BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 863| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ UNFINISHED BUSINESS Bill No: SB 863 Author: De León (D), et al. Amended: 8/30/12 Vote: 21 PRIOR VOTES NOT RELEVANT ASSEMBLY FLOOR : Not available SUBJECT : Workers compensation SOURCE : Author DIGEST : This bill enacts major reforms to the workers compensation system. Assembly Amendments delete Senate version of the bill and insert the above language. ANALYSIS : Existing law: 1. Provides, based on the state constitution, that the Legislature has plenary authority to establish a system of providing workers' compensation benefits to workers who suffer injuries that arise out of or in the course of employment. 2. Grants the Legislature broad discretion is CONTINUED SB 863 Page 2 establishing the means by which disputes in the workers' compensation system may be resolved. 3. Includes both medical services and indemnification payments for permanently disabled workers among the various benefits that are available to injured employees. 4. Provides for "employer control" of medical treatment if the employer establishes a Medical Provider Network (MPN) that meets detailed criteria, including a requirement that 25% of the doctors in the MPN are not occupational medicine specialists. 5. Provides that an employer is entitled to require an injured employee to be treated for a workplace injury within its MPN, provided that the MPN is approved by the administrative director, and various notice requirements have been met. 6. Allows, via case law, injured employees to be treated outside the MPN due to minor failures in pre-employment notice requirements, workplace notice posting requirements, as well as substantive deficiencies in the MPN. 7. Allows an entity that arranges for networks of medical providers to require a physician to participate in a workers' compensation network as a condition of participation in other networks arranged by that entity. 8. Provides that most services provided to parties in the workers' compensation system are subject to a fee schedule, but does not have a formal fee schedule for interpreter, copying, transportation or ambulatory surgery center services. 9. Provides that disputes about medical treatment are resolved based on pre-litigation utilization review by employers, expert medical opinion obtained through the Qualified Medical Examiner (QME)/Agreed Medical Evaluator (AME) process, and litigation before a workers' compensation judge. SB 863 Page 3 10. Requires billing disputes (that is, conflicts over whether billing codes were properly complied with, fee schedules properly applied, and related matters that do not involve a challenge to the actual services provided) be resolved by a workers' compensation judge in connection with the case-in-chief, often causing delays in settling cases, and creating a huge backlog of low-priority workload for workers' compensation judges. 11. Allows a report from a self-procured physician to be admitted into evidence on any disputed issue, even if the employee has improperly declined to seek treatment within the MPN. 12. Establishes selected, but not comprehensive, financial conflict of interest rules for participants in the workers' compensation system. 13. Allows basic permanent disability ratings to be increased due to individualized evidence that the injured worker has suffered "compensable consequences" of the primary injury due to sleep and sexual disorders that flow from the primary injury. 14. Allows an injured worker to present evidence to rebut a permanent disability rating derived from the basic permanent disability rating formula, and to present evidence of a diminished future earning capacity. 15. Establishes a Supplemental Job Displacement Benefit, but contains functional impediments in most cases that prevent delivery of these benefits in a manner helpful to an injured worker who needs retraining. 16. Contains a soft statute of limitation on the filing of liens for disputed medical or other services, and requires that liens be adjudicated by workers' compensation judges. 17. Requires the AD to adopt and periodically update an Official Medical Fee Schedule, but does not mandate or prohibit that this schedule be based on Medicare's SB 863 Page 4 resource based relative value system (RBRVS) system. 18. Provides that medications provided to injured workers shall be paid for at the rate determined by the MediCal fee schedule. 19. Allows generally for home care services to be paid for where an injured worker needs these services as a result of the injury, but does not provide any specific rules governing the scope of or payment for these services. This bill: 1. Eliminates one of the two pathways for chiropractors to qualify as a QME. 2. Limits the number of office locations that a QME may file with the Division of Workers' Compensation (DWC) to 10. 3. Reduces the scope of evaluations that QMEs perform by establishing an Independent Medical Review system (IMR), patterned after the existing IMR process implemented by the Department of Managed Health Care (DMHC) for resolving health insurance disputes, to resolve medical treatment issues. 4. Establishes a hierarchy of standards that are to be applied by IMR, with the Medical Treatment Utilization Schedule adopted by the AD as the highest source for evaluating the appropriateness of medical treatment, followed by the same ranked standards that apply to HMOs under the Knox-Keene Act. 5. Eliminates the WCAB's authority to adjudicate medical treatment disputes that are directed to the IMR process. 