BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 563 (Pan) - Workers' compensation: utilization review ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: January 4, 2016 |Policy Vote: L. & I.R. 5 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: January 19, 2016 |Consultant: Robert Ingenito | | | | ----------------------------------------------------------------- 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. SB 563 (Pan) Page 1 of ? 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. SB 563 (Pan) Page 2 of ? 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. -- END --