BILL ANALYSIS Ó
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 863|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
UNFINISHED BUSINESS
Bill No: SB 863
Author: De León (D), et al.
Amended: 8/30/12
Vote: 21
PRIOR VOTES NOT RELEVANT
ASSEMBLY FLOOR : Not available
SUBJECT : Workers compensation
SOURCE : Author
DIGEST : This bill enacts major reforms to the workers
compensation system.
Assembly Amendments delete Senate version of the bill and
insert the above language.
ANALYSIS :
Existing law:
1. Provides, based on the state constitution, that the
Legislature has plenary authority to establish a system
of providing workers' compensation benefits to workers
who suffer injuries that arise out of or in the course
of employment.
2. Grants the Legislature broad discretion is
CONTINUED
SB 863
Page
2
establishing the means by which disputes in the
workers' compensation system may be resolved.
3. Includes both medical services and indemnification
payments for permanently disabled workers among the
various benefits that are available to injured
employees.
4. Provides for "employer control" of medical treatment
if the employer establishes a Medical Provider Network
(MPN) that meets detailed criteria, including a
requirement that 25% of the doctors in the MPN are not
occupational medicine specialists.
5. Provides that an employer is entitled to require an
injured employee to be treated for a workplace injury
within its MPN, provided that the MPN is approved by
the administrative director, and various notice
requirements have been met.
6. Allows, via case law, injured employees to be treated
outside the MPN due to minor failures in pre-employment
notice requirements, workplace notice posting
requirements, as well as substantive deficiencies in
the MPN.
7. Allows an entity that arranges for networks of
medical providers to require a physician to participate
in a workers' compensation network as a condition of
participation in other networks arranged by that
entity.
8. Provides that most services provided to parties in
the workers' compensation system are subject to a fee
schedule, but does not have a formal fee schedule for
interpreter, copying, transportation or ambulatory
surgery center services.
9. Provides that disputes about medical treatment are
resolved based on pre-litigation utilization review by
employers, expert medical opinion obtained through the
Qualified Medical Examiner (QME)/Agreed Medical
Evaluator (AME) process, and litigation before a
workers' compensation judge.
SB 863
Page
3
10. Requires billing disputes (that is, conflicts over
whether billing codes were properly complied with, fee
schedules properly applied, and related matters that do
not involve a challenge to the actual services
provided) be resolved by a workers' compensation judge
in connection with the case-in-chief, often causing
delays in settling cases, and creating a huge backlog
of low-priority workload for workers' compensation
judges.
11. Allows a report from a self-procured physician to be
admitted into evidence on any disputed issue, even if
the employee has improperly declined to seek treatment
within the MPN.
12. Establishes selected, but not comprehensive,
financial conflict of interest rules for participants
in the workers' compensation system.
13. Allows basic permanent disability ratings to be
increased due to individualized evidence that the
injured worker has suffered "compensable consequences"
of the primary injury due to sleep and sexual disorders
that flow from the primary injury.
14. Allows an injured worker to present evidence to rebut
a permanent disability rating derived from the basic
permanent disability rating formula, and to present
evidence of a diminished future earning capacity.
15. Establishes a Supplemental Job Displacement Benefit,
but contains functional impediments in most cases that
prevent delivery of these benefits in a manner helpful
to an injured worker who needs retraining.
16. Contains a soft statute of limitation on the filing
of liens for disputed medical or other services, and
requires that liens be adjudicated by workers'
compensation judges.
17. Requires the AD to adopt and periodically update an
Official Medical Fee Schedule, but does not mandate or
prohibit that this schedule be based on Medicare's
SB 863
Page
4
resource based relative value system (RBRVS) system.
18. Provides that medications provided to injured workers
shall be paid for at the rate determined by the MediCal
fee schedule.
19. Allows generally for home care services to be paid
for where an injured worker needs these services as a
result of the injury, but does not provide any specific
rules governing the scope of or payment for these
services.
This bill:
1. Eliminates one of the two pathways for chiropractors
to qualify as a QME.
2. Limits the number of office locations that a QME may
file with the Division of Workers' Compensation (DWC)
to 10.
3. Reduces the scope of evaluations that QMEs perform by
establishing an Independent Medical Review system
(IMR), patterned after the existing IMR process
implemented by the Department of Managed Health Care
(DMHC) for resolving health insurance disputes, to
resolve medical treatment issues.