6. Permits the employee to provide new information to the IMR not reviewed by utilization review, provided the employee gives this additional information to the employer to allow the employer an opportunity to reconsider based on this information. SB 863 Page 5 7. Allows the employee to appeal a utilization review decision by requesting an IMR either immediately after the utilization review decision or after getting a second utilization review with addition information. 8. Makes the results of the IMR process binding on all parties, absent clear and convincing evidence of fraud or conflict of interest, that the AD acted in excess of his or her authority, that the decision was the result of bias relating to protected classes, or that the decision was the result of a plainly erroneous express or implied finding of fact that is a matter of ordinary knowledge and not a matter that is subject to expert opinion. 9. Prohibits the WCAB or a court to make a determination on a medical matter in the event of a reversal of an IMR decision, and instead requires that the matter be returned to IMR, for additional appropriate proceedings. 10. Establishes penalties in the event an employer fails to notify an injured worker of his or her right to IMR, or fails to implement a decision by IMR favorable to the injured worker. 11. Provides that a reversal of a utilization review decision by IMR is not necessarily an unreasonable delay in providing treatment within the meaning of the provisions that penalize an insurer or employer for unreasonably denied treatment. 12. Adopts findings and declarations of Legislative intent with respect to the IMR process and its value to injured workers and to the workers' compensation system. 13. Establishes an Independent Bill Review (IBR) process to take medical billing disagreements out of the jurisdiction of the WCAB adjudication system under rules similar to the IMR process. 14. Adopts a severability clause for the IMR provisions. SB 863 Page 6 15. Provides for the Administrative Director of the DWC to contract with qualified organizations to implement the IMR and IBR functions, subject to detailed conflict of interest rules and substantive responsibilities, as specified. 16. Contains findings relating to the need to contract for IMR and IBR services. 17. Repeals several outdated annual reporting requirements. 18. Prohibits Professional Employer Organizations (PEOs) and temporary staffing agencies from becoming self-insured for workers' compensation purposes, and requires any of these entities that are currently self-insured to become insured by January 1, 2015. 19. Requires public agencies that are self-insured to submit specified data to the Department of Industrial Relations (DIR) for purposes of policy analysis, and directs the Commission on Health and Safety and Workers' Compensation (CHSWC) to conduct a study of public sector self-insured programs. 20. Provides that the costs incurred by DIR in administering the public sector workers' compensation program are to be paid from the Workers' Compensation Administration Revolving Fund (user funding as opposed to General Fund.) 21. Repeals the requirement that a second opinion be obtained in cases of spinal surgery, and instead would resolve questions of appropriateness of spinal surgery in the IMR process. 22. Streamlines the AME and QME process to eliminate unnecessary delays and friction in the system. 23. Provides that a report by a physician procured independently by an injured worker cannot be the sole basis of an award for compensation, but that a QME or authorized treating physician, when the QME or SB 863 Page 7 authorized treating physician is preparing a report, shall address any such report and indicate whether he or she agrees with the findings or conclusions of the independently procured physician, and there reasons therefore. 24. Establishes a prohibition for any interested party in the workers' compensation system to have a financial interest in another entity to which it is referring a party for services, or for which it is paying or receiving compensation, if the employer is paying the charges; provided that financial interests in affiliated entities in claims handling are subject to mandatory disclosure rather than this prohibition. 25. Increases aggregate permanent disability benefits by approximately $740 million per year, phased in over a two-year period, and adjusts the formula for calculating the benefit amount so that compensation amounts more accurately reflect loss of future earnings, and to ensure that no class of injured workers receive a lower award than under the present system. 26. Eliminates sleep disorder and sexual dysfunction "add-ons" to primary injuries that do not include these injuries when calculating the level of permanent disability, but require all appropriate medical treatment for these injuries. 27. Eliminates the diminished future earnings capacity from the determination of permanent disability, and limits the definition of permanent disability to include only a consideration of how occupation affects the overall classification of employment of the injured worker, rather than the individual injured worker's ability to compete in the open labor market or reduction of future earnings. 