What were the top 10 developments in California workers' compensation during the first half of 2011?

Here's my list, in no particular order. You should note that many of the items are developments that are still in transition, so things may be very different as the year progresses.

1. CALIFORNIA COURTS HEARD ARGUMENTS IN SEVERAL KEY CASES

In Baker v. WCAB, the California Supreme Court heard arguments regarding the interpretation of the cost of living COLA factor statute which affects some severely disabled workers injured after 2003.
The California Court of Appeal heard oral arguments in Ogilvie v. City and County of San Francisco. Ogilvie deals with the issue of whether and how the workers' comp rating schedule can be rebutted with wage loss data.
Meanwhile, the Bakersfield-area California Court of Appeals 5th District refused to hear the appeal in the Almaraz case, refusing to grant a writ. Defendants in Almaraz have now appealed to the California Supreme Court.

2. THE WCAB ISSUED A RULING CRACKING DOWN ON USE OF NON-MPN
DOCTORS

In a decision that has attracted much attention, an en banc decision of the California Workers Compensation Appeals Board, Elayne Valdez v.
Warehouse Demo Services, held that where unauthorized medical treatment is obtained outside a validly established and properly noticed Medical Provider Network (MPN), reports from the non-MPN doctors are inadmissible, they may not be relied upon, and defendant is not liable for their cost:
http://www.dir.ca.gov/wcab/EnBancdecisi ... aldezE.pdf

The applicant has filed for reconsideration in Valdez. Assuming Valdez is not reversed, there will likely be increased numbers of followup cases dealing with whether MPNs were properly set up and noticed and compliant with other regs.
Also notable was Scudder v. Verizon, a WCAB panel decision where the board rejected use of non-MPN specialists in a case where the applicant had properly predesignated a treating physician who was not in the MPN.
Overall, Valdez and Scudder threaten the practice model of some attorneys and doctors who have regularly ignored the MPNs.

3. INCREASED FOCUS ON PRESCRIBING PATTERNS AND USE OF OPIOIDS IN WORKERS' COMP MEDICAL TREATMENT

At midyear, a dispute emerged as the State Compensation Insurance Fund sent an enrollment form to doctors on the SCIF MPN asking them to agree not to prescribe opioids for longer than 60 days and not to write any prescriptions for compounded medicals without prior approvals.
Applicant attorneys and doctor groups objected, writing to the DWC to question whether this violated MPN regs and even invalidated the SCIF MPN network.
SCIF's action followed increasing concerns among many system stakeholders about the efficacy of opioid medications and compounded medications and the costs associated with them. In January 2011 CHSWC heard a RAND study on issues associated with compound drugs in California's workers' comp program.
Two studies by the California Workers' Compensation Institute charged that the top 10% of doctors who prescribe Schedule II opioids for California injured workers account for nearly 80% of all workers' comp prescriptions for these drugs:
http://www.cwci.org/research.html

A Workers' Compensation Research Institute study of opiate usage in workers' compensation in 17 states revealed that California was below the median among the 17 states in terms of the percentage of workers who received narcotic pain medications. But the WCRI study claimed that
California workers were being prescibed higher amounts of narcotics, and for longer periods, than the median state (the list of states included most of the largest and most populous U.S. states)

4. CALIFORNIA WORKERS' COMP REMAINED MORE PROFITABLE THAN THE NATIONAL AVERAGE

Release of a study by the National Association of Insurance Carriers
(NAIC), a report comparing profitability of insurance by lines among different states, documented that California workers' comp is more profitable than the national average.
While California workers' comp is now considerably less profitable for carriers than soon after the 2003 & 2004 reforms, the NAIC study shoed California ranked 25th in profitability among the 46 states that do not have a monopolistic comp fund:
http://www.naic.org/store_pub_statistic ... fitability

5. BROWN ADMINISTRATION IS QUIET ON THE WORKERS' COMP FRONT

We heard little from the Jerry Brown administration regarding workers' comp during the first half of 2011. Undoubtedly, the Governor would be happy to keep workers' comp low on the radar.
As the second half of 2011 begins, there are two vacancies at the statewide Workers' Compensation Appeals Board. One is due to the retirement of WCAB Commissioner James Cuneo; the other is a seat vacated when Schwarzenegger appointee Commissioner Agazharian was not confirmed.
No Administrative Director has been named at the Division of Workers Compensation, although rumors abound that an appointment is pending soon.
And no new Executive Director has been named at CHSWC to replace Christine Baker, who was moved to head up the Department of Industrial Relations.
Meanwhile, various policy issues simmered, but few boiled.

