 6th District. Senator Adler stated that as one of the main goals of passing the Automobile Insurance Cost Reduction Act of 1998 ("AICRA") was to lower private passenger automobile insurance rates. Senator Adler stated that the proposed rules raise the same concerns he had previously expressed regarding the rules governing PIP medical protocols and diagnostic tests. Senator Adler expressed concern that the Department has exceeded its statutory authority in promulgating new fee schedules that are contrary to the Legislative intent. Senator Adler also reiterated concerns he had received from medical providers that the proposed revisions would reduce most fees by one-third or more that insurers pay medical providers who treat auto accident victims; cap rates for chiropractic treatments, physical therapy visits and therapeutic procedures; and create an "unfair fee schedule" for private nurses and home health aides where they would be paid by the visit rather than by the hour.

In addition, Senator Adler stated that there were concerns that may justify Legislative oversight hearings, including: the interpretation of the statute giving rise to the medical fee schedules, in particular, the Department's interpretation of the phrase "reasonable and prevailing fees of 75% of the practitioners within the region," which the Department stated is 75% of the reimbursed fees, not charged fees; the data the Department utilized in setting these fees; and why most of the reduced fees relate to diagnostic tests and procedures.

Assemblyman Guy F. Talarico, State Assemblyman, 38th District. Assemblyman Talarico stated that there is a "fine line" in trying to provide quality care to people at affordable costs, and that quality health care may be jeopardized by reducing costs to a point that health care providers cannot afford to provide care. The Assemblyman cited the various rules and other measures implemented to reduce automobile insurance costs established in AICRA, including PIP medical protocols, precertifications and care paths. The Assemblyman stated that the Department should carefully scrutinize the proposal and not adopt the changes until Acting Governor DiFrancesco’s views may be addressed.

Dr. William Winters, President, New Jersey State Board of Chiropractic Examiners. The Board noted that it has played an active part in the implementation of the reforms mandated by AICRA, despite concerns it had expressed regarding the Department's implementation of medical protocols and diagnostic testing rules. The Board acknowledged that there appears to be a reduction in fraudulent and abusive practices, including over-utilization, and believed that the reforms implemented thus far have had a substantial impact on reducing costs associated with providing treatment, without sacrificing the needs for injured parties to receive appropriate and necessary care for their injuries. While the Board believed that the Department has accomplished its primary goals, it believed that these gains may be undermined by the proposed medical fee schedule that does not reflect the true cost of providing treatment. The Board expressed concern that the adoption of the proposal may encourage some practitioners to "turn to creative activities designed to maximize their own reimbursement, rather than by encouraging practitioners to provide an appropriate level of quality services, for which they would receive a reasonable and equitable level of reimbursement."

The Board further stated that the current PIP fee schedule has been in place for more than seven years without change, while costs have significantly increased.

Moreover, the Board questioned the Department's interpretation of the statute to base the fee schedule on fees actually accepted and received by health care providers, as opposed to fees "billed" by providers, on which the current schedule is based.

The Board also requested that the Department more specifically identify the sources of data utilized to develop the fee schedule. The Board stated that the chiropractic community has access to a number of billing and coding guides, including published data from Ingenix (the consulting firm utilized by the Department in the development of the fee schedule). The Board expressed concern that the fee schedule is based on the Medicare fee schedule, which is generally recognized to be at the lower end of the scale of reasonable and prevailing fees for health care services. The Board believed that reimbursement at "artificially" reduced managed care and Medicare actual reimbursement levels, rather than on reasonable and prevailing fees, would lead to a larger number of practitioners engaging in abuses that initiated the reforms in the first instance, contrary to the goals of AICRA.

The Board also noted that the fee schedule contains a significant difference in compensations for osteopathic manipulation codes versus chiropractic manipulation codes. The Board stated that Relative Value Units ("RVU") are the basis for fee calculations in the health care field and establish parity in fees between various specialties. The difference in charges between osteopathic and chiropractic procedures should result in a difference between 10.3% and 12.3%, as opposed to 18.3% and 32.5% in the proposed fee schedule. The Board attached to its written testimony a comparison that it stated demonstrated this disparity in fees. The Board requested that the Department provide a detailed explanation of the disparity and provide information regarding the data used in the development of the fees.

Finally, the Board expressed concerns with specific provisions of the proposed fee schedule as follows:

1. Elimination of reimbursement for hot or cold pack treatments, commonly used by chiropractors and billed as Code 97010. The Board stated that these modalities are not "stand alone treatments," but are employed by chiropractors to facilitate physiological changes that are beneficial when used in immediate conjunction with other treatment modalities for various conditions. The Board thus requested that reimbursement for those modalities be reinstated in the rules.

2. Reduced level of reimbursement of various diagnostic procedures. The Board stated that reimbursement under the fee schedule for typical diagnostic studies are far below reasonable and prevailing fees, and that setting fees at this level may result in inadequate time spent by providers in performing testing when appropriate, leading to inaccurate and flawed diagnoses.

The Board concluded that it would be more appropriate to assess and quantify the gains made under the existing reforms thus far, noting not only benefits, but identifying problems that have arisen, prior to implementing changes that will burden practitioners.

Dr. Albert Talone, Vice President, New Jersey Association of Osteopathic Physicians and Surgeons. The Association expressed concerns similar to others that the fee schedule, based upon reimbursed fees, is not consistent with the requirements of the statute. The Association commended the Department, however, for revising the fee schedule to include codes that include osteopathic manipulative treatment ("OMT") codes. The Association also noted that OMT is exempted from the $90.00 maximum allowable fee limitation in proposed N.J.A.C. 11:3-29.4(m).

The Association noted that it reviewed the proposed fee schedule in consultation with the American Osteopathic Association ("AOA"), which expressed concern that follow-up evaluation and management services ("E/M services") under N.J.A.C. 11:3-29.4(o) should not be limited to twice in any 30 day period. The Associated cited an AOA position paper, included as part of its testimony, that states that the work of E/M service cannot be considered to be included in the "work value of the OMT procedure" since there is a separate relative value unit for evaluation and management of OMT. As the healing process is dynamic and a patient's status may change from one visit to the next, the Association stated an osteopathic physician examines a patient at each visit to determine the treatment plan for that session and whether OMT is necessary. The Association thus requested that the Department revise N.J.A.C. 11:3-29.4(o).

The Association also submitted AOA protocols and other medical literature, and stated that in view of the benefits and lower costs of this form of treatment to the insurer, it was concerned about "low fees" assigned to the five codes and other related codes for osteopathic treatment. The Association stated that this is the first time these codes have been included in the fee schedules, and noted that it is unclear how the Department developed these fees since they are lower than current reimbursed rates and usual customary reasonable rates, as outlined in a document also attached and submitted as part of its testimony.

