BILL ANALYSIS Ó
SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS
Senator Tony Mendoza, Chair
2015 - 2016 Regular
Bill No: SB 563 Hearing Date: January 13,
2016
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|Author: |Pan |
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|Version: |January 4, 2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Gideon L. Baum |
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Subject: Workers' compensation: utilization review
KEY ISSUES
Should the Legislature prohibit physician incentive contracts
and agreements on the basis of modifying or denying care in the
California workers' compensation system?
Should the Legislature give the Division of Workers'
Compensation the authority to request physician compensation
agreements in order to enforce the above-described prohibition?
ANALYSIS
Existing law:
1) 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.
2) 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
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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)
3) 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)
4) Requires that each utilization review (UR) 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))
5) 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)
6) 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:
1) Prohibit the employer, or any entity conducting
utilization review on behalf of the employer, from offering
or providing any financial incentive or consideration to a
physician based on the number of UR modifications, delays,
or denials made by the physician.
2) Provide the Division of Workers' Compensation (DWC) with
the explicit authority to review any compensation
agreement, payment schedule, or contract between the
employer, or any entity conducting utilization review on
behalf of the employer, and the utilization review
physician.
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COMMENTS
1. Staff Comments on the Recent Amendments to SB 563:
The Committee last heard SB 563 on April 29, 2015. At that
time, SB 563 included language prohibited the use of UR and
IMR in certain circumstances and shifted medical dispute
resolution from the IMR process to the Workers' Compensation
Appeals Board (WCAB). Due to the increase in WCAB workload,
the fiscal impact of the language was estimated to be at least
$12 million annually, leading to the 2015 version of SB 563
being held by the Senate Appropriations Committee.
SB 563 was amended on January 4th of this year to narrow to
address fiscal costs. As currently written, SB 563 would
clearly and explicitly prohibit the use of financial
incentives to UR physicians on the basis of UR decisions. SB
563 would also allow the DWC to request compensation
agreements to ensure compliance with the law. This request
would almost certainly occur within the confines of Labor Code
§129. However, this may need to be made explicit in order to
simplify the implementation of this bill. Senator Pan's office
has committed to working with stakeholders to develop language
to address this concern.
2. 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,
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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,
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)).
3. 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.
4. Proponent Arguments :
The California Medical Association (CMA) argues that SB 563
will increase transparency and accountability within the
workers' compensation utilization review process to ensure
persons involved in authorizing injured worker medical care on
behalf of the employer are not being inappropriately
incentivized to modify, delay, or deny requests for medically
necessary services. CMA notes that, while there is agreement
among most that such an incentive is unacceptable, there
currently is no explicit prohibition in statute ensuring it
does not occur. By making such a prohibition explicit and
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giving the Division of Workers' Compensation the explicit
authority to ensure inappropriate incentives are not used, CMA
argues that SB 563 is a necessary reform to California's
workers' compensation system and brings California into line
with other states that prohibit inappropriate UR incentives.
5. 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)
process.
SUPPORT
California Medical Association (Sponsor)
California Labor Federation, AFL-CIO
California Orthopedic Association
OPPOSITION
None on file.
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