California: Utilization Review and IMR in SB 863

California: Utilization Review and IMR in SB 863

Medical Treatment Changes

Some of the most extensive changes to the Labor Code in SB 863 are intended to tighten up medical control in both Labor Code § 4600 as well as in the Medical Provider Networks. One of the principle methodologies for controlling medical costs in this legislation appears to be the removal of the review of decision-making processes involving medical treatment from the Workers' Compensation Appeals Board to an Independent Medical Review (IMR) process. All appeals from utilization review determinations under Labor Code § 4610, will either be subject to a second UR review or directed to the Independent Medical Review process. The stated goal in the legislative package is to have medical decisions made by medical personnel rather than through the litigation process using QMEs, AMEs and the Workers' Compensation Appeals Board.

There are multiple other changes to the provision of medical treatment enacting with this Legislation many of which are designed to close various loopholes in statutory processes and increase certainty in medical treatment decision making. Changes other than IMR and UR will be discussed in subsequent messages.

Independent Medical Review Organizations:

Labor Code § 139.5 is added to the Labor Code empowering the administrative director to contract with "one or more independent medical review organizations and one or more independent bill review organization to conduct reviews pursuant to Article 2 (beginning with Labor Code 4600).

The Independent Medical Review organizations (and the same rules apply to the independent bill review organizations) applying for consideration for the DWC contract must be unaffiliated with any insurance carrier or TPA and are required to provide extensive documentation to the administrative director regarding their internal policies and procedures, their current clients (along with notice within five days of the change) and other requirements all designed to make certain that when Independent Medical Reviews are conducted there is no conflict of interest with the existing parties to a claim. The statutory scheme specifically provides the independent medical review (IMR) organization must have a California licensed medical director although it does not direct that independent medical reviews must be conducted by California licensed physicians. Included in the requirements for the application process is a description by the IMR organization as to how they assign cases to specific physicians presumably to make certain that they are matching up the specialty of the physician with the specific medical issue under review.

Until the bidding process results in contracts with both IMR and IBR providers, the AD is given several options to make certain both IMR and IBR services are available with the effective date of the legislation (1/1/13) and has the option of contracting the existing providers under contract with the California Department of Managed Care, arranging for an interagency agreement to obtain the services and services may be obtained without competitive bidding through 1/1/15. Clearly the intent is that this program is to begin working immediately.

IMR and IBR providers are given extensive protections from civil liability for communications involving medical information provided that in their communication with parties, the entity acts without malice, makes a reasonable effort to determine the facts of the matter communicated and acts with a reasonable belief that the communication is warranted by the facts actually known to the consultant after a reasonable effort to determine the facts. The Legislature appears to wish to make the position of IMR and IBR consultant (so designated in statute) an attractive one for providers to want and to shield them from undesirable civil liability.

The independent medical review process for utilization review is a mandatory process with limited further review as will be described below.

Utilization Review Appeals:

While the basis structure of the UR process as set out in Labor Code § 4610 is preserved, including the statutory timeframes, there are subtle but very significant amendments which make it considerably more employer friendly and which close some gaps in the UR process that the industry had been struggling with since 2004. There are also some changes to address issues which have been raised by various stakeholders such as the requirement that each entity performing UR is required to have a Medical Director licensed in California. However there is still no requirement that UR reviews must be performed by physicians licensed in this state.

More employer friendly provisions include:

  • Where a request for authorization is made retrospectively, if payment is made timely pursuant to Labor Code § 4603.2, not UR determination need be served [Labor Code § 4610(l)]
  • If a utilization review decision to deny or delay a medical service is due to incomplete or insufficient information, the decision shall specify the reason for the decision and specify the information that is needed. [Labor Code § 4610(g)(4)]
  • An period for which a UR decision to delay, deny or modify treatment is created on Labor Code § 4610(g)(6) and such determinations shall remain effective for 12 months from the date of the decision without further action by the employer with regard to any further recommendation by the same physician for the same treatment unless the further recommendation is supported by a documented change in the facts material to the basis of the utilization review decision.
  • Labor Code § 4610(g)(7) addresses UR where liability is contested and allows deferral of Utilization review of a treatment recommendations while the employer is disputing liability for injury or treatment of the condition for which treatment is recommended pursuant to Section 4062. Where liability is ultimately accepted, the time for initiation of UR timeframes is the date of acceptance or determination of liability for retrospective reviews and the date of receipt of prospective requests for authorization.

