SB 863 Enacts Independent Medical Review System

Monday, October 29, 2012 | 0

Signed by the governor on Sept. 18, Senate Bill 863 brought in a host of changes that affect the business and litigation processes in the world of workers’ compensation. These changes were designed to address a host of problems that have been brewing since the passage and implementation of Senate Bills 228 (2003) and 899 (2004).

PRIOR LEGISLATIVE EFFORTS

Medical treatment and associated costs have always been under the legislative and policy microscope, so it shouldn’t be a surprise to see that bold steps were taken to try to reduce costs while ensuring that medically necessary treatment is provided. As many of us can recall, the 1993 reforms gave a legal presumption of correctness to the opinions of treating physicians, a maneuver that was intended to address skyrocketing medical-legal costs. However, when Minniear v. Mt. San Antonio Community College District (61CCC 1055) eventually extended that presumption to medical treatment determinations, employers had little leverage to question the recommendations of a treating physician, none of which were required to be in accordance with an evidence-based standard. Although employers could implement utilization review procedures, those reports were inadmissible at the WCAB.

Subsequent legislative changes in 2003 under the Davis administration made formal utilization review programs mandatory in California and ushered in the requirement that treatment be in accordance with evidence-based guidelines. During those legislative discussions, the Davis administration argued strongly for the inclusion of an Independent Medical Review (IMR) process based on the non-occupational IMR program regulated by the Department of Managed Health Care. It didn’t gain enough traction at that time for inclusion into SB 228, but the option of increasing medical control through a medical provider network was enacted upon the signing of SB 899.

But medical costs in workers’ compensation continued to rise. According to a recent report from CWCI, medical care costs for insurers increased by 4.6% in 2011 from the 2010 levels, and medical cost containment expenses represented slightly over 3% of total workers’ compensation expenditures (CWCI Bulletin 12-14, cited with permission). In an attempt to restrain costs before they further affected the insurer pure premium rates, several measures were taken in SB 863 to address them, including the resurgence of IMR to replace the medical-legal process governing post-utilization review disputes.

FROM UTILIZATION REVIEW TO INDEPENDENT MEDICAL REVIEW

While the utilization review process remains, injured workers may appeal any denials directly to a medical review organization contracted through the DWC. The reviewer will only review records, and the identity of the reviewing physicians will be unknown to the parties. Their decisions will be binding on all parties unless successfully appealed to the WCAB, but the WCAB jurisdiction is limited to specific factual circumstances and they will not have authority to contradict the medical opinion of a reviewer. This completely removes medical necessity disputes from the AME/QME process for claims with dates of injury on or after Jan. 1, 2013, and to all disputes over treatment requested on or after July 1, 2013, regardless of the date of injury.

There are some unknowns about how the IMR process in the non-occupational world will translate to the workers’ compensation system. Setting aside any legal or policy arguments, the volume of disputes in workers’ compensation is much greater. According to the Department of Managed Health Care’s 2011 annual report, only 1,436 cases were reviewed by the IMR organization. Such a small number likely reflects the layers of interim measures that are taken by managed care organizations to address patient grievances. In contrast, the Bickmore analysis of the cost/benefit of SB 863 was based on an estimate of 21,000 QME evaluations reflecting treatment disputes.

To get a better idea of how IMR works with medical necessity determinations, I queried the redacted decisions on the Department of Managed Care website. Using search parameters commonplace to the workers’ compensation world (“orthopedic/musculoskeletal,” diagnosis subcategory for “back pain,” and treatment subcategory of “pain management”), only four IMR decisions were made in 2011.

While we wait to evaluate the long-term impact of these changes, we can soon expect to see regulations implementing the IMR process, including the development of a fee to be paid by the employer for each IMR, estimated by Bickmore in their cost/benefit analysis at $500 per review. The $125 million in savings “scored” for this part of the reform are predicated on the elimination of 21,000 QME medical-legal costs, the elimination of approximately 30,000 liens expected to be affected by Independent Medical Review, and the offset of the anticipated fees for IMR.

Peggy Sugarman is director of training and organizational development for the Grancell, Lebovitz, Stander, Reubens and Thomas law firm. This column was reprinted with permission from the firm's quarterly newsletter.