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A test case is for 'go for launch': a critical issue in the changes to California's workers' compensation law is whether medical provider networks will provide better care at a lower price.

Lots of things are tested in California. Movies are screen tested, products are market tested, and laws of all kinds often face stiff" legal challenges. This time, the changes in the state's broken workers' compensation system are about to find out whether they'll survive in their new form--a legislative bill known as 8B 899.

The state's Senate Bill 899, as the workers' comp law is called, is an aggressive new set of laws aimed at curbing the huge workers' comp payments that have burdened medical care from the Redwoods north of San Francisco to the deserts east of San Diego.

Beginning in January, for the first time injured workers will be directed to employer-established, medical provider networks (MPNs) for their care.

Created by the new regulations, these lists of medical practices based upon occupational medicine guidelines will now be the sole recourse for such care. Injured workers will no longer be free to choose any family doctor, chiropractor, orthopedist, or other practitioner.

Critics say the reforms have given employers and their insurers too much power. Patients no longer have the ability to choose what's best for them, these critics say. Beginning in 2005, care will have to conform to a new set of statewide standards adopted from the American College of Occupational and Environmental Medicine, a set of guidelines not originally intended for the purpose of treating patients in the workers' comp care system.

Other lobbying groups like the California Labor Federation/AFL-CIO are taking a more cautious approach. "We're looking to see how bad it's going to be," says Angle Wei, the group's legislative director. "Basically, we're taking a cautious, wait-and-see approach."

Either way, the new approach to components of workers' comp reform is about to face an unprecedented test in a market of this size. In this effort, however, California is as much playing catch-up with other states as it is being innovative.


Backers of the new law claim the changes hold promise. Employers will see their workers' comp increases level off--perhaps even decrease--and employees will be able to get better care. Business and labor are the true beneficiaries in this reformed system, the proponents say.

Labor, businesses large and small, the insurance industry and lawmakers agreed that something had to be done. Faith in discounts from deregulation proved shortsighted in California. While the amount spent to cover workers' comp premiums doubled in recent years, abuses continued to mount and litigation rates climbed further. Yet medical and return-to-work outcomes remained poor.

"It was as if we had a system where everyone was eligible for unlimited care that was not applied against any standards," says Deborah Gonzalez, chief of staff for California Sen. Charles Poochigian, the author of SB 899. "Less-injured employees were sometimes taking more resources more often than seriously injured ones."

Employers had some medical control but only for the first 30 days. Afterward, employees were allowed to choose. They had a great deal of leeway to switch physicians multiple times.

With the escalating cost per claim, many insurers went out of business, left the state, or stopped writing workers' comp policies. With remaining commercial rates so high, more than half the market was now resorting to the insurer of last resort, the State Compensation Insurance Fund.

As a result, no one came out a winner. "There has also been lots of friction between parties," says Chris Wheaton, vice president of Dallas-based Concentra, an occupational medicine provider.

Among steps that the state took was asking its Commission on Health and Safety and Workers' Compensation--a nonpartisan, labor-policy body--to find specific cost areas that were out-of-line and to recommend revisions. Partly as a result of the research conducted by the commission, the California legislature passed SB 899 in the spring.


The standards of the American College of Occupational and Environmental Medicine that had already gone into effect last fall were meant to introduce more clarity to the system. "Doctors have to document treatment by the guidelines, which are very important to avoiding overtreatment or undertreatment," says Lachlan Taylor, a workers' comp judge on the staff of the commission. "We've now put managed care into the system."

Most claims of work-related injury are legitimate and best resolved if treated early. For these reasons, the new law makes employers responsible for providing immediate medical care [up to a $10,000] for any declared work-related injury until the injury is accepted or denied.

But employers may begin enrolling workers in their medical provider networks as of Jan. 1. Primary-care physicians and specialists will comprise the networks, and these practitioners will manage the care of injuries, in turn referring patients to other therapies. HMOs, health care provider groups, and other health care organizations already offering occupational medicine will be deemed approved pools. Self-insured employers will form their own networks.

"There will be a big race for doctors to get into these networks," says Lori Kammerer a labor lobbyist and employer representative. "Employers now have a great opportunity to say to employees, 'We want to you be well, and we have a network of people who are screened and convenient to use and who want to get you well,'" says Concentra's Wheaton.

The state is debating regulations for the medical provider networks that were developed by Andrea Hoch, administrative director of the state's Division of Workers' Compensation. Hoch is a Schwarzenegger appointee. The jury is still out on her efforts.

"The drafts we've seen so far for these medical provider network regulations are inadequate," says labor's Wei. "We are concerned about provisions for application, approval and retention of physicians in these networks. There's also no criteria for reviewing the geographic and specialty distribution of these providers." The law does stipulate, though, that if an employee is dissatisfied with care after three opinions within the network, he or she may appeal to a medical reviewer.

