BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1160|
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UNFINISHED BUSINESS
Bill No: SB 1160
Author: Mendoza (D), et al.
Amended: 8/29/16
Vote: 21
SENATE LABOR AND IND. REL. COMMITTEE: 4-1, 4/13/16
AYES: Mendoza, Jackson, Leno, Mitchell
NOES: Stone
SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/27/16
AYES: Lara, Beall, Hill, McGuire, Mendoza
NOES: Bates, Nielsen
SENATE LABOR AND IND. REL. COMMITTEE: 5-0, 8/31/16 (pursuant
to Senate Rule 29.10)
AYES: Mendoza, Stone, Jackson, Leno, Mitchell
SENATE FLOOR: 26-12, 5/31/16
AYES: Allen, Beall, Block, De León, Galgiani, Glazer, Hall,
Hancock, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara,
Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Pan,
Pavley, Roth, Wieckowski, Wolk
NOES: Anderson, Bates, Berryhill, Fuller, Gaines, Huff,
Moorlach, Morrell, Nguyen, Nielsen, Stone, Vidak
NO VOTE RECORDED: Cannella, Runner
ASSEMBLY FLOOR: 80-0, 8/30/16 - See last page for vote
SUBJECT: Workers compensation
SOURCE: California Labor Federation, AFL-CIO
California Professional Firefighters
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DIGEST: This bill expedites medical care at the beginning of
an injured worker's claim, modernizes data collection in the
workers' compensation system, and implements anti-fraud measures
in the filing and collection of liens.
Assembly Amendments rewrite the bill, creating, among other
things, the 30 day utilization review (UR) period and the
anti-fraud measures.
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 through the consent of the
Department of Industrial Relations (DIR) to self-insure or by
securing insurance against liability from a state authorized
insurance company.
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 be
provided by the employer. (Labor Code §4600)
3) Requires the administrative director (AD) of the Division of
Workers' Compensation (DWC) 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
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§§5307.27 and 4604.5)
4) Requires that all employers create an UR process, which is a
process that prospectively, retrospectively, or concurrently
review and approves, modifies, delays, or denies, 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)
5) Requires that each UR process be governed by written
policies, procedures, and a description of the utilization
process, must be filed with the AD and disclosed by the
employer to employees, physicians, and the public upon
request. [Labor Code §4610(c)]
6) 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)
7) Requires that, in the absence of fraud, error, or illegal
conduct, the IMR decision is final and binding. (Labor Code
§4610.6)
8) Requires the AD 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 measure 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 makes a series of significant, wide-ranging changes to
the operation and UR processes, approval of UR processes, and
lien filing and collection. Specifically, this bill:
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UR Operation:
1) 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.
2) Provides several exceptions to the "no UR" rule, including
surgery, medications not covered by the formulary,
psychological treatment, non x-ray imaging, durable medical
equipment (DME) if total costs for all DME exceeds $250, and
home health care services.
3) Requires any treatment provided within the first 30 days to
be reported to the employer or claims administrator - failure
by the provider to properly report treatment can lead to
revocation of the "no UR" rule.
4) Authorizes an employer to conduct retrospective UR to ensure
compliance with evidence-based medicine standards, and if a
pattern of non-compliance is discovered, the "no UR" rule
could be revoked or the provider removed from the MPN.
UR Process Approval:
5) Prohibits explicitly an employer or claims administrator
from providing a UR organization with financial incentives to
deny or modify treatment.
6) Requires financial interest disclosure of UR entities be
shared with DWC.
7) Requires any UR organization to be accredited by an entity
specified by the DWC, subject to exceptions for certain
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public entities that have internal systems approved by the
DWC. The entity must be independent and non-profit. Until the
rules are approved by the AD, the entity will be URAC.
8) Provides authority to the DWC to approve UR processes.
UR and Medical Guideline Modernization:
9) Requires, through the URAC accreditation process, the
availability of peer-to-peer communication in the event of a
UR modification or denial.
10)Requires the AD to develop a mandatory electronic system for
sharing documents necessary to conduct UR.
11)Adopts new procedures designed to better facilitate delivery
of information for purposes of IMR.
12)Establishes an expedited five-day time frame for IMR
decisions related to medications on the formulary.
13)Provides that MTUS may be updated with evidence-based
medicine standards by an expedited process.
Anti-Fraud Measures:
14)Requires, for liens filed on or after January 1, 2017, a
lien filer to specify in the lien filing the basis upon which
the lien is authorized.