4. Establishes a hierarchy of standards that are to be
applied by IMR, with the Medical Treatment Utilization
Schedule adopted by the AD as the highest source for
evaluating the appropriateness of medical treatment,
followed by the same ranked standards that apply to
HMOs under the Knox-Keene Act.
5. Eliminates the WCAB's authority to adjudicate medical
treatment disputes that are directed to the IMR
process.
6. Permits the employee to provide new information to
the IMR not reviewed by utilization review, provided
the employee gives this additional information to the
employer to allow the employer an opportunity to
reconsider based on this information.
SB 863
Page
5
7. Allows the employee to appeal a utilization review
decision by requesting an IMR either immediately after
the utilization review decision or after getting a
second utilization review with addition information.
8. Makes the results of the IMR process binding on all
parties, absent clear and convincing evidence of fraud
or conflict of interest, that the AD acted in excess of
his or her authority, that the decision was the result
of bias relating to protected classes, or that the
decision was the result of a plainly erroneous express
or implied finding of fact that is a matter of ordinary
knowledge and not a matter that is subject to expert
opinion.
9. Prohibits the WCAB or a court to make a determination
on a medical matter in the event of a reversal of an
IMR decision, and instead requires that the matter be
returned to IMR, for additional appropriate
proceedings.
10. Establishes penalties in the event an employer fails
to notify an injured worker of his or her right to IMR,
or fails to implement a decision by IMR favorable to
the injured worker.
11. Provides that a reversal of a utilization review
decision by IMR is not necessarily an unreasonable
delay in providing treatment within the meaning of the
provisions that penalize an insurer or employer for
unreasonably denied treatment.
12. Adopts findings and declarations of Legislative
intent with respect to the IMR process and its value to
injured workers and to the workers' compensation
system.
13. Establishes an Independent Bill Review (IBR) process
to take medical billing disagreements out of the
jurisdiction of the WCAB adjudication system under
rules similar to the IMR process.
14. Adopts a severability clause for the IMR provisions.
SB 863
Page
6
15. Provides for the Administrative Director of the DWC
to contract with qualified organizations to implement
the IMR and IBR functions, subject to detailed conflict
of interest rules and substantive responsibilities, as
specified.
16. Contains findings relating to the need to contract
for IMR and IBR services.
17. Repeals several outdated annual reporting
requirements.
18. Prohibits Professional Employer Organizations (PEOs)
and temporary staffing agencies from becoming
self-insured for workers' compensation purposes, and
requires any of these entities that are currently
self-insured to become insured by January 1, 2015.
19. Requires public agencies that are self-insured to
submit specified data to the Department of Industrial
Relations (DIR) for purposes of policy analysis, and
directs the Commission on Health and Safety and
Workers' Compensation (CHSWC) to conduct a study of
public sector self-insured programs.
20. Provides that the costs incurred by DIR in
administering the public sector workers' compensation
program are to be paid from the Workers' Compensation
Administration Revolving Fund (user funding as opposed
to General Fund.)
21. Repeals the requirement that a second opinion be
obtained in cases of spinal surgery, and instead would
resolve questions of appropriateness of spinal surgery
in the IMR process.
22. Streamlines the AME and QME process to eliminate
unnecessary delays and friction in the system.
23. Provides that a report by a physician procured
independently by an injured worker cannot be the sole
basis of an award for compensation, but that a QME or
authorized treating physician, when the QME or
SB 863
Page
7
authorized treating physician is preparing a report,
shall address any such report and indicate whether he
or she agrees with the findings or conclusions of the
independently procured physician, and there reasons
therefore.
24. Establishes a prohibition for any interested party in
the workers' compensation system to have a financial
interest in another entity to which it is referring a
party for services, or for which it is paying or
receiving compensation, if the employer is paying the
charges; provided that financial interests in
affiliated entities in claims handling are subject to
mandatory disclosure rather than this prohibition.
25. Increases aggregate permanent disability benefits by
approximately $740 million per year, phased in over a
two-year period, and adjusts the formula for
calculating the benefit amount so that compensation
amounts more accurately reflect loss of future
earnings, and to ensure that no class of injured
workers receive a lower award than under the present
system.
26. Eliminates sleep disorder and sexual dysfunction
"add-ons" to primary injuries that do not include these
injuries when calculating the level of permanent
disability, but require all appropriate medical
treatment for these injuries.
27. Eliminates the diminished future earnings capacity
from the determination of permanent disability, and
limits the definition of permanent disability to
include only a consideration of how occupation affects
the overall classification of employment of the injured
worker, rather than the individual injured worker's
ability to compete in the open labor market or
reduction of future earnings.