28. Limits psychological add-ons when calculating a permanent disability rating to cases involving catastrophic injury or that involved a violent workplace incident. SB 863 Page 8 29. Provides that all permanent disability awards are increased by a multiplier of 1.4 for the loss of future earnings. 30. Establishes, for injuries occurring from January 1, 2013 through December 31, 2015, a 30% "bump up" of the permanent disability award, and for injuries occurring on or after January 1, 2016, a 15% "bump up" of the permanent disability award for injured workers who are not given a qualifying return to work offer. 31. Provides that in enacting the bill adding these changes to the permanent disability system, it is not the intent of the Legislature to overrule the holding in Milpitas Unified School District v. Workers' Comp. Appeals Bd . (Guzman), which established that the presumption that an AMA Guides rating is correct is rebuttable by evidence presented by the injured worker. 32. Requires the Commission on Health and Safety and Workers' Compensation to conduct a study comparing average loss of earnings for employees who sustained work-related injuries with permanent disability ratings under the permanent disability rating schedule and evaluate the impact of increased payments made pursuant to the "bump up" provisions, and report to the Legislature before January 1, 2016 33. Clarifies that an insurer or employer can pay for physical medicine treatments in excess of the 24-visit cap without that payment constituting a blanket waiver of the cap. 34. Provides that a chiropractor who has reached the 24-visit cap cannot serve as the injured worker's primary treating physician. 35. Eliminates the requirement that a MPN have non-occupational medicine specialists constitute at least 25% of the physicians in the network. 36. Requires an MPN to obtain a written acknowledgement from a physician that the physician agrees to be in the MPN. SB 863 Page 9 37. Requires all MPNs to have a "medical access assistant" staff person or persons, who need not be employees, but who must be located within the United States, to aid injured workers in obtaining appointments or referrals within the MPN. 38. Allows the AD to generically approve an MPN, as opposed to requiring a separate approval for each employer. 39. Provides that the approval of an MPN by the AD is conclusive in a matter before the WCAB that the MPN is valid, subject to proof that there was a specific failure as to a specific injured worker. 40. Requires periodic administrative audits of MPNs by the AD. 41. Authorizes discretionary administrative audits of MPNs by the AD. 42. Limits the reasons that can be used to avoid obtaining treatment within an MPN, and establishes an expedited process to resolve any disputes about whether the injured worker is required to be treated within the MPN. 43. Requires a physician who knows or should know that the patient is suffering from an occupational injury to notify the employer within 5 days that the injured worker is being treated outside the MPN, and prohibits payment by an employer or insurer for any treatment provided to the injured worker when the notice requirements have not been complied with. 44. Provides that where interpreter services are needed, the injured worker shall make a request to the employer or insurer, and the employer or insurer shall pay for the interpreter services. 45. Requires that interpreters be certified, and authorizes the AD to establish, operate or contract for an interpreter certification program. SB 863 Page 10 46. Prohibits an interpreter certification entity from having a financial interest in training or employing interpreters. 47. Modifies the Supplemental Job Displacement Benefit (SJDB) rules to: A. Change the point in time the benefit is triggered; B. Prohibit "cashing out" the retraining voucher in settlements; C. Establish which schools are qualified to be paid by the retraining voucher; D. Limit the time period during which the voucher is valid to 2 years; and E. Specify that an injury that occurs during retraining does not constitute a compensable injury. 1. Prohibits the filing of a lien against an award for matters that are subject to IMR and IBR dispute resolution. 2. Establishes a $150 filing fee in order to file a lien, recoverable if the lien claimant prevails. 3. Establishes a $100 activation fee for legacy liens (unless the lien was previously subject to a since-sunsetted $100 filing fee), recoverable if the lien claimant prevails. 4. Adopts firm time limits within which liens must be filed. 5. Adopts a fee schedule for ambulatory surgery centers (ASCs). 6. Requires the DIR to study the feasibility of establishing a facility fee for services performed in SB 863 Page 11 ASCs. 7. Requires the AD to adopt a medical fee schedule methodology based on Medicare's RBRVS system, with specified modifications for California's workers' compensation system, including geographic adjustments. 8. Clarifies the rules that govern the fee schedule applicable to vocational expert compensation, and provides that written testimony, in lieu of live testimony, is proper. 9. Provides that if the MediCal fee schedule for prescription medications is reduced in order to meet specified MediCal budget needs that reduction shall not be included in the workers ' compensation official medical fee schedule, which is otherwise linked to the MediCal schedule. 