The California Division of Workers’ Compensation has jumped the gun in posting proposed changes to the California workers’ compensation Medical-Legal Fee Schedule.

Julius Young

A multitude of physicians and stakeholder groups have participated in a DWC online forum on the proposed regs. The majority of those warn of adverse effects, as well as some possible unintended consequences.

Those comments demonstrate that there is a significant risk that there could be a large negative impact on qualified medical examiner availability in the system, as well as an adverse impact on the quality of QME reporting.

This is something that should be of concern to my friends in the employer and insurer community, and not just to doctors and applicants' attorneys. If it becomes more difficult to get timely reports, cases may take longer to resolve. If report quality suffers, the system may be impacted in many ways.

But let’s pull back for a moment and look at the bigger picture. What are some of the recent studies telling us?

The June 28, 2017, Workers' Compensation Insurance Rating Bureau's “Report on 2016 California Workers’ Compensation Losses and Expenses” lists medical-legal evaluations as paid losses of $30 million in calendar year 2015 (out of $4.9 billion in overall paid medical losses), and $30 million in calendar 2016 (out of $4.8 billion in overall paid medical expenses).

Exhibits 1.1 and 1.2 to the WCIRB report note that med-legal evaluation payments for calendar year 2016 were 7.1% of total medical costs paid. Exhibit 1.4 to shows an increase in the percentage of total medical payments for med-legal from 2013 (when the percentage was 5.7% of calendar year medical costs paid), to 2016 (7.1%).

Other exhibits attached to the report show some shifts among numbers and costs of reports among various medical specialties.

The WCIRB “2017 State of the System” report includes a different metric. In that report it is noted that as a percentage of 2016 paid frictional costs, med-legal costs were 9.6% of the overall frictional cost pie (compared with 23.8% for defense attorney expenses, 13.5% for medical cost containment, 11.7% for applicants' attorney fees, 14.9% for other allocated loss expenses and 26.5% for unallocated loss expenses).

Also in the mix of studies on QMEs was the February 2018 CWCI study, “Changes in the QME Population and Medical-Legal Trends in California Workers’ Compensation,” by researcher Stacy l. Jones. Findings of that study included that the total number of QME providers dropped by 20% between January 2012 and September 2017. Of those, 82.8% voluntarily non-renewed their QME certifications.

An earlier report, prepared by UC Berkeley researcher Frank Neuhauser for the Commission on Health and Safety and Workers' Compensation in 2010, had noted that between 2005 and 2010 there had been a 45% reduction in the number of active QMEs. In a 2017 update to the study, Neuhauser claimed a 17% drop in the number of QMEs between 2007 and 2016.

As far as the costs of reports, Jones noted that, “After increasing for seven consecutive years, the number of comprehensive (ML 104) medical-legal evaluations-the most detailed and expensive reports-began to level off in 2015.”

Jones noted that ML 104 reports as a percentage of total med-legal services declined since 2014 (from 34.6% in 2014, to 33.6% in 2015; to 31.4% in 2016; and to 25.8% as of mid-2017).

The average paid per med-legal service was basically flat for 2014, 2015 and 2016, and declined somewhat as of mid-2017.

However, Jones did report that there was a notable increase in payments for supplemental med-legal evaluations and supplemental reports. And she noted that there were a number of other issues pertaining to the QME system that merit further study.

In his October 2017 presentation to CHSWC, Neuhauser found increases in average QME income and the total cost of reports, but was comparing 2016 with 2007 figures as a benchmark. CHSWC commissioners raised a number of questions about the study, and the Neuhauser update has not been approved by a CHSWC vote yet.

Putting all of these data points from the various studies together, it hardly looks like a crisis of med-legal costs is plaguing the comp system. That’s not to say that there may not be providers who are abusing their timekeeping and billing (something I don’t doubt).

However, an analysis of the 2016 and 2017 WCIRB charts, and the 2018 CWCI study, does not indicate a runaway problem with med-legal costs at the moment.

What makes the DWC timing in proposing new billing regs now so puzzling is that Rand Corp. has not issued a long-awaited report on the QME system that was commissioned by CHSWC.

A fact sheet on the Rand study at its inception several years ago provided these following explanations:

“This study will assess whether changes should be made in the various reports required from primary treating physicians and in the fee schedule for medical-legal expenses under California’s workers’ compensation (WC) system. The study is being conducted in conjunction with a separate evaluation of the impact of Senate Bill (SB) 863 provisions affecting medical care provided to injured workers.

“The reports and the fee schedule allowances have not changed for a number of years, and the utility of the reported information and the pricing structure need to be reassessed to assure the policies are consistent with efficient program administration. Similarly, the fee schedule allowances for medical-legal evaluations and reports have not been updated since July 1, 2006, and need to be reviewed.

“We plan to use interviews and focus groups, and an environmental scan of other WC programs, to develop findings and recommendations on whether the policies for WC-required reports and medical-legal evaluations should be modified. For the WC-required reports, our focus will be on how the reports and specific data elements are used, reporting burden, and whether there are alternative sources for the information and collection processes. For medical-legal evaluations, our focus will be on how the medical evaluations are conducted, the level of effort and complexity relative to evaluation and management visits, how complexity differs by type of impairment, whether the reports could be made more efficient for the users, and whether refinements are needed in the definitions of the complexity levels of the evaluations.”

As I prepared this post I did some digging about the status of the Rand report. I was told by someone in the know that the report “is close to finalizing.”

Under these circumstances it would appear prudent for the DWC to pull the proposed regulations until everyone can see what Rand recommends, and until Rand's conclusions can undergo scrutiny by CHSWC and public comment.

The available data show no crisis sufficient to justify rushing into interim changes.

For a number of years now the DWC has claimed that it is focused on making data-driven policy changes. But in this instance the DWC would appear to be getting out ahead of its skis before Rand has delivered its research.

Also, Rand could well benefit by looking at the stakeholder comments on the proposed regs, since those comments give plenty of insight into the concerns of the QME providers.

Julius Young is a claimants' attorney for the Boxer & Gerson law firm in Oakland. This column was reprinted with his permission from his blog, www.workerscompzone.com.