Impact of Senate Bill 1160 on California Workers' Compensation System

Workers’ Compensation has again become a hot button topic in the State of California.  Labor advocates want to ensure that workers receive the benefits and medical care needed to get injured employees healthy and back to work.  Business advocates also want to see employees back to work but want to make sure that the system is financially efficient and there are sufficient protections against fraud and systematic abuse.  Historically, these sides find themselves at opposite ends of the reform arguments.  However, in 2016, California State Senator Tony Mendoza, a Democrat from Artesia, recognized an opportunity to provide more efficient medical treatment to injured workers and introduced Senate Bill 1160. 

“This bill transforms the workers’ compensation system so that injured workers are guaranteed to receive timely and appropriate medical treatment and benefits within the first 30 days of a work place injury,” said Senator Tony Mendoza (Mendoza, 2016).  Mendoza reported that the bill was also passed in hopes of cracking down on the billions of dollars in fraudulent medical billing in the state explaining, “Fraud hurts injured workers and drives up costs for California’s businesses” (Mendoza, 2016).  According to the California Division of Workers’ Compensation, 17% of all medical treatment liens filed between 2011 and 2015 were filed by providers with fraud indictments or convictions (Mir, 2016).

 

            Senate Bill 1160 was originally introduced in the first half of 2016 and was co-sponsored by the California Professional Firefighters and California Labor Federation as a way to improve the state’s Utilization Review system for approving medical treatment.  However, as summer began, the Department of Industrial Relations (DIR) was actively writing amendments to the bill in order to add provisions that would protect against fraud.  On August 18, 2016, with only nine working days remaining in the legislative session, the bill was amended to include the lien provisions contained in Assembly Bill AB1244 in order to make it more attractive to the business community (CSIMS, 2016).  Additional amendments were added during the period between August 18th and August 26th of 2016, when the bill passed out of the Assembly with the added lien amendments. 

 

            After introduction by Senator Mendoza, The California Assembly Insurance Committee approved the amended senate bill that automatically stays any lien filed by a medical provider who is subsequently charged with billing fraud or other crimes relating to the practice of medicine.  The measure also prohibits prospective Utilization Review for most treatment requests during the first 30 days following an injury.  After the Insurance Committee approved the bill in a 12-0 vote, SB 1160 was passed by the full Senate with only three "no" votes on Wednesday, August 31, 2016, in the closing hours of the biennial legislative session (CSIMS, 2016).  The bill was then sent to Governor Jerry Brown’s desk where it remained until it was signed into law on September 30, 2016.

 

            California’s workers’ compensation system is one of the most complex of all the states in the country.  It seems that every few years reforms and changes to California’s workers’ compensation system are hard fought by both sides.  However, Senate Bill 1160 was supported by both labor and business representatives including the California Labor Federation, Allied Managed Care, Small Business California, the California Medical Association, and United Parcel Service because it promised fast medical treatment for injured workers but also provided tough restrictions to control medical billing fraud (“SB 1160 Sails,” 2016).  

 

            Senate Bill 1160 contains two significant features. The first provision was intended to speed up medical treatment to injured workers by adjusting the Utilization Review process.  In order to accomplish this goal, the bill prohibits prospective Utilization Review during the first 30 days of a claim if the care is being provided through an “employer-directed provider” such as a physician in the employer’s Medical Provider Network (“SB 1160 Sails,” 2016).  California law requires that all medical treatment requests be submitted through Request for Authorization forms and supporting medical reporting from an approved Primary Treating Physician within the employer’s Medical Provider Network.  All requests for medical treatment are then evaluated through an approved Utilization Review process.  Neutral physicians serve on the Utilization Review committee and review the Primary Treating Physician’s Request for Authorization for medical treatment in order to make sure treatment requests are justified by the standards set forth in the American Occupational and Environmental Medicine’s (ACOEM) Occupational Medicine Practice Guidelines.  If a dispute arises over the Utilization Review decision, parties can appeal the denial of medical treatment to an Independent Medical Review with the state’s Administrative Director.  This process was designed to reduce litigation at the Workers’ Compensation Appeals Board where medical treatment disputes had been previously heavily litigated at the trial court level and decided by non-medically trained workers’ compensation administrative law judges.

 

            However, even after the Medical Provider Network and Utilization Review reforms, there were still delays in the provision of medical treatment during the initial 30 days following an industrial injury, even when the injured worker was following all the requirements of the law. The first few weeks of medical care can be the most important when treating an industrial injury.  Injured workers would have necessary treatment requests processed through the Utilization Review system and at times, not be able to receive the needed treatment timely during that initial month.  Labor representatives were in favor of Senate Bill 1160 because it promised to speed up the authorization process of important medical treatment for injured workers who were abiding by the rules during the first month of medical treatment.  Pro-business representatives saw the benefit of keeping the claim un-litigated during the initial month of treatment.  One of the primary reasons an injured worker decides to obtain an attorney to represent them on their workers’ compensation claim is because medical treatment during the initial few weeks has been delayed or denied.  Injured workers can become frustrated and confused by the complicated medical treatment process and seek out help from an attorney.  One of the first things that an attorney representing an injured worker is likely to do is to transfer their client to a more liberal treating physician, often times outside of the employer’s Medical Provider Network.  Providing timely medical treatment to injured workers is in the best interest of both employees and employers.