10. Prohibits payment for home care services where the services were already being provided prior to injury (i.e., no pay for cooking for the injured worker if a spouse was already doing that function prior to injury); authorizes the AD to adopt a home care services utilization and fee schedule, and limits the re-opening of old cases where home care services are alleged to have been provided but were not authorized or ordered by a physician before the services were rendered. 11. Authorizes the AD to adopt a fee schedule for copying services, and establishes substantive rules to govern these services. 12. Eliminates the "double-payment" pass-through for implantable surgical hardware, subject to the AD adopting a regulation to allow an additional reimbursement where the basic hospital fee schedule does not adequately cover the cost of the hardware. 13. Contains language to prevent chaptering problems with SB 1105. Comments SB 863 Page 12 According to the Assembly Insurance Committee, this bill reflects a negotiated compromise between employers and employees to adopt a substantial increase in permanent disability benefits ($740 million), to ameliorate unexpected reductions that flowed from the 2004 reforms, balanced by substantial changes in the benefit delivery system to eliminate waste, inefficiency, and other loopholes that result in unnecessary employer costs that go to recipients other than injured workers. Workers' Compensation - the Great Compromise . Fundamentally, workers' compensation is an agreement between employers and employees to each give up a right in exchange for the stability and certainty of the workers' compensation system. Employees give up the right to sue in tort for injuries, and employers give up the right to contest fault. Employees give up the right to tort damages in favor of more limited, but more certain and more easily obtained benefits. Employers agree to pay benefits in all cases where the injury is work related. The hallmark of this arrangement is that relatively certain defined benefits are to be delivered to injured workers on a no fault basis in a relatively timely manner. In this system, the relevant parties to the agreement are employees and employers. Every other stakeholder - providers of medical services and products, lawyers, insurers, and various providers of a range of related services - are service providers contributing goods and services necessary to carry out the agreement between employees and employers. However, they are not direct parties to the agreement. Over the years, the principles of relatively certain defined benefits and relatively timely delivery have been seriously eroded. Inconsistency in parties' ability to ascertain exactly what benefits an injured worker is entitled to has forced the system to develop a complex, cumbersome, and slow litigation-based dispute resolution system. At a fundamental level, the proposal contained in this bill is an effort by the direct parties to the workers' compensation agreement (employees and employers) to return to the principles of relatively certain defined SB 863 Page 13 benefits, and relatively timely delivery of those benefits. The 2004 Reforms . In 2004, with recently-elected Governor Schwarzenegger poised to file signatures to place a workers' compensation reform initiative on the ballot, the Legislature passed and the Governor signed SB 899 (Poochigian), Statutes 2004, Chapter 34, in lieu of the initiative. These reforms enacted a broad range of changes to the workers' compensation system, but two issue areas are of primary importance to the reform proposal contained in SB 863. First, SB 899 substantially changed the permanent disability rating system. Employers and insurers had long complained that the rating system was far too subjective, which resulted in widely varying results for similar cases. The result of this variation was a tremendous amount of litigation because both sides could see the potential of changing the result in a great number of cases. SB 899 adopted several changes to the law designed to resolve this problem. The bill required objective medical findings, the use of the American Medical Association Guides to the Evaluation of Permanent Impairment, 5th Edition (AMA Guides), and use of a numerical formula to address the impact on the injured worker's future earning capacity (FEC). These changes were intended to reduce litigation and increase consistency of results. They were also intended to eliminate some cases altogether - so-called "zeroes" who under the old system obtained a rating based on subjective but not medically verifiable pain. Under the new rules, this class of injured worker receives a "zero" percent PERMANENT DISABILITY rating. These reforms did not have as much impact on litigation as predicted, largely due to a clearly unexpected result - permanent disability awards for injured workers who still obtained a rating fell by approximately 50% or more on average. This result was largely due to the way the Schwarzenegger Administration's regulations implemented SB 899. The call for reform had never included an argument that widespread benefit reductions be included. As these reductions became evident, lawyers sought aggressive means to develop ways to increase the low ratings, and they SB 863 Page 14 succeeded in certain respects, discussed in more detail below. Contemporaneously, political pressure began to build for a permanent disability benefit increase, which is a key component of SB 863. Second, SB 899 authorized the establishment of MPNs that, if properly established by the employer