In addition, the Association stated that N.J.S.A. 39:6A-4.6 provides that the "purveyor of the fee schedules" shall maintain the fee schedule "which shall be adjusted biennially for inflation." The Association stated that Ingenix did not discuss inflation factors, and specifically stated that the data was not trended for inflation. The Association stated that this is contrary to the express requirement of the statute. Furthermore, the Association stated that the Ingenix report contains numerous references to a methodology it was told to develop based solely upon the Department's goals. The Association stated that this is evidence that the proposed fee schedule deviates from the legislative intent.

Dr. Edward Magaziner, New Jersey Society of Physical Medicine & Rehabilitation. The Society stated that PIP fees cannot be compared with those for HMOs, Medicaid and Medicare because dealing with PIP is more labor intensive, and includes requirements to obtain pre-certification for tests and therapies and other administrative costs related thereto. The Society noted that HMOs have, in many cases, stopped requiring pre-certification for tests. Additionally, the Department contracted with an outside agency to develop the fee schedule and it is flawed because Ingenix (formerly known as Medicode) is no longer an independent company because it was "bought by an insurance company." In support of this assertion, Dr. Magaziner stated that the Medicode "Book of Usual and Customary Fees" from 1999-2000" was cut 30-50 percent based on data supplied by the insurance industry.

Further, basing the fee schedule on the fees reimbursed does not truly reflect the market because it includes Medicare and Medicaid, which are not usual and customary fee schedules, but rather mandated fee schedules. Dr. Magaziner stated that providers accept these fees, not because it is usual and customary, but rather because they are mandated to do so. Further, the fee schedule is based on old data. Many doctors and other providers are leaving HMOs, PPOs and other networks because they are "going out of business." In addition, many physicians and providers are working out-of-network, or fee-for-service. The Society questioned how Ingenix tracks these fees in the marketplace. It was noted that just because a provider cashes a check does not mean the provider did not balance bill the patient for the part the insurance company did not cover.

In addition, the Society stated that the division of the zip codes into regions I, II and III (south, central and north) has been incorrectly set. It questioned how the central region, where costs of labor and rent are high, receives less reimbursement under the schedule than rural areas in the southern part of the State.

The Society further questioned why dental and emergency room fees have been excluded since 90 percent of the sprains and strains seen in the emergency room are the same patients that come for outpatient services.

It was also stated that osteopathic manipulation only gets reimbursed if an osteopath performs the service. It was noted that many physiatrists have courses in osteopathic manipulation, and the Society believed any MD so trained should be included. It was also noted that Medicare includes fees for osteopathic manipulations performed by any MD.

The Society also expressed concern that the rules do not allow providers to bill for a treatment code on the same day as an evaluation/management visit. The Society believed that this is inefficient and noted that Medicare does not impose this requirement.

The Society further stated that multiple surgical procedures, including trigger point injections and joint injections, should be reimbursed at the 100: 50: 50 ratio that Medicare allows. The Society stated that there is no second code as there is with facet and epidural injection, and thus could be reimbursed incorrectly by the insurer. The Society requested clarification on this issue.

The Society also agreed with the Neurology Society that EMG coding is significantly under-reimbursed under the new fee schedule. In addition, it expressed concern that the fee schedule does not contain wording with respect to "each nerve" as it does with nerve conduction studies, and could be misconstrued by insurers to mean that only one payment would be made regardless of the number of nerves studies conducted.

The Society also believed that proposed fees for cervical/thoracic/lumbar facet injections are too low. It was stated that these injections take as much time and skill as an epidural injection, and that they should be reimbursed at a level similar to that for those procedures. Similar concerns were expressed with the fees for transforaminal epidural injection in the cervical/thoracic/and lumbar spine as well as for E/M coding.

Finally, the Society requested that the schedule not be adopted, Ingenix be investigated as to its methods of calculating the fees, the raw data and statistical methods utilized be available for public review and an independent organization agreed upon by both insurers and providers develop a more accurate fee schedule.

Elaine Caruso, New Jersey Society of Medical Assistants and New Jersey Society of Physical Medicine and Rehabilitation. Ms. Caruso stated that the fee schedule could place patients at risk of being "shuffled into area clinics" and forcing physicians "out of business." Further, it was stated that the data relied upon is 15 years old, and has been updated and increased by the Health Care Finance Administration ("HCFA").

Moreover, the fee schedule does not allow a physician's expenses to be considered into the factoring, or prevailing area fee profiles. Ms. Caruso stated that New Jersey has always had its own fee profile based on population, utilization and specialization.

Ms. Caruso also questioned the obtainment of the data because she believed HCFA prohibited the release of this data, except to a contracted Medicare vendor or the Department of Justice.

Further, the proposed schedule effects the greatest reduction of fees in the part of the State where the population is greatest. However, premiums for insurers were increased due to population and road congestion.

Ms. Caruso further stated that the proposed schedule would financially dictate a patient's course of treatment. For example, reimbursement for all diagnostic testing has been drastically reduced, while reimbursement for only three evaluation and management codes have been increased.

Further, Ms. Caruso reiterated that HMOs are reimbursing more than the proposed fee schedule allows. The reductions in the proposed schedule represents only 70% of MAAC allowable from the Medicare program. Moreover, Medicaid rates have not increased in over 23 years.

In addition, costs of living and administrative costs in New Jersey have not decreased, but rather have increased, while the fee schedule has not been revised in over nine years.

Ms. Caruso further believed that Ingenix's recommendations regarding the "bundling" and "unbundling" of certain services violates the standard of medicine. A physician should not be required to practice medicine a certain way, but then only be allowed to bill for parts of those services. Ms. Caruso cited as an example, EMG and nerve conduction tests. The proposed schedule reduces reimbursement for EMG and combines it with nerve condition studies, with no separate reimbursement for nerve condition. It was believed that this forces the elimination of a valuable test.

Ms. Caruso further stated that the fee schedule should not be adopted and that New Jersey physicians be allowed an opportunity to submit their own proposed schedule based on the basic criteria utilized by not only the government's mandated programs, but also traditional health carriers, and the top five HMOs. In addition, the raw data used to compile the schedule should be made public so providers may be afforded an opportunity to review and research the data.

Dr. David M. Glick. Since the implementation of AICRA, administrative costs have doubled. These costs include: cost to obtain precertification for electrodiagnostic testing, and in many cases, a referral for a consultation is not granted. Dr. Glick stated that with a reduction in fees for neurological testing by 60 percent, depending on the region, physicians could no longer afford to remain in practice. Moreover, similar to others who testified, Dr. Glick stated that it appears that the primary goal of cost reduction has been attained. Dr. Glick believed that there are other cost saving measures that can be applied which would not pose the risk of comprising care. For example, creating more consistency and efficiency in claims administration on behalf of insurers as well as electronic claims submission.

