BILL ANALYSIS Ó
SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS
Senator Tony Mendoza, Chair
2015 - 2016 Regular
Bill No: SB 563 Hearing Date: April 22,
2015
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|Author: |Pan |
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|Version: |April 13, 2015 |
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|Urgency: |No |Fiscal: |No |
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|Consultant:|Gideon Baum |
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Subject: Workers' compensation: utilization review
KEY ISSUE
Should the Legislature prohibit the use of Utilization Review
(UR) and Independent Medical Review (IMR) to review medical
treatment if the treatment is ongoing and there is no evidence
of changes in the circumstances or condition of the injured
worker?
Should the Legislature shift medical dispute resolution from UR
and IMR physicians to the Workers' Compensation Appeals Board
(WCAB)?
ANALYSIS
Existing law establishes a workers' compensation system that
provides benefits to an employee who suffers from an injury or
illness that arises out of and in the course of employment,
irrespective of fault. This system requires all employers to
secure payment of benefits by either securing the consent of the
Department of Industrial Relations to self-insure or by securing
insurance against liability from an insurance company duly
authorized by the state.
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Existing law provides that medical, surgical, chiropractic,
acupuncture, and hospital treatment, including nursing,
medicines, medical and surgical supplies, crutches, and
apparatuses, including orthotic and prosthetic devices and
services, that is reasonably required to cure or relieve the
injured worker from the effects of his or her injury shall be
provided by the employer.
(Labor Code §4600)
Existing law requires that all employers create a utilization
review process, which is a process that prospectively,
retrospectively, or concurrently review and approve, modify,
delay, or deny, based in whole or in part on medical necessity
to cure and relieve, treatment recommendations by physicians,
prior to, retrospectively, or concurrent with the provision of
medical treatment services. (Labor Code §4610)
Existing law requires that each utilization review process shall
be governed by written policies and that these policies and
procedures, and a description of the utilization process, must
be filed with the administrative director and shall be disclosed
by the employer to employees, physicians, and the public upon
request. (Labor Code §4610(c))
Existing law provides that, in the event over a dispute over a
utilization review decision on or after July 1, 2014, all
disputes must be submitted for Independent Medical Review (IMR).
The independent reviewer's information must be kept
confidential.
(Labor Code §§4610.5 and 4610.6)
Existing law requires that, in the absence of fraud, error, or
illegal conduct, the IMR decision is final and binding. (Labor
Code §4610.6)
This bill would prohibit the use of utilization review for a
treatment recommendation by a physician if all of the following
conditions are met:
1) The treatment is solely for the purpose of maintaining
an injured employee's current healthcare regimen for a
preexisting injury ;
2) A prior recommendation for the injured employee was
reviewed and approved or modified, in whole or in part on
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medical necessity and the injured worker's current
healthcare regimen is a result of that decision; and
3) There is no evidence of a change in the injured worker's
circumstances or condition showing that the services are no
longer reasonably required to cure and relieve the injured
worker from the effects of the industrial injury.
This bill would also require that the written policies and
procedures for a specific utilization review process include the
method of compensation and incentive payments contingent on the
approval, modification, or denial of a claim for an individual
or entity providing utilization review services.
COMMENTS
1. What is Utilization Review (UR)?
In California's workers' compensation system, an employer or
insurer cannot deny treatment. When an employer or insurer
receives a request for medical treatment, the employer or
insurer can either approve the treatment or, if the employer
or insurer believes that a physician's request for treatment
is medically unnecessary or harmful, the employer or insurer
must send the request to Utilization Review.
Utilization Review (UR) is the review process for medical
treatment recommendations by physicians to see if the request
for medical treatment is medically necessary . The full UR
process varies by vendor, but it generally involves initial
review by a non-physician, with higher level review(s) being
conducted by a physician or physicians. Only a licensed
physician who is competent to evaluate the specific clinical
issues involved in the medical treatment services may modify,
delay, or deny a request for medical treatment. If the UR
physician does modify, delay, or deny the medical treatment,
then the injured worker can appeal the decision to Independent
Medical Review (IMR), but without the UR decision there cannot
be an IMR decision.
