AUGUST 27, 2016: Late session amendments to a broad-reaching bill to ease utilization review early in the life of a workers’ comp claim while cracking down on fraudulent medical liens were enough to win over California employer and insurance industry support for an administration-backed bill. SB 1160 by Sen. Tony Mendoza (D-Artesia) cleared the Assembly Insurance Committee and is expected to head soon to the Governor’s desk for signature.

The bill appears to be another compromise hammered out in large part by the employer and labor representatives to the Commission on Health, Safety and Workers’ Compensation (CHSWC). Commissioner Sean McNally representing employers, and Commissioner Christine Bouma representing labor were seated at the witness table next to Sen. Mendoza to offer their joint support for the bill. SB 863 had a similar genesis among labor and management representatives to the Commission. Behind the scenes was Division of Industrial Relations Director Christine Baker.

The Insurance Committee also passed on consent AB 1244 by Assemblyman Adam Gray (D-Merced) to suspend physicians convicted of healthcare fraud from treating injured workers. The bill also creates a special lien resolution process for handling liens filed by a convicted provider when the criminal case does not resolve the filed liens. The special process will determine if the liens were related to the criminal activity and therefore dismissed.

Sen. Mendoza, chair of the Senate Labor and Relations Committee, made it clear to the committee that the intent of SB 1160 is to speed up delivery of care to injured workers and to tackle the on-going abuse of the medical lien process by the subset of providers’ intent on bilking the system.

In the ramp up to the hearing, the Department of Industrial Relations released information showing that providers whose owners have either pled guilty or been indicted on fraud charges hold some $600 million in liens.

The Department maintains that the bill could generate overall savings of $818 million for California employers on their workers’ comp costs. The bill targets fraudulent activity by staying liens filed by providers charged with workers’ comp, insurance or medical fraud. The bill also clarifies the existing prohibition on assignment of liens and requires lien filers to make a declaration under penalty of perjury that the dispute is not subject to independent bill review and that the lien claimant is qualified to file the lien. Failing to file the declaration or filing a false declaration is grounds for dismissal with prejudice.

The declarations will be required for all liens filed after Jan. 1, 2017. Lien holders with older liens will have until July 1, 2017, to file the required information. Opponents of the bill testified that holders of the 1.2 million liens currently in the system might not have access to all of the required information to document a denial of care and will have to go the Workers’ Compensation Appeals Board to obtain that information. They predicted that this would clog the courts, but the argument was not persuasive.

UR Changes

Sen. Mendoza testified to the committee that the proposed changes to the utilization review system benefit both workers and employers. Even the stated opponents to the bill say they support the proposed changes to the UR system. The UR changes are proposed to take effect for all dates of injury occurring on or after Jan. 1, 2018.

“This bill speeds up medical care at the beginning of the claim getting the worker back to work quickly. SB 1160 also ensures that the UR decisions issued in the event of a medical dispute are issued for the right reasons and not for financial incentives,” Mendoza testified. “For employers, SB 1160 will ensure that the injured worker goes back to work quickly, but also provides protections to ensure that they will have the tools to remove medical providers that provide inappropriate, unnecessary and dangerous medical care.”

The bill would generally exempt most common medical care from UR during the first 30 days from prospective utilization review as long as a network or predesignated physician renders the care. Amendments adopted yesterday clarify that this exemption only pertains to accepted body parts or conditions. Surgeries, home health care, MRIs and expensive durable medical equipment would still be subject to review, however, unless it is an emergency situation.

Retrospective review would be allowed to determine if the medical care was in line with the medical treatment utilization schedule (MTUS). Providers that are not adhering to the guidelines could be removed from the medical provider network (MPN) and also be barred from providing UR-exempt care in the future.

WCIS Penalties

The bill now also includes a more modest penalty provision for employers and claims adjusters that fail to report required data to the state’s Workers’ Compensation Information System (WCIS). An analysis of the bill notes that some entities are choosing to pay the current $5,000 penalty rather than report data. The bill calls for an annual penalty cap of $10,000, but earlier versions would have allowed penalties to rise eventually to $45,000 for recalcitrant claims organizations.

The bill does call for the public shaming of administrators though that are not complying with the reporting requirements. Under the legislation, the Division of Workers’ Compensation administrative director is to publish an annual report and list claims administrators who are in violation of the data reporting requirements.

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