Ronald Saltiel, Vice President, Coalition for Quality Health Care. Similar to concerns expressed by others, Mr. Saltiel expressed concern that the Department interprets the amendments to the statute to base the fees on paid fees. In addition, Mr. Saltiel expressed concern with excluding emergency care physicians from the fee schedule on the basis of the higher costs involved with those services. Mr. Saltiel believed that excluding emergency care physicians on that basis is discriminatory.

In addition, Mr. Saltiel believed that the proposed fee schedule is actually an attempt to base the fees on 120 percent of the reimbursement under the Medicare fee schedule, which was considered and rejected by the Legislature in amending N.J.S.A. 39:6A-4.6. Similarly, he expressed concern about eliminating the dental fee schedule entirely and not utilizing the existing dental fee schedule. Mr. Saltier noted that if there are problems with the dental fee schedule, there would be problems with all of the schedules.

Dr. Steven Lomazow, Neurological Association of New Jersey. The Association expressed concerns in general regarding the reduction in fees and the use of government reimbursement in determining the fee schedules, which the Association believed included Medicaid. The Association stated that Medicaid reimbursement in New Jersey is 50th out of 51 jurisdictions, including the District of Columbia. Specifically, it expressed concern about a "selected targeted reduction" in reimbursement for diagnostic testing, and in particular, the EMG and nerve conduction velocity studies, which in some cases is over 50 percent. The Association believed that this is arbitrary and unreasonable.

Similar to others who testified, the Association stated that the 15 percent rate reduction mandated by AICRA has been achieved, and that insurer profits are high. Any further reduction in reimbursement would only take reimbursement directly from providers and increase insurer profits. The Association stated that if the Department seeks to reduce reimbursement, the reduction should be passed along to consumers with a corresponding proportional reduction in PIP premiums. It was also noted that the biennial inflation adjustment required by N.J.S.A. 39:6A-4.6 has never been made.

The Association also stated, similar to others, that Ingenix is not impartial, thus resulting in a conflict of interest.

With respect to the fees for each of the three regions, the Association noted that the highest reimbursement for EMG codes is in Region I, with the lowest per capita income of the three regions. The Association believed that this indicates a flawed analysis in the development of the fee schedule.

The Association thus requested that the proposed fee schedule be rejected and that the Department work with providers to develop a set of standards to maintain high quality of performance, reduce over utilization by unscrupulous practitioners, and thus serve the injured citizens of New Jersey.

Dr. Alexander M. Pendino, Hamilton Neurology Associates. Dr. Pendino expressed concern regarding the proposed fee schedule for EMG and nerve conduction studies and, similar to those expressed by the New Jersey Neurological Association, opposed the apparent selective reduction in reimbursement for these services. Similarly, Dr. Pendino stated that the reduction for these services is greatest in regions in the State with higher costs of living. Further, it was stated that the present care paths and precertification process under AICRA has built-in savings by preventing over-utilization of these services. In addition, Dr. Pendino stated that the 15% premium reduction mandated by AICRA has already been achieved, and thus there is no need to further reduce reimbursement to providers. These limits, along with the Department's intent to permit insurers to form preferred provider networks, will result in lower reimbursements for electrodiagnostic testing, will further limit access to neurological care and unfairly burden neurologists. Finally, it was noted that there has never been a biennial inflationary adjustment to the medical fee schedule as required by the statute.

Dr. Howard Adelman. Dr. Adelman stated that the reduction of fees for psychologists would compromise the quality of care and diminish the ability of psychologists to provide care. Dr. Adelman stated that the field of psychology is based on time and that the new fee schedule reduces fees for this therapy by over 25%, while the reforms implemented pursuant to AICRA as well as other requirements, such as under HMOs, have resulted in an increase in administrative costs.

Timothy Raymond. Mr. Raymond generally expressed the same concerns as expressed by others who testified. He objected to the proposed fee schedule and the reduction in fees. Moreover, Mr. Raymond objected to the use of reimbursed fees as the basis for determining the fee schedule. As an example, Mr. Raymond cited CPT Code 97610, with respect to the application of hot and cold packs, for which reimbursement is zero. Mr. Raymond did not believe any provider would charge nothing for this service.

Mr. Raymond also stated that the schedule targets the underprivileged and minority communities that, in many circumstances, only have access to medical providers through PIP and have no secondary insurance. Mr. Raymond believed that the majority of quality medical providers will not see patients who are involved in automobile accidents if this fee schedule is promulgated, limiting access to care.

Jane Adelman. Ms. Adelman submitted as part of her testimony explanations of benefits from various automobile insurance carriers in New Jersey stating that, based on audits of the fees charged by her office, the fees are reasonable and customary for a geographic area. Ms. Adelman thus questioned how the Department's fee schedule has reduced these fees 25 to 50 percent. Ms. Adelman also generally testified regarding perceived problems with the precertification and medical protocols procedures and the time and costs related thereto.

Dr. Richard Polino, New Jersey Chiropractic Society. The Society believed that the existing protocols and care paths, combined with the proposed fee schedule, represents discrimination against the chiropractic profession and its patients. The Society further believed that the fee schedule discourages chiropractic treatment of traumatic injuries.

Dr. Anthony Calzaretto, President, Southern New Jersey Chiropractic Society. First, the Society stated, similar to others who testified, that the data used to develop the fee schedule, and the use of fees reimbursed, as opposed to billed fees, is in contradiction of the statute. The Department may not compare the fees to a State or Federally funded program since New Jersey automobile insureds pay for insurance plans privately and have the option of selecting from multiple insurance carriers.

Secondly, the Society expressed similar concerns as others with the repeal of the current dental fee schedule and the failure to propose a new dental fee schedule. The Society stated that isolating the dental profession by the Department stating it does not have sufficient data on paid dental fees to develop a fee schedule at this time presents "an image of incompetence." The Society believed that before imposing such drastic changes, the Department should present a complete and concise product before all physicians in the State.

Third, the Society believed it was an "insult" for the Department to state that medical specialists who staff New Jersey's system of trauma centers have a higher cost basis than out-patient and regularly scheduled surgery. The Society believed this does not account for inflation, daily operational costs of independent physicians, or increases in administrative costs through the implementation of AICRA, including precertification plans and care paths.

Fourth, the proposed schedule provides reimbursement for an RN at the same level as an LPN, and was developed based on the actual mix of RN/LPN services used in New Jersey. The Society believed that based on educational and licensure requirements alone, a clear distinction exists between the two levels of nursing professionals. The Society stated that at no time have institutions or private organizations paid RN's and LPN's similar fees.

