BILL ANALYSIS Ó
SB 1160
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SENATE THIRD READING
SB
1160 (Mendoza)
As Amended August 29, 2016
Majority vote
SENATE VOTE: 26-12
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Insurance |12-0 |Daly, Melendez, |Bigelow, Gallagher, |
| | |Travis Allen, |Jones, Obernolte, |
| | |Bigelow, Chu, Cooley, |Wagner |
| | |Cooper, Dababneh, | |
| | |Dahle, Frazier, | |
| | |Gatto, Rodriguez | |
| | | | |
| | | | |
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SUMMARY: Prohibits, subject to exceptions, prospective
utilization review (UR) in the first 30 days of a claim if the
treatment is being provided by an employer directed provider, or
a pre-designated physician; clarifies and enhances the rules
governing the assignment and filing of liens, and makes a number
of changes to the rules governing UR. Specifically, this bill:
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1)Increases from $5,000 to $10,000 the potential penalty for a
failure of a claims administrator to file required workers'
compensation data with the Division of Workers' Compensation
(DWC).
2)Contains findings and Legislative intent with respect to liens
3)Provides that, with respect to medical treatment that is
provided through a medical provider network (MPN), a health
care organization (HCO), other employer directed provider, or
a pre-designated physician, no prospective UR may be
undertaken for the first 30 days of treatment.
4)Provides several exceptions to the "no UR" rule, including
surgery, medications not covered by the formulary,
psychological treatment, imaging, other than x-ray imaging,
durable medical equipment if total costs for all durable
medical equipment (DME) exceed $250, and home health care
services.
5)Requires any treatment provided within the first 30 days to be
reported to the employer or claims administrator, and a
failure by the provider to properly report treatment
constitutes grounds to revoke the "no UR" rule as to that
provider.
6)Requires the Administrative Director (AD) of the DWC to
contract, by March 1, 2019, with an outside, independent
research organization to evaluate the impact of the "no UR"
rule on claims filed between January 1, 2017, and December 31,
2018, and report to the DWC and the Legislature no later than
December 31, 2019.
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7)Authorizes an employer to conduct retrospective UR for the
purposes of ensuring that the provider is complying with
evidence-based medicine standards, and if a pattern or
practice of failing to do so is discovered this would be
grounds to revoke the "no UR" rule, or to remove the provider
from the MPN.
8)Prohibits an employer or claims administrator from providing a
UR organization with financial incentives to deny or modify
treatment.
9)Authorizes the AD to review any contracts with a UR
organization, but any of these contracts in possession of the
AD do not constitute public records.
10)Requires any UR organization to obtain accreditation from an
accrediting entity specified by the AD, subject to exceptions
for certain public entities that have internal systems
approved by the AD.
11)Requires prospective UR decisions relating to formulary drugs
after the first 30 days of a claim to be conducted within 5
days after the claims administrator receives the request for
authorization.
12)Adopts new procedures designed to facilitate better
communication between UR entities and providers.
13)Requires the AD to develop a mandatory electronic system for
sharing documents necessary to conduct UR.
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14)Adopts new procedures designed to better facilitate delivery
of information for purposes of independent medical review
(IMR).
15)Establishes an expedited five day time frame for IMR
decisions related to medications on the formulary.
16)Provides that the medical treatment utilization schedule
(MTUS) may be updated with evidence-based medicine standards
by an expedited process.
17)Redefines "medical necessity" and "medically necessary" by
reference to the MTUS and to the drug formulary.
18)Requires a lien filer to specify in the lien filing the basis
upon which the lien is authorized.
19) Adds specific data requirements that must be included in any
lien filed on or after January 1, 2017.
20)Requires, for liens filed between January 1, 2013, and
January 1, 2017, that the lien filer comply with these filing
notice and data requirements by July 1, 2017.
21)Requires these same data elements to be added to pre-existing
liens, but allows until July 1, 2017, for lien filers to
comply.
22)Provides that the failure to comply with the requirements
noted above results in a dismissal of the lien with prejudice.
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23)Provides that in the event a lien filer is charged with
workers' compensation fraud, all liens are stayed pending
resolution of the charges.
24)Requires to AD to post on the DWC website the name and an
internet link to the indictment of any provider subject to the
lien stay.
25)Clarifies the existing rule that liens are not assignable by
a provider, unless that provider is going out of business, and
states these amendments to be declaratory of existing law.
26)Directs the AD to adopt a fee schedule for certain attorney
services by July 1, 2018.
27)Recasts the requirements for the physician's initial report
of injury, and require the AD to adopt regulations to
implement these requirements.
28)Includes technical and conforming changes to implement the
amendments, above.
EXISTING LAW:
1)Establishes a comprehensive system to provide benefits,
including medical treatment, to employees who are injured or
suffer conditions that arise out of or in the course of
employment.
