California Orthopaedic Association SUMMARY 2012 WORKERS COMPENSATION REFORMS. 1 California Orthopaedic Association

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1 2012 California Orthopaedic Association SUMMARY 2012 WORKERS COMPENSATION REFORMS 1 California Orthopaedic Association

2 A deal crafted by labor and business came together in the last hours of the Legislative Session to pass comprehensive Workers Compensation reforms in SB 863 (DeLeon). The cornerstone of the legislation is an increase in permanent disability benefits for injured workers by more than $700 million. To gain the last support needed for passage, an additional $120 million was earmarked for catastrophically injured workers who suffer disproportionate losses in wages. There is no definition of a catastrophic injury in the Labor Code. The Assembly passed the bill 66-4 and the Senate passed the bill The actual language of SB 863 can be found at: Major provisions of SB 863 Injured Worker Benefit Increase Increase permanent disability benefits by $700 million over two years by adjusting the formula used to calculate maximum awards. Creates a $120 million program to increase benefits for injured workers who suffer a disproportionate loss of earnings. Authorizes a $6,000 supplemental job displacement benefit that can be used for vocational rehabilitation. The 15% bump-up/bump-down provision is eliminated. Currently if an employer made an alternative job offer following the injury, the injured worker s benefits were decreased by 15%. Conversely, if the employer did not make an offer, the benefits were increased by 15%. The insurance company can delay payment of permanent disability benefits until the case is settled and can prevent the injured worker from going to court for at least 6 months more than in the current system. They can delay permanent disability benefits for 90 more days by requesting a supplemental report from the QME. Official Medical Fee Schedule Physician Services Transitions the Official Medical Fee Schedule physician services to a Medicare RBRVS system in four years. In year four of the transition, reimbursement will be at an aggregate pool of money representing 120% of 2012 Medicare reimbursement rates. Uncovered Medicare services such as consultation services are to be considered when establishing the pool of available monies. The transition starts for dates of services beginning January 1, 2014 and the bill establishes the following conversion factors during the transition: January 1, 2014 Surgery - $ Radiology - $ Anesthesia - $ All other services - $ California Orthopaedic Association

3 January 1, 2015 Surgery - $ Radiology - $ Anesthesia - $ All other services - $ January 1, 2016 Surgery - $ Radiology - $ Anesthesia - $ All other services - $ January 1, % of the 2012 Medicare Conversion Factor annualized aggregate fees to include uncovered Medicare benefits. Requires the DWC to adopt Ground Rules that are different than Medicare rules when appropriate for a Workers Compensation system. Consultation codes and global surgical periods are specifically noted in the bill. COA was instrumental in bringing to the attention of the negotiators the significant amount of additional work involved post-surgically for injured workers. We were successful in inserting language into SB 863 that calls upon the DWC to adopt ground rules that are different from the Medicare rules which bundles up to 90 days of postsurgical E&M visits into the surgical fee. The reimbursement shall incorporate a Geographic Adjustment Factor of An annual Medicare Economic Index (MEI) plus 1% which shall be applied starting January 1, The MEI in recent years has been 2-3%. DWC will be required to annually update the CPT procedural codes. COA was instrumental in the addition of this requirement. We had introduced legislation in the past to mandate the update to improve communication regarding the procedure actually performed and to standardize the procedural codes on the most current AMACPT codes. The Administrative Director promised legislators that they would study the impact that the transition to a Medicare RBRVS-type fee schedule will have on injured workers access to medically necessary services and make revisions should access problems be identified. Ambulatory Surgery Centers (ASC) Reimbursement for ASC fees were set at 80% of the fee paid by Medicare for the same services performed in a hospital outpatient department as of January 1, We believe that this represents approximately a 30%-40% reduction. Requires the Department of Industrial Relations (DIR) to study the feasibility of allowing procedures such as knee and hip replacements to be performed in an ASC setting rather than in 3 California Orthopaedic Association

4 an inpatient setting as required by Medicare. The reimbursement was set at 85% of the hospital DRG rate. Self-Referral Laws The original version of the bill would have prohibited individuals, including surgeons from referring patient to facilities in which they had an ownership interest. COA was successful in adding language that retained the existing self-referral exemptions currently allowed. The self-referral prohibitions, however, were extended to other professionals involved in the Workers Compensation system such as: injured workers, employers, insurance carriers, claims administrators, and attorneys. They are now prohibited from referring another person for services to an entity in which they receive some form of financial compensation for the referral. Spinal Pass-Through Hospitals The additional amounts that hospital currently receive to cover the costs of spinal implants were eliminated. The Administrative Director is required to adopt by July 1, 2013, regulations specifying additional reimbursement for spinal DRGs to ensure that the aggregate reimbursement is sufficient to cover the implant costs. Copier Services Requires the Division of Workers Compensation to adopt a fee schedule for reasonable maximum fees for copy and related services. Interpreters Requires the employer to arrange and pay for the services of an interpreter when needed because the injured worker does not understand English. Requires the interpreter to be certified, unless the employer agrees to the use of another interpreter. The DWC is to establish a fee schedule for interpreter services. The DWC or another independent organization is to publish a list of certified interpreters. Home Health Services Shall be provided as medical treatment only if reasonably required to cure or relieve the injured employee from the effects of his or her injury and prescribed by a physician and surgeon. Employer shall not be liable for home health care services that are provided more than 14 days prior to the date of the employer s receipt of the physician s prescription. Requires the Administrative Director to develop a fee schedule for home health services. 4 California Orthopaedic Association