 

            Although Senate Bill 1160 prohibits Utilization Review during the first 30 days of a claim, there are exceptions to the rule, if the services include surgery, non formulary medications, psychological treatment, diagnostic imaging other than X-rays, durable medical equipment costing more than $250, and home health care services (“SB 1160 Sails,” 2016).   These services must still go through the established Utilization Review process because of the higher cost and history of abuse.

 

            The bill also contains additional pro-business provisions intended to prevent fraudulent medical treatment and billing.  Under Senate Bill 1160, medical liens filed on or after January 1, 2017, would have to be accompanied by a declaration that the dispute is not subject to independent bill review and that the lien claimant is in the employer’s Medical Provider Network.  Pre-existing liens would be required to provide a similar declaration by July 1, 2017.  Failure to file the declaration or filing a false declaration would be grounds to dismiss a lien (“SB 1160 Sails,” 2016).  

 

            California has a well-documented problem with out of control, disputed medical treatment and billing.  Several physicians have recently been indicted for fraud and yet are still practicing medicine, treating injured workers, and attempting to collect on fraudulent billing.  The California Workers’ Compensation system provides an opportunity for injured workers to obtain medical treatment that has been denied by the insurance carrier.  Medical providers can agree to perform the disputed services on a lien basis in hopes of getting paid after the legal case with the injured worker is resolved.  The medical provider will have to prove, among other elements, that the injury was compensable and that the treatment was reasonable and necessary.  The insurance carriers and the medical providers then litigate the underlying lien issues, often times for years after the injured worker’s case has resolved.  The extended lien litigation has created a significant drain on the resources of an already stretched workers’ compensation system. 

 

            With the amendments added to Senate Bill 1160, liens filed by someone charged with workers’ compensation fraud must be stayed pending resolution of the fraud charges.  With passage through the legislative process and signature by Governor Jerry Brown on September 30, 2016, Senate Bill 1160’s provisions of for Utilization Review and lien reform went into effect in California on January 1, 2017 (“UR timetable,” 2016).

 

            While it is too soon to measure the impact of the Utilization Review provisions, the California Department of Industrial Relations reported on January 18, 2017 that it stayed more than 200,000 liens with a total claimed value of more than $1 billion filed by medical providers facing criminal fraud charges (“DIR Stays,” 2017).  The department stayed the liens under the provision in Senate Bill 1160 requiring it to restrict the ability of providers to pursue payment if they have been accused or convicted of defrauding workers’ compensation or other medical programs, including Medicare and Medi-Cal.  The measure also stops interest from accruing on any unpaid liens while the stay is in effect.  The California Department of Industrial Relations (DIR) said the liens it stayed were related to 75 providers who have been indicted for fraud in state and federal courts (“DIR Stays,” 2017).  A new fraud prevention page has also been added to the DIR website that provides a list of indicted medical providers.  The list is not completely up to date but the department notes it will be updated regularly.  The list includes notorious medical providers linked to fraud such as Dr. Munir Uwaydah, who Los Angeles County prosecutors say masterminded a $150 million scheme through which he paid kickbacks to attorneys and others who referred patients to his Frontline Medical Associates clinics (“DIR Stays,” 2017).  According to grand jury testimony that was unsealed in 2015, prosecutors also allege that Uwaydah performed unnecessary surgeries and allowed an untrained assistant to perform surgery on 21 patients (“DIR Stays,” 2017).  The recent passage of Senate Bill 1160 prevents doctors such as Uwaydah from using the workers’ compensation system to litigate fraudulent medical bills.

 

            After only the first month, it appears that Senate Bill 1160 has already had a big impact and is off to a fast start at bringing reform to the California workers’ compensation system.  It will be interesting to see how the lien provisions are able to clean up the billing litigation process and to see if the streamlining of Utilization Review will result in a more efficient provision of medical treatment to injured workers.  The largest impact of the law may well be the joint support from both labor and business advocates in the passage of the bill.  Can we expect more cooperation from traditional adversaries during future legislation?  Senate Bill 1160 may be reason for optimism.

-Brent M. Daub, Gilson Daub, Inc.

 

 

References

DIR stays 200,000 liens with claimed value of $1 billion. (2017). Workcompcentral. Retrieved from https://ww3.workcompcentral.com

 

Mendoza, T (2016) Historic workers’ compensation reform measure signed by Governor Brown. Retrieved from http://sd32.senate.ca.gov/news/9302016-historic-workers’-compensation-reform-measure-signed-governor-brown

Mir, F. (2016), AB 1244 and SB 1160 passed to combat workers’ compensation fraud and reform lien filing. Nielsonhardiman. Retrieved from http://www.nelsonhardiman.com/ab-1244-sb-1160-passed-combat-workers-compensation-fraud-reform-lien-filing/

 

SB 1160 - Workers' comp, UR & lien filing. (2016). CSIMS. Retrieved from http://www.csims.org/?page=SB1160

 

SB 1160 sails through committee despite lien concerns. (2016). Workcompcentral. Retrieved from https://ww3.workcompcentral.com

 

UR timetable under SB 1160 raising questions. (2016). Workcompcentral. Retrieved from https://ww3.workcompcentral.com

Jon Phillips

Gilson Daub, Inc., 34270 Pacific Coast Highway, Dana Point, CA, 92629