Division Rule 16: Increasing the Complexity of Utilization Preauthorization Disputes

On January 1, 2017, the Colorado Division of Workers’ Compensation’s revised Rule 16 will CDLE-Logotake effect. Rule 16 encompasses the medical, legal, and administrative standards for medical billing and for preauthorization of services requested by medical providers. The revised rule impacts the daily adjusting of workers’ compensation claims, specifically, responding to requests for preauthorization of medical services consistent with the Colorado Medical Treatment Guidelines (“MTG”). The critical alterations pertaining to the utilization review process impute additional legal obligations upon the insurance carrier or third party administrator (“TPA”) to take action after receiving a preauthorization request.


The most significant addition to Rule 16 was the incorporation of the “Notification” provision found in Rule 16-9. The Notification process was the Division’s response to concerns about expediting medical services to injured workers while guaranteeing that the medical providers would receive payment without a prior promise of payment from the insurance carrier or TPA. Rule 16-9(A) states “[t]he Notification process is for treatment consistent with the Medical Treatment Guidelines that has an established value under the Medical Fee Schedule. Providers may, but are not required to, utilize the Notification process to ensure payment for medical treatment that falls within the purview of the Medical Treatment Guidelines. Therefore, lack of response from the payer within the time requirement set forth in section 16-9 (D) shall deem the proposed treatment/service authorized for payment.”


The language contained in Rule 16-9(B) emphasizes that a medical provider “may” obtain permission to provide a service within the Medical Treatment Guidelines verbally within normal business hours.  The providers can obtain verbal confirmation and may make a request for written confirmation regarding payment of those services. If the provider wishes, the provider can submit a written Notification to the claim examiner. The provider must use the boilerplate Division form WC195, which is available online at the Division’s website. The provider must include on the form a statement as to why the service is medically necessary and cite the applicable MTG.


After the carrier or TPA receives the Notification, the respective recipient has 5 business days from the receipt of the Notification to respond to the provider. The timing for the response to the provider differs from the current structure of Rule 16 whereby the carrier is permitted 7 business days from the date of the request to respond to the request for authorization. If the carrier or TPA does not respond to a verbal or written request in 5 business days, the requested service is deemed automatically authorized for payment.


The carrier or TPA may either accept or deny the request for services. Similar to the current Rule 16 structure, the carrier or TPA always reserves the right to agree to pay for the requested services without a formal review of the requested services. The carrier or TPA can alternatively contest the services on the following grounds: “(1) for claims which have been reported to the Division, no admission of liability or final order finding the injury compensable has been issued; (2) proposed treatment is not related to the admitted injury; (3) provider submitting Notification is not an Authorized Treating Provider (ATP), or is proposing for treatment to be performed by a provider who is not eligible to be an ATP; (4) injured worker is not entitled to proposed treatment pursuant to statute or settlement;  (5) medical records contain conflicting opinions among the ATPs regarding proposed treatment; and (6) proposed treatment falls outside the Medical Treatment Guidelines (see section 16-9(E).”


If the carrier or TPA contests the Notification on the grounds that the treatment is not related to the industrial injury, the medical records contain conflicting opinions, or that the treatment falls outside of the MTG, the carrier or TPA must notify the provider. The carrier or TPA must then allow the provider to submit supporting documentation to justify the relatedness of the service. If the provider submits the requested supporting documentation, then the carrier or TPA must review the request consistent with the Rule 16-10 and 16-11 preauthorization rules within 7 business days. A party contesting the denial of a Notification request may file an Application for Hearing.


The Division inserted a penalties provision in Rule 16-9(G). Under this new rule, if any medical provider or payer, the carrier or TPA, misapply the Medical Treatment Guidelines in the Notification process, the respective party may be subject to penalties. This provision continues the Colorado state government’s history of advocating punitive sanctions for violations of administrative rules.


In addition to the Notification provision, the Division altered the rules pertinent to traditional utilization review contests for medical services outside of the MTG.  The utilization standards contained in Rule 16-10 largely remained unchanged by the new rule. The modification to Rule 16-11, however, focused upon remodeling the carrier’s and TPA’s right to contest the request for authorization.  Prior to January 1, 2017, in order to contest the request for preauthorization for services, the carrier or TPA had 7 business days to obtain a medical review or file an Application for Hearing to challenge the request. After January 1, 2017, the carrier or TPA must follow a different procedure to contest preauthorization, presuming that medical providers perfect their request for authorization.


Under the new Rule 16-11(E): “[f]ailure of the payer to timely comply in full with the requirements of section 16-11(A) or (B), shall be deemed authorization for payment of the requested treatment unless: (1) a hearing is requested within the time prescribed for responding as set forth in section 16-11(A) or (B) and the requesting provider is notified accordingly. A request for hearing shall not relieve the payer from conducting a medical review of the requested treatment, as set forth in section 16-11(B); or (2) the payer has scheduled an independent medical examination (IME) within the time prescribed for responding as set forth in section 16-11(B).” In short, filing an Application for Hearing by itself is no longer sufficient to contest the preauthorization request. If the carrier or TPA requests a hearing, the carrier or TPA must complete the medical review process within seven business days or actually schedule the injured worker for an Independent Medical Evaluation (“IME”) within seven business days.


The new Notification process for medical services, consistent with the MTG and the limitations on contesting a requests for preauthorization for services outside of the guidelines, raises numerous questions on how the rules will practically operate. For instance, does a verbal Notification for a service within the MTG left on a claims examiner’s voicemail meet the criteria for Rule 16-9(B)? Does an injured worker have legal standing to request penalties under Rule 16-9 if a medical provider misapplies the MTG in a request thereby causing a delay in medical treatment? If a carrier or TPA files an Application for Hearing and schedules an IME, and the IME is later cancelled for various reasons, is the requested service automatically authorized? Given the historical litigation surrounding Rule 16 utilization reviews, carriers and TPAs should begin implementing safeguards and training to ensure strict compliance with the complex additions to the modified rule.