and approved by the AD, were intended to grant "employer control" over medical treatment. Prior to SB 899, the injured worker had the choice of treating physician starting 30 days after the injury. This right was criticized because of employer concerns that injured workers were being directed to physicians who were not using evidence-based treatments, and instead were engaging in treatment patterns designed to increase the legal case for higher disability ratings. The MPN was intended to provide quality evidence-based treatment for injured workers but with a network of physicians developed by the employer, which would presumably decline to contract with outlier physicians. Two primary problems have developed with MPNs . Injured workers have far too frequently found it difficult or impossible to find physicians on the MPN list to treat them. A related problem is that because of these difficulties, many injured workers are being directed to the same outside physicians that employers sought to avoid by creation of the MPNs. In addition, physicians have complained that they are leveraged to be in networks they do not want to be in, and get listed in networks that they had no notice of. A major part of the reforms proposed by SB 863 involve strengthening the rules to ensure that the MPNs are sound, and strengthening the rules requiring treatment of injured workers by MPN physicians. MPN Reforms . One of the primary concerns expressed by employers is that the expected control of medical care and delivery of evidence-based medicine to injured workers through MPNs authorized by SB 899 has not materialized. Employers point out that the workers' compensation courts have allowed a range of erosions to what was expected after SB 899 was enacted. Specifically, they point to cases where employees, after being in treatment within an MPN, simply go to outside physicians, expect those physicians to be paid by the employer, and justify this through technical SB 863 Page 15 notice errors that have nothing to do with the delivery of health care services. In response, SB 863 requires out-of-network physicians treating an injured worker to notify the employer within 5 days, establishes an expedited hearing process to determine if treatment outside the MPN is legitimate, and prohibits payment to physicians violating these rules. The bill is designed to eliminate existing practices whereby weeks or months of out of network treatment is being provided, often without any notice to the employer, and liens are being filed in staggering number (see below) by providers seeking payment for treatments that were not pre-authorized. In addition, the bill tightens regulatory oversight to ensure that MPNs are viable entities, and provides rights to physicians who may not want to be included in the MPN, including a repeal of the rule at least 25% of each MPN's providers must be non-occupational medicine specialists. The concern has been that these are the providers least likely to be willing to take workers' compensation cases, and account for a high percentage of providers on the lists given to injured workers who will not schedule appointments. These reforms are designed to improve the quality of the MPNs, and in that regard improve the quality of evidence-based medicine as the basis of treating injured workers, and based on these improvements, enhance the ability of employers to provide treatment for injured workers within the MPN. The bill expressly eliminates some of the reasons that attorneys for injured workers have used to justify getting treated outside of MPNs. For example, the law requires a pre-employment notice to an employee that the employer uses an MPN, and there are requirements for on-site posting of MPN notices in workplaces. Deficiencies in meeting these requirements have been used to get out of MPNs, even by injured workers who, at the time of injury received all necessary information about accessing the MPN, and who in fact had been treated by MPN providers for some time. The bill eliminates these technical violations as a basis to obtain treatment outside of the MPN, establishes a presumption that an approved MPN is valid, but continues to SB 863 Page 16 allow an injured worker to prove that the MPN is failing to make appropriate treatment available, thereby justifying outside treatment. The bill also addresses one of the incentives to seek treatment outside of an MPN. Case law at the WCAB level had held that a medical report obtained outside an MPN that should have been used for treating the worker was inadmissible in WCAB proceedings. The Court of Appeal revered this rule in the Valdez case. Employers have argued that allowing this sort of evidentiary use would incentivize wrongful efforts to seek treatment outside of the MPN. The bill stops short of overruling the Court of Appeal, but adds two rules: first, the bill provides that a report from an outside physician shall not be the sole basis of an award of compensation, and second, a QME or treating physician shall consider the outside report in any report they make, and indicate agreement of disagreement, and the reasons therefore. Independent Medical Review . This bill proposes to change the way medical disputes are resolved. Currently, when there is a disagreement about medical treatment issues, each side attempts to obtain medical opinions favorable to its position, and then counsel for each side tries to convince a workers' compensation judge based