6. CHSWC REPORT ON EAMS ASSESSES STATUE OF EAMS

In June 2011, CHSWC unveiled an assessment of the DWC electronic adjudication system known as EAMS. The report confirms many of the frustrations of system stakeholders with the system and makes a number of recommendations for the system's future:
http://www.dir.ca.gov/chswc/Reports/201 ... Report.pdf

Some of the flaws noted with EAMS are design flaws, many centering on decisions by Deloitte Consulting to use Curam software that was ill-suited to the special needs of the workers' comp system.

Lack of staffing for scanning, limited access due to licensing issues, and consequential errors associated with the system are among the issues discussed in the report.

But with money in short supply, tackling these problems will be a big hurdle for the DWC.

7. CWCI STUDY DOCUMENTS THAT ADMINISTRATIVE COSTS ARE GROWING FASTER THAN ACTUAL MEDICAL COSTS

A study by the California Workers Compensation Institute showed that transactional costs such as bill review and utilization review were growing, while the spending on actual medical treatment in proportion to transactional costs had decreased.
As noted in an analysis filed by Brad Cain in the Workers' Comp Executive (www.wcexec.com), CWCI statistics show that "only 75 cents of every dollar spent on "medical benefits" during the first year of care goes to actual medical treatment". Pouring over the stats, Cain notes that "spending on medical cost containment services and medical legal reports continues to increase at double-digit rates". Overall, Cain notes that "employers in California are spending more to care for injured workers, but the percentage of the dollar that actually pays for medical treatment continued its steady decline through 2010".
It appears that the middlemen are prospering.

8. THE WCIRB DECIDED THAT IT WOULD NOT SEEK AN INCREASE IN THE PURE PREMIUM COMP RATE

After considering filing a request for a 40% hike in the advisory workers' comp rate known as "pure premium rate", the Workers' Compensation Insurance Rating Bureau (WCIRB) decided not to file for an increase after all.

Under prior Insurance Commissioner Poizner, double digit rate requests had been rejected in 2009 and 2010:
"Commish's Parting Shot"
http://www.workerscompzone.com/index.ph ... 123-214035

Instead of filing for an actual increase, the WCIRB decided to do an "informational filing".

But in May 2011 the "informational-only" submission was withdrawn, after the WCIRB was told by the Insurance Commissioner's office that the submission might trigger requirements for public hearings.

With longtime WCIRB President Robert G. Mike retiring, it's not clear when the WCIRB will be coming back with a rate filing request.

Form more analysis of what has happened with California rates over the last few years, here's a post, "Another Whopper Request":
http://www.workerscompzone.com/index.ph ... 403-211906

9. TRANSITION TO A DIFFERENT METHOD OF COMPENSATION DOCTORS REMAINED HOTLY CONTESTED

At mid-year 2011, it remained unclear whether California would be moving to a new method of compensating treating doctors in workers' comp cases.
A bill (SB 923) to mandate replacement of the current OMFS that compensates doctors with a schedule based on the Medicare RBRVS system remained under consideration in legislative committee.
The bill was generating great controversy among various groups of treating physicians and clinics, some of whom would benefit under the switch-over and some of whom would lose. Some observers predicted a physician exodus from the system in the event of such a switch. Others were not so sure.
Here's a link to recent blog entries on the subject:
"Docs Charge That Bill Would Create Physician Exodus"
http://www.workerscompzone.com/index.ph ... 706-222837
"Doctors and Fee Schedules"
http://www.workerscompzone.com/index.ph ... 714-212320

