BILL ANALYSIS �
Senate Committee on Labor and Industrial Relations
Ted W. Lieu, Chair
Date of Hearing: April 27, 2011 2011-2012 Regular
Session
Consultant: Gideon L. Baum Fiscal:Yes
Urgency: No
Bill No: SB 127
Author: Emmerson
Version: As Introduced January 27, 2011
SUBJECT
Official medical fee schedule: physician services.
KEY ISSUE
Should the Legislature require that new Current Procedural
Terminology (CPT) codes, descriptors, and modifiers be billed
"By Report" and outside of the Official Medical Fee Schedule?
PURPOSE
To require that the Administrative Director of the Division of
Workers' Compensation annually update the Current Procedural
Terminology (CPT) codes, descriptors, and modifiers for
physician services, as well as require that new CPT codes be
coded "By Report" for billing purposes.
ANALYSIS
Existing law 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.
Existing law requires the administrative director of the
Division of Workers' Compensation (DWC) to adopt and
periodically revise an Official Medical Fee Schedule (OMFS) to
establish reasonable maximum medical fees for medical services,
including physician services.
This bill would require that, in order to keep the OMFS
appropriately updated for physician services, the Administrative
Director of the Division of Workers' Compensation (DWC) to
annually adopt the Current Procedural Terminology (CPT) codes,
descriptors, and modifiers published by the American Medical
Association.
This bill would also require that new procedures added by this
update be coded "By Report (BR)" until the Administrative
Director, through public hearings, adopts and revises the
official medical fee schedule rates for physician services.
COMMENTS
1. Need for this bill?
Current Procedural Terminology (CPT) codes are 5-digit
identifiers of medical, surgical, and diagnostic services.
The codes are developed by the American Medical Association
through specialized advisory boards that annually review and
revise the CPT codes. The codes themselves were first
developed in 1966 by the AMA to standardize service
descriptors and nomenclature. Today, CPT codes are required
by federal law as the procedural code set for physician
services by the Health Insurance Portability and
Accountability Act (HIPAA) for the purposes of electronic
transmission of health information.
Presently, the Official Medical Fee Schedule (OMFS) for
physician services in the workers' compensation system is not
current. This creates challenges for physicians who try to
bill using the OMFS, but discover that the payor's software
utilizes up-to-date CPT codes and therefore has challenges
processing the bill for services. SB 127 seeks to address
this by requiring that the DWC updates the CPT codes used in
the OMFS for physician services on an annual basis, and
thereby keeping them up-to-date.
Hearing Date: April 27, 2011 SB 127
Consultant: Gideon L. Baum Page 2
Senate Committee on Labor and Industrial Relations
2. The Challenge of "By Report" Coding:
The practice of "By Report" (BR) coding is, while well
established, relatively rare in the area of workers'
compensation. BR coding is utilized when the service being
codes is not listed on the Official Medical Fee Schedule
(OMFS), which is due to the service being rarely provided,
unusual or variable.
In the case of requiring the coding of BR for updated CPT
codes, this creates some unique challenges. For example,
changes to the CPT codes can be due to nomenclature or the
deletion and/or merger of existing CPT codes. This could
create a situation where existing medical services must now be
coded "By Report", placing those services outside of the
cost-containment of the OMFS and potentially increasing
medical and legal costs throughout the workers' compensation
system.
The Committee may wish to consider addressing this challenge
by taking the amendments suggested by the opposition:
On page 5, strike lines 35 after the word "Association" and
strike line 36 until the word "through" and insert "reimbursed
at 120 percent of the fee prescribed by the Medicare Payment
System".
This would place the reimbursement of the new CPT codes within
the existing framework of the Official Medical Fee Schedule.
3. Proponent Arguments :
Proponents argue that SB 127 would align workers' compensation
payment coding methodology with national and regional payors,
particularly Medicare. Proponents note that SB 127 will
require the replacement of outdated CPT codes, reducing the
administrative strain endured by various medical service
providers who are forced to utilize multiple billing methods
in order to be paid for services rendered. Proponents note
that the Official Medical Fee Schedule's use of outdated CPT
codes is also a source of lien creation, as there is lack of
Hearing Date: April 27, 2011 SB 127
Consultant: Gideon L. Baum Page 3
Senate Committee on Labor and Industrial Relations
clear communication between the medical service provider and
the payor on what services were actually rendered. Proponents
believe that requiring an annual update of the CPT codes will
ensure that these problems are diminished and physicians
receive appropriate compensation.
4. Opponent Arguments :
The California Labor Federation had adopted an "Oppose Unless
Amended" position on SB 127. The Labor Federation notes that,
while they have no concerns with the adoption of new medical
procedure codes, they believe that the reimbursement of these
codes "By Report" is problematic. The Labor Federation argues
that "By Report" is the worst possible way to set fees because
it opens every bill to litigation and removes the services
from the Official Medical Fee Schedule. The Labor Federation
believes that this will drive up costs and drive down medical
access and quality for injured workers, hurting the entire
system. The Labor Federation has suggested amendments, which
were discussed above.
5. Prior Legislation :
AB 2091 (Fuentes), Statutes of 2009, Chapter 193, requires
that the administrative director of the Division of Workers'
Compensation (DWC) contract with an independent consulting
firm to study if there is adequate access for injured workers
of pharmacy services and prescription drugs and, if necessary,
adjust the reimbursement rates under the Medi-Cal fee
schedule.
SUPPORT
California Orthopedic Association (Sponsor)
California Medical Association
California Physical Therapy Association
California Society of Industrial Medicine and Surgery (CSIMS)
California Society of Physical Medicine and Rehabilitation
(CSPMR)
OPPOSITION
Hearing Date: April 27, 2011 SB 127
Consultant: Gideon L. Baum Page 4
Senate Committee on Labor and Industrial Relations
California Labor Federation, AFL-CIO (Unless Amended)
Hearing Date: April 27, 2011 SB 127
Consultant: Gideon L. Baum Page 5
Senate Committee on Labor and Industrial Relations