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2)Requires medical treatment to be evidence-based, as detailed
in the MTUS adopted and maintained by the AD.
3)Provides for a Workers' Compensation Information System
(WCIS), and mandates that specified claims data be filed by
entities that pay workers' compensation claims.
4)Authorizes the AD to impose a fine of up to $5,000 per year
for a failure of an employer or claims administrator to comply
with the law.
5)Requires every employer or insurer to maintain a UR process,
which is the mechanism for the employer or insurer to review,
delay, modify or deny treatment requested by a treating
medical provider.
6)Allows an employer to subject any requested treatment to UR,
either prospectively or retrospectively.
7)Authorizes providers to file a lien in the event the provider
believes he or she is entitled to compensation for services
rendered, and empowers the Workers' Compensation Appeals Board
(WCAB) to adjudicate the lien either in connection with the
underlying case or in a separate proceeding.
8)Requires a filing fee of $150 to file a lien, which is
refundable in the event the lien claimant succeeds in
obtaining payment on the lien.
9)Prohibits a medical provider from assigning lien rights to a
third party unless the provider is going out of business.
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10)Requires disputes over medical treatment to be resolved via
IMR.
11)Requires the AD to adopt a prescription drug formulary for
use in the workers' compensation system.
FISCAL EFFECT: Unknown.
Comments:
1)Purpose. This bill represents the Administration's proposal
to address two concerns in the workers' compensation system.
First, it is designed to smooth what are perceived as the
rough edges of the UR process, which some stakeholders believe
is causing unnecessary delay or denial of appropriate medical
treatment. Second, it is designed to clarify the rules
governing liens, which has been an area of abuse that was
addressed by SB 863 (De León), Chapter 363, the 2012 workers'
compensation reform bill. However, the Administration
believes the lien rules require updating and clarification.
While the current bill contains mostly new language that is in
print for the first time, a broad array of workers'
compensation stakeholders have been meeting with the DWC, and
have been privy to the developing draft for some time. The
recent amendment to the bill has been expected.
2)Utilization review. Utilization review is the only mechanism
an insurer or employer has to object to treatment that is
being recommended for an injured worker by a treating
provider. The procedure is detailed in statute. A claims
adjuster is not authorized to modify or deny medical treatment
- only a provider who is trained and experienced similarly to
the recommending provider can overrule a requested treatment.
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Typically insurers and employers retain a UR firm, which in
turn has contracts with a network of qualified providers who
are schooled in the mandated-by-statute evidence-based
medicine principles that govern medical treatment in
California's workers' compensation system.
Proponents of the bill have become concerned that there is too
much treatment being denied or modified via UR, and in
particular see wide variations among insurers and employers in
how utilization review is being used. They recognize,
however, that there is not good data on UR practices, and this
is one reason why this bill proposes to increase penalties on
claims administrators that fail to file mandated claims data
with the DWC. This bill also increases the AD's authority to
review contracts that might create a financial conflict of
interest. However, the concern with UR is more deep-seated.
Some proponents believe that UR is used as an intentional
delaying tactic. This bill attempts to ensure that some
issues, such as disputes about treatment based on drugs listed
for use in the (not yet adopted) formulary are handled in an
expedited fashion.
3)No UR within the first 30 days. Subject to a list of
exceptions for more sensitive treatments, the bill provides
that there shall be no UR in the first 30 days when the
injured worker goes to a provider who is recommended by the
insurer or employer, or if the injured worker predesignated
their primary care provider to be their workers' compensation
physician in case they are injured on the job. Some claims
administrators suggest that this is a "best practices"
approach, and that treatment provided quickly may be the best
way to get an injured worker back to work sooner. These
claims administrators also note that early treatments are not
typically the sort of complex medical issues that generate
debate over medical necessity or appropriateness. Others are
not convinced that "no UR" isn't an invitation to certain
providers to "over treat" and pad their billings. In any
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event, insurers and employers have grudgingly agreed that this
part of the proposal is acceptable, provided that lien reform
is also a part of the package.
4)Medical necessity. This bill proposes a modification of the
definition of medical necessity by referring to the MTUS,
which defines or refers to appropriate guidelines that govern
appropriate treatment for most conditions or injuries.
However, there are potentially some conditions or injuries
that are not addressed by the MTUS, and the concern has been
expressed that the changes to the statute leave it unclear how
to determine appropriate treatment in these circumstances.
The AD has pointed out in response that the MTUS itself
identifies how to proceed when a condition or injury is not
addressed substantively. Specifically, in Title 8 of the
California Code of Regulations, Section 9792.21.1, it states
"(2) In the limited situation where a medical condition or
injury is not addressed by the MTUS or if the MTUS presumption
of correctness is being challenged, then:" The regulation
proceeds to describe in detail how the standards of
evidence-based medicine are to be applied in these situations.