Fifth, the Society believed that the Department has "delved into the world of managed care" but discriminates against specific professions. For example, the daily maximum allowable fee of $90.00 for physical medicine and rehabilitation procedures, which does not apply to osteopathic manipulative treatment, reflects a lack of knowledge of the service that the chiropractic profession offers. The Society believed that chiropractors should not be labeled within the global group of physical medicine in consideration of the training they receive.

Sixth, similar to concerns expressed by others, the Society expressed concern regarding the limitation on re-examination reimbursements to twice within a 30-day period. The Society believed that this restricts the flexibility of chiropractors. The Society stated that the condition of an injured patient can vary greatly within a 30-day period, and that the physician may be unable to determine in advance what direction the patient's condition may follow. Accordingly, the chiropractor needs the option to make certain determinations from a re-evaluation that may be required more than twice within a 30-day period.

Dr. Jerry Molitor, Medical Society of New Jersey. The Society stated that all of the proposed fees are below those published in the prior schedule, which was never adjusted for inflation since it was originally adopted. Moreover, the Society stated that Ingenix appears to have first reduced the fees and then developed a rationale to justify its product. In some cases, the fees are below those authorized by Medicare.

The Society further stated that the Department stated that Medicaid, managed care and Medicare were taken into consideration in developing this schedule, which the Society believed is inappropriate. Medicaid reimbursement in New Jersey ranks between 49th and 50th in physician reimbursement among the states. With respect to managed care, while physicians have entered into contracts with managed care companies, the Society stated that these contracts generally were signed under duress and signed with the expectation that the physician would gain something in return, such as more volume or prompt payment. With respect to Medicare, the Society stated that this is a taxpayer-financed health care program for senior citizens and the disabled. It is a duty of physicians to care for these patients and they do not expect to realize a large reimbursement in excess of overhead. Moreover, the expectations for treatment under PIP as opposed to under Medicare are vastly different. With respect to treatments under PIP, which usually involves younger people, a full medical recovery is expected.

The Society further stated that the Department must be aware that the proposed fees are too low insofar as the schedule does not apply to medical care given immediately after an automobile accident. The Society thus questioned what fees will apply if the schedule does not apply to "emergency care." Moreover, if an auto insurer reimburses below usual and customary, the Society questioned whether the physician may bill the patient for the balance. While the Society noted the statute prohibits this practice, since the rules provide that emergency care is not subject to the fee schedule, it requested clarification on this issue.

In addition, the Society requested that the definition of "emergency care" be clarified. It includes a presumption that medical care initiated within five days of an accident falls within the definition, but appears to give insurers latitude to apply other standards.

Further, the Society stated that excluding emergency care from the fee schedule inappropriately de-emphasizes the value of follow-up care. The Society stated that virtually all automobile accidents result in high-impact injuries that require a significant amount of treatment for months after the occurrence, long after the patient has been discharged from the hospital.

The Society requested that the Department and the Society work together to improve the proposed fee schedule.

Dr. Jeffrey Hammond, Chairman, New Jersey Trauma Center Council; and Chair, New Jersey Chapter of the American College of Surgeons Committee on Trauma. Dr. Hammond applauded the efforts of the Department in modifying the original proposal. However, it was stated that certain language is vague and may be confusing. It was stated that the proposal summary provides that the fee schedule will not apply to services rendered as emergency care at an acute care hospital, and recognizes that medical specialists who staff "New Jersey's system of trauma centers around the clock have a higher cost basis than out-patient and regularly scheduled surgery." Dr. Hammond noted that trauma care by these trained specialists is rendered only at the 10 Level I or Level II trauma centers, and not the 70 plus other acute care hospitals in New Jersey. Moreover, it was stated that exempting physician services at acute care hospitals for trauma care and allowing providers to bill at "usual and customary" charges is unnecessarily vague since "usual and customary" is not defined. This would permit insurers or payors potentially to establish an arbitrary fee schedule by a mechanism they choose and claim that to be "usual and customary," resulting in appeals to the Department. Dr. Hammond believed that this issue could be avoided by providing that the prior PIP fee schedule would remain in effect, with an appropriate cost of living increase, as the benchmark for "usual and customary" trauma care rendered at acute care hospitals.

Dr. Stephen A. Becker, Director, Regional Trauma Center at the Jersey Shore Medical Center. Dr. Becker generally reiterated the comments of Dr. Hammond, requesting clarification as to what fee schedule would apply to trauma centers. In addition, it was stated that insurers deny health benefits to those convicted of driving while intoxicated and requested that the Commissioner issue a ruling preventing this practice from continuing.

Dr. Nancy Mueller, Institute of Neurological Care. Dr. Mueller generally reiterated comments previously presented that the fee schedules for the three regions of the State appear to be lowest in the north and central regions, where costs of living are the highest. It was stated that to ensure good patient care, the Department must consider the cost of living of the physician, including administrative costs. Similar to others, Dr. Mueller stated that if fees are reduced as proposed, qualified providers will stop engaging in the practice of treating PIP patients. Moreover, Dr. Mueller stated there is blatant abuse of the system by insurers, and that providers and patients have no recourse, other than make a complaint. Dr. Mueller commended the Department's enforcement staff in addressing these complaints, but stated that the time involved to address each complaint impacts on the patient.

Dr. Mueller further testified that costs have been lowered, as contemplated by AICRA, but the fees that have been raised under the proposed schedule relate to high level consultants and high level office visits. Dr. Mueller believed that this would lead to fraud. If a provider can provide documentation, he or she can charge more. However, it was stated that a longer record does not necessarily reflect more patient care. Dr. Mueller thus believed that this is an inappropriate change to the fee schedule.

Dr. Rosemarie Moser, New Jersey Psychological Association; Chair, Committee of Legislative Action for NJPA; and Past President, New Jersey Neuropsychological Society and Director of R.M. Psychological Center. The Association urged the Department not to adopt the proposed fee schedule insofar as they do not comply with the intent of the statute. In addition, the Association believed that the proposed fees would restrict the availability of psychological and neuropsychological services for citizens who sustain injuries. Similar to others who testified, Dr. Moser stated that the reduced fees do not reflect increased costs associated with providing the care. In addition, Dr. Moser highlighted a perceived discrepancy between what an insurer will pay for an independent medical evaluation (IME) as opposed to what it actually pays for treatment or evaluation on behalf of the patient. Dr. Moser stated that it appeared that if an insurer is trying to determine whether a patient really needs services, it is willing to pay; but it is not necessarily willing to pay or at least is more "obstructionistic" when patients actually need treatment. Moreover, insurers place a greater value on hiring experts than on expert treatment. Dr. Moser believed the proposed fees will further increase this discrepancy and further limit the quality of care to which New Jersey citizens will have access. Dr. Moser believed this creates a "two-tiered system."