on this evidence what the proper treatment is. This system of "dueling doctors" with lawyers/judges making medical decisions has resulted in an extremely slow, inefficient process that many argue does not provide quality results. Long delays in obtaining treatment result in poorer outcomes, reduced return to work potential, and excessive costs in the system, none of which are good for injured workers. This bill instead adopts an independent medical review system patterned after the long-standing and widely applauded IMR process used to resolve medical disputes in the health insurance system. Thus, a conflict-free medical expert would be evaluating medical issues and making sound medical decisions, based on a hierarchy of evidence-based medicine standards drawn from the health insurance IMR process, with workers' compensation-specific modifications. This bill contains findings that this system would result in faster and better medical dispute resolution than existing law. SB 863 Page 17 The IMR system is designed to ensure that medical expertise is used to resolve medical disagreements. Thus, the decision from the IMR is final and binding on the parties. Nonetheless, in the exercise of the Legislature's plenary authority to establish a workers' compensation system that includes a review of decisions, there is a process to appeal the IMR result, but this review process does not allow the second-guessing of medical expertise. Rather, the appeal is limited to circumstances where there was fraud, conflict of interest, discrimination based on protected classes, or clear mistakes of facts that do not involve medical expertise. According to the California Applicants' Attorneys Association (CAAA) the IMR process prohibits WCAB or judicial review of medical necessity for treatment of work injuries, and is in direct conflict with the California Supreme Court's Determination in State Compensation Insurance Fund v. WCAB (Sandhagen), which provided that an injured worker was entitled to an expeditious, complete and final judicial review of all treatment disputes. It should be noted that Sandhagen was not decided in the context of an IMR process, and may not be on point with respect to reviewing an IMR decision. Permanent disability Reforms . Permanent disability reforms are probably the most controversial element of the proposal. Despite increasing annual permanent disability payments to injured workers by an estimated $740 million (after a 2-year phase-in), some have objected to the way that this increase is structured, as well as changes in how approximately $1 billion in existing permanent disability expenditures are redirected. There are numerous ways that a permanent disability system can be structured. At one end of the spectrum, there can be relatively broad guidelines, and every injured worker could be entitled to prove to the workers' compensation courts his or her individual circumstances. This approach, of course, would have little predictability, and would have tremendous frictional costs and delays in delivering benefits. At the other end of the spectrum, there can be a total formulaic approach where there is no opportunity to bring in individualized proof. Employers have argued that the SB 863 Page 18 current system operates too close to the former, and this bill moves in the direction of the latter, while retaining key rights for limited individual proof of unique circumstances. Employees have agreed to these changes in exchange for increased benefits for all classes of employee, and increased certainty and speed in the delivery of the benefits. The bill specifically limits some of the "add-ons" that can be established by individualized proof - sleep disorders, sex disorders, and to a limited extent, psychological disorders - because these add-ons have greatly expanded in recent years, largely as a result of the inappropriately low permanent disability ratings that followed from the 2004 reforms. Since benefit levels are being substantially increased by the bill, many believe that these add-ons, which generate substantial litigation expense, are no longer needed. Not everyone agrees with this conclusion. For example, the CAAA argues that the bill alters the existing statutory description of permanent disability and may undermine or reverse fifty years of California Supreme Court case law allowing injured workers to recover compensation for their lost ability to earn a living, citing the Court of Appeal decision in Ogilvie v. WCAB and the 2007 Supreme Court Decision in Brodie v. WCAB . Lien Reforms . The current lien system in workers' compensation is out of control. There is no effective statute of limitations, because case law has developed tolling rules that result in most billing matters remaining alive indefinitely. In addition, the method of resolution requires formal litigation in an already overcrowded workers' compensation court system. There are presently hundreds of thousands of backlogged liens, possibly in excess of a million, and many of these are related to long-since closed cases. One of the concerns most often expressed by employers is that liens get filed by providers for months of treatment when the employer had no idea that there was any treatment being provided. The bill seeks to avoid these situations by mandatory notice by providers to the employer, an SB 863 Page 19 expedited hearing process to determine if the provider has a right to be treating the injured worker, and a