Proponents have argued that this bill's language does not
alter this regulation in any way, and that the intent of this
bill is that this regulation controls in those limited
situations where the MTUS itself does not address a condition
or injury directly.
5)Lien filing requirements. This bill establishes two new
requirements that are necessary when a lien is filed. First,
this bill requires additional data to be included in the
filing so that, on its face, it is much easier to ascertain
what services were provided, and the reasons those services
were provided. Second, this bill requires the lien filer to
specify from a list of statutory categories the basis upon
which the lien is being pursued by a proper lien filer. The
filing notification contained in the proposed amendments to
Labor Code Section 4903.05 does not expand the circumstances
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under which the law authorizes a lien to be filed. Those
authorizations are contained in other substantive Labor Code
provisions. This bill is merely requiring that the lien filer
specify the basis upon which the lien would be lawful.
6)Assignment of liens. Current law governing the assignment of
liens was adopted by SB 863 after stakeholders concluded that
lien abuse was rampant, and that the inappropriate (although
not necessarily illegal) use of liens was encouraging wasteful
expenses to the workers' compensation system. The SB 863
language provided that a lien payment "shall be made for
payment only to the person who was entitled to payment for the
expenses... at the time the expenses were incurred, and not
to an assignee" unless the provider were going out of
business. This language was commonly understood to mean that
a health care provider could pursue a lien on his/her own
behalf, but could not assign the lien to another party.
Indeed, the Court of Appeal in Chorn v Workers' Compensation
Appeals Board, decided in March of this year, stated: "The
effect of [Labor Code] Section 4903.8 is to prohibit WCAB from
ordering or awarding lien payments to anyone other than the
medical provider who incurred the expense."
Notwithstanding the apparent prohibition on assignment of
liens, some financiers opted to rely on an alternative
interpretation of the statute that would effectively continue
the widespread practice of purchasing the right to the
proceeds of workers' compensation liens. Based on their
business judgment that the status quo was more or less
unchanged, these financiers continued to purchase medical
receivables - lien rights to payment for workers' compensation
treatments. Their interpretation of the SB 863 language
appears to be that, so long as the name of the original
provider is used to file the lien and payment is made to the
provider, it does not matter that the right to payment on the
underlying lien had already been assigned to the financier.
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This bill addresses this problem by adding language to the
lien assignment provision of the Labor Code that is consistent
with Chorn , and declares these changes to be declaratory of
existing law. In the end, a court is likely to rule on
whether the original intent of SB 863 controls liens filed by
assignees since SB 863 took effect, or whether the financiers'
interpretation of the statute is correct.
7)Continued lien abuse. Despite the efforts of the Legislature
and the DWC to control lien abuses in California's workers'
compensation system, the number of, and dollar value of,
workers' compensation liens has returned to pre-SB 863 levels.
According to the DWC, in the time period from 2011 through
2015, over $600 million of workers' compensation liens have
been filed - and allowed to be pursued - on behalf of
providers who have either been convicted of or indicted for
workers' compensation fraud.
Not all workers' compensation liens are abusive, and in fact
this bill is proposing rules that will govern when liens are
appropriate, and what data elements are required when a lien
is filed. Many providers, including providers who participate
in insurer or employer-established MPNs, will end up with
payment disputes that result in liens. This is not the source
of the primary lien abuses faced by the workers' compensation
system.
Many providers establish their practices, whether these are
physician offices, chiropractic or other physical medicine
clinics, or imaging and related testing facilities, for the
sole purpose of treating injured workers outside of the
established system (and if media reports and recent
prosecutions are to be believed, NOT providing treatment but
billing anyway), and then filing liens as the sole means of
obtaining payment. In essence, these providers find ways
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(sometimes legal, but frequently illicit) to provide treatment
without the approvals or evidence-based medicine oversight
built into the workers' compensation system, and seek to be
paid much later by filing liens. Treating injured workers
outside of the system is contrary to a number of policies that
have been pursued in recent years, including evidence-based
medicine treatment guidelines, utilization review by qualified
health care providers, and independent medical review.
It is impossible in the overcrowded workers' compensation
courts to individually adjudicate all of these liens, and
payors complain that they are forced by workers' compensation
judges to settle by paying substantial funds on liens that are
believed to be inappropriate.
8)How capital encourages abuse. A small medical practice could
hardly stay in business if the only way it gets paid is months
or years later when the workers' compensation case is finally
resolved. Therefore these providers look to financiers who
will pay them now in exchange for assigning the lien rights to
the financiers. In this sense, these financiers are directly
enabling and incentivizing the lien providers and their
oftentimes abusive behavior. Commencing January 1, 2017, this
bill establishes a clear barrier to the assignment of liens.
Analysis Prepared by:
Mark Rakich / INS. / (916) 319-2086 FN: 0004959
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