Utilization Review Appeals:

Disputes over provision of medical treatment is removed entirely from Labor Code § 4062. New section 4610.5 is added to the Labor Code under SB 863 addressing disputes over utilization review decisions for injuries occurring on or after January 1, 2013 and further applying to any dispute over utilization review decision where the decision is communicated to the requesting physician on or after July 1, 2013 regardless of the date of injury. The section also provides that disputes under either of those two time tables will be resolved only in accordance with Labor Code § 4610.5. As was previously the law only the employee may challenge a utilization review determination delaying, denying or modifying medical treatment. Additional amendments to Labor Code §§ 4062, 4064, 4604 and 4610 have reinforced the use of 4610.5 for medical treatment disputes. Labor Code § 4062 includes a provision prohibiting the use of an AME or QME to resolve a UR dispute. As there is no provision for an employer to make such an appeal presumably treatment which has been authorized is to be provided by the employer without further dispute.

The same code section also provides that utilization review determination shall be based upon medical necessity for medical treatment that is reasonably required to cure or relieve the injured worker from the effects of his or her injury and based upon a series of standards set out specifically within the Labor Code with reliance upon a lower rank standard allowed only if a higher rank standard is inapplicable to the employee's medical condition. The standards are ranked as follows:

A. The medical treatment utilization schedule (MTUS) adopted by the administrative director.

B. Peer-reviewed scientific and medical evidence regarding the effectiveness of the disputed service.

C. Naturally recognized professional standards.

D. Expert opinion.

E. Generally accepted standards of medical practice.

F. Treatments that are likely to provide a benefit to a patient for conditions for which other treatments are not clinically efficacious.

The UR determination by an employer or its UR company will be accompanied by a form designed by the Administrative Director to allow the employee to appeal utilization review determinations which delay, modify or deny medical treatment which is to be partially completed with identifying data by the employer. The UR determination must be appealed within 30 days of the date of service of the UR decision on the employee. The employee or their designee, so identified in writing after the UR decision has issued, is the one required to file the actual appeal. Labor Code § 4610.6(j) specifically provides that the requesting physician may join with or otherwise assist the employee in seeking independent medical review and advocate on behalf of the employee. It does not however indicate the physician can file the appeal without the employee’s designating the physician as an agent for this purpose. While the code references parents, guardians, spouses etc. it allows the employee to identify a designee which presumably could be an attorney. An additional wrinkle is the requirement that designations of an agent made prior to the UR determination are not valid. (Editor’s comment: It will be interesting to see if this limitation is interpreted to apply to representation by counsel as the general rules on attorney client relationships specifically allow an attorney to act on behalf of their client by virtue of the relationship. It would certainly not surprise me to have this section interpreted to apply to a designee other that an attorney where there is an attorney client relationship.)

The appeal provisions also require the employee to be given notice that should an appeal be filed, entitles the employer to obtain a consent for release of medical records by any provider consulted with by the employee on the matter. ( Editor’s note: This one is going to require some regulations to figure out how it works as the implication is the employer is to provide a release to be signed by the employee. Time frames and consequences for failing to timely execute could certainly be an issue in this provision)

The information provided to the employee shall advise failure to appeal within the statutory time frame will render the UR determination final. The employee is also to be given notice that additional information may be provided by the employee either directly or through the PTP to the UR consultant. Such information may include any of the following:

(A)The treating physician’s recommendation indicating that the disputed medical treatment is medically necessary for the employee’s medical condition.

(B) Medical information or justification that a disputed medical treatment, on an urgent care or emergency basis, was medically necessary for the employee’s medical condition.

(C) Reasonable information supporting the employee’s position that the disputed medical treatment is or was medically necessary for the employee’s medical condition, including all information provided to the employee by the employer or by the treating physician, still in the employee’s possession, concerning the employer’s or the physician’s decision regarding the disputed medical treatment, as well as any additional material that the employee believes is relevant.