5 Independent Medical Review Requires disputes over utilization review denials to be resolved through an Independent Medical Review (IMR) process effective January 1, No physical examination of the injured worker is required. IMR decisions are presumed to be correct and can only be overturned for fraud, conflict of interest, or a material mistake of fact. In reaching a decision, the reviewer must rely on one of the five enumerated standards which include: 1) administrative guidelines, 2) peer-reviewed scientific and medical evidence, 3) nationally recognized professional standards, 3) expert opinion, 4) the generally accepted standards of medical practice, and 5) treatments that are likely to provide a benefit to a patient for conditions for which other treatments are not clinically effective. The reviewer must consider these standards in this order. These are the same standards used for Knox-Keene health plans, however, the reviewer can consider guidelines in any order. The identity of the reviewer will not be disclosed to the applicant or defense attorney. The reviewer must review all pertinent medical records of the injured worker and has 30 days to render a decision on whether the disputed health care service Is medically necessary to cure or relieve the injury. DWC can use the IMR system utilized by the Department of Managed Health Care for group health coverage until they have the ability to implement an IMR system. The existing process for requesting a second-opinion for spinal surgery was repealed. Disputes regarding spinal surgery will be resolved through the IMR process. Employers must pay the cost of IMR. IMR reviewers must be physicians as defined by Labor Code , be knowledgeable in the treatment of the injured worker and the proposed treatment, and hold an unrestricted license in any state in the United States. California licensed physicians are to be given preference over out-of-state physicians. As of January 1, 2014, IMR reviewers cannot also be Qualified Medical Evaluators (QMEs). IMR decisions are presumed to be correct. Allows a second IMR if either party has new or different information that was not presented to the employer or insurer at the time of the initial IMR process. Makes the results of the IMR binding on all parties, absent clear and convincing evidence of fraud. Codified a 2006 ruling in Knight v. UPS that said that an employer is responsible for treatment an injured worker obtains outside a network only if the employer s failure to properly notice the network resulted in an actual denial of care. Failure to give notice to workers about the network is not justification to self-procure treatment outside of the network. Injured workers are responsible for the costs and outcomes of treatment procured outside a validly established network. Medical-Legal Issues Qualified Medical Evaluators/Agreed Medical Evaluators 5 California Orthopaedic Association

6 Limits Qualified Medical Evaluators (QMEs) to 10 practice locations. Prohibits a chiropractor from serving as the primary treating physician after 24 chiropractic sessions. Clarifies that it is not an ex parte communication to contact the physician regarding scheduling, whether records have been received, inquire whether the injured worker attended the evaluation, inquire regarding need for diagnostic testing, anticipated report completion date, or other purely administrative issues. Prohibits add-ons for psychological conditions, sexual disorders and sleep dysfunction in permanent disability awards. An injured worker who is a victim or witness to a violent act or who suffers a catastrophic injury could still increase their award if they suffered a psychological condition as part of the original injury. Repeals Labor Code Section 4066 which automatically allowed attorney fees even if the Agreed Medical Evaluator s evaluation was contested by the employer. Medical Provider Networks An injured worker has the right to retain their own personal physician if they are also covered by health care insurance at the time of the injury. In these cases, medical treatment, utilization review of medical treatment, access to medical treatment, and other medical treatment issues shall be governed by the applicable provisions of the Insurance Code. The insurer may require prior authorization of any nonemergency treatment or diagnostic service and may conduct reasonably necessary utilization review. A report by a provider outside of an MPN cannot be the sole basis of an award for compensation. Eliminates the requirement that non-occupational providers make up at least 25% of a medical provider network (MPN). Requires periodic audits of MPNs and authorizes discretionary MPN audits every 4 years. Provides that failure of an employer to post notice of any MPN is not a sufficient reason for an injured worker to treat outside of the network. As of January 1, 2014, requires that a treating physician can only be included in the network if the physician or authorized employee of the physician gives a separate written acknowledgement that the physician has agreed to be part of the network. Every medical provider network must include one or more persons who are medical access assistants to help an injured worker find an available physician and assist injured workers in scheduling appointments. Liens Workers Compensation Appeals Board Establishes a $150 lien filing fee and a $100 activation fee for liens that have already been filed with the Workers Compensation Appeals Board. The loser has to include the lien filing fee in the award. 6 California Orthopaedic Association

7 Two other Workers Compensation bills that passed in the last days of session. AB 1687 Would authorize attorney fees when an injured worker with an award of future medical care hires an attorney who successfully appeals a utilization review decision to deny or modify treatment. AB 1454 Would allow audiologists to become qualified medical evaluators (QMEs). They are required to consult with a physician on evaluations when requested by an employer, insurer, injured worker, or applicant attorney. The Governor has 30 days to act on these bills. If signed into law, COA will continue you to update on the implementation of the reforms as more details become available. Questions should be directed to COA: coa1@pacbell.net Phone: California Orthopaedic Association 1246 P Street Sacramento, CA Phone: coa1@pacbell.net Updated: October 31, California Orthopaedic Association