15)Requires these same data elements to be added to
pre-existing liens, but allows until July 1, 2017, for lien
filers to comply.
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16)Provides that the failure to comply with the requirements
noted above results in a dismissal of the lien with
prejudice.
17)Provides that in the event a lien filer is charged with
workers' compensation fraud, Medi-Cal fraud, or Medicare
fraud, all liens are stayed pending resolution of the
charges.
18)Prohibits, for liens on or after January 1, 2017, any
assignment of liens unless the person has ceased doing
business in the capacity held at the time the expenses were
incurred and has assigned all rights, title, and interest in
the remaining accounts receivable to the assignee. The
assignment of a lien, in violation of this paragraph is
invalid by operation of law.
19)Clarifies existing law on liens assigned between 2013 and
2016 by codifying Chorn v. WCAB (Workers' Compensation
Appeals Board) (2016), 2016 Cal. App. LEXIS 232 and states
these amendments to be declaratory of existing law.
Comments
SB 1160 and 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 UR process varies by vendor, but
generally involves initial review by a non-physician, with
higher level review(s) being conducted by a physician(s). Only a
licensed physician who is competent to evaluate the specific
clinical issues involved in the medical treatment services may
modify or deny a request for treatment.
Recently, UR has become a growing area of concern. Both injured
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workers and medical providers report delays and denials of
medical care due to the UR process. While such delays and
denials may not be system-wide, they may be specific to certain
employers or UR entities. This suggests, in part, that the
implementation of best-practices across the system will lead to
improvements for injured workers who are having their care
delayed or denied.
SB 1160 addresses the reported challenges with the UR in two
ways. First, SB 1160 eases the requirements of UR within the
first 30 days of a worker's injury, with certain exceptions.
Employers are still able to conduct retrospective review, and SB
1160 provides tools to employers in the event a medical provider
abuses the workers' compensation system.
Second, SB 1160 requires that all UR entities rise to meet the
"best practices" of the industry. This includes URAC
accreditation, a voluntary peer-to-peer process between doctors
in the event of a medical dispute, and a prohibition on the use
of financial incentives to deny or modify medical care. SB 1160
also provides for an expedited, transparent process for updating
existing medical guidelines, ensuring that UR decisions are
based on the best available medical science.
Finally, SB 1160 also requires DWC to create a database that
captures UR decisions and documentation. This data will make
possible targeted audits and legislative initiatives that
address unnecessary medical disputes, while preserving important
protections against unnecessary and abusive medical treatment.
SB 1160 and the workers' compensation liens process:
In a recent letter to the Commission on Health and Safety and
Workers' Compensation, the author of SB 1160 identified fraud in
the workers' compensation system as a fundamental challenge.
Specifically, the letter cited the recent press coverage by the
Center of Investigative Reporting, which detailed more than $1
billion in fraudulent activity by a variety of medical
providers. The schemes have one common feature: the use of the
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workers' compensation lien system to monetize the fraud. Despite
the criminal charges, medical bills and workers' compensation
liens from doctors charged or even convicted of medical fraud
continue to be pursued. Please see Senate Labor and Industrial
Relations Committee policy analysis for an example of these
schemes.
Overall, DWC places the dollar amount of liens held by providers
who have been charged or convicted of workers' compensation
fraud at $600 million - or 17% of all liens in the system.
SB 1160 addresses fraud in the workers' compensation lien
process in three ways:
First, SB 1160 requires that, when a medical provider is charged
with workers' compensation, Medicare, or Medi-Cal fraud, his or
her liens must be stayed until criminal charges are resolved. If
the medical provider is cleared of all charges, his or her liens
will be adjudicated in the same way as other liens without
prejudice.
Second, SB 1160 requires all lien claimants to file a
declaration as to which specific category provided under
existing law allows the claimant to file a lien. As the statute
that provides the specific categories for filing a lien is
unchanged by SB 1160, the causes for filing a lien under
existing law remain unchanged by SB 1160 - including denied
industrial injuries. The only change is that a lien claimant
must now file a declaration to support an assertion of rights.
Third, SB 1160 prospectively prohibits lien assignments in the
workers' compensation system, unless the medical provider has
ceased doing business. SB 1160 also clarifies the law on lien
assignments made between 2013 and 2016.