28. Limits psychological add-ons when calculating a
permanent disability rating to cases involving
catastrophic injury or that involved a violent
workplace incident.
SB 863
Page
8
29. Provides that all permanent disability awards are
increased by a multiplier of 1.4 for the loss of future
earnings.
30. Establishes, for injuries occurring from January 1,
2013 through December 31, 2015, a 30% "bump up" of the
permanent disability award, and for injuries occurring
on or after January 1, 2016, a 15% "bump up" of the
permanent disability award for injured workers who are
not given a qualifying return to work offer.
31. Provides that in enacting the bill adding these
changes to the permanent disability system, it is not
the intent of the Legislature to overrule the holding
in Milpitas Unified School District v. Workers' Comp.
Appeals Bd . (Guzman), which established that the
presumption that an AMA Guides rating is correct is
rebuttable by evidence presented by the injured worker.
32. Requires the Commission on Health and Safety and
Workers' Compensation to conduct a study comparing
average loss of earnings for employees who sustained
work-related injuries with permanent disability ratings
under the permanent disability rating schedule and
evaluate the impact of increased payments made pursuant
to the "bump up" provisions, and report to the
Legislature before January 1, 2016
33. Clarifies that an insurer or employer can pay for
physical medicine treatments in excess of the 24-visit
cap without that payment constituting a blanket waiver
of the cap.
34. Provides that a chiropractor who has reached the
24-visit cap cannot serve as the injured worker's
primary treating physician.
35. Eliminates the requirement that a MPN have
non-occupational medicine specialists constitute at
least 25% of the physicians in the network.
36. Requires an MPN to obtain a written acknowledgement
from a physician that the physician agrees to be in the
MPN.
SB 863
Page
9
37. Requires all MPNs to have a "medical access
assistant" staff person or persons, who need not be
employees, but who must be located within the United
States, to aid injured workers in obtaining
appointments or referrals within the MPN.
38. Allows the AD to generically approve an MPN, as
opposed to requiring a separate approval for each
employer.
39. Provides that the approval of an MPN by the AD is
conclusive in a matter before the WCAB that the MPN is
valid, subject to proof that there was a specific
failure as to a specific injured worker.
40. Requires periodic administrative audits of MPNs by
the AD.
41. Authorizes discretionary administrative audits of
MPNs by the AD.
42. Limits the reasons that can be used to avoid
obtaining treatment within an MPN, and establishes an
expedited process to resolve any disputes about whether
the injured worker is required to be treated within the
MPN.
43. Requires a physician who knows or should know that
the patient is suffering from an occupational injury to
notify the employer within 5 days that the injured
worker is being treated outside the MPN, and prohibits
payment by an employer or insurer for any treatment
provided to the injured worker when the notice
requirements have not been complied with.
44. Provides that where interpreter services are needed,
the injured worker shall make a request to the employer
or insurer, and the employer or insurer shall pay for
the interpreter services.
45. Requires that interpreters be certified, and
authorizes the AD to establish, operate or contract for
an interpreter certification program.
SB 863
Page
10
46. Prohibits an interpreter certification entity from
having a financial interest in training or employing
interpreters.
47. Modifies the Supplemental Job Displacement Benefit
(SJDB) rules to:
A. Change the point in time the benefit is
triggered;
B. Prohibit "cashing out" the retraining voucher
in settlements;
C. Establish which schools are qualified to be
paid by the retraining voucher;
D. Limit the time period during which the
voucher is valid to 2 years; and
E. Specify that an injury that occurs during
retraining does not constitute a compensable
injury.
1. Prohibits the filing of a lien against an award for
matters that are subject to IMR and IBR dispute
resolution.
2. Establishes a $150 filing fee in order to file a
lien, recoverable if the lien claimant prevails.
3. Establishes a $100 activation fee for legacy liens
(unless the lien was previously subject to a
since-sunsetted $100 filing fee), recoverable if the
lien claimant prevails.
4. Adopts firm time limits within which liens must be
filed.
5. Adopts a fee schedule for ambulatory surgery centers
(ASCs).
6. Requires the DIR to study the feasibility of
establishing a facility fee for services performed in
SB 863
Page
11
ASCs.
7. Requires the AD to adopt a medical fee schedule
methodology based on Medicare's RBRVS system, with
specified modifications for California's workers'
compensation system, including geographic adjustments.
8. Clarifies the rules that govern the fee schedule
applicable to vocational expert compensation, and
provides that written testimony, in lieu of live
testimony, is proper.