Richard Wildstein, Esq., Association of Trial Lawyers of America, New Jersey. ATLA stated that the "drastic" reduction in remuneration for health providers is inappropriate, dangerous and "patently illegal." ATLA stated that for the past three years, the Department has undertaken numerous actions that have endangered the health of citizens who sustain traumatic injury in automobile accidents under the auspices of AICRA. These include adopting medical protocols that ATLA believed are not in accordance with acceptable professional standards, requiring virtually all treatments to be pre-approved by the insurer, restricting diagnostic testing, etc. Moreover, ATLA stated that actions of the Department have been compounded by removing the ability by providers and patients to address grievances to the State. AICRA provided for the establishment of the Office of the Insurance Claims Ombudsman, but the Commissioner has ruled that the Ombudsman created by AICRA has no jurisdiction to deal with PIP matters.

ATLA stated that regardless of the above actions, the reduction in PIP schedules to rates approximately 20 percent higher than Medicare as is proposed was considered and rejected by the Legislature. ATLA maintained that no benefit will be derived by New Jersey citizens from this proposal and that the only beneficiary of the fee schedule will be increased profits for insurers. No direct or immediate reduction of premiums will result if these regulations are adopted. ATLA stated that the National Association of Insurance Commissioners indicated that in 1998 the profits of automobile carriers in New Jersey was 14%. Moreover, even after rate reductions in 1999, they achieved profits of 11.5%. ATLA stated that these profit levels far exceeded the 6% cap required under New Jersey law. ATLA thus maintained that this fee schedule is unnecessary.

ATLA also maintained that the proposed fee schedule violates N.J.S.A. 39:6A-4.6 in that the statute requires that a PIP fee schedule be predicated on a formula of 75% of the reasonable and prevailing fees, interpreted by ATLA to mean "charges," in a region. ATLA noted that the Department's current proposal is not based on charges, but rather on the receipts or collections of medical providers within a region. ATLA stated that in a 1996 Appellate Division case, the Court reviewed comments of the Insurance Commissioner in 1989 regarding the proposed fee schedule and concluded that the formula refers to the reasonable and customary charges as opposed to receipts or collections of providers. In another case, ATLA stated that the Appellate Division observed that the PIP medical fee schedule means that "hospitals and other similar facilities are expected to charge the usual and customary and reasonable fees." ATLA stated that that case also concluded that the term "usual, reasonable and customary is a phrase which has not been defined by Statute or Code; rather it is to be identified by health care providers and health agencies. It a phrase whose meaning is understood by those who set the amounts which they charge." ATLA thus stated it is the charges, not receipts, that constitute the meaning of the applicable language in N.J.S.A. 39:6A-4.6.

ATLA further stated that since the schedule is predicated on amounts actually collected, each year receipts of the providers will "spiral downward" because the yearly auto collections will always decrease. ATLA maintained that the 1998 amendments under AICRA permitting the Commissioner to contract with a purveyor of fee schedules was to "compel the Department to revise the schedule properly with an anticipation that the allowable fees would be raised in accordance with inflationary increases."

ATLA urged the Department to revise the fee schedules in accordance with various studies submitted by medical organizations.

Dr. Marc Kahn, Garden State Orthopedic Society. Dr. Kahn noted that under AICRA he has experienced increased overhead and, with a further reduction in reimbursement as proposed under the fee schedule, he doubted whether he could continue to provide PIP care to victims of automobile accidents. These are similar issues raised by others regarding increased costs under the new PIP medical protocols and care paths under AICRA.

Dr. Lawrence Swayne, President, Radiological Society. Dr. Swayne stated that there has been no free market with regard to medical fees in New Jersey for over a decade, and thus, basing fees on amounts paid is inappropriate. The Medicare fee schedule typically pays radiologists 30% of their fees. While about 85-90% of radiologists participate in Medicare, and that is perceived as an acceptability of Medicare rates, Dr. Swayne stated that the economic reality is that of coercion. If a provider does not participate, only a portion would then be billed directly to the patient. The overhead in collecting numerous small bills is not cost-effective. Moreover, the New Jersey Medicaid schedule is one of the lowest in the nation; it has not been increased in over 20 years. Finally, the use of large managed-care organizations and the inability of physicians to collectively bargain, permits the unilateral dictation of fees.

Dr. Swayne also raised specific concerns regarding the proposed fee schedule as follows:

(1) N.J.A.C. 11:3-29.4(f) refers to prescribed discounts for multiple and bilateral procedures, but then states that it is not intended to apply to, or should be used in conjunction with, billings submitted for non-surgical services provided during the same visit. Dr. Swayne questioned whether this applies to radiology and whether it applies to time-intensive, expensive radiological special procedures that currently bill under surgical codes in the CPT 3000 and 5000 series. Dr. Swayne stated that if it does apply, clarification should be provided on the mechanism for discounting; and

(2) N.J.A.C. 11:3-29.4(g) prohibits the practice of "unbundling," which is the usual and customary manner that angiography and special procedures are billed across country.

(3) Dr. Swayne reiterated the same concerns regarding the fees for radiological services which had been previously expressed, that is, that the fees are lower in the northern regions of the State where costs of living are higher, and higher in the southern portions of the State, where costs of living are lower.

Dr. Richard S. Schenk, New Jersey Orthopedic Society. Similar to concerns expressed by others, the Society objected to basing the fee schedule on Medicaid, Medicare and managed care, and stated that these programs should not be considered in the calculation of fees. The specific reasons are similar to those previously expressed. Given the difference in the nature of injuries and treatments between those insured under Medicare who are senior citizens, and those involved in automobile accidents, it is inappropriate to base fees on the reimbursement schedule for this program. In addition, the Society stated that in orthopedic trauma, many procedures require the use of an assistant surgeon. If the fees drop to the level proposed, the Society believed it would be impossible to get an assistant on these complex cases.

The Society specifically supported the attempt to separate trauma patients by having separate reimbursement in the first five days as stated, although it was believed that the rules should be clarified to identify the fees that will be charged. In addition, the Society requested clarification of the application of the rules regarding stage procedures or reconstructive procedures that are complex, but that need to be done after the five-day period.

Finally, the Society stated that multiple fractures of one bone should not be subject to the multiple treatment reduction formula. Multiple fractures are just as difficult to treat, if not more difficult. The Society stated that in many instances, the presence of one fracture interferes with the treatment of another.

Dr. Daniel P. Conte, III, New Jersey Association of Osteopathic Physicians and Surgeons. Initially, Dr. Conte reiterated concerns previously expressed regarding the limitation of evaluation and management to two visits, and also requested reconsideration of the fee schedule for osteopathic manipulative treatment.