Labor Code § 4610(f)

These provisions seem to allow an unlimited range of information the employee (or their attorney) to provide to the IMR consultant. Since the injured work has up to 30 days to file the appeal (since the time is triggered by service of the UR determination, the extension for mailing of 5 days, or 10 days if mailed from outside of CA, will apply potentially extending the time for gathering information even further).

Where there is a dispute as to injury AOE/COE or other disputes which make rendering the UR determination premature, the decision on UR may be deferred until the claims administrator notifies the administrative director that the dispute is resolved. Presumably this means through either a Qualified Medical Examine addressing the issue of nature and extent of injury (or injury AOE/COE) or acceptance of liability by the defendant of the specific medical condition under review.

Much like the now removed provisions under Labor Code § 4062(b) which insulated employers from liability for spinal surgery where the treatment was provided prior to completion of the second opinion process, Labor Code § 4610(e) specifically provides “neither the employee nor the employer shall have any liability for medical treatment furnished without the authorization of the employer if the treatment is delayed, modified, or denied by a utilization review decision unless the utilization review decision is overturned by independent medical review in accordance with this section.” Clearly providing treatment without authorization is at the medical providers own risk.

An additional new provision designed to help make certain medical decisions are based on medical issues and not technicalities is contained in subsection (h)(3):

(3) If the employer fails to comply with subdivision (e) at the time of notification of its utilization review decision, the time limitations for the employee to submit a request for independent medical review shall not begin to run until the employer provides the required notice to the employee.

There does appear to be a drafting error in this section as subdivision (e) does not deal with the notification process, which is actually in subdivision (f). The import of the section however is the same. Failing to serve the UR appeal process does not invalidate the decision but just delays the time for the employee to appeal. However there is certainly no pass in the UR audit process and a $5000 per day fine is available for each day that notice is delayed. There is no provision in either Labor Code § 4610 or 4610.5 that gives a pass on an untimely UR review or decision as far as the treatment request is concerned. It therefore still appears to be the law if there is a proper request for authorization and the UR determination is not timely, the appeal process in Labor Code § 4610.5 does not apply. In this circumstance it appears the injured worker is entitled to proceed to the W.C.A.B. to seek an order for the treatment. The process in Labor Code § 4610.5 is limited to appeals of UR decisions and not to any issue involving medical treatment. Timely UR is still a requirement and the rules set out by the Supreme Court in Sandhagen v W.C.A.B. are still operative.

Once the appeal has been filed, the Administrative Director shall give notification promptly that the appeal has been accepted and of the IMR consultant assigned to the review. The employer is to provide all of the documentation within ten days of the notice of assignment necessary to complete the review and is to provide notice to the employee of the required material that is being forwarded to the independent medical review organization, a list of all the documents submitted and copies of the material not previously provided to the employee or the employee's designate. Newly discovered or developed documents can also be forwarded to the IMR organization as long as they are copied to the injured worker. The employer is required to provide information submitted by the employee in support of the appeal to the assigned IMR consultant.

Labor Code § 4610.6 describes how the IMR consultant is to handle the appeal. Once the administrative director has assigned the matter for IMR and the documentation has been forwarded to the IMR organization that entity shall assign one or more medical professionals to conduct the independent medical review. Reviews are to be completed within 30 days (or as otherwise directed by the administrative director by regulation) with specific provisions for expedited review in the event of conditions involving medical necessity (also outlined in statute). If more than one medical professional reviews the case than a recommendation in the majority shall prevail. If more than one medical professional reviews the case and the opinions are evenly split over the disputed healthcare service the service shall be provided (ties go to the injured worker). The independent medical review is to include analysis and determination from the medical professionals regarding the case, the description of the qualifications as well as the significant documentation regarding the basis for the determination.

The IMR consultant determination shall be deemed the determination of the Administrative Director and is binding on all parties. An appeal of the IMR determination is allowed by either party within 30 days of the date of mailing of the determination to the employee or employer. Labor Code § 3610.6(h) provides that determinations of the administrative director (the IMR organization) shall be presumed to be correct and shall be set aside only upon proof by clear and convincing evidence of one or more of the following grounds for appeal:

1. The administrative director acted without or in excess of the administrative director's powers.

2. The determination of the administrative director was procured by fraud.

3. The independent medical reviewer was subject to a material conflict of interest in violation of Section 139.5.

4. The determination was the result of bias on the basis of race, national origin, ethnic group identification, religion, age, sexual orientation, color or disability.