prohibition against paying bills submitted in violation of these rules. But lien abuse is not limited to treatment the employer has no notice of. For example, it has become common for third parties to purchase old receivables from providers, who often billed at (higher) usual and customary rates but were properly paid according to established fee schedules. These third parties then file liens in an effort to leverage settlements. Another example of lien abuse involves a provider filing a lien for excessive amounts after being paid, again with the hope of obtaining a settlement. Nuisance-value settlements are rampant because the workers' compensation courts simply don't have time for these minor matters when crucial right to benefits issues are the priority cases. To address this growing volume of problem liens, the bill proposes to re-enact a lien filing fee, so that potential filers of frivolous liens have a disincentive to file. This approach worked well in the past before it sunset (due to the DWC's inability to track the fees - a problem DWC says no longer exists.) The lien filing fee is refundable if the lien-claimant prevails. In addition, for liens that are pending, and were filed after the prior filing fee sunset, the bill provides for the payment of an activation fee. Again, the purpose is to provide a disincentive to file frivolous liens. Not surprisingly, there has been concern expressed that filing fees are a burden on providers who may have legitimate billing disputes with the employer or insurer. Therefore, in order to further eliminate a major portion of the unnecessary volume of liens, the bill would create an "independent bill review" process where expert bill reviewers would make determinations in cases where it is merely a billing, and not a substantive treatment, dispute. This IBR process would relieve substantial congestion in the workers' compensation courts, provide much faster dispute resolution, and result in better decisions by billing experts as opposed to judges, who have no special training in the arcane world of billing codes and procedures. SB 863 Page 20 RBRVS . Medicare uses a RBRVS as the foundation for calculating payment for physician services. Most states use RBRVS in their workers' compensation system. In California, this issue has been debated for years, and subject to substantial consideration and hearings by the DWC. However, it has not been adopted. Last year, the Assembly Insurance Committee passed SB 923 (De Leon), which would have required the DWC to adopt RBRVS, but the bill was not taken up on the Assembly Floor. RBRVS is not without controversy within the medical community, even as it is a well-understood system that is virtually self-updating as Medicare regularly updates it. Specifically, it is argued by specialists that the RBRVS rules favor primary care physicians over specialists, and would result in unfair reimbursement cuts to specialists. On the other hand, primary care physicians argue that some specialties receive reimbursement at over 300% of the Medicare rate by California's workers' compensation system. It should be noted that this bill does not provide the "revenue neutrality" provision that rendered SB 923 controversial. Other Fee Schedules . Market pricing does not work well in workers' compensation, since the people who receive services (injured workers) are not the payors. There is not market pressure for the injured worker to say "no" to over-priced services. As a result of this dynamic, most services that employers are mandated to pay for in workers' compensation are subject to a fee schedule, and in many cases, to utilization schedules as well (as over-utilization has the same inflationary impact as over-pricing.) However, not all services have been subjected to fee schedules, and some services are covered by fee schedules that allow for overly generous payments according to research data reported by CHSWC. As a result, the bill proposes establishing or updating utilization and/or fee schedules for the following services: ambulatory surgery center facility fees, interpreter services, vocational experts, home care services, and copying services. With respect to home care services, the bill seeks to adopt a fee schedule, identify appropriate utilization, require a SB 863 Page 21 physician to order the services, and cut off a practice of re-opening old cases where there had never been a physician order for home care, and pursuing a lien on behalf of a family member who cared for the injured worker. Since attorneys pursuing these claims are not representing the injured worker, the usual attorneys fee rules for workers' compensation cases do not apply. There have been reports of 50% contingency fees on claims of months of 24/7 home care services, where there had never been any notice that the services were needed or ordered by a physician. SJDB . Return to work after an injury is crucial to an injured worker's long term financial and emotional health. California, unfortunately does a poor job of returning its injured workers to work. In 2004, SB 899 adopted a supplemental job displacement benefit designed to provide retraining services for injured workers who could not return to their existing job. However, this program has never worked well because the trigger for the benefit occurs far too late for the benefit to work well. This bill attempts to reform the SJDB to make its promise of retraining viable. FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes Local: Yes SUPPORT : (Verified 8/31/12) Acclamation Insurance Management Services Air Conditioning Sheet Metal Association Allied Managed Care ALPHA Fund American Federation of State, County and Municipal Employees American Subcontractors Association of California Associated California Self Insured Businesses (ACSIB) Association of California Healthcare Districts (ACHD) Association of California School Administrators (ACSA) AT&T Boeing Brand Source Pacific Rim Region California Association of Competitive Telecommunications Companies California Association of Joint Powers Authorities (CAJPA) SB 863 Page 22 California Association of School Business Officials California Association of Sheet Metal and Air Conditioning Contractors Association California Association of Suburban Schools California Carpenters Conference California Chamber of Commerce California Chapter of the American Fence Association California Chapters of the National Electrical Contractors Association California Coalition on Workers' Compensation California Concrete Contractors Association California Employers Association California Faculty Association California Farm Bureau California Fence Contractors' Association California Grocers Association California Independent Oil Marketers Association California Labor Federation California Landscape and Irrigation Council California Landscape Association California Landscape Contractors Association California Legislative Conference of the Plumbing, Heating and Piping Industry California Manufacturers and Technology Association California Medical Association California Metals Coalition California Nevada Cement Association California Nurses Association California Occupational Medicine Physicians California Physical Therapy Association California Professional Association of Specialty Contractors California Professional Firefighters California Retailers Association California School Boards Association California School Employee Association California Small Business Association California Special Districts Association California State Association of Counties California State Council of Laborers California State Pipe Trades Council California Teachers Association California Teamsters Public Affairs Council SB 863 Page 23 California Trucking Association California-Nevada Conference of Operating Engineers Change.org Clinica Romero Coalition of Small and Disabled Veteran Businesses Communication Workers of America Confederacion ControAmericana Disney El Centro Del Pueblo Engineering Contractors' Association Federal Express Flasher Barricade Association Gateways Hospital Globe Iron Foundry, Inc. Golden State Builders Exchanges Grimmway Farms Hermandad Mexicana National Homeboy Industries Insurance Brokers and Agents of the West International Alliance of Theatrical Stage Employees International Brotherhood of Electrical Workers International Union, United Automobile, Aerospace & Agricultural Implement Workers of America - UAW Jesuit Restorative Justice Initiative Kaiser Permanente Kern County Superintendent of Schools Legacy LA Liberty Mutual Los Angeles Police Protective league Marin Builders' Association Monterey County Business Council National Federation of Independent Businesses North Bay Labor Council Northern California Independent Booksellers Association Oakland Metropolitan Chamber of Commerce Painting & Decorating Contractors of California, Inc. PECG/CAPS Plumbing Heating and Cooling Contractors Association of California Psych Techs Regional Council of Rural Counties Safeway Salvadoran-American Leadership and Educational Fund San Francisco Builders Exchange SB 863 Page 24 San Francisco Chamber of Commerce San Francisco Council of District Merchants Associations San Francisco Small Business Network School Insurance Authority SEIU Local 1000 Service Employees International Union Sheet Metal Workers Small Business Association Small Business California Southern California Contractors Association State Building & Construction Trades Council of California Tri-Counties Central Labor Council U.S. Health Works Medical Group UAW International Union and Locals 2865, 4123 and 5810 UNITE HERE United Auto Workers United Food and Commercial Workers United Parcel Service Western Carwash Association Western Electrical Contractors Association (WECA) Western Growers Association Western Occupational & Environmental Medical Association White Memorial Medical Center Zenith OPPOSITION : (Verified 8/31/12) California Applicants' Attorneys Association ARGUMENTS IN SUPPORT : The supporters write, "This negotiated package increases permanent disability benefits, minimizes delays in medical treatment, Improves access to care and provides hard savings in excess of the cost of benefit increases." ARGUMENTS IN OPPOSITION : The California Applicants' Attorneys Association opposes this bill and writes, "Though there are some worthy proposals embedded in the legislation and a partial restoration of permanent disability benefits for some injured workers, as an overall matter it takes away rights of many of the most seriously injured workers to get fair compensation for their injuries. In particular, the legislation restricts the ability of an injured worker to access necessary medical treatment and to SB 863 Page 25 receive adequate compensation if a worker is permanently disabled and cannot return to work at the same salary." PQ:d 8/31/12 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****