Dr. Conte also referred to information that he compiled from various insurers comparing the amount allowed by each insurer for the specific codes and the comparison with the proposed fee schedule. Dr. Conte stated that there is a significant difference between the amount allowed as usual, customary and reasonable, and the proposed fee schedule. Dr. Conte concluded that all patients are individuals and the time needed to treat those individuals varies.

Dr. William Schroeder, President, Central Jersey Chiropractic Society. The Society opposed the proposed fee schedule for various reasons. First, the Society believed that N.J.A.C. 11:3-29.4(m) discriminates against chiropractors by placing a cap of $90.00 for physical medicine and rehabilitation procedures, which does not apply to osteopathic manipulative treatment. The Society believed that the codes relating to treatment provided by chiropractors should be excluded from the $90.00 daily maximum since this service is no different than the services provided by osteopaths.

Secondly, the Society believed that Ingenix had "skewed" the numbers by using inappropriate data. The Society believed that Medicaid, Medicare and HMO reimbursement rates had been used, contrary to the intent of the statute. The Society reiterated concerns previously expressed that the statute requires that fees be based on 75% of the fees charged, not those reimbursed. The Society stated that it is "common knowledge" that the reasonable and customary rate is between 35% and 55% of the Medicare fee schedule, and thus the proposed fee schedule of the Department is "obviously low." Moreover, the Medicare fee schedule is adjusted annually for inflation while the Department's fee schedule is not. Fees have not increased since the original fee schedule was adopted, while costs continue to rise.

Third, expenses for doctors are similar throughout the State. Accordingly, it is unclear why the northern regions of the State are reimbursed at a lower level than the southern region. The Society believed that this is discriminatory to providers treating patients in low-income areas. The Society stated that reimbursement between regions should not deviate by more than five percent for the same service.

Finally, the Society believed that the proposed fee schedule punishes consumers and accident victims by decreasing access to providers and lowering standards of care because many providers would decide not to treat accident victims due to the lower reimbursement rates, bureaucracy of pre-certification procedures, and increased regulations.

Anthony Mazzola, HealthSouth, Corp. Mr. Mazzola expressed concern with the general reduction in fees. Mr. Mazzola generally expressed concerns similar to others who testified that the fees are too low and are based on State and Federally mandated fees. Mr. Mazzola stated that the practical effect of State and Federally mandated fees goes beyond the intent to offer discounted services to a certain population. Mr. Mazzola stated that that would establish a "list price" that is the new base line for all services, that are then subjected to further discounting by insurers. For example, Mr. Mazzola stated that the proposed cap of $90.00 for physiotherapy services is "faulty and the Department admits this." Mr. Mazzola cited the economic impact statement, page 11, of the proposal where it states, "providers of physiotherapy type services may be adversely affected as a result of the adoption of a per patient, per visit upper limit ceiling amount of $90.00 reimbursement." Mr. Mazzola requested the $90.00 cap be removed as it is unsupported. In addition, Mr. Mazzola stated that the multiple procedures reduction formula should be eliminated and that fees be increased to reflect the reality that market-driven forces not in place ten years ago are now in place to contain costs.

Jan Moyer. Mr. Moyer raised the question regarding the application of the fee schedule in consideration of the fact that the fee schedule does not apply to in-patient services provided by acute care hospitals or trauma centers, and the physicians' fee schedule does not apply to services provided in emergency care. Mr. Moyer posed the question that if a physician at a trauma center installs a Greenfield filter into a patient as a result of an accident and the UCR is $3,500, whether the provider would be entitled to the UCR of $3,500. The proposed fee under the schedule for this service would be $1,660.95. If it is a trauma center physician, the treatment is exempt from the fee schedule, which Mr. Moyer stated that for all the years that the fee schedule has been in existence, the application of the schedule has been inappropriate, and PIP carriers have "kept doctors' money." Donald Bryan, Director of Insurance, representing the Department, indicated that these types of comments will be evaluated in the adoption notice and published as part of the comments and responses in the adoption notice.

Dr. Daniel P. Conte, Sr. Dr. Conte expressed concern regarding reimbursement rates regarding preferred provider organizations ("PPOs") and HMOs. Dr. Conte stated that if a provider is treating a PIP patient who is also assigned with an HMO or PPO carrier, the PIP carrier requires the provider to accept the rates of the HMO, and the PIP carrier does not reimburse the patient for the amount of money paid for PIP insurance against the lower rates that they are paying. Dr. Conte maintained that this is "illegal" and not provided for in any rules.

In addition to those who testified, several written comments were submitted in lieu of oral testimony as follows:

John A. Andryszak, American Insurance Association. The Association urged the Department to adopt the fee schedule, or another, if amendments were determined to be necessary, as expeditiously as possible. The Association stated that the adoption of a medical fee schedule is one of the most significant things that can be done to assure that the cost-savings intended by the passage of AICRA are realized by insurers. The Association further stated that the "rate rollbacks" mandated by AICRA have already been passed on to New Jersey policyholders, while cost savings that comprise those roll backs in part are contingent upon the adoption of medical fee schedules.

Richard M. Stokes, Esq., Vice President, Governmental Affairs, Insurance Council of New Jersey. The Insurance Council supported the adoption as a step towards full implementation of the automobile insurance reform sought by the State over the last 10 years. The Council believed that the adoption of the fee schedule will be a major step toward achieving the State's goal of reducing fraud, abuse and over-utilization as recognized by the State Legislature in the passage of AICRA.

The Council also stated that adoption of this proposal will help complement the progress already made through other measures to ensure that injured persons receive timely, medically necessary treatment, while increasing financial certainty for medical providers. The Council further stated that adoption of the proposal will help provide more efficiency in automobile insurance claims operations by reducing unnecessary disputes among insurers, policyholders and medical providers. It will help medical providers understand precisely what medical treatment regiment will be covered and at what cost.

Further, the Council stated that significant changes to the fee schedules have not taken place in over eight years, while market conditions and health treatment has changed significantly during that time, and it is important to note and reflect current medical costs and medical treatment requirements in line with the State's goals.

The Council, however, expressed concern that the fee schedule does not include a schedule for dental and hospital charges. The Council believed that it is important that the Department develop a fee schedule for these charges to take advantage of the costs and medical treatment as outlined above to more fully effectuate the intent of the statute. The Council recommended that the Department make adoption of such a schedule a high priority. In addition, the Council stated that there continues to be a lack of a code for reimbursement for acupuncture (Codes 97780 and 97781) and Extraspinal Manipulation-Chiropractic (Code 98943). The Council requested that the Department clarify the use of these codes by either indicating an amount for reimbursement or by specifying that the codes should not be considered for payment.

