BILL ANALYSIS Ó
SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS
Senator Tony Mendoza, Chair
2015 - 2016 Regular
Bill No: SB 1160 Hearing Date: April 13,
2016
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|Author: |Mendoza |
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|Version: |April 6, 2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Gideon Baum |
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Subject: Workers' compensation: utilization review
KEY ISSUE
Should the Legislature increase administrative penalties for
employers who refuse to submit injury and medical data to the
Workers' Compensation Information System?
Should the Legislature expand existing guidelines on the
provision of physical therapy and occupational therapy, as well
as ensure that up-to-date evidence-based guidelines are used in
the provision of medical treatment?
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.
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2) Requires that, if an employer is found to be employing
individuals without workers' compensation coverage, the
director of the Department of Industrial Relations (DIR)
serves a stop order prohibiting the use of employees until
workers' compensation coverage is secured. An employer may
protest the stop order by making and filing with the
director a written request for a hearing within 20 days
after service of the stop order. The hearing shall be held
within five days from the date of filing the request.
(Labor Code §3710.1)
3) 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)
4) Requires the administrative director of the Division of
Workers' Compensation to create a Medical Treatment
Utilization Schedule (MTUS), which is evidence-based, peer
reviewed, and addresses, at a minimum, the frequency,
duration, intensity, and appropriateness of all treatment
procedures and modalities commonly performed in workers'
compensation cases. The MTUS is presumed to be correct,
unless rebutted by a preponderance of evidence. (Labor Code
§§5307.27 and 4604.5)
5) Limits injured workers to 24 chiropractic, 24
occupational therapy, and 24 physical therapy visits per
industrial injury. Employers are not prohibited from
granting additional visits if necessary, however. (Labor
Code §4604.5)
6) 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)
7) Requires that each utilization review (UR) process shall
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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))
8) 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)
9) Requires that, in the absence of fraud, error, or
illegal conduct, the IMR decision is final and binding.
(Labor Code §4610.6)
10) Requires the administrative director to create and
maintain a workers' compensation information system (WCIS),
which is used to assist DIR to manage the workers'
compensation system in an effective manner, as well as
measuring how adequately the system indemnifies injured
workers and their dependents. Penalties for failing to
report data to the WCIS are capped at $5,000 per year.
(Labor Code §138.6)
This bill would reform the penalty structure of failing to
comply with the data collection requirements of the WCIS.
Specifically, this bill would:
1) Increase the minimum penalty for failing to report
workers' compensation data to the WCIS from $5,000 to
$10,000;
2) Require the posting of a list of claims administrators
who are out of compliance with the WCIS data reporting
requirements on the DIR website;
3) Starting January 1, 2019, the administrative director
must assess an additional penalties of not less than
$15,000 and not more than $45,000 if the following is true:
i) In the immediate previous year, the claims
adjuster was assessed a penalty of $8,000 or more.
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ii) In the current year, the claims adjuster will be
assessed a penalty of $8,000 or more in the current
year.
1) Starting January 1, 2020, the administrative director
may assess an additional administrative penalty against a
claims administrator for a pattern or practice of failing
to comply with the data reporting requirements adopted
pursuant to this section of not less than $100,000 in any
single year.
2) Permits the director of DIR, if the administrative
director of DWC finds that an employer of claims
administrator engages in a pattern or practice of failing
to comply with the data reporting requirements, to issue
and serve a stop order on that employer prohibiting the use
of employee labor by the employer until the employer's
compliance with the date reporting requirements. The stop
order shall become effective immediately upon service.
This bill would also modify the operation of Utilization Review
(UR), Independent Medical Review (IMR), and the Medical
Treatment Utilization Schedule. Specifically, this bill would:
1) Expand and recast the existing post-surgical guidelines
in the MTUS to cover physical medicine and rehabilitation
for both post-surgical treatment and return-to-work
treatment and require the DWC to adopt regulations to
effectuate this expansion on or before January 1, 2018;
2) Require that, for injuries covered by the MTUS, if a
specific clinical topic in the MTUS has not been updated in
5 or more years, authorized medical treatment for injured
workers must be in accordance with other medical treatment
guidelines that are recognized generally by the national
medical community and scientifically based if the guideline
is five or less years old;
3) Require that, if an employer requires additional
information in order to make UR decision to approve,
modify, delay, or deny medical treatment, the employer must
provide a physician at least 72 hours to respond to any
request for medical treatment;
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4) Require that, on or before July 1, 2018, all UR
processes must be accredited by an independent, nonprofit
organization to certify the UR process meets specified
criteria, including, but not limited to, timeliness in
issuing a utilization review decision, the scope of medical
material used in issuing a utilization review decision, and
requiring a policy preventing financial incentives to
doctors and other providers based on the utilization review
decision. UR processes would need to be re-accredited every
three years, or more frequently as required by the DWC.
5) Require the DWC to adopt rules to implement the
selection of an independent, nonprofit organization for
those certification purposes. The DWC may also adopt rules
to require additional specific criteria for measuring the
quality of a utilization review process for purposes of
certification.
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
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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)).
2. Recent Research on UR:
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 OVERALL in California's workers' compensation
system.
