BILL ANALYSIS Ó
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 923
Author: De Leon
Version: As Amended April 11, 2011
SUBJECT
Workers' compensation: official medical fee schedule: physician
services.
KEY ISSUE
Should the Legislature require the Administrative Director of
the Division of Workers' Compensation to adopt a Resource-Based
Relative Value Scale (RBRVS) for the payment of physician
services in the workers' compensation system?
PURPOSE
To require the use of a Resource-Based Relative Value Scale
(RBRVS) in the workers' compensation system.
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 federal law requires the use of the Resource-Based
Relative Value Scale (RBRVS) for all Medicare reimbursement of
physician services.
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 the Administrative Director of the
Division of Workers' Compensation (DWC) to adopt an Official
Medical Fee Schedule (OMFS) for physician services based on the
RBRVS by January 1, 2012. This bill would also require the
Administrative Director to adopt and revise the Official Medical
Fee Schedule (OMFS) for physician services every two years.
This bill would prohibit the Administrative Director from using
conversion factors that are any less than the following, with
the exception of anesthesiology:
----------------------------------
| Surgery |Radiol| All other |
| | ogy | physician |
| | | services |
----------------------------------
|---------+------+-----------------+-----------------|
| 2012 | 57 | 57.75 |46.5 |
|---------+------+-----------------+-----------------|
| 2013 | 58 | 58.5 |51 |
|---------+------+-----------------+-----------------|
| 2014 | 59 | 59.25 |55.5 |
|---------+------+-----------------+-----------------|
|2015 and | 60 | 60 |60 |
| after | | | |
----------------------------------------------------
This bill would also prohibit the Administrative Director from
using conversion factors that are any less than 34 for
anesthesiology.
This bill would also require the Administrative Director to
adjust the OMFS for physician services to conform to any
relevant changes in the Medicare and Medi-Cal payment systems no
Hearing Date: April 27, 2011 SB 923
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Senate Committee on Labor and Industrial Relations
later than 60 days after the effective date of those changes,
provided that a change in a payment system does not reduce the
existing reimbursement rate payable to workers' compensation
physicians.
This bill defines "conversion factor" as the number that is
multiplied by the relative value to produce the reimbursement
rate payable to workers' compensation physicians, except that
for anesthesiology services, "conversion factor" means base
units plus time units.
This bill defines "Resource-Based Relative Value Scale" as the
relative value scale created by the federal Centers for Medicare
and Medicaid Services and set forth in the Federal Register for
each calendar year.
COMMENTS
1. What is the Resource-Based Relative Value Scale (RBRVS)?
The Resource-Based Relative Value Scale was created in 1985 at
Harvard University by Dr. William Hsiao and published in 1988.
The goal of the scale was to assign each procedure a relative
value, which would then be adjusted by geographic cost
differences, in order to reimburse procedures done through
Medicare by their actual cost and value. The scale was
adopted in 1992 by President George H.W. Bush for the purposes
of reimbursing Medicare physician services.
With RBRVS, each service, which is defined by the Current
Procedural Terminology (CPT) code, is assigned three relative
value units (RVU). The three relative value units are the
work done, the medical practice expense, and medical liability
insurance. This way, if the procedure takes a long period of
time or is especially dangerous, the reimbursement rate will
be higher, or the reimbursement rate may be lower if the
procedure is quick and relatively low-risk.
Generally, the RVUs are numbers that are less than or around
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Senate Committee on Labor and Industrial Relations
1, and therefore become a multiplier when combined. Once
these RVUs are combined, they are then multiplied by the
conversion factor, which then yields the reimbursement.
For example, the most frequent CPT code utilized is 99213
(which is an office or other outpatient visit requiring
expanded problem focused history and physical exam and a
medical decision making of low complexity), and it has the
following RVUs:
Work RVUs: 0.97
NonFacility Practice Expense RVUs: 0.99
Professional Liability Insurance RVUs: 0.07
These RVUs are then added together:
(0.97) + (0.99) + (0.07) = 2.03
And the combined RVUs are multiplied by the conversion
factor:
(2.03) x (46.50) = $94.395
In this example, the conversion factor used is the required
minimum conversion factor for physician services in 2012 as
set by this bill. Additionally, these numbers can be adjusted
up or down by Geographic Practice Cost Index (GPCI). However,
as current written, this bill is silent on the use of GPCI.
