California Workers’ Compensation Medical Dispute Resolution

At the 2016 WCRI Annual Issues & Research Conference, Alex Swedlow from California Workers’ Compensation Institute (CWCI) discussed their studies around medical review and medical dispute resolution in California workers’ compensation.

CWCI studies many potential areas of of friction to see the impact this had on state benefit costs. There is almost no correlation between regulatory staff per capita and costs for workers’ compensation benefit delivery. In addition, they also found little correlation between fee schedule rates and claim costs. However, they did find that attorney involvement and other issues have a significant impact on claim costs. In particular, they found that California has more attorneys per capita than other states and that this correlates with higher litigation rates. In Los Angeles there are 40% more litigated claims than other parts of the state.

Medical cost containment fees are also a significant driver in benefit delivery costs. In California these have increased 269% in the last ten years.  This includes utilization review, medical bill review, and network fees. Utilization review accounts for over 50% of medical cost containment fees in California.

SB863 changed the medical dispute resolution process in California by creating an Independent Medical Review (IMR) on medical disputes instead of having those issues litigate with judges. It is supposed to focus on the treatment complying with evidence-based treatment guidelines.

The main areas of dispute over medical care are unit of cost, utilization, and standard of care. The tools to resolve these disputes are fee schedules, bill review programs, and evidence-based guidelines.

CWCI did a study in 2015 measuring how medical care was approved, modified, and denied. This was intended to show how the IMR process was functioning. The study showed:

• Almost 85% of requests for care were approved with no dispute.
• Of the 15% that was subject to additional review, 60% of that had the treatment approved by non-physician reviewers (nurses, etc). That left 6% of all treatment requests being sent for physician utilization review.
• 70% of the medical requests that went to utilization review was approved by that review.
• 96% of the medical care requested was approved before going to the IMR process.
• The 4% of medical care that was modified or denied by UR has resulted in over 13,000 requests for IMRs per month. By comparison, Texas had under 1400 medical review requests in 2015. Group health in California has 20 times the amount of treatment compared to workers’ compensation yet it had under 1800 IMR requests compared to almost 300,000 requests in workers compensation.
• Almost half of all IRM requests involve pharmacy and 11% of those are for compound drugs.
• The top 1% of all physicians treating in workers’ compensation generated 41% of all IMR requests.
• The top 10 providers alone generated 12% of all IMR requests.

Last year California passed a bill requiring the DWC to develop a drug formulary for California workers’ compensation claims. It is hoped this drug formulary will not only reduce the pharmacy spend, but also reduce frictional costs associated with disputes.

There is ongoing debate over the IMR process with some feeling it is over-reaching. Providers would like to see certain procedures be exempt from the UR/IMR process. Others are calling for network providers to be exempt from the process.