SB 1160 and lien assignments:
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Some stakeholders have noted that assignment and factoring of
accounts receivable are common in many industries. Generally
speaking, accounts receivable can be sold to a third party or
used as collateral for a loan in order to allow a business to
maximize cash flow and not focus on chasing down payment. The
business generally receives 50-85% of the amount of the
receivables, with the remainder going to the third party.
In California, through lawsuits, grand jury transcripts, and
research, anti-fraud investigators have put forward a common
scenario by which lien assignments are used to drive fraud. In
our hypothetical, a compound pharmacy company contracts with a
third party marketing company. This company is in fact an
illegal "running and capping" organization, which pays doctors
and attorneys illegal kickbacks to prescribe the pharmacy's
products.
To capitalize this scheme, a lien assignment firm buys the
company's accounts receivable and files them as liens, paying
only 20% of the face value of the receivables. This provides the
capital necessary for the pharmacy to compound products, as well
as pay the marketing firm for kickbacks. For the lien assignment
company, any lien settlement above 20 cents on the dollar is
nearly pure profit. As the cost of a compound medication can be
manipulated by the costs of the ingredients, this allows all
participants to grow their profit margins based on volume. In
short, all participants make money, with employers paying
exorbitant costs and injured workers receiving substandard,
profit-driven care.
SB 1160 explicitly prohibits any assigning or factoring of a
lien on or after January 1, 2017, unless the medical provider is
no longer in business in the capacity in which they filed a
lien. For liens assigned between 2013 and 2016, SB 1160 codifies
the recent appellate court decision, Chorn v. WCAB (2016), 2016
Cal. App. LEXIS 232, which found that restrictions on lien
assignments were constitutional and that "The effect of section
4903.8 is to prohibit WCAB from ordering or awarding lien
payments to anyone other than the medical provider who incurred
the expense."
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FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
Unknown with recent amendments.
SUPPORT: (Verified8/31/16)
California Labor Federation, AFL-CIO (co-source)
California Professional Firefighters (co-source)
Acclamation Insurance Management Services
California Alliance of Self-Insured Groups
California Medical Association
California Occupational Medicine Physicians
Communication Workers of America, District 9
Orange County Professional Firefighters Association, Local 3631
Risk Insurance Management Society
Small Business California
U.S. HealthWorks Medical Group
UPS
Western Occupational and Environmental Association
OPPOSITION: (Verified8/31/16)
California Neurology Society
California Society of Industrial Medicine and Surgery
California Society of Physical Medicine and Rehabilitation
California Workers' Compensation Interpreters Association
California Workers' Compensation Services Association
Voters Injured at WORK
ARGUMENTS IN SUPPORT: Proponents argue that, while UR
decisions should focus on whether the treatment aligns with
their MTUS, medically necessary treatment is inappropriately
delayed or denied via UR, generating needless costs for
employers and pointless delays for workers. Proponents argue
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this bill limits unnecessary UR in the first 30 days, and
provides a voluntary peer-to-peer communication process between
doctors. Proponents also argue that independent accreditation
will ensure that UR entities are making medical care decisions
timely and in an appropriate manner. Finally, proponents argue
that, while SB 863 made great strides to eliminate fraud,
fraudulent liens continue to be problematic and SB 1160 helps
resolve this by placing important safeguards in the lien
process, including ending the assignment of liens to third
parties-unless the provider has left that business-and require a
declaration of lien filers to ensure that these requests for
payments are filed for appropriate reasons.
ARGUMENTS IN OPPOSITION: Opponents argue that SB 1160 will
result in significant financial losses for lien claimants.
Specifically, opponents are concerned that they will not have
sufficient time to file declarations and avoid losing their
liens. Opponents further argue that, in order to comply, they
may need to request that the WCAB compel documentation from
employers on claims, overwhelming to local WCABs. Opponents also
argue that the lien disclosure may overturn settled law that
gives specific rights to injured workers to self-procure medical
treatment in the event of a denial by the employer. Finally,
some opponents have raised concerns about the provisions which
stay workers' compensation liens in the event of criminal
charges related to workers' compensation fraud. These opponents
argue that this provision may not hold up in court, and
therefore should be removed from this bill.
ASSEMBLY FLOOR: 80-0, 8/30/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,
Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley,
Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth
Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto,
Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper,
Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim,
Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis,
Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte,
O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez,
Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,
Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon
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Prepared by: Gideon L. Baum / L. & I.R. / (916) 651-1556
8/31/16 14:00:04
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