This process is triggered by the physician submitting a
Request for Authorization for Medical Treatment (RFA), which
is a Division of Workers' Compensation (DWC) form where the
physician details his or her diagnosis and treatment, and must
include an additional form which provides a narrative and
substantiates the need for treatment. As was discussed above,
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an employer or insurer cannot contest or in any way delay or
deny treatment without sending the RFA through UR. (see State
Compensation Insurance Fund v. WCAB (Sandhagen), 44 CAL. 4TH
230 (2008)).
SB 563 would prohibit an employer from applying the
utilization review process and Independent Medical Review to
cases where treatment had previously been approved or modified
and there is no evidence of a change in the injured worker's
circumstances or condition.
2. Recent Research on UR and Treatment Denials:
Recently, UR has come under some scrutiny by stakeholders,
many of whom argue that it is leading to a significant number
of injured workers being denied care. This claim, however, is
not currently supported by the data. As was discussed at the
Committee's March 25th oversight hearing, a recent study by
the California Workers' Compensation Institute (CWCI) found
that only approximately 25% of medical treatment requests go
through UR , with approximately 75% of the medical treatment
requests approved. Once the approvals from UR and Independent
Medical Review (IMR) are included, more than 94% of treatment
is approved in California's workers' compensation system.
3. Several Key Questions Regarding SB 563:
It would be very difficult to predict the full impact of SB
563 on California's workers' compensation system. Noting that
the Utilization Review process has been required since 2004,
SB 563 would upend and nullify more than a decade of case law
and industry practice. As such, SB 563 raises many important
questions, several of which will be discussed below.
Medical Dispute Resolution under SB 563:
Currently, when an employer disputes a medical treatment
recommendation, the dispute is settled by doctors. As was
noted above, only a licensed physician can deny or delay
treatment through UR. If a UR physician does deny or delay
treatment, the injured worker can then request that their
request for treatment goes through Independent Medical Review
(IMR). Again, IMR is done by physicians, who are independent
and experts in their relevant area.
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Under SB 563, it is unclear how such disputes would be
resolved, as the bill language is unclear. It is probable,
however, that the dispute resolution would instead shift to
the Workers' Compensation Appeals Board (WCAB). This would
place Administrative Law Judges (ALJs) in the position of
deciding such threshold issues such as if the injured worker's
condition had not changed, possibly as well as if the medical
treatment is appropriate. In short, SB 563 would probably
shift the resolution of medical disputes from doctors to WCAB
Administrative Law Judges who lack medical expertise, as well
as lengthen the amount of time required to resolve medical
disputes. The Committee may wish to consider the policy
implications of such a change to existing law.
Opioids under SB 563:
As has been discussed in prior legislative and oversight
hearings by this Committee, the use of opioids in the
management of chronic pain remains a vexing challenge in
California's workers' compensation system. While all
stakeholders agree that the management of chronic pain is a
necessary component of California's workers' compensation
system, studies conducted by CWCI suggest significant misuse
and abuse of exceptional strong Schedule II opioids, such as
fentanyl. According to the CDC, fentanyl is hundreds of times
more potent than heroin and is a drug of abuse.
Under SB 563, it would be nearly impossible to control the
utilization of opioids by injured workers. If opioids were
approved, then such an approval would essentially be
open-ended, which is an outcome that was recently rejected by
the WCAB (see McCool v. Monterey Bay Medicar, ADJ2086501
(2014)). Noting that SB 563 also includes modified UR
decisions, it would also be nearly impossible to taper opioids
if abuse was likely. The Committee may wish to consider if
such a change to existing law could increase the likelihood of
opioid abuse in California's workers' compensation system.
SB 563 and Administrative Complexity
Beyond the issues discussed above, SB 563 poses two additional
unique challenges for employers administrating workers'
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compensation claims. The first issue is that the provisions
of SB 563 are not self-administrating, and the
responsibilities for employers and medical providers are not
clear. Would the medical provider still need to submit an RFA?
