BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 563 (Pan) - Workers' compensation:  utilization review
          
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          |Version: January 4, 2016        |Policy Vote: L. & I.R. 5 - 0    |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: January 19, 2016  |Consultant: Robert Ingenito     |
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          This bill meets the criteria for referral to the Suspense File.




          


          Bill  
          Summary:  With respect to the State's workers' compensation  
          system, SB 563 would (1) prohibit physician incentive contracts  
          and agreements on the basis of modifying or denying care, and  
          (2) give the Department of Industrial Relations (DIR) authority  
          to request physician compensation agreements in order to provide  
          related enforcement.


          Fiscal  
          Impact:  DIR indicates that it would incur first-year costs of  
          $600,000 and $575,000 ongoing (special fund) to implement the  
          provisions of the bill, a result of increased auditing and legal  
          workload.








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          Background:  In California's workers' compensation system, an employer or  
          insurer cannot deny treatment. When an employer or insurer  
          receives a request for medical treatment, it can either (1)  
          approve the treatment, or (2) if it believes that a physician's  
          request for treatment is medically unnecessary or harmful, it  
          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, but 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.


          As was discussed in a Senate Labor and Industrial Relations  
          Committee oversight hearing in 2015, a recent study by the  
          California Workers' Compensation Institute (CWCI) found that  
          approximately 25 percent of medical treatment requests go  
          through UR, with approximately 75 percent of those requests  
          approved. Once the approvals from UR and Independent Medical  
          Review (IMR) are included, more than 94 percent of treatment is  
          approved in California's workers' compensation system.




          Proposed Law:  
            This bill would prohibit an employer, or any entity conducting  
          UR 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. Additionally, the bill would provide DIR's 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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          Staff  
          Comments:  This Committee heard SB 563 previously, in 2015. At  
          that time, the bill included language prohibiting the use of UR  
          and IMR in specified instances, and instead shifted medical  
          dispute resolution to DIR's Workers' Compensation Appeals Board  
          (WCAB). Due to the increase in WCAB workload, the bill's fiscal  
          impact was estimated to be about $14 million annually. That  
          version of the bill was ultimately held by this Committee.  

          As currently written, SB 563 would prohibit the use of financial  
          incentives to UR physicians on the basis of UR decisions. The  
          bill also would allow DWC to request compensation agreements to  
          ensure compliance with the law. The fiscal impact of the current  
          version of the bill is considerably smaller than when the bill  
          was previously considered by this Committee.





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