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california legislation > SB 923

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Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair

SB 923 (De Leon)

Hearing Date: 5/26/2011 Amended: 5/3/2011
Consultant: Bob Franzoia Policy Vote: L&IR 6-0
BILL SUMMARY: SB 923 would require the Administrative Director
(AD) of the Division of Workers' Compensation, by July 1, 2012,
to adopt an Official Medical Fee Schedule (OMFS) for physician
services based on the resource-based relative value scale
(RBRVS). This bill would require the AD, on or after January 1,
2013, and no less frequently than biennially, to revise the
OMFS. This bill would delete obsolete provisions relating to
the adoption of a medical fee schedule for inpatient facility
fees for burn cases.
Fiscal Impact (in thousands)

Major Provisions 2011-12 2012-13 2013-14 Fund
Annual updating of
- initial implementation $500 to $700Special*
(rule making and study)

- biennial revision Up to $100Special*

Change in reimbursementUnknown, increase or decrease
rates for medical services current reimbursement rates
paid by Special
employers, including the state

* Workers' Compensation Administrative Revolving Fund


The OMFS is promulgated by the AD under Labor Code section
5307.1 and can be found in Sections 9789.10 et seq. of Title 8,
California Code of Regulations. It is used for payment of
medical services required to treat work related injuries and

SB 923 (De Leon)
Page 1


The bill notes the that RBRVS is currently used by the federal
Centers for Medicare and Medicaid Services and in 33 other
states' workers' compensation physician services fee schedules.

Adoption of a fee schedule based on RBRVS would not necessarily
result in new costs over the current fee schedule as the AD is
currently obligated to adopt a physician fee schedule and
requiring it to be based on RBRVS does not itself add costs.
However, it is difficult to estimate ongoing savings as there
would still need to be annual rulemaking actions to adopt
updates. In general, the workers' compensation system overall
should benefit by having a physician fee schedule that is up to

A budget neutral conversion to RBRVS, as estimated in a study by
Lewin, would result in overall reimbursement that is 11.4
percent above Medicare. Preliminary information indicates the
current reimbursement is 18 percent above Medicare. However,
with a budget neutral single conversion factor, some service
categories may experience substantial reduction. For example,
surgery may decrease approximately 20 percent and radiology may
decrease approximately 31 percent, raising concerns about
potential access problems which the AD must address.

This bill does not set rates as it does not mandate any
particular conversion factor. A physician fee schedule based on
RBRVS could be adopted in a budget neutral fashion, or could add
money to the system to increase reimbursement. Decreasing
overall reimbursement is not feasible as access would be

This bill proposes to add Labor Code 5307 (l) (2) stating: The
administrative director shall adjust the official medical fee
schedule to conform to any relevant changes in the Medicare and
Medi-Cal payment systems no later than 60 days after the
effective date of those changes, provided that in no event shall
a change in a payment system reduce the existing reimbursement
rate payable to workers' compensation physicians.

This language appears to apply to adjustments after initial
adoption, and not at initial adoption which is covered in Labor
Code 5307.1(l) (1). Once adopted, the language in (l) (2) would

SB 923 (De Leon)
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substantially hinder updates as adjustments to the relative
value scale (or payment rules) may decrease some codes. Only
increased values would be allowed, thus eliminating savings from
codes that may decrease. This would also disrupt the relativity
between the codes. Staff recommends striking this language as
it prevents the AD from cost effectively managing rates and
access. Additionally, the requirement to adjust the fee
schedule within 60 days of relevant changes may not be feasible
and would increase workload.

This bill proposes an implementation date of July 1, 2012. To
adopt RBRVS, the AD will need to issue a request for proposal,
award a contract, provide a pre-rule making comment period and a
conduct formal rulemaking which is likely to necessitate several
comment periods. Staff recommends an amendment to move the
implementation date to January 1, 2013 as a six month period may
not be feasible and would increase workload. The staff
recommendations were adopted as committee amendments.