Would the RFA need to be changed? What would happen if a
medical treatment which fell under SB 563 was still put
through UR? All of these questions likely entail additional
litigation and administrative costs for employers.
The second issue is possible system challenges in shifting the
role of UR in California's workers' compensation system. As
was noted above, denials of medical treatment are currently
infrequent in California's workers' compensation system. If,
however, approving or modifying a claim through UR will
prevent further medical outcome-based review either through UR
or IMR, SB 563 may incentivize medical treatment denials in
order to ensure that treatment requests can continue to be
reviewed through IMR. If this occurred, SB 563 would delay the
provision of medical care and increase administrative costs
throughout California's workers' compensation system.
4. Technical Issues with SB 563:
Beyond the policy issues delineated above, SB 563 also has
several technical issues which will require additional work
should the bill continue to progress through the legislative
process. These include:
1) Clarifying the medical dispute process: A strict reading
of SB 563 would suggest that an employer would be
completely unable to contest any treatment once it had been
initially approved. This is likely unconstitutional. The
author may wish to clarify the ability of an employer to
contest treatment to avoid unnecessary litigation.
2) Use of the term "preexisting condition": While
preexisting condition is a well-known term in group health,
this term isn't used in California's workers' compensation
system, and it may open the door to non-industrial injuries
and illnesses being required to be treated in California's
workers' compensation system. Again, this is likely
unconstitutional. The author may wish to strike this
terminology from the bill.
5. Proponent Arguments :
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The California Medical Association (CMA), citing a survey from
its members, argues that California's workers' compensation
system is facing significant challenges and CMA is concerned
that IMR may incentivize and allow the denial of necessary
patient care. CMA also cites a recent ProPublica article on
workers' compensation as possible evidence that necessary home
healthcare is being denied to injured workers. CMA therefore
believes that SB 563 is necessary to clarify that previously
authorized care must be honored, unless there is a change in
condition, to limit this confusion in the future and make sure
these tragic stories being reported by physicians and injured
workers alike do not become the new normal in California's
workers' compensation system. CMA also notes that SB 563 will
increase transparency on how UR providers compensate
individuals or entities providing utilization review services.
6. Opponent Arguments :
The California Chamber of Commerce argues that SB 563
undermines the entire medical treatment review process in
California's workers' compensation system and exposes injured
workers to potentially inappropriate treatment. Opponents note
that both UR and IMR were designed to ensure that injured
workers receive the most necessary, efficacious, and
appropriate treatment and are regulated and audited by the
Division of Workers' Compensation. Opponents also note that
there is no data or research to support the idea that UR and
IMR are regularly delaying or denying necessary treatment and
point to the recent CWCI study which shows that the vast
majority of treatment is approved through the UR and IMR
processes. Finally, opponents note that SB 563 will trigger
significant system cost increases and subverting the recent
data-driven reform processes that were approved by the
Legislature.
7. Prior Legislation :
SB 863 (DeLeon), Statutes of 2012, Chapter 363, was a holistic
reform of California's workers' compensation system that,
among other things, created the Independent Medical Review
(IMR) process.
SB 228 (Alarcon), Statutes of 2003, Chapter 639, was a part of
a larger reform of California's workers' compensation system
that, among other things, created the Utilization Review (UR)
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process.
SUPPORT
California Medical Association (Sponsor)
California Labor Federation, AFL-CIO
California Orthopedic Association
The California Applicants' Attorneys Association
OPPOSITION
American Insurance Association
Associated General Contractors
Association of California Insurance Companies
California Association of Bed and Breakfast Inns
California Chamber of Commerce
California Coalition on Workers' Compensation
California Grocers Association
California Hotel and Lodging Association
California League of Food Processors
California Lodging Industry Association
California Manufacturers and Technology Association
California Professional Association of Specialty Contractors
California Retailers Association
California State Association of Counties
California Trucking Association
CSAC Excess Insurance Authority
Pacific Compensation Insurance Company
Western Growers Association
Zenith Insurance Company
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