2. Need for this bill?
During the last years of the Schwarzenegger administration,
the Division of Workers' Compensation attempted to revise the
Official Medical Fee Schedule (OMFS) for physician services
based on Resource-Based Relative Value Scale. In doing this,
the Division was following the lead of earlier studies done in
2002 which suggested significant cost savings for employers by
switching to an RBRVS-based system. Those studies have been
supported by newer studies, such as the 2010 Lewin Group
study, though were predicated on a lower conversion factor
than suggested in this bill.
Hearing Date: April 27, 2011 SB 923
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Senate Committee on Labor and Industrial Relations
However, when the DWC began the process for adopting an RBRVS
model, it quickly encountered significant opposition from
specialists in the medical field, as their reimbursements
would be lowered, in some cases significantly. For example,
the 2010 Lewin Group study estimated that surgery
reimbursements would be cut by nearly 10% and radiology
(between 3.5% and 12%), while physical medicine would see
reimbursement rates increase significant amount (between 12%
and 16%). This opposition, plus the reality of an upcoming
new administration, eventually halted these efforts.
This bill seeks to require the Division to implement the
RBRVS-based schedule, based on the work and studies that the
Division and their contractors have done over the years, as
well as statutorily require certain minimum conversion factors
for physician services.
3. Proponent Arguments :
Proponents argue that this bill will require a long-overdue
conversion of the workers' compensation fee schedule to a
schedule based on Resource-Based Relative Value Scale utilized
by the Medicare system. Proponents note that the existing
system is antiquated and based on valuations and assumptions
that are out-of-date and place primary treating physicians at
a disadvantage. Proponents also note that an RBRVS-based
schedule would be simpler and easier for employers and payor
to comply with.
The California Society of Industrial Medicine and Surgery
(CSIMS) and the California Society of Physical Medicine and
Rehabilitation (CSPMR) have taken a 'support if amended'
position. Both organizations request an amendment that adopt
the RBRVS-based schedule, but with a provision that would
prevent any physician from having a lower reimbursement.
The California Medical Association (CMA) has taken a 'support
if amended' position, noting that they feel the conversion
factor may be insufficient and therefore create access issues.
CMA also notes that the bill currently is silent on payment
rules, and request that the author take language to prohibit
the use of the Medicare payment system in workers'
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compensation without additional payment rules.
4. Opponent Arguments :
Opponents argue that, while an RBRVS-system has considerable
merit, SB 923 would significantly increase reimbursement rates
for physicians, increasing costs on employers and would
endanger efforts to increase workers' compensation benefits
for seriously injured workers. Opponents also note that
increasing reimbursement rates for certain specializations
could create perverse incentives for unnecessary medical
procedures, which would not be beneficial for injured workers.
Finally, opponents argue that the Division of Workers'
Compensation (DWC) is empowered to create a RBRVS-based
Official Medical Fee Schedule, and the future Administrative
Director of the DWC should be given the chance to do so.
The California Orthopedic Association has taken a 'oppose
unless amended' position, for reasons similar to CSIMS, CSPMR,
and CMA.
5. Current Legislation :
SB 127 (Emmerson), which will be heard on the same day as this
bill, addresses the OMFS for physician services, as well as
requires the use of current Current Procedural Terminology
(CPT) codes.
SUPPORT
California Occupational Medicine Physicians
U.S. Health Works
Western Occupational & Environmental Medical Association
SUPPORT (IF AMENDED)
California Medical Association
California Society of Industrial Medicine and Surgery (CSIMS)
California Society of Physical Medicine and Rehabilitation
(CSPMR)
Hearing Date: April 27, 2011 SB 923
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Senate Committee on Labor and Industrial Relations
OPPOSITION
California Coalition on Workers' Compensation
California Labor Federation, AFL-CIO
California Orthopedic Association (Unless Amended)
Hearing Date: April 27, 2011 SB 923
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Senate Committee on Labor and Industrial Relations