The Council also stated that N.J.A.C. 11:3-29.4(h), which provides that separate procedures that are commonly carried out as an integral part of another procedure shall not be billed in conjunction with the other procedure, but may be billed when performed independently, should be clarified. The Council recommended that the Department adopt standard texts such as in the "Medicode's Surgical Unbundler." The Council also stated that osteopathic manipulative treatment performed by the osteopathic physician are not included in the fee schedule. The Council recommended that these procedures should be included in the daily maximum fee to avoid over-utilization of different providers and procedures that could circumvent the intent and purpose of the daily maximum fee. The Council stated that under this provision, a multi-discipline medical facility may increase the treatment cost by charging different costs among the disciplines when the services are performed for the same patient on the same date.

The Council further stated that the provision of reimbursement of follow-up evaluation and management services for the re-examination of an established patient not more than twice in any 30-day period pursuant to N.J.A.C. 11:3-29.4(o), provides that potential follow-up evaluation more frequently than provided for in the care paths and decision point review process. The Council requested that the Department bring this timeframe in concert with the operation of the care paths and decision point review process to maintain consistency.

The Council also reiterated concerns expressed by others that more specificity should be provided for certain procedures and CPT codes. The Council urged the Department to further clarify the requirements regarding the "daily maximum." The Council stated that medical treatment provided by other providers within a medical providers' practice should be viewed as one treatment for a particular diagnosis and subject to the $90.00 per visit maximum. In addition, the Council expressed concern with the possibility that treatment that is no longer reimbursable may be charged in another CPT code or may be substituted for more expensive treatment. The Council suggested that the Department clarify these points to reduce any future confusion.

Finally, the Council stated that the Miscellaneous CPT code ending in "99" may become an opportunity for abuse and over-utilization. The Council believed that the Department should amend the rules to permit the insurer to substitute the correct CPT code or to request further clarification from the medical provider regarding the appropriateness of the treatment.

Beverly Lynch, New Jersey Society of Anesthesiologists. The Society expressed concern with the fee schedule, as it relates to pain management. The Society stated that the U.S. Department of Health and Human Services published a document in 1992 wherein the medical profession was "accused" of failing to treat pain adequately. In response thereto, the medical community established pain divisions and pain clinics. However, the fee schedule appears to reduce reimbursement for treatment of pain to a "fraction of what has been usual and customary." Similar to comments previously expressed, the Society expressed concern that the fees are based on reimbursed fees, not charged fees, and include Medicare, Medicaid and HMO discounted fees.


Many of those who testified at the hearing commented that they were concerned that the medical fee schedules were based on actual levels of reimbursement, rather than on amounts charged by health care providers. They commented that this approach violated N.J.S.A. 39:6A-4.6a. As set forth in the Summary to the Department’s proposal, I believe that a focus on reimbursed fees better reflects the supply and demand spectrum, and more accurately carries out the cost containment features of the Automobile Insurance Cost Reduction Act ("AICRA").

A related concern that many commenters raised was that lower fees would force providers to stop offering services to automobile accident victims, and that the quality of care would be adversely affected. I believe that this concern is only speculative; similar objections to the existing fee schedules were raised at the time of their proposal, and were also raised in other states that use fee schedules. Fee schedules are successfully utilized in other contexts -- e.g. Medicare and workers’ compensation. I note that the only contradictory information in the record is anecdotal. I recommend that the Department continue to monitor and update the schedules as warranted.

Many comments were likewise received on the specific levels of fees and the differences in reimbursement among the three geographical regions of the State (North, Central, and South) and the apparent inverse correlation between the cost of living in those regions and reimbursement rates. Another concern expressed was that the fee schedules do not take into consideration the increasing expenses of physicians. After careful review of the testimony, I believe that the record is insufficient on these issues to determine what adjustments, if any, should be made to the fee schedules. Accordingly, I recommend that the Department not adopt the schedules proposed in N.J.A.C. 11:3-29, Exhibits 1-5, at this time. I also recommend that the Department complete its further review of these issues within 60 days of the date of this report.

As noted above, I believe the concerns regarding the disparate reimbursements among geographical regions of the State also warrant further study. However, as part of the Department's mandate to implement the cost containment objectives of N.J.S.A. 39:6A-4.6 and AICRA, I believe that this legislative mandate is best served by adopting all other portions of the proposal at this time, rather than deferring the entire adoption until a later date.

Further, although some concerns were raised by persons who testified at the hearing, I believe that it is appropriate and necessary to adopt the repeal of the current Dental Fee Schedule. This schedule was the subject of recent litigation and requires revision. At this time, there is insufficient information on which to base a new fee schedule. However, insofar as dental costs are a small fraction of the overall PIP costs, and thus do not substantially impact containment goals, I believe it is consistent with the legislative mandate to repeal these rules at this time.

I therefore recommend that the remaining portions of the proposal, other than the Appendix and the revised region definitions in N.J.A.C. 11:3-29.3, be adopted at this time.

Another area of concern was the elimination of reimbursement for hot or cold pack treatments. Those who testified at the hearing have assumed incorrectly that the $0 reimbursement for this modality means that it has no value. In this instance, the Department is following the determination by Medicare that application of hot/cold packs are performed as part of another procedure. This corresponds to one of the comments on this provision. Therefore, I recommend that the rule be clarified to include the prohibition of separate reimbursement for application of hot/cold packs in the rules concerning unbundling of related procedures.

Another area of considerable comment focused on N.J.A.C. 11:3-29.4(m), which provides for a $90 daily maximum allowable fee for certain physical medicine and rehabilitation procedures excluding osteopathic manipulation treatment when performed by an osteopathic physician. Many commenters focused on the fact that therapeutic manipulation by osteopathic physicians was being compensated differently than that by chiropractors. Commenters representing chiropractors stated that there should be no difference in compensation for these types of treatments between the two types of provider.

Based on data received from the Osteopathic Association, it does not appear that osteopathic manipulation is usually performed with other physical medicine and rehabilitation modalities. Similar evidence regarding chiropractic manipulation is not part of this record. I recommend that the Department evaluate this issue further. However, I believe that it is reasonable and necessary to adopt N.J.A.C. 11:3-29.4(m) at this time, because this provision represents an important cost containment feature.

N.J.S.A. 39:6A-4.6(b) permits the fee schedule to include a single fee for a group of services commonly provided together. The $90.00 daily cap is reasonable in comparison to fees developed using the multiple procedures reduction formula. For example, when the multiple procedures reduction formula is applied to four commonly billed physical medicine procedures in New Jersey ((CPT 97014, 97035, 97110 and 97112), the results are fees of $77.18, 79.54, and 72.08 in Regions 1 through 3 respectively. The multiple procedures reduction formula was also applied to a group of codes representing a common chiropractic treatment session (CPT 98941, 97112 and 97530) resulting in fees of $71.20, 80.10 and 70.06 in Regions 1 through 3 respectively. Finally, a $90.00 fee is further supported by comparison with two other states, Connecticut and Washington, which use a daily cap of $90 and $91 respectively, for physical medicine services in their worker’s compensation fee schedules.