9. Provides that if the MediCal fee schedule for
prescription medications is reduced in order to meet
specified MediCal budget needs that reduction shall not
be included in the workers ' compensation official
medical fee schedule, which is otherwise linked to the
MediCal schedule.
10. Prohibits payment for home care services where the
services were already being provided prior to injury
(i.e., no pay for cooking for the injured worker if a
spouse was already doing that function prior to
injury); authorizes the AD to adopt a home care
services utilization and fee schedule, and limits the
re-opening of old cases where home care services are
alleged to have been provided but were not authorized
or ordered by a physician before the services were
rendered.
11. Authorizes the AD to adopt a fee schedule for copying
services, and establishes substantive rules to govern
these services.
12. Eliminates the "double-payment" pass-through for
implantable surgical hardware, subject to the AD
adopting a regulation to allow an additional
reimbursement where the basic hospital fee schedule
does not adequately cover the cost of the hardware.
13. Contains language to prevent chaptering problems with
SB 1105.
Comments
SB 863
Page
12
According to the Assembly Insurance Committee, this bill
reflects a negotiated compromise between employers and
employees to adopt a substantial increase in permanent
disability benefits ($740 million), to ameliorate
unexpected reductions that flowed from the 2004 reforms,
balanced by substantial changes in the benefit delivery
system to eliminate waste, inefficiency, and other
loopholes that result in unnecessary employer costs that go
to recipients other than injured workers.
Workers' Compensation - the Great Compromise .
Fundamentally, workers' compensation is an agreement
between employers and employees to each give up a right in
exchange for the stability and certainty of the workers'
compensation system. Employees give up the right to sue in
tort for injuries, and employers give up the right to
contest fault. Employees give up the right to tort damages
in favor of more limited, but more certain and more easily
obtained benefits. Employers agree to pay benefits in all
cases where the injury is work related. The hallmark of
this arrangement is that relatively certain defined
benefits are to be delivered to injured workers on a no
fault basis in a relatively timely manner.
In this system, the relevant parties to the agreement are
employees and employers. Every other stakeholder -
providers of medical services and products, lawyers,
insurers, and various providers of a range of related
services - are service providers contributing goods and
services necessary to carry out the agreement between
employees and employers. However, they are not direct
parties to the agreement.
Over the years, the principles of relatively certain
defined benefits and relatively timely delivery have been
seriously eroded. Inconsistency in parties' ability to
ascertain exactly what benefits an injured worker is
entitled to has forced the system to develop a complex,
cumbersome, and slow litigation-based dispute resolution
system. At a fundamental level, the proposal contained in
this bill is an effort by the direct parties to the
workers' compensation agreement (employees and employers)
to return to the principles of relatively certain defined
SB 863
Page
13
benefits, and relatively timely delivery of those benefits.
The 2004 Reforms . In 2004, with recently-elected Governor
Schwarzenegger poised to file signatures to place a
workers' compensation reform initiative on the ballot, the
Legislature passed and the Governor signed SB 899
(Poochigian), Statutes 2004, Chapter 34, in lieu of the
initiative. These reforms enacted a broad range of changes
to the workers' compensation system, but two issue areas
are of primary importance to the reform proposal contained
in SB 863.
First, SB 899 substantially changed the permanent
disability rating system. Employers and insurers had long
complained that the rating system was far too subjective,
which resulted in widely varying results for similar cases.
The result of this variation was a tremendous amount of
litigation because both sides could see the potential of
changing the result in a great number of cases. SB 899
adopted several changes to the law designed to resolve this
problem. The bill required objective medical findings, the
use of the American Medical Association Guides to the
Evaluation of Permanent Impairment, 5th Edition (AMA
Guides), and use of a numerical formula to address the
impact on the injured worker's future earning capacity
(FEC). These changes were intended to reduce litigation
and increase consistency of results. They were also
intended to eliminate some cases altogether - so-called
"zeroes" who under the old system obtained a rating based
on subjective but not medically verifiable pain. Under the
new rules, this class of injured worker receives a "zero"
percent PERMANENT DISABILITY rating.
These reforms did not have as much impact on litigation as
predicted, largely due to a clearly unexpected result -
permanent disability awards for injured workers who still
obtained a rating fell by approximately 50% or more on
average. This result was largely due to the way the
Schwarzenegger Administration's regulations implemented SB
899. The call for reform had never included an argument
that widespread benefit reductions be included. As these
reductions became evident, lawyers sought aggressive means
to develop ways to increase the low ratings, and they
SB 863
Page
14
succeeded in certain respects, discussed in more detail
below. Contemporaneously, political pressure began to
build for a permanent disability benefit increase, which is
a key component of SB 863.