10. A BUSY BUT INCONCLUSIVE LEGISLATIVE SESSION

As predicted, many workers' comp bills surfaced in the legislature as legislative Democrats carried a number of bills on the wish-list of labor and injured worker groups. Still, with the Governor's office preoccupied with the budget, it was not clear at mid-year exactly what Governor Brown would support in the workers' comp area. As in prior years, the California Chamber of Commerce attacked some bills as "job killers".
The legislature in in recess until August 15. Bills that appear to be stalled could be amended and inserted into other bills. And bills that have been moving through the process could end up getting nixed by the Governor.
Currently among the prominent bills are:
-AB 1155 (Luis Alejo, D-Salinas) (limiting discrimination in apportionment)
-AB 378 (Jose Solorio, D-Santa Ana) (regulating compound drug reimbursement rates)
-AB 228 (Felipe Fuentes, D-Sylmar) (allowing SCIF to write coverage on out-of-state employees)
-AB 1168 (Richard Pan, D-Natomas) (requiring the DWC to establish a voc rehab expert fee schedule)
-AB 947 (Jose Solorio, D-Santa Ana) (extending the 2 year TD cap to 240 weeks in some cases where additional medical treatment is required to reach MMI status)
-AB 335 (Jose Solorio, D-Santa Ana) (requires the DWC to maintain a web based informational booklet)
-SB 863 (Ted Lieu, D-Torrance) (addressing lien filing requirements)
-AB 397 (Bill Monning, D-Carmel) (requiring contractors to show
coverage status when renewing contractor licenses

Highly subjective, that's my list of the Top 10 for the first half of 2011.

Julius Young
www,workerscompzone.com
www.boxerlaw.com

Would revamping California workers' comp physician fee schedules be playing with fire?

That's a question currently being debated in many circles.

Since 2001 the California Division of Workers' Compensation has been considering a change in physician reimbursement methodology. Studies have been performed under contract with the DWC.

In 2011, a bill was introduced to require California to move to another system, the RBVS. That bill, AB 923, carried by Kevin DeLeon of Los Angeles, has not moved from Committee since late June. But whether the bill stalls this year or not, the issue remains on the DWC's plate.

With a new DWC Administrative Director likely to be announced very soon, the issue of physician fee schedules remains in play.

Injured workers and applicant attorneys are very concerned about quality of care and access to care. Of particular concern is access to specialty care.

Would specialists, including surgeons and docs who do diagnostic tests, leave the California comp system in hopes of finding greener pastures if
adoption of RBVS means lower pay?

Generally, the RBVS method (also used by Medicare) would increase reimbursement rates to primary care physicians and shift pay away from specialists.

It's no secret in Sacramento that some of the occupational medical clinics
are fans of such a shift. Occ med chains would benefit from such a transition.

Would the shift lead to a doctor exodus?

That's a question that is being analyzed by one of my blogging compadres, David DePaolo. DePaolo is the publisher of Workcompcentral.com.

In his recent blog posts, has analyzed the issue. Here's a quote from a recent post, outlining his focus:
" If you will recall, I opined that the medical community had not proffered any valid research reflecting that a change in California to a RBRVS reimbursement schedule would create an access issue for injured workers."

DePaolo continues: "I was taken to task by Carl Brakensiek of the California Society of Industrial Medicine and Surgery (CSIMS), and Robert Weinmann (The Weinmann Report). Mr. Brakensiek offered to supply me with studies that, he said, "indicate there are substantial access problems in RBRVS states with low (below 125%) Medicare conversion factors." I promised to review each report and, if I'm wrong, admit so publicly here and write a letter to the legislature as to my findings; and if I'm right, I would still write to the legislature..."

So DePaolo notes that "I was supplied with several studies which I listed in my post of July 5. In my opinion, to make my promise complete, each of these reports deserves time alone, and comment alone - thus each report will be reviewed in separate blog postings"

Over the past week DePaolo has commented on specific studies that may be relevant to the issue of whether RBVS would cause problems with worker access to physicians.

