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 ----------------------------------------------------------------- |Author: |Pan | |-----------+-----------------------------------------------------| |Version: |April 13, 2015 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |No | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant:|Gideon Baum | | | | ----------------------------------------------------------------- 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. SB 563 (Pan) Page 2 of ? 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 SB 563 (Pan) Page 3 of ? 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, SB 563 (Pan) Page 4 of ? 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. SB 563 (Pan) Page 5 of ? 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' SB 563 (Pan) Page 6 of ? 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 : SB 563 (Pan) Page 7 of ? 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) SB 563 (Pan) Page 8 of ? 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 -- END --