HOWEVER, there appear to be discrepancies between payors at
the rate they approve, modify, delay, or deny treatment
through UR. For example, in a recent RAND presentation before
the Commission on Health and Safety and Workers' Compensation,
a sample of payor data showed that a public self-insured
employer with an in-house UR process approved treatment at the
initial claims adjuster level about 90% of the time, while a
Third Party Administrator who also had an in-house UR process
approved treatment at the initial claims adjuster level about
50% of the time. While that same TPA eventually approved a
similar level of treatment, it is unclear why the TPA would
send more treatment through the full UR process. While the
RAND study is preliminary and the numbers above may change as
the study is finalized, these numbers suggest that the UR
process discrepancies between payors may explain stakeholder
concerns surrounding the UR process, and require exploration
to explain.
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3. The Goals of SB 1160:
SB 1160 is an evolving reform bill that seeks to address
stakeholder concerns with varies components of the workers'
compensation system. These components will be discussed in
detail below.
WCIS Penalties
The Workers' Compensation Information System (WCIS) is a
database that is run by the Division of Workers' Compensation
(DWC) that is populated by employer data on workplace injuries
and medical bills. Through this data, the DWC is able to
monitor and measure how well the workers' compensation system
is operating. Additionally, researchers use the WCIS to study
the system in order to better understand how laws and
regulations impact injured workers and employers. Without this
system, the DWC is reduced to educated guesses and anecdotes
in regulating and improving the workers' compensation system.
Unfortunately, according to several stakeholders, compliance
and data quality remain an issue with the WCIS. While
significant improvements have occurred in the past few years,
the system may still have holes in its data collection,
particularly among public entities. This creates blind spots
in our data that disproportionately impact public sector
employees, such as police officers, fire fighters, and other
first responders.
Under current law, the maximum penalty for not providing data
to the WCIS is $5,000 per year. Compared to other states, this
penalty amount is quite low. In Texas, for example, the
penalties are $25,000 per day. It is likely that the higher
penalty amounts have assisted Texas in the development of
their database. SB 1160 seeks to strike a balance by doubling
the penalty to $10,000 per year, which is still far lower than
Texas, but then create a gradually increasing penalty schedule
designed to encourage non-compliant employers to comply with
the data requirements. In order to reach maximum penalties
allowed under SB 1160, an employer would need to be
significantly out of compliance for at least three years and
not showing any improvement in a pattern or practice of
refusing to provide data to the WCIS.
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UR/IMR Process Reforms and MTUS Enhancements
In talking to medical stakeholders throughout California, one
common area of friction between physicians and payors that
generally led to UR and IMR is physical therapy/occupational
therapy, and one common area of friction after medical
treatment was elevated to UR was a lack of peer-to-peer
communication and unclear policies and procedures. SB 1160
seeks to address these challenges in three ways.
First, SB 1160 expands an existing chapter within the MTUS on
post-surgical physical medicine, which provides specific
physical/occupational therapy duration guidelines for
recovering from surgeries. By expanding this guideline to
include pre-surgical and return-to-work physical medicine, SB
1160 would provide additional guidance to employers and
medical providers on appropriate physical/occupational therapy
treatments. Further, by placing this guideline in the MTUS and
excluding the physical medicine guidelines from the 24 visit
caps, SB 1160 provides the DWC with the opportunity to craft
regulations that would specify the application of UR to this
new physical medicine guideline.
Second, SB 1160 requires that, if a UR process needs
additional information in order to approve or deny a
treatment, the medical provider must be given at least 72
hours to respond to the request for additional information.
Currently, a medical provider can be given as little as 24 or
48 hours to respond to a voicemail asking for additional
information, which can be difficult for a medical provider
seeing a full complement of injured workers each day. Without
the information in question, a UR vendor could deny treatment,
leading to delays in medical treatment for injured workers. By
requiring 72 hours, SB 1160 will hopefully encourage
peer-to-peer communication among medical providers and speed
up high quality medical care for injured workers.
Finally, this bill requires all UR processes to be accredited
by an independent, nonprofit entity to certify that the UR
process meets specified criteria. SB 1160 explicitly includes
both timeliness in issuing UR decisions and policies
preventing financial incentives to doctors based on medical
decisions as criteria for review. One existing accreditation
entity, URAC, currently measures UR processes against those
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criteria, as well as more than 70 other components.
Additionally, SB 1160 would require that, for injuries covered
by the MTUS, if a specific clinical topic in the MTUS has not
been updated in 5 or more years, medical treatment needs to be
in accordance with other, more current medical treatment
guidelines that are recognized generally by the national
medical community and scientifically based. This will ensure
that medical treatment is based on the latest in medical
research, as well as ensure that out-of-date medical treatment
guidelines are not granted the imprimatur of being presumed
correct.
4. Proponent Arguments :
Proponents argue that SB 1160 will help ensure timely and
appropriate care for injured workers. Specifically, proponents
argue that SB 1160 will improve compliance with the WCIS
through higher penalties, allowing for reliable data to
improve efforts to prevent workplace injuries. Proponents also
note that SB 1160 will help improve the provision of medical
care for injured workers by ensuring that only up-to-date
medical guidelines are used in the treatment of injured
workers. Finally, proponents note that SB 1160 will create a
physical medicine guideline, which will hopefully reduce
medical disputes and ensure that injured workers receive the
occupational therapy and physical therapy they require to
return to work.
5. Prior Legislation :
SB 228 (Alarcon), Chapter 639, Statutes of 2003, required
employers to implement a utilization review process, as well
as required the administrative director to create the MTUS.
SUPPORT
California Professional Firefighters (Sponsor)
California Labor Federation, AFL-CIO
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OPPOSITION
None on file.
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