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california legislation > SB 923

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Date of Hearing: June 22, 2011

ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
SB 923 (De Leon) - As Amended: May 31, 2011

SENATE VOTE : 39-0

SUBJECT
: Workers' compensation: official medical fee schedule:
physician services

SUMMARY : Requires the Administrative Director (AD) of the
Division of Workers' Compensation (DWC) to adopt a
resource-based relative value scale (RBRVS) for physician
services. Specifically, this bill :

1)Requires the AD to adopt an Official Medical Fee Schedule
(OMFS) for physician services based on the RBRVS by January 1,
2013.

2)Requires the AD to adopt and revise the OMFS for physician
services no less frequently than every two years.

3)Defines "Resource-Based Relative Value Scale" as the relative
value scale created by the federal Centers for Medicare and
Medicaid Services and set forth in the Federal Register for
each calendar year.

EXISTING LAW :

1)Establishes a comprehensive system of workers' compensation
benefits for employees who suffer from an injury or illness
that arises out of and in the course of employment,
irrespective of fault, including medical benefits.

2)Requires the AD to adopt and periodically revise an OMFS to
establish reasonable maximum medical fees for medical
services, including physician services.

3)Requires, as a matter of federal law, the use of the
Resource-Based Relative Value Scale (RBRVS) for all Medicare
reimbursement of physician services.

FISCAL EFFECT : According to the Senate Appropriations
Committee, approximately $500,000 to $700,000 special fund costs








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to initially adopt the fee schedule, with approximately $100,000
special fund costs biennially to update the fee schedule.

COMMENTS :

1)Purpose . According to the sponsors of the bill, U.S. Health
Works Medical Group, SB 923 will implement nearly ten years of
study by the DWC to bring the California workers' compensation
fee schedule into the 21st century. In particular, an RBRVS
system would compensate primary care physicians at a higher
level, a result most observers agree is appropriate.

2)What is the Resource-Based Relative Value Scale (RBRVS)? The
Resource-Based Relative Value Scale was created in 1985 at
Harvard University by Dr. William Hsiao and published in 1988.
The goal of the scale was to assign each procedure a relative
value, which would then be adjusted by geographic cost
differences, in order to reimburse procedures done through
Medicare by their actual cost and value. The scale was
adopted in 1992 by President George H.W. Bush for the purposes
of reimbursing Medicare physician services.

With RBRVS, each service, which is defined by the Current
Procedural Terminology (CPT) code, is assigned three relative
value units (RVU). The three relative value units are the
work done, the medical practice expense, and medical liability
insurance. This way, if the procedure takes a long period of
time or is especially dangerous, the reimbursement rate will
be higher, or the reimbursement rate may be lower if the
procedure is quick and relatively low-risk.

3)Need for this bill? During the last years of the
Schwarzenegger Administration, the DWC attempted to revise the
OMFS for physician services based on RBRVS. In doing this,
the DWC was following the lead of earlier studies done in 2002
which suggested significant cost savings for employers by
switching to an RBRVS-based system. Those studies have been
supported by newer studies, such as the 2010 Lewin Group
study.

However, when the DWC began the process for adopting an RