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

                                      -- END --