Finally, some progress on workers' compensation.

It's only a small step, but a recently passed law represents progress in the right direction

It was hailed as a small but significant move toward breaking the stalemate over workers' compensation reform. And in the opinion of some experts, it will be legislation like Sen. Patrick Johnston's SB 31 that brings reform -- step by laborious step.

Signed April 3 by Gov. Pete Wilson, SB 31 trims the costs of medical-legal evaluations, significantly narrows the definition of a medical-legal report and clarifies the procedure under which a report may be contested.

Expected to save employers at least $100 million yearly -- and perhaps two or three times more -- SB 31 unanimously passed the Democratic-controlled Assembly and Senate. When signed, the bill instantly repealed the old "73rd percentile" method of determining reasonable fees for initial comprehensive medical-legal evaluations and replaced it with a new medical-legal fee schedule unveiled by Casey Young, the administrative director of the Division of Workers' Compensation.

Reimbursement rules

Under the new regulations, evaluations will now fall into one of five categories, depending on the complexity of the evaluation and the amount of time it takes the doctor to complete it. The five reimbursement categories (and dollar amounts) proposed by Young are:

* Very Simple -- $187.50

* Simple -- $350

* Average -- $500

* Complex -- $700

* Very Complex -- $1,000

The new reimbursement categories significantly reduce the dollar amounts associated with the old system, which was based on medical specialties and compensated doctors -- no matter how long they worked on an evaluation -- between $994 and $1,427. Young's plan aims to compensate doctors at the rate of $150 to $200 per hour.

The medical-legal fee schedule allows extra charges on top of the $1,000 cap in so-called "extraordinary" cases -- those that are exceptionally complex and time-consuming. The Department of Industrial Relations, in a fact sheet discussing SB 31, says these cases should occur "very, very seldom."

Time-consuming evaluations

Evaluations requiring an unusual amount of time, such as when an interpreter is used, can exceed the cap by 10 percent. In cases where doctors function as an agreed medical evaluator, they may add 25 percent to the fee for complex and very complex evaluations.

Although the medical-legal fees schedule takes effect after Young holds two public hearings, on June 7 in Los Angeles and June 8 in San Francisco, and the final regulatory language is approved, the administrative director has asked doctors to follow the guidelines from the effective date of the law, April 3.

Young's fee schedule was lauded by business groups and won general praise from doctors and insurers, although doctors expressed some concern about payments being delayed in the interim before the regulations become effective and insurers would have preferred more stringent cost controls.

Vague terms

The vagueness of terms such as "extraordinary circumstances" was troubling to people like Barry Carmody of the Association of California Insurance Companies, who says he wants more details about what types of evaluations fall under which reimbursement categories.

"What we see is an opportunity for some creep (in charges) depending on how well the doctor can articulate the complexity of the procedure," Carmody said.

Young's schedule does give a few examples of which evaluations might fall into each of his five categories and says a more complete list is being prepared.

Other provisions of SB 31 prohibit reimbursement for evaluations that present no evidence proving or disproving a disputed medical issue, a provision designed to prevent the morass of medical-legal reports submitted by medical "mills" that are often the employer's first notice of an injury and serve no legal purpose. In addition, SB 31 presents several other measures designed to cut costs in the workers' compensation system:

Cost-cutting measures

* Employers have up to 90 days to investigate a claim before becoming liable for workers' medical-legal expenses for cumulative injuries or occupational diseases. This prevents liability for evaluation expenses incurred before making a decision about contesting the claim.

* Doctors will be required to document and certify the amount of time spent with the patient, another condition directed at high-volume medical mills.

* Diagnostic testing will not be reimbursable unless justification is shown and the tests present information not available to the physicians from previously administered tests.

* The cost of a medical-legal report is only payable if it is timely when received by the employer -- not, for example, after the case is settled.

* In response to doctors' complaints that some insurers contest all bills with form-letter objections, SB 31 includes new rules specifying how objections are to be made and prohibiting form objections which do not identify the deficiencies of the report being contested.

Small battle

SB 31 was considered a small battle in the war to cut costs in the $11 billion workers' compensation system. Although complimentary about the legislation, Wilson noted that "this reform, as necessary and commendable as it is, is just a first step. Much more needs to be done."

The California Workers' Compensation Institute (CWCI), an insurance company-backed organization, agreed, saying in a recent CWCI Bulletin that the $100 million in projected savings is "an impressive number -- but probably on 10-15 percent of the current cost of medical-legal evaluations. "Now that SB 31 has passed, all eyes will be on two comprehensive workers' compensation packages in the Assembly and Senate. The conference committee will iron out the differences between the two bills -- AB 110 by Assemblyman Steve Peace, D-Chula Vista, and SB 31 by Johnston, D-Stockton.

Both packages are aimed at reforming workers' compensation in six major areas:

Areas of reform

* The provision of medical care.

* Vocational rehabilitation.

* Stress claims.

* Post-termination claims.

* Compensation insurance rates.

* Cash benefits to injured workers.

Insiders at the Capitol agree that both bills, in their current form, are little more than "wish lists" yet to be agreed upon by the powerful groups that could be hurt or helped by compensation reform -- insurers, doctors, lawyers, businesses and labor representatives.

Peace wants to start work immediately in the conference committee, before the state budget battle gears up. Typically in past years, workers' compensation agreements have blown apart during the frenzied last days of the legislative session, distracting the media and the public and taking the heat off lawmakers.

Meanwhile, smaller stabs at reform, like SB 31, are making some headway. Among these is AB 1300, an anti-fraud bill by Assembly Speaker Willie Brown, D-San Francisco, which requires a month-long waiting period for medical-legal evaluations. The bill restricts such exams to one per side in a disputed disability claim and requires the doctors performing the exams to declare under penalty of perjury that the information on the report is true.

Some insiders call the bill the "easy work" of reform because it takes aim at obvious abuses but does little about the legal loopholes that drive up insurance costs and rob workers of adequate benefits.

This article was reprinted from Workers' Comp Advisor, a newsletter dealing with workers' compensation issues in California. For permission to reprint call [phone].