Another area of concern addressed the omission of medical doctors as part of the exclusion for osteopathic manipulation treatment. Based on my review of the record, I recommend that the rule be revised upon adoption to include osteopathic manipulation treatment performed by a medical doctor as well as an osteopath.

Another area of considerable comment involved N.J.A.C. 11:3-29.4(o), which provides that follow-up evaluation and management services are reimbursed only for two visits within any 30-day period. The commenters were concerned that this precludes additional follow-up care, which may be needed. I believe that the standard is reasonable and adequate. The rule only addresses those instances in which additional reimbursement for evaluation is necessary. Providers routinely assess a patient’s progress during treatment sessions. Moreover, none of the commenters has provided a suggested number of follow-up evaluations, thereby implying that no limit is needed. This would be in direct conflict with the cost containment features of the statute, and could encourage the reimbursement of unnecessary care.

Several commenters expressed concern that Ingenix, the Department's consultant on the medical fee schedules, utilized Medicare and Medicaid reimbursements in developing and determining the fees. Although Exhibits 1-5 are not being adopted at this time, I recommend that the Department confirm the sources of the data used by Ingenix to make sure that the data used to develop the fees represents a cross-section of the payments for medical treatment.

Many who testified also questioned the impartiality of Ingenix, formerly known as Medicode. This issue was raised because Ingenix is now a subsidiary of a holding company that also owns health insurers and HMOs. As stated in the summary to the rule proposal published in

December, 2000, a public bidding process was held, after which Ingenix’s predecessor contracted with the Department to revise the fee schedules. N.J.S.A. 39:6A-4.6a specifically permits the Commissioner to contract with a proprietary purveyor of fee schedules to maintain New Jersey's fee schedules. At the time of the public bidding process, Ingenix was, and remains, one of a small handful of well respected, qualified bidders. The change in ownership occurred after the public bidding process was concluded. The Department has no evidence of deficiencies in contract fulfillment, and Ingenix continues to provide services to health insurers and other states on similar projects.

Another issue that received several comments at the hearing involved the exclusion of the medical fee schedules to emergency care services. As noted in the summary to the proposal, medical specialists in trauma centers have a higher cost basis per patient than physicians performing these procedures in other settings.

Several commenters indicated that the Department should work with providers to develop standards to maintain a high quality of performance, reduce overutilization and serve patients better. I note that the proposed amendments to the fee schedules were distributed to interested parties well before formal proposal. Additional opportunity for public comment was also provided at the public hearing. The Department received substantial comments, many of which were reflected in the proposal. I therefore believe that the Department has worked with providers and provider groups to develop a set of standards and will continue to do so.

One person at the hearing raised questions regarding the definition of "emergency care", and sought clarification as to what was included in the term. Another commenter asked for clarification of the definition of emergency care regarding surgical or reconstructive procedures that need to be performed after the first five days of treatment. I recommend that the Department clarify the definition of emergency care to limit the exemption from the fee schedule to treatment at Level I and Level II trauma centers when the new Appendix is adopted. In addition, I recommend that the Department amend the rule upon adoption to delete the reference to the first five days of treatment. This period is not relevant to the definition of emergency care used in the fee schedule rule.

Several comments indicated that exempting physician services at trauma centers from the fee schedules and allowing the usual and customary charge is vague, since the usual and customary charges are undefined. One commenter indicated that this could be clarified by referring to the current schedule in effect and adding the cost of living. That would constitute a benchmark for usual and customary fees for trauma care rendered in an acute care hospital.

This issue highlights an apparent longstanding misconception regarding the application of the medical fee schedules rule. The fee schedules are not intended to provide a level of mandatory reimbursement. Rather, the rules indicate the limit of an insurer's maximum liability for reimbursement, which is no more than the provider's usual, customary and reasonable (UCR) charges. This standard for reimbursement under PIP is the same one used for reimbursements under health insurance policies. The amount to be reimbursed by the PIP carrier is the lower of the UCR or the amount set forth in the fee schedules, which similarly indicate maximum limits for services outlined in the schedules. If the provider's usual and customary charge is less than the amount in the fee schedules, then the insurer's limit of liability is the usual, customary and reasonable charge, not the dollar amount in the fee schedule.

One commenter addressed N.J.A.C. 11:3-29.4(f), which provides guidelines for reimbursement of multiple and bilateral procedures. The comment addressed whether this applies to radiology in general, and to certain radiological procedures in the 3000 and 5000 CPT surgical code series. I do not believe it was the Department’s intent to make separate and distinct testing procedures that are addressed differently in other contexts subject to the multiple procedures reduction formula.

Another comment addressed the applicability of N.J.A.C. 11:3-29.4(g), which prohibits unbundling, to angiography and special procedures where according to the commenter, it is usual and customary across the country to bill such procedures separately. I note that N.J.A.C.11:3-29.4(g) states that it is "virtually never appropriate" to artificially separate one procedure into its component parts to increase billing. If the commenter is correct that angiography and other special procedures are normally billed separately, then such separation would not be artificial and the unbundling rule would not apply. I recommend that the Department monitor this issue and determine if future rule amendments are necessary.

One commenter recommended that the Department adopt a standard under N.J.A.C. 11:3-29.4(h), to adopt Medicare’s surgical unbundler, rather than the proposed language that separate procedures that are commonly an integral part of another procedure, may not be separately billed.

The change suggested by the commenter would require re-proposal, since it would constitute a significant substantive change to the proposal. Therefore, it cannot be addressed at this time. However, I recommend that the Department evaluate this suggestion for possible further amendment if it determines that the Medicare standard represents "established practice" as referred in the rule.

One commenter stated that the provision for reimbursement of follow-up and management service potentially provides for more frequent follow-ups than the Care Paths set out in the Appendices to N.J.A.C. 11:3-4. The commenter recommended that they be consistent.

I note that the protocols contemplate a course of treatment, but recognizes that there may be exceptions. If so, the rule provides a reimbursement for those situations. I therefore believe that the rule as proposed is appropriate.

Finally, one commenter stated that the daily maximum reimbursement of $90 found in N.J.A.C. 11:3-29.4(m) could be viewed to apply to treatments by other providers within a particular provider's practice. The commenter is correct that, to the extent that the medical treatment is offered by multiple providers within one provider's practice, it is subject to the $90 per visit maximum.


Based on the foregoing analysis, I recommend that the Commissioner partially adopt N.J.A.C. 11:3-29; and incorporate the recommended changes to the proposal upon adoption, as set forth above.

4/24/01 /s/ Karen Garfing, Hearing Officer