I'm not ready to endorse all of DePaolo's conclusions, but his analytical effort serves as a good introduction to anyone trying to get up to speed on the issue. So here are links to his commentaries on specific posts:

"2007 Levin/Kent Report Raises Concerns, But Not Access Concerns"
http://daviddepaolo.blogspot.com/2011/0 ... cerns.html

" Levin/Kent 2008 Study Does Not Prove Access Issues"
http://daviddepaolo.blogspot.com/2011/0 ... prove.html

"Association of CA Neurologists 2005 Report - No Better"
http://daviddepaolo.blogspot.com/2011/0 ... -2005.html

"Dembe Report Indicates More Issues to Access than Fees"
http://daviddepaolo.blogspot.com/2011/0 ... es-to.html

"Hawaii Report on Fee Schedules = Best Evidence, Mixed Results"
http://daviddepaolo.blogspot.com/2011/0 ... s-125.html

"Johnson Study - Doctors Won't See Patients"
http://daviddepaolo.blogspot.com/2011/0 ... ients.html

After reviewing the studies, DePaolo remains skeptical that they demonstrate that adoption of RBVS and lower pay will hamper worker access to care.

But a big unknown is how the change would fit with other changes in the healthcare system which may be coming. As the population ages there are shortages of specialists in many places. For example, dermatologists and psychiatrists are in short supply in many places in the state. And if Obamacare survives political and legal challenges, will specialists be busier treating new populations that didn't have insurance?
That's the sort of variable that's not in the studies, but it needs to be considered in any switch to RBVS.

This is a hot-potato issue. I'll be commenting further soon.

And soon I'll be doing my piece on the Top Ten developments in California workers' comp during the first half of 2011.

Julius Young
www.workerscompzone.com
www.boxerlaw.com

Sometimes you read a statistic that jumps out at you.

So it was today when I read this, in a piece by Motoko Rich in The New York Times:
"Close to $2 of every $10 that went into Americans’ wallets last year were payments like jobless benefits, food stamps, Social Security and disability, according to an analysis by Moody’s Analytics. In states hit hard by the downturn, like Arizona, Florida, Michigan and Ohio, residents derived even more of their income from the government."

20% of the national income coming from public benefits, of which workers' comp is one form.

And like it or not, government is shrinking.

As programs are cut or eliminated, there's less money circulating, less purchasing, less expanding, less hiring.

Programs like workers' comp and unemployment may burden businesses, but they also put money in people's pockets.

What will happen as the federal stimulus expires and government budgets, in the red, are cut? Rich notes that:
"By the end of this year, however, many of those dollars are going to disappear, with the expiration of extended benefits intended to help people cope with the lingering effects of the recession. Moody’s Analytics estimates $37 billion will be drained from the nation’s pocketbooks this year."

Here's a link to the article, which explores the relationship between the 20% and a fragile economy:
http://www.nytimes.com/2011/07/11/busin ... ry.html?hp

Stay tuned.

Julius Young
www.workerscompzone.com
www.boxerlaw.com

If you had to pick a messy California problem that has gotten little attention in the press, the financial mess of California's Unemployment Insurance Fund would be a good candidate. California has borrowed over $11 billion from the Federal government to keep the California program running.

This is an issue that should be near and dear to the hearts of California workers' comp system stakeholders. Why?

First, UI benefits are part of the general worker safety net. I can't prove it with stats, but if there is a reduction in the availability of unemployment benefits, there's likely to be more pressure on workers to seek some funds through the workers' comp system, whether rightly or wrongly.

Second, if employers are forced to pay higher amounts into the Unemployment Insurance Fund, this will be seen as "bad for business' and increase political pressure to hold down workers' comp costs.

