BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 563|
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THIRD READING
Bill No: SB 563
Author: Pan (D)
Amended: 1/4/16
Vote: 21
SENATE LABOR AND IND. REL. COMMITTEE: 4-1, 4/29/15
AYES: Mendoza, Jackson, Leno, Mitchell
NOES: Stone
SENATE LABOR AND IND. REL. COMMITTEE: 5-0, 1/13/16
AYES: Mendoza, Stone, Jackson, Leno, Mitchell
SENATE APPROPRIATIONS COMMITTEE: 7-0, 1/21/16
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen
SUBJECT: Workers compensation: utilization review
SOURCE: California Medical Association
DIGEST: This bill prohibits physician incentive contracts and
agreements on the basis of modifying or denying care in the
California workers' compensation system.
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
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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 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 (UR)
process, which is a process that prospectively,
retrospectively, or concurrently reviews and approves,
modifies, delays, or denies, based in whole or in part on
medical necessity to cure and relieve, treatment
recommendations by physicians. (Labor Code §4610)
4)Requires that each UR process 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 must be disclosed by the employer to employees,
physicians, and the public upon request. (Labor Code
§4610(c))
5)Provides that, in the event of a dispute over a UR 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:
1)Prohibits the 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
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of UR modifications, delays, or denials made by the physician.
2)Provides 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 UR on behalf of the employer, and the UR
physician.
Background
Utilization review. 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 UR.
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 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 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)).
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FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee, the Department
of Industrial Relations indicates that it would incur first-year
costs of $600,000 and $575,000 ongoing (special fund) to
implement the provisions of this bill, a result of increased
auditing and legal workload.
SUPPORT: (Verified1/21/16)
California Medical Association (source)
California Labor Federation, AFL-CIO
California Orthopedic Association
OPPOSITION: (Verified1/21/16)
None received
ARGUMENTS IN SUPPORT: The California Medical Association
(CMA) argues that SB 563 will increase transparency and
accountability within the workers' compensation UR 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 giving the
DWC 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.
Prepared by: Gideon L. Baum / L. & I.R. / (916) 651-1556
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