Governor Signs Workers' Comp Measure
Law Does Not Cut Physician Reimbursement or Add RBRVS
[Updated 04/22/04]

The governor Monday signed a bill (SB 899) to overhaul the workers’ compensation system. The Assembly and Senate adopted the measure on Friday by votes of 77-3 and 33-3, respectively. The law takes effect immediately.

Following the Legislature’s action, a business group backing a workers’ compensation ballot initiative said they would not proceed with a ballot measure in November. If the Legislature had not reached an acceptable compromise, the Committee for Workers’ Compensation Reform and Accountability had intended to submit the 1 million signatures they had gathered to election officials Friday.

In keeping with many of the recommendations of CMA’s Workers’ Compensation Reform Technical Advisory Committee, the law significantly redirects the focus of the California workers’ compensation system from a program that emphasizes the legal process to one that is designed to be more objective and based on physician assessment of injury.

CMA realizes that this law is not perfect, but CMA successfully headed off strong efforts by labor, business, and insurance interests to cut physician reimbursement and mandate a Medicare-based fee schedule. CMA also defeated unmanageable billing requirements and an “economic credentialing” program that would exclude physicians based on the cost of care that they authorize. CMA also won legislative support for the independent medical review process, which places treatment decisions in the hands of qualified physicians with appropriate clinical knowledge, and the ability to integrate treatment of injured workers with other health care services.

Among the major changes to the workers’ compensation program are: development of medical provider networks, independent medical review, an integrated 24-hour care option, and revised methodology for determining and compensating disability. The law also reaffirms and strengthens the utilization management provisions of last year’s workers’ compensation changes (SB 228), retains the caps on physical therapy and chiropractic services, and leaves unaltered existing fee schedule provisions. The new workers’ compensation rules will apply to all cases, regardless of the date of injury.

CMA will participate fully as new workers’ compensation regulations are written to ensure that the changes are evenhanded and do not hurt physicians or their patients. A key battleground will concern the criteria for creating provider networks and whether the networks will seek out the lowest-cost providers, as well as how the regulations will implement the legislative mandate to use scientific-based treatment guidelines instead of the existing standards of practice.

Below is a summary of the law’s major provisions as they affect physicians. For a comprehensive legal interpretation of SB 899, click here.

MEDICAL PROVIDER NETWORKS—Allows an insurer or employer beginning in 2005 to establish medical provider networks to provide care for injured workers. These networks must receive approval from the workers' comp administrative director. At least 25 percent of the physicians in any network must be primarily engaged in the treatment of nonoccupational injuries. One goal of these provider networks will be to integrate treatment of occupational and nonoccupational injuries.

Established networks must have a sufficient number of physicians to provide treatment to injured workers in a “timely manner,” as defined by the National Committee of Quality Assurance, and must include the type of physicians reasonably needed to treat common occupational injuries in the industry and geography of the employer. The employer has the exclusive right to determine who is in the network and an injured worker is required to obtain treatment (as well as second and third opinions) from the network unless a specific exemption is granted.

The law allows employers or insurers to use economic profiling to determine the network. However, an employer or insurer that uses “economic profiling”—evaluation based in whole or in part on the economic costs or utilization of services associated with medical care that is provided or authorized—shall disclose to the state how profiling is used in utilization review, peer review, incentive, and penalty programs, as well as in provider retention and termination decisions. This information will be available to the public upon request. The employer must also provide the state with a written continuity-of-care policy that demonstrates the ability to provide appropriate continuity of care when a provider leaves or is terminated from the network. Network regulations will be published by November.

MEDICAL TREATMENT—The employer is required to provide treatment reasonably required to “cure or relieve" and defines such treatment as treatment within the guidelines to be established by the Administrative Director. Until such guidelines are adopted, American College of Occupational and Environmental Medicine (ACOEM) guidelines must be followed. If ACOEM guidelines do not address a particular injury or illness, other guidelines may be used, but these guidelines must be scientifically based, peer reviewed, and accepted by the national medical community.