California's Legislative Analyst has now produced a report, "Managing California's Insolvency: The Impact of Federal Proposals on Unemployment Insurance". A pdf version of the report is downloadable here:
http://www.lao.ca.gov/reports/2011/ssrv ... 070711.pdf

Here is the executive summary of the report:
"Background. The Unemployment Insurance (UI) program provides weekly benefits for workers who have lost their jobs through no fault of their own. The UI program is authorized in federal law, administered by California’s Employment Development Department (EDD), and is financed by contributions paid by employers.
Many States Face UI Fund Insolvency. Beginning in 2008, the UI funds of many states, including California’s, were under stress and soon became insolvent. To continue payment of UI benefits, many states sought loans from the federal government. As of June 2011, California’s outstanding federal loan totaled over $10 billion. The state is required to make interest payments on its federal loan, the first of which is expected to total $320 million and is due September 2011.
Federal Proposals Have Been Introduced to Correct UI Fund Insolvency. In response to UI fund insolvency in many states, three federal proposals have recently been introduced to address the insolvency issue. Two of these proposals introduce a comprehensive solvency plan aimed at ensuring the long-term solvency of states’ UI funds. In addition to providing a framework for achieving solvency, these two proposals would suspend state interest payments and federal UI tax increases on employers during the next two years. The third proposal includes significant changes to program financing in the short-term and tightens eligibility requirements which could substantially impact future costs of the UI program.
Federal Proposals Could Solve California’s UI Fund Deficit. All three of the recent federal proposals would improve the solvency of California’s UI fund. We find that the two comprehensive solvency plans would likely eliminate California’s UI fund deficit by 2016 and put California on track to develop a sizeable reserve by the end of the decade. This improved solvency would come through a significant increase in the UI employer contributions—amounting to a total increase of $13 billion between 2012 and 2018 compared to current law.
Pending Federal Proposals Complicate Difficult Choices for the Legislature. It is currently unclear whether any federal reforms will be enacted. This uncertainty complicates the Legislature’s decision as to how it should address the insolvency of its UI fund. By acting now, the Legislature could stop the growth of the UI fund deficit and reduce associated state interest costs. On the other hand, such actions have the disadvantage of increasing employment costs and/or decreasing aid to unemployed workers during what is likely to remain a difficult economic time for the state.
Ensure Long-Term Solvency of the UI Fund. Regardless of whether Congress acts to address the UI insolvency problems faced by California and other states, we recommend that the Legislature ensure implementation of a long-term solvency plan by 2014. If federal reforms are enacted, it is likely that no additional action by the Legislature will be necessary to ensure long-term solvency. However, if no federal reforms are enacted, it will be critically important for the Legislature to adopt its own long-term solvency plan. In developing such a plan, we recommend that the Legislature consider an approach which includes both increased employer contributions and decreased benefits for UI claimants."

So it looks as though the eventual way out may involve higher employer contributions, and reduced benefits to workers.

Expecting lots of further help from the Federal government is likely to be unrealistic, just as the people of Athens aren't getting much love from the folks in Brussels.

It's unknown whether this collateral impact would be only minimally bad for California's workers' comp system, or whether the political and economic fallout would be substantial.

But such a scenario may be on the horizon in a few years as the endless legislative "Comp Wars" are fought.

For an earlier post I did on the issue "Over at EDD", click here:
http://www.workerscompzone.com/index.ph ... 026-223149

Stay tuned.

Julius Young
www.workerscompzone.com
www.boxerlaw.com

One of the bills that's been under consideration this legislative session is
SB 923 (DeLeon).

If California adopts a different system for compensating treating doctors there will be winners and losers.

A recent op-ed piece in the California Progress Report by Dr. Robert Weinmann of San Jose sounds an alarm about the bill. Here, quoted in entirety, is Weinmann's argument:

"SB 923 (De Leon) is before the Assembly Appropriations Committee. SB 923 would replace the current Office Medical Fee Schedule (OMFS) that’s now used to pay the primary treating physicians (PTPs) and specialists who take care of injured workers in California. The OMFS would be replaced by the Medicare RBRVS system. The Medicare RBRVS is advantageous to primary treating physicians because it would raise their payment rates. The bill is sponsored by USHealthWorks which is divided into a management group which includes non-physicians as owners and a medical group which includes the PTPs. The bill would lower payments to specialists."