If the reviewer agrees, the injured worker may seek treatment outside of the network. Workers may also apply to go outside if a needed specialist is not in the network.

"Employers want to take care of employees," says Kammerer.

"Chances are that the practitioners (that they will route their employees to) will be same ones that their family doctor would know and recommend."


Even if many--or even some--of these regulations have been used in other states, they've never been tested in a single market as large as California.

The workers' comp situation here in recent years has created a challenging climate for employers to do business in and the hope is the new laws will change that.

Another goal is for the state to eventually free itself from the American College of Occupational and Environmental Medicine standards by authoring its own set of guidelines. For now though, advocacy groups remain concerned.

The California Applicants Attorneys Association claims that physicians are electing to no longer provide care for work-related injuries, because they cannot fit appropriate care under the American College of Occupational and Environmental Medicine guidelines.

But lawmakers and other proponents of the reforms believe that a smaller number of occupational medicine providers with more accountability can only benefit patients. "We'd like to see more oversight of the medical provider networks, so that, for example, who's applying to the networks and on what basis goes on a list that is publicly posted on the Internet," says Wei.

The belief, though, is that employers will look for doctors who have a track record of the best outcomes. Good occupational medicine providers have been measuring and reporting outcomes for years, and those selected for the networks on this basis will look upon the new system as a validation of their efforts.

"It stands to reason that enlightened self-interest for employers lies with getting workers healthy and back to work, to the extent possible," says Wheaton.

The previous system favored "unscrupulous doctors and opportunistic attorneys," says Kammerer, a former executive director of the California Coalition on Workers' Compensation. "Now, though, the medical provider networks are going to drive the success or failure of whatever else is in these bills. Unions, employers, competing physicians, and monitoring groups will be watching medical provider networks and will put an end to them if they don't work properly."

Proponents hope that the new approach will eliminate the fraud and overutilization now in the system.

"We think it's a step in the right direction that is going to save significant costs," says Baker.

The new law offers the potential for billions of dollars in savings for the state, employers and workers' comp insurers.

And it also raises the prospect of bringing more insurers back into the California and thus regaining the benefits of competition in rates and services.

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A controversial piece of California's workers' comp challenge lies with nonstandard medical care. Various types of nonmedical therapies have been adding significantly to costs, with chiropracty ranking as the largest expense.

The legislature is perceived as having gone after this by adopting the American College of Occupational and Environmental Medicine guidelines, which are generally not viewed as favorable toward use of chiropracty or alternative therapies. The standards recognize the usefulness of manipulation early in the course of treatment for certain problems, but claims adjusters appear to be applying this guidance conservatively. The new law also places a 24-visit-per-injury limit on chiropracty use.

Similar restrictions also apply to other types of care; however more patients have traditionally used chiropracty over a longer, multiyear term than, for example, physical or occupational therapies. "Even with a physician recommendation for continued chiropracty, our practitioners are often met with denials. You have claims examiners with little training controlling everything," says Wayne Whalen, chairman of the workers' comp committee for the California Chiropractic Association.

He cites the example of a fireman or policeman who may have used chiropracty for years, as needed, to control a back condition, but who suddenly can't get this benefit anymore. "Patients are upset and so are doctors," says Whalen, who notes that "some chiropractors have continued to treat patients with no assurance they are going to get paid."

According to the association, workers' comp care makes up roughly a quarter to a third of the patient workload in a typical chiropractic practice. "But I am hearing from some colleagues that they have lost 50 percent or more of this work," says Whalen.

The association contends that chiropractors and the research behind their work were underrepresented on the panel that originally wrote the American College of Occupational and Environmental Medicine guidelines. Other forms of therapy, such as acupuncture, acupressure and massage therapy are feeling excluded too. "ACOEM had the best guidelines available, but some areas in it rely on little more than consensus and anecdotes," says Judge Lachlan Taylor of the Commission on Health and Safety and Workers' Compensation. "Treatments are incorporated that are widely accepted and used but that don't have much hard evidence."

Concentra's Chris Wheaton agrees: "Some medical procedures rode in with no more substantiation than chiropracty, but because a lot of doctors do them and want to do them, they are in. It's not even-handed."

Still stinging from the recent proposal to remove chiropracty from the state's Medicare program, California chiropractors are on a campaign to show that chiropractic care saves the system a substantial amount of money, in part by preventing more invasive treatments, such as surgery, in a large percentage of patients.

"There have been abuses of chiropracty in the past, and unfortunately we see this new law as payback time," says Whalen. "Instead of using ACOEM as a guide, it's being used as an endpoint."

--Russ Allen

RUSS ALLEN writes on medical risk for Risk & Insurance. He can be reached at
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Title Annotation:Workers' Compensation
Author:Allen, Russ
Publication:Risk & Insurance
Date:Dec 1, 2004
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