California: DIR Director Christine Baker Provides Update on Progress of SB 863 Eighteen Months After Operative Date

A report from the California Workers’ Compensation & Risk Conference, Sept. 10-12, 2014, Dana Point, CA

By David Bryan Leonard, Esq.

Without pause, Christine Baker, Director of the California Department of Industrial Relations, took the stage immediately following national basketball player James Worthy’s inspirational discussion of the elements of the team work and emphasis of the need for each team player to adhere to the team’s leader’s philosophy irrespective of an individual’s thoughts or impressions.

Stepping up to the microphone while the rumble of applause for Mr. Worthy’s presentation echoed away, Ms. Baker proclaimed that she is a team player. She began by referring to her new boss David Lanier, Secretary of the California Labor and Workforce Development Agency, whom she described as tough, frugal and thoughtful. She noted that DIR, just like every other governmental department, has experienced freezes, furloughs and crises. Despite the funding difficulties, over the past several years, DIR has been rebuilding itself. It has implemented a modernization program to evaluate efficiency and evaluate departmental workload and structure along with the creation of new policy and procedural guidelines. The goal is to create a fair playing field for employers and employees, ultimately leading to a clear and fair enforcement of the rules to increase compliance and deter California’s underground economy.

Despite these problems and challenges, DIR did win a national award for its lien filing program. DIR is also grappling with the QME panel process, which it is streamlining in an effort to maintain up-to-date panel issuance.

Ms. Baker talked about budgetary review and lack of funding. DIR is using employer funding fees and also creating industry specific assessments, which would allow DIR to focus funding costs on specific enforcement problems such as oil refineries. A task force is in place to monitor and continue to assess refinery progress.

In addition, Senate Bill 863 addressed one of the largest system costs drivers by creating the lien filing fees. These fees were intended to make the system more efficient and to eliminate fraud and abuse.

After reviewing DIR’s past success and growth, Ms. Baker turned to the topic of bringing back humanity to the workers’ compensation system. An emerging problem is the need to bring the individual medical practitioner back into medicine. Specifically, Ms. Baker noted that the treatment guidelines are flexible. Indicating that these guidelines may not be applied as intended, Ms. Baker noted that the system needs to bring back compassion and consideration of the individual injured employee. Senate Bill 863 did address the majority of abuses. It cut out the overuse of opiates and reduced the extent of unnecessary treatment. It removed unnecessary billing incentives and created an RBRVS to rebalance treatment value. Second opinions for spinal surgery are no longer required. This is now addressed by the IMR process. There is no more duplicate payment for spinal hardware. Lower reimbursement rates have led to lower claims costs. Ms. Baker also observed that there has been a reduction in the number of disputes and, thus, reduced litigation costs. Currently, there are one half of the number of liens coming into the system when compared to previous times. The filing fees have generated approximately $40 million. The reduction in lien litigation is saving the industry $270 million. The rating Bureau is indicating that future insurance costs should go down. In short, the tail of the SB 863 process is working its way through the system. Ms. Baker recommended that the community be patient as the results are still coming in.

Turning to the IMR process, Ms. Baker noted that 20% of the utilization review decisions are reversed by IMR. Ms. Baker believed this number was too high because it meant that 20% of the UR decisions were incorrect and injured workers were being denied treatment. Ms. Baker commented that in many cases, for inexpensive treatment modalities, IMR costs more than the actual treatment service in dispute. Hence, in many cases, good appropriate medical care is more reasonable than the IMR process itself. Ms. Baker explained that employers and insurance carriers need to set the system right. The employer has the ability to decide whether or not it is going to send a treatment request to utilization review. Better decisions need to be made regarding which cases are sent to utilization review in order to avoid the unnecessary IMR process. Ms. Baker emphasized that the focus should be on the employees care and returned to work.

Moving on to the topic of labor and management, Ms. Baker noted that it appeared that self-insured employers were benefiting more from the reforms in SB 863 then insurance carriers. [To the author, it appeared that Ms. Baker may have been insinuating that self-insured employers have more flexibility to make individual case decisions resulting in better cost savings. It may be that self-insured employers are not sending every request for utilization review and may be allowing their adjusters to make better individual decisions regarding quested medical treatment.]

Specifically addressing the IMR tidal wave, Ms. Baker observed that the system contained a 20% level of duplicate filings. Furthermore, 25% of the filings were not eligible for IMR. This means that only 55% of the IMR requests in the tidal wave were actually eligible for review. Progress is being made to quickly process the tidal wave. All valid IMR requests will be processed and those that are not eligible will be excluded.

Looking toward the future, Ms. Baker anticipated that there would be better control regarding the use of narcotics and the reduction of drug addiction. There may be an increased focus on wellness and injury prevention as this may be a good way to achieve cost savings. Future studies will result in new regulations. Current hot topics include home health care, interpreters and copy service fees. Issues such as the overuse of the utilization review process will be considered. Ultimately, there may be regulations regarding when utilization review should be commenced. One commentator from the audience suggested that all claims adjusters should be given a bundle of authorization capacity in order to better filter which treatment requests go to UR and which are approved on the spot by the adjuster.

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