BILL ANALYSIS Ó SB 923 Page 1 SENATE THIRD READING SB 923 (De León) As Amended September 8, 2011 Majority vote SENATE VOTE : 39-0 INSURANCE 8-3 APPROPRIATIONS 15-2 ----------------------------------------------------------------- |Ayes:|Solorio, Hagman, Feuer, |Ayes:|Fuentes, Harkey, | | |Hayashi, Miller, Olsen, | |Blumenfield, Bradford, | | |Skinner, Torres | |Charles Calderon, Davis, | | | | |Donnelly, Gatto, Hall, | | | | |Hill, Lara, Nielsen, | | | | |Norby, Solorio, Wagner | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Carter, Grove, Wieckowski |Nays:|Campos, Mitchell | | | | | | ----------------------------------------------------------------- SUMMARY : Requires the Administrative Director (AD) of the Division of Workers' Compensation (DWC) to adopt a resource-based relative value scale (RBRVS) for physician services. Specifically, this bill : 1)Requires the AD to adopt an Official Medical Fee Schedule (OMFS) for physician services based on the RBRVS by January 1, 2013. 2)Requires the AD to adopt and revise the OMFS for physician services no less frequently than every two years. 3)Defines "Resource-Based Relative Value Scale" as the relative value scale created by the federal Centers for Medicare and Medicaid Services and set forth in the Federal Register for each calendar year. 4)Requires the new RBRVS fee schedule to be revenue neutral. 5)Provides that the changes to the OMFS be phased in over a three-year period. 6)Contains a double-jointing provision to avoid a chaptering out problem with AB 378 (Solorio). SB 923 Page 2 EXISTING LAW : 1)Establishes a comprehensive system of workers' compensation benefits for employees who suffer from an injury or illness that arises out of and in the course of employment, irrespective of fault, including medical benefits. 2)Requires the AD to adopt and periodically revise an OMFS to establish reasonable maximum medical fees for medical services, including physician services. 3)Requires, as a matter of federal law, the use of the Resource-Based Relative Value Scale (RBRVS) for all Medicare reimbursement of physician services. FISCAL EFFECT : According to the Assembly Appropriations Committee, administrative costs associated with this legislation would be minor and absorbable as the AD has been studying the feasibility of adopting an RBRVS-based schedule for at least five years and is already statutorily required to periodically update the OMFS for physician services. COMMENTS : 1)According to the sponsors of the bill, U.S. Health Works Medical Group, this bill will implement nearly ten years of study by the DWC to bring the California workers' compensation fee schedule into the 21st century. In particular, an RBRVS system would compensate primary care physicians at a higher level, a result most observers agree is appropriate. 2)The Resource-Based Relative Value Scale was created in 1985 at Harvard University by Dr. William Hsiao and published in 1988. The goal of the scale was to assign each procedure a relative value, which would then be adjusted by geographic cost differences, in order to reimburse procedures done through Medicare by their actual cost and value. The scale was adopted in 1992 by President George H.W. Bush for the purposes of reimbursing Medicare physician services. With RBRVS, each service, which is defined by the Current Procedural Terminology (CPT) code, is assigned three relative value units (RVU). The three relative value units are the work done, the medical practice expense, and medical liability SB 923 Page 3 insurance. This way, if the procedure takes a long period of time or is especially dangerous, the reimbursement rate will be higher, or the reimbursement rate may be lower if the procedure is quick and relatively low-risk. 3)During the last years of Governor Schwarzenegger's Administration, the DWC attempted to revise the OMFS for physician services based on RBRVS. However, when the DWC began the process for adopting an RBRVS model, it quickly encountered significant opposition from specialists in the medical field, as their reimbursements would be lowered, in some cases significantly. For example, the 2010 Lewin Group study estimated that surgery reimbursements would be cut by nearly 10% and radiology (between 3.5% and 12%), while physical medicine would see reimbursement rates increase significant amount (between 12% and 16%). This opposition, plus the reality of an upcoming new administration, eventually halted these efforts. 4)Proponents argue that this bill will require a long-overdue conversion of the workers' compensation fee schedule to a schedule based on the system utilized by the Medicare system. Proponents note that the existing system is antiquated and based on valuations and assumptions that are out-of-date and place primary treating physicians at a disadvantage. Proponents also note that an RBRVS-based schedule would be simpler and easier for employers and payors to comply with. 5)Opponents argue that RBRVS is an unnecessary and costly method to update the OMFS, and that it has been shown by use in other states to harm access to care for injured workers. It is unnecessary because the AD already has the authority to adopt an RBRVS system if, in the expert judgment of the AD that is the appropriate approach. There is also the concern that the mandate could be understood to require revenue neutrality, which would necessitate reductions in compensation for specialists to make up for increases to primary care providers when there is no evidence specialists are overpaid. Related legislation . SB 127 (Emmerson), which addresses the OMFS for physician services, requires the use of current Current Procedural Terminology (CPT) codes. Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086 SB 923 Page 4 FN: 0002850