Second, SB 899 authorized the establishment of MPNs that,
if properly established by the employer and approved by the
AD, were intended to grant "employer control" over medical
treatment. Prior to SB 899, the injured worker had the
choice of treating physician starting 30 days after the
injury. This right was criticized because of employer
concerns that injured workers were being directed to
physicians who were not using evidence-based treatments,
and instead were engaging in treatment patterns designed to
increase the legal case for higher disability ratings. The
MPN was intended to provide quality evidence-based
treatment for injured workers but with a network of
physicians developed by the employer, which would
presumably decline to contract with outlier physicians.
Two primary problems have developed with MPNs . Injured
workers have far too frequently found it difficult or
impossible to find physicians on the MPN list to treat
them. A related problem is that because of these
difficulties, many injured workers are being directed to
the same outside physicians that employers sought to avoid
by creation of the MPNs. In addition, physicians have
complained that they are leveraged to be in networks they
do not want to be in, and get listed in networks that they
had no notice of. A major part of the reforms proposed by
SB 863 involve strengthening the rules to ensure that the
MPNs are sound, and strengthening the rules requiring
treatment of injured workers by MPN physicians.
MPN Reforms . One of the primary concerns expressed by
employers is that the expected control of medical care and
delivery of evidence-based medicine to injured workers
through MPNs authorized by SB 899 has not materialized.
Employers point out that the workers' compensation courts
have allowed a range of erosions to what was expected after
SB 899 was enacted. Specifically, they point to cases
where employees, after being in treatment within an MPN,
simply go to outside physicians, expect those physicians to
be paid by the employer, and justify this through technical
SB 863
Page
15
notice errors that have nothing to do with the delivery of
health care services. In response, SB 863 requires
out-of-network physicians treating an injured worker to
notify the employer within 5 days, establishes an expedited
hearing process to determine if treatment outside the MPN
is legitimate, and prohibits payment to physicians
violating these rules. The bill is designed to eliminate
existing practices whereby weeks or months of out of
network treatment is being provided, often without any
notice to the employer, and liens are being filed in
staggering number (see below) by providers seeking payment
for treatments that were not pre-authorized.
In addition, the bill tightens regulatory oversight to
ensure that MPNs are viable entities, and provides rights
to physicians who may not want to be included in the MPN,
including a repeal of the rule at least 25% of each MPN's
providers must be non-occupational medicine specialists.
The concern has been that these are the providers least
likely to be willing to take workers' compensation cases,
and account for a high percentage of providers on the lists
given to injured workers who will not schedule
appointments.
These reforms are designed to improve the quality of the
MPNs, and in that regard improve the quality of
evidence-based medicine as the basis of treating injured
workers, and based on these improvements, enhance the
ability of employers to provide treatment for injured
workers within the MPN.
The bill expressly eliminates some of the reasons that
attorneys for injured workers have used to justify getting
treated outside of MPNs. For example, the law requires a
pre-employment notice to an employee that the employer uses
an MPN, and there are requirements for on-site posting of
MPN notices in workplaces. Deficiencies in meeting these
requirements have been used to get out of MPNs, even by
injured workers who, at the time of injury received all
necessary information about accessing the MPN, and who in
fact had been treated by MPN providers for some time. The
bill eliminates these technical violations as a basis to
obtain treatment outside of the MPN, establishes a
presumption that an approved MPN is valid, but continues to
SB 863
Page
16
allow an injured worker to prove that the MPN is failing to
make appropriate treatment available, thereby justifying
outside treatment.
The bill also addresses one of the incentives to seek
treatment outside of an MPN. Case law at the WCAB level
had held that a medical report obtained outside an MPN that
should have been used for treating the worker was
inadmissible in WCAB proceedings. The Court of Appeal
revered this rule in the Valdez case. Employers have
argued that allowing this sort of evidentiary use would
incentivize wrongful efforts to seek treatment outside of
the MPN. The bill stops short of overruling the Court of
Appeal, but adds two rules: first, the bill provides that a
report from an outside physician shall not be the sole
basis of an award of compensation, and second, a QME or
treating physician shall consider the outside report in any
report they make, and indicate agreement of disagreement,
and the reasons therefore.
