California DIR Officials Outline Goals and Tasks for Implementing SB 863 Workers’ Comp Reforms

 By David Bryan Leonard, Esq., Special to the LexisNexis Workers’ Compensation Law Community

The 2012 California Workers’ Compensation and Risk Conference opened September 19, 2012 at the St. Regis Resort, Dana Point with an update from the DIR/DWC/WCAB entitled “What’s on the horizon for 2013?”

Presented by WCAB Chairwoman Ronnie Caplane and Katherine Zalewski, Chief Counsel for the Department of Industrial Relations, the panel gave a candid summary of Senate Bill 863.  Just signed into law by Governor Brown, SB 863 was presented as a sweeping overhaul of California’s Workers’ Compensation Act.

Acknowledging that SB 863 imposes seemingly “daunting” tasks for the WCAB and DIR, both panelists noted the need for additional enabling regulations from each Department.

Effective January 1, 2013, with gradual wage loss phase in, SB 863 eliminates permanent disability increases for underlying injuries that subsequently cause sleep disorders, sexual dysfunction and psychiatric disability. While briefly noting that issues such as independent individual injury may exist, both panelists agreed that an injured worker with compensable consequences would be entitled to treatment to cure or relieve these conditions.

The panelists anticipate that SB 863’s provision for supplemental job displacement benefit in the form of a voucher for up to $6,000 to cover various education-related retraining and skill enhancement expenses, in lieu of employer offers of employment, would result in less friction within the workers’ compensation system.

In addition, the panel believed that eliminating the need for permanent disability advances if the employer has offered the employee a position that pays at least 85 percent of the wages and compensation paid to the employee at the time of injury, or if the employee is employed in a position that pays at least 100 percent of the wages and compensation paid to the employee at the time of injury, would avoid the exhaustion of permanent disability, thus allowing money to be available at the time of settlement. Specifically, it was hoped that this modification to the permanent disability advance process would avoid cases where all permanent disability is dissipated and allow cases with resulting disability to settle with a sum payable.

The panel then turned to the new methods to resolve medical treatment disputes. For injuries occurring after January 1, 2013, and then for all treatment disputes occurring after July 1, 2013, the administrative director’s office will implement an Independent Medical Review (“IMR”) process. The panel explained that the IMR protocol was intended to replace the need for Agreed Medical Examiners (AME) and Qualified Medical Examiners (QME) to resolve treatment disputes. The IMR process is intended to resolve treatment disputes in an expedited fashion and eliminate the delays associated with obtaining a medical legal report for treatment disputes or expedited hearings.

The panel explained that the IMR process will be designed to remove industry participants from potentially influencing treatment decisions. To this end, rather than have insurance carriers contract with utilization review companies, the Division of Workers’ Compensation (“DWC”) will contract directly with independent medical organizations. The panelists noted that this contract may be with either a single or multiple review agencies. Until regulations and contracts are in place, and to allow the IMR process to go into effect on January 1, 2013, the Administrative Director may contract with independent review organizations currently active with the Department of Managed Health Care pursuant to Section 1374.32 of the Health and Safety Code.

The panelists noted that the anonymity of the IMR physician and the lack of face-to-face interaction with the injured worker will present some regulatory challenge to insure unbiased and correct medical decision making. In addition, it was recognized that practical questions such as “does an incorrect or untimely utilization review trigger the IMR process” will require additional consideration. Finally, regulations regarding the limited grounds for challenging the validity of the IMR’s decision may be required.

While there are still a number of details to be resolved, the panelists both concluded that the new treatment dispute resolution process has a lot of positive potential. Some of the immediate benefits would be removing the Workers’ Compensation Judge (“WCJ”) from having to make medical treatment decisions and avoiding treatment authorizations based on technical misapplication. An example was given where it seems to be in the injured worker’s best interest to avoid a significant medical procedure, such as surgery, simply because an opinion is late. It was also hoped that the new IMR process would eliminate potential conflicts of interest between the reviewing physicians and utilization review service payors. Ideally, treatment decisions should be based on unbiased reporting. Additionally, the panelists noted that the new IMR treatment protocols should result in a natural industry adjustment process. Specifically, once patterns of medical authorization become apparent, it is hoped that the participants will self-regulate and adjust their decision making process to authorize medical treatment rather than repeatedly incur the expense of the IMR protocol.

While both AMEs and QMEs would be removed from the medical treatment dispute process, both panelists observed that medical legal reports would still be required to resolve significant issues such as injury AOE/COE, nature and extent of disability, and the need and type of future medical treatment. In addition, it was agreed that the IMR physician can only address treatment issues. The IMR cannot provide forensic opinion or assessment on medical legal issues such as whether or not an injury occurred.

The panelists observed that SB 863, and its enabling regulations, would end the treating physician’s frustration regarding whether or not they are in a Medical Provider Network (“MPN”). Effective January 1, 2014, a physician may be included in an MPN only if the physician, or authorized employee of the physician, gives a separate written acknowledgment that the physician is a member of the network. Hoping to facilitate the injured worker’s ability to locate participating treating physicians, SB 863 now requires that every MPN employ one or more persons to act as “medical access assistants”. These individuals would be required to help an injured employee find an available physician and assist the employee in scheduling treatment appointments.

Finally, the DIR and WCAB were hopeful that SB 863 would reduce the extent of litigation regarding employer posting of an MPN notice. Specifically, while the employer is still required to notify employees of the existence of an MPN, under amended Labor Code Section 4616.3(b), the employer's  failure to provide or post MPN notice will no longer be the sole basis  allowing an employee to treat outside of the MPN. Under the amendment, injured workers will be allowed to treat outside an MPN only if the employer has failed to provide proper notice of the MPN and it is shown that the failure to provide notice has resulted in the denial of medical care.

The panelists concluded that a lot of work is still required to create and implement the enabling regulations envisioned by SB 863. Both were confident that with community input and substantial DIR and WCAB effort, the necessary regulations will be created.

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***Robert G. Rassp, Esq. has written a 14-page article analyzing the 8/30/2012 version of SB 863 and Permanent Disability. The article is for sale on the LexisNexis Bookstore. For further information, click here.***