INDEPENDENT MEDICAL REVIEW (IMR)— Injured workers who dispute an initial diagnosis or treatment plan may seek second and third opinions from physicians within the provider network. At that point, if a dispute remains, the worker may request an independent medical review (IMR). IMRs will be performed by physicians (M.D. or D.O.) who have clinical knowledge and board certification in the area of care. The injured worker may request that the IMR include a physical examination.

IMRs must be reviewed within 30 days. If the IMR is successful, the worker will be allowed to seek treatment from the physician of his or her choice.

The state will contract with individual physicians or a review organization to perform IMRs. The law requires these reviews to be completed in a timely, fair, independent, and impartial manner that is consistent with state and federal laws governing confidentiality of medical records.

PHYSICIAN BILLING—Payment is required within 45 working days after receipt of a properly written bill. The law specifies that when billing a physician must submit an “itemization of medical services provided.” While this “itemization” is not defined, the law does make it clear that the intent is to pay for services at the OMFS rates, or the physician’s contracted rates (if different). The law also clarifies that interest must be paid on properly completed claims if they are not paid within the required timeframe.

24-HOUR CARE CARVE OUTS— The legislation also resurrects—on a pilot project basis—California's 24-hour-care program, which allows companies with union contracts to purchase integrated health-care and workers' comp insurance coverage from the same carrier.

PREDESIGNATION OF PHYSICIAN— If an employer provides nonoccupational group health coverage, workers may, prior to injury or illness, predesignate his/her personal M.D. or D.O. physician to provide care for work-related injury. The physician must agree in writing to be predesignated, have previously treated the worker, and have his or her medical records. The number of employees receiving care from predesignated physicians at any one time throughout the state cannot exceed 7 percent. Predesignation expires April 30, 2007, unless extended by statute.

PERMANENT DISABILITY—Physicians must utilize the American Medical Association Guides to the Evaluation of Permanent Impairment (5th Edition) when formulating a disability rating. The administrative director shall formulate an adjusted rating schedule based on empirical data and findings of the RAND Institute for Civil Justice. This schedule pertains to injuries occurring on or after January 1, 2005.

TEMPORARY DISABILITY—Limits temporary disability coverage for most injuries to two years (104 weeks) from the date of injury. Coverage can be extended to 240 weeks for injuries that typically take more than two-years to heal, such as hepatitis B or C, amputations, severe burns, HIV, high-velocity eye injuries, pulmonary fibrosis, and chronic lung disease.

PENALTIES—California's workers' comp system has a number of penalty provisions, originally designed to ensure that injured workers receive treatment and benefit checks in a timely manner. Many employers and insurers have complained that some of these penalties, particularly those under Labor Code Section 5814, result in excessive fines for minor infractions.

For example, a single late payment could trigger a penalty equivalent to 10 percent of all past, current, and future medical costs. These penalties were uncapped. Under the new law, penalties will be calculated based on the amount of the late payment itself, rather than the total award. These penalties will be capped at 25 percent of the late payment or $10,000, whichever is less. The law also provides the “right to repair” if a violation is discovered by the employer or insurer. This permits an employer or insurer to avoid further penalties by paying a self-imposed increase of 10 percent of the delayed or refused payment.

APPORTIONMENT—Under the old system, employers were often held liable for 100 percent of an injury even when it was not entirely work-related. Under the new law, employers can only be liable for the percentage of permanent disability directly caused by the injury arising out of and occurring in the course of employment. The bill also caps multiple awards so that an individual cannot get more than 100 percent disability for any single region of the body over his or her lifetime. Prior permanent disability awards will be conclusively presumed to exist at the time of the subsequent injury, preventing individuals from receiving multiple permanent disability awards for the same injury.

Contact: Bryce Docherty, 916/444-5532 or bdocherty@cmanet.org.