5. The determination was the result of a plainly erroneous express or implied findings of fact provided that the mistake of fact is a matter of ordinary knowledge based upon the information submitted for review pursuant to Section 4610.5 and not a matter that is the subject to expert opinion.

If one of these bases is found to be a grounds for reversal of the IMR determination/administrative director determination the Appeals Board is not empowered to make further medical determinations but must return the matter to the administrative director for assignment of a different IMR organization or a different IMR reviewer to reassess the case and make a determination regarding the medical issues in the utilization review determination. The statute specifically provides

"In no event shall a Workers' Compensation Administrative Law Judge, the Appeals Board or any higher court make a determination of medical necessity contrary to the determination of the independent medical review organization."


Perhaps the most substantial change in SB 863 is the removal from the Workers' Compensation Appeals Board of determinations regarding medical treatment. It has long been sought by employers and carriers to have medical decisions made by physicians rather than by administrative law judges. In many circumstances, the decision-making process for awarding medical treatment was not based on medical determinations but based on "gotcha" findings based on late UR determinations, technical violations (such as service dates of utilization review determinations), etc. Such deficiencies have little or no impact on whether the medical treatment is appropriate but were used as a way of avoiding the necessity for making medical decisions. These changes do not alter all of those options but do provide some limitations and where UR has been properly done, limits the decision making to medical professionals.

Labor Code § 4610.5 does provide that late service of UR appeal forms does not invalidate the UR determination, just extends the time for appeal for the employee. The question becomes as asked by my good friend and respected colleague Julius Young what is the incentive for employers and carriers to timely submit such documentation to an injured worker. The answer lies in the UR audit process. Employers and carriers were subject to significant fines as well as publication of failing scores for utilization review audits. Claims organizations can be subject to similar fines and audit determinations for claims reviews. In an increasingly competitive business environment where employers and carriers are looking for quality and timeliness of claims and utilization review services repeated fines and failing scores are of more than minor significance. Such determinations may be the basis for failing to obtain contracts particularly for public entities but frequently for employers and carriers who are looking to make certain that their claims are handled in an expedited fashion. Poorly handled claims and untimely utilization review determinations also tend to promote litigation which is anathema to claims organizations. Therefore as was discussed in a recent lunch with Mr. Young the audit rules and fines are a very serious deterrent to failing to comply with UR timeframes including appeal notices on a timely basis. Many claims organization and utilization review determination companies are more concerned with the results of an audit than any individual case-by-case determination.

One of the other significant features of the utilization review and IMR process is the elimination of the second surgical opinion process for spine surgery. Instead spine surgeries will now fall into the same criterion for consideration of all medical treatment and be subject to utilization review followed by Independent Medical Review, followed by possible appeals for the W.C.A.B. with the IMR determination being presumed to be correct and capable of being overturned only on some very limited basis. The factual basis for reversing such a determination is really limited to those issues which can be pointed out by the applicant (or defendant) where there is a mistake that is so open and obvious that it requires no expert judgment to assess. A circumstance for that would be where an IMR determination has denied authorization for carpal tunnel surgery on the basis that the applicant had a negative EMG study when in reality the EMG study was interpreted as being positive. This would be the kind of open and obvious error which would be appropriate for reversal of the determination. However as noted above, the trial judge with W.C.A.B. cannot reverse a determination and then award the procedure. Instead they must return the issue to the IMR process for review by a physician as to whether the positive EMG is a sufficient basis to award surgery. It may very well be that the IMR review will require an expert reviewer by a neurologist to determine whether the EMG findings are actually clinically significant as there is significant variation between examiners of the same data in an EMG study (the same could be said of EKG and other diagnostic tests requiring interpretation).

Coming soon, more on changes handling of medical treatment including MPNs, Liens claims and IBR as well as medical legal changes.

© Copyright 2012 Richard M. Jacobsmeyer. All rights reserved. Reprinted with permission.

Shaw Jacobsmeyer Crain Claffey LLP

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