Independent Medical Review . This bill proposes to change
the way medical disputes are resolved. Currently, when
there is a disagreement about medical treatment issues,
each side attempts to obtain medical opinions favorable to
its position, and then counsel for each side tries to
convince a workers' compensation judge based on this
evidence what the proper treatment is. This system of
"dueling doctors" with lawyers/judges making medical
decisions has resulted in an extremely slow, inefficient
process that many argue does not provide quality results.
Long delays in obtaining treatment result in poorer
outcomes, reduced return to work potential, and excessive
costs in the system, none of which are good for injured
workers. This bill instead adopts an independent medical
review system patterned after the long-standing and widely
applauded IMR process used to resolve medical disputes in
the health insurance system. Thus, a conflict-free medical
expert would be evaluating medical issues and making sound
medical decisions, based on a hierarchy of evidence-based
medicine standards drawn from the health insurance IMR
process, with workers' compensation-specific modifications.
This bill contains findings that this system would result
in faster and better medical dispute resolution than
existing law.
SB 863
Page
17
The IMR system is designed to ensure that medical expertise
is used to resolve medical disagreements. Thus, the
decision from the IMR is final and binding on the parties.
Nonetheless, in the exercise of the Legislature's plenary
authority to establish a workers' compensation system that
includes a review of decisions, there is a process to
appeal the IMR result, but this review process does not
allow the second-guessing of medical expertise. Rather,
the appeal is limited to circumstances where there was
fraud, conflict of interest, discrimination based on
protected classes, or clear mistakes of facts that do not
involve medical expertise.
According to the California Applicants' Attorneys
Association (CAAA) the IMR process prohibits WCAB or
judicial review of medical necessity for treatment of work
injuries, and is in direct conflict with the California
Supreme Court's Determination in State Compensation
Insurance Fund v. WCAB (Sandhagen), which provided that an
injured worker was entitled to an expeditious, complete and
final judicial review of all treatment disputes. It should
be noted that Sandhagen was not decided in the context of
an IMR process, and may not be on point with respect to
reviewing an IMR decision.
Permanent disability Reforms . Permanent disability reforms
are probably the most controversial element of the
proposal. Despite increasing annual permanent disability
payments to injured workers by an estimated $740 million
(after a 2-year phase-in), some have objected to the way
that this increase is structured, as well as changes in how
approximately $1 billion in existing permanent disability
expenditures are redirected. There are numerous ways that
a permanent disability system can be structured. At one
end of the spectrum, there can be relatively broad
guidelines, and every injured worker could be entitled to
prove to the workers' compensation courts his or her
individual circumstances. This approach, of course, would
have little predictability, and would have tremendous
frictional costs and delays in delivering benefits. At the
other end of the spectrum, there can be a total formulaic
approach where there is no opportunity to bring in
individualized proof. Employers have argued that the
SB 863
Page
18
current system operates too close to the former, and this
bill moves in the direction of the latter, while retaining
key rights for limited individual proof of unique
circumstances. Employees have agreed to these changes in
exchange for increased benefits for all classes of
employee, and increased certainty and speed in the delivery
of the benefits.
The bill specifically limits some of the "add-ons" that can
be established by individualized proof - sleep disorders,
sex disorders, and to a limited extent, psychological
disorders - because these add-ons have greatly expanded in
recent years, largely as a result of the inappropriately
low permanent disability ratings that followed from the
2004 reforms. Since benefit levels are being substantially
increased by the bill, many believe that these add-ons,
which generate substantial litigation expense, are no
longer needed.
Not everyone agrees with this conclusion. For example, the
CAAA argues that the bill alters the existing statutory
description of permanent disability and may undermine or
reverse fifty years of California Supreme Court case law
allowing injured workers to recover compensation for their
lost ability to earn a living, citing the Court of Appeal
decision in Ogilvie v. WCAB and the 2007 Supreme Court
Decision in Brodie v. WCAB .
Lien Reforms . The current lien system in workers'
compensation is out of control. There is no effective
statute of limitations, because case law has developed
tolling rules that result in most billing matters remaining
alive indefinitely. In addition, the method of resolution
requires formal litigation in an already overcrowded
workers' compensation court system. There are presently
hundreds of thousands of backlogged liens, possibly in
excess of a million, and many of these are related to
long-since closed cases.
One of the concerns most often expressed by employers is
that liens get filed by providers for months of treatment
when the employer had no idea that there was any treatment
being provided. The bill seeks to avoid these situations
by mandatory notice by providers to the employer, an
SB 863
Page
19
expedited hearing process to determine if the provider has
a right to be treating the injured worker, and a
prohibition against paying bills submitted in violation of
these rules.
But lien abuse is not limited to treatment the employer has
no notice of. For example, it has become common for third
parties to purchase old receivables from providers, who
often billed at (higher) usual and customary rates but were
properly paid according to established fee schedules.
These third parties then file liens in an effort to
leverage settlements. Another example of lien abuse
involves a provider filing a lien for excessive amounts
after being paid, again with the hope of obtaining a
settlement. Nuisance-value settlements are rampant because
the workers' compensation courts simply don't have time for
these minor matters when crucial right to benefits issues
are the priority cases. To address this growing volume of
problem liens, the bill proposes to re-enact a lien filing
fee, so that potential filers of frivolous liens have a
disincentive to file. This approach worked well in the
past before it sunset (due to the DWC's inability to track
the fees - a problem DWC says no longer exists.) The lien
filing fee is refundable if the lien-claimant prevails. In
addition, for liens that are pending, and were filed after
the prior filing fee sunset, the bill provides for the
payment of an activation fee. Again, the purpose is to
provide a disincentive to file frivolous liens.
Not surprisingly, there has been concern expressed that
filing fees are a burden on providers who may have
legitimate billing disputes with the employer or insurer.
Therefore, in order to further eliminate a major portion of
the unnecessary volume of liens, the bill would create an
"independent bill review" process where expert bill
reviewers would make determinations in cases where it is
merely a billing, and not a substantive treatment, dispute.
This IBR process would relieve substantial congestion in
the workers' compensation courts, provide much faster
dispute resolution, and result in better decisions by
billing experts as opposed to judges, who have no special
training in the arcane world of billing codes and
procedures.
SB 863
Page
20
RBRVS . Medicare uses a RBRVS as the foundation for
calculating payment for physician services. Most states
use RBRVS in their workers' compensation system. In
California, this issue has been debated for years, and
subject to substantial consideration and hearings by the
DWC. However, it has not been adopted. Last year, the
Assembly Insurance Committee passed SB 923 (De Leon), which
would have required the DWC to adopt RBRVS, but the bill
was not taken up on the Assembly Floor.
RBRVS is not without controversy within the medical
community, even as it is a well-understood system that is
virtually self-updating as Medicare regularly updates it.
Specifically, it is argued by specialists that the RBRVS
rules favor primary care physicians over specialists, and
would result in unfair reimbursement cuts to specialists.
On the other hand, primary care physicians argue that some
specialties receive reimbursement at over 300% of the
Medicare rate by California's workers' compensation system.
It should be noted that this bill does not provide the
"revenue neutrality" provision that rendered SB 923
controversial.
Other Fee Schedules . Market pricing does not work well in
workers' compensation, since the people who receive
services (injured workers) are not the payors. There is
not market pressure for the injured worker to say "no" to
over-priced services. As a result of this dynamic, most
services that employers are mandated to pay for in workers'
compensation are subject to a fee schedule, and in many
cases, to utilization schedules as well (as
over-utilization has the same inflationary impact as
over-pricing.) However, not all services have been
subjected to fee schedules, and some services are covered
by fee schedules that allow for overly generous payments
according to research data reported by CHSWC. As a result,
the bill proposes establishing or updating utilization
and/or fee schedules for the following services: ambulatory
surgery center facility fees, interpreter services,
vocational experts, home care services, and copying
services.
With respect to home care services, the bill seeks to adopt
a fee schedule, identify appropriate utilization, require a
SB 863
Page
21
physician to order the services, and cut off a practice of
re-opening old cases where there had never been a physician
order for home care, and pursuing a lien on behalf of a
family member who cared for the injured worker. Since
attorneys pursuing these claims are not representing the
injured worker, the usual attorneys fee rules for workers'
compensation cases do not apply. There have been reports
of 50% contingency fees on claims of months of 24/7 home
care services, where there had never been any notice that
the services were needed or ordered by a physician.
SJDB . Return to work after an injury is crucial to an
injured worker's long term financial and emotional health.
California, unfortunately does a poor job of returning its
injured workers to work. In 2004, SB 899 adopted a
supplemental job displacement benefit designed to provide
retraining services for injured workers who could not
return to their existing job. However, this program has
never worked well because the trigger for the benefit
occurs far too late for the benefit to work well. This
bill attempts to reform the SJDB to make its promise of
retraining viable.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 8/31/12)
Acclamation Insurance Management Services
Air Conditioning Sheet Metal Association
Allied Managed Care
ALPHA Fund
American Federation of State, County and Municipal
Employees
American Subcontractors Association of California
Associated California Self Insured Businesses (ACSIB)
Association of California Healthcare Districts (ACHD)
Association of California School Administrators (ACSA)
AT&T
Boeing
Brand Source Pacific Rim Region
California Association of Competitive Telecommunications
Companies
California Association of Joint Powers Authorities (CAJPA)
SB 863
Page
22
California Association of School Business Officials
California Association of Sheet Metal and Air Conditioning
Contractors Association
California Association of Suburban Schools
California Carpenters Conference
California Chamber of Commerce
California Chapter of the American Fence Association
California Chapters of the National Electrical Contractors
Association
California Coalition on Workers' Compensation
California Concrete Contractors Association
California Employers Association
California Faculty Association
California Farm Bureau
California Fence Contractors' Association
California Grocers Association
California Independent Oil Marketers Association
California Labor Federation
California Landscape and Irrigation Council
California Landscape Association
California Landscape Contractors Association
California Legislative Conference of the Plumbing, Heating
and Piping
Industry
California Manufacturers and Technology Association
California Medical Association
California Metals Coalition
California Nevada Cement Association
California Nurses Association
California Occupational Medicine Physicians
California Physical Therapy Association
California Professional Association of Specialty
Contractors
California Professional Firefighters
California Retailers Association
California School Boards Association
California School Employee Association
California Small Business Association
California Special Districts Association
California State Association of Counties
California State Council of Laborers
California State Pipe Trades Council
California Teachers Association
California Teamsters Public Affairs Council
SB 863
Page
23
California Trucking Association
California-Nevada Conference of Operating Engineers
Change.org
Clinica Romero
Coalition of Small and Disabled Veteran Businesses
Communication Workers of America
Confederacion ControAmericana
Disney
El Centro Del Pueblo
Engineering Contractors' Association
Federal Express
Flasher Barricade Association
Gateways Hospital
Globe Iron Foundry, Inc.
Golden State Builders Exchanges
Grimmway Farms
Hermandad Mexicana National
Homeboy Industries
Insurance Brokers and Agents of the West
International Alliance of Theatrical Stage Employees
International Brotherhood of Electrical Workers
International Union, United Automobile, Aerospace &
Agricultural Implement Workers of America - UAW
Jesuit Restorative Justice Initiative
Kaiser Permanente
Kern County Superintendent of Schools
Legacy LA
Liberty Mutual
Los Angeles Police Protective league
Marin Builders' Association
Monterey County Business Council
National Federation of Independent Businesses
North Bay Labor Council
Northern California Independent Booksellers Association
Oakland Metropolitan Chamber of Commerce
Painting & Decorating Contractors of California, Inc.
PECG/CAPS
Plumbing Heating and Cooling Contractors Association of
California
Psych Techs
Regional Council of Rural Counties
Safeway
Salvadoran-American Leadership and Educational Fund
San Francisco Builders Exchange
SB 863
Page
24
San Francisco Chamber of Commerce
San Francisco Council of District Merchants Associations
San Francisco Small Business Network
School Insurance Authority
SEIU Local 1000
Service Employees International Union
Sheet Metal Workers
Small Business Association
Small Business California
Southern California Contractors Association
State Building & Construction Trades Council of California
Tri-Counties Central Labor Council
U.S. Health Works Medical Group
UAW International Union and Locals 2865, 4123 and 5810
UNITE HERE
United Auto Workers
United Food and Commercial Workers
United Parcel Service
Western Carwash Association
Western Electrical Contractors Association (WECA)
Western Growers Association
Western Occupational & Environmental Medical Association
White Memorial Medical Center
Zenith
OPPOSITION : (Verified 8/31/12)
California Applicants' Attorneys Association
ARGUMENTS IN SUPPORT : The supporters write, "This
negotiated package increases permanent disability benefits,
minimizes delays in medical treatment, Improves access to
care and provides hard savings in excess of the cost of
benefit increases."
ARGUMENTS IN OPPOSITION : The California Applicants'
Attorneys Association opposes this bill and writes, "Though
there are some worthy proposals embedded in the legislation
and a partial restoration of permanent disability benefits
for some injured workers, as an overall matter it takes
away rights of many of the most seriously injured workers
to get fair compensation for their injuries. In
particular, the legislation restricts the ability of an
injured worker to access necessary medical treatment and to
SB 863
Page
25
receive adequate compensation if a worker is permanently
disabled and cannot return to work at the same salary."
PQ:d 8/31/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****