The background of this dispute goes back to 2007, when the DWC contracted with the Lewin Group to do a study in preparation for the 20008 update to the OFMS (Offical Medical Fee Schedule).
For years, California has compensated physicians by using CVRS, the California Relative Value Scale. But a move to RBRVS was being contemplated. RBVRS stands for Resource Based Relative Value Scale. It's a federal system from the Centers for Medicare and Medicaid Services, and it's used by many other states for computing compensation for workers' comp physicians.
Many doctors-including the California Society of Industrial Medicine and Surgery-have been concerned about the switch-over. In some states that adopted RBVRS, the payments to specialists decreased, causing an exodus of doctors from the system. In the past I've done posts on that topic; for example:
http://www.workerscompzone.com/search.php?q=chico

Weinmann charges that "The question for the injured worker is which system is likely to help them more or harm them less. At the present time the complaint about the OMFS is that it’s among the lowest pay scales in the USA. It is not a surprise to anyone that none of the participating doctors like it. On the other hand, it has paid enough to stay in business. Now USHealthWorks management has developed a bill that is helpful to their own medical group of PTPs – but at the expense of the specialists upon whom the PTPs depend in difficult cases. Not surprisingly, the specialists are not enamored of USHealthworks’ sponsored legislation."

According to Weinmann, "At the Assembly Insurance Committee hearing, Ronald Kent, MD, neurologist, stated that about 80% of specialists dropped out of participation in Workers Comp in Hawaii when that state adopted the Medicare RBRVS. Hawaii realized its error when the beleaguered specialists quit the system. Hawaii then raised it remuneration rates but many of the specialists did not return to the system once they realized how little the system cared about their own injured workers. They felt betrayed because they were betrayed."

Weinmann continues, noting "Stuart Bussey, MD, JD, also testified. He stated that his practice could get “a boost” from the Medicare RBRVS system because he is a PTP. On the other hand, Bussey also said that he could be cutting his own throat because he would lose access to the specialists such as the orthopedists, the neurologists, and the cardiologists he needs to help with the care of difficult specialty cases. He said he’d end up “holding the bag.” His reference was to holding the malpractice bag because he now would have patients to whom he could no longer provide indicated care.

Moreover, Weinmann notes that "Andy Parker, MD, Vice President of USHW, testified that he hadn’t seen any access problems – it was as though Dr. Parker and Dr. Kent were at different hearings. Maybe, Dr. Parker didn’t hear Dr. Kent’s testimony which is buttressed by Hawaii’s own internal reporting."

In conclusion, Weinmann claims that "The obvious solution is simply to reform the OMFS – that is the solution proposed by the California Society of Industrial Medicine and Surgery (CSIMS). It has not been accepted by USHealthWorks. It would appear as though the USHW management system isn’t worried that the PTPs in their medical group might lose access to specialists who would withdraw from the system once their already stingy pay schedule were replaced by an even stingier one. Injured workers know how difficult it’s been to get consultations and treatment from orthopedic specialists and other specialists. We believe that Senator De Leon knows it, too. We even believe that Dr. Parker knows better. The trick is to make them care enough to set aside SB 923 which will further deprive injured workers from access to specialty care.
Local unions need to exert their influence within the labor movement to stop this unwise legislation."

Here are links to the Lewin Group studies on RBRVS:

The initial study by the Lewin Group on adapting RBRVS to the California workers' compensation system can be found here:

http://www.dir.ca.gov/dwc/RBRVSReport/RBRVS_May2008.pdf

The Lewin Group supplemental study:
http://www.dir.ca.gov/dwc/RBRVSLewinRep ... rt2010.pdf

Currently, it's not clear whether SB 923 will advance through the legislature. Here is the most recent analysis of the bill posted online by legislative committee staff:
http://www.leginfo.ca.gov/pub/11-12/bil ... _comm.html

Stay tuned.

Julius Young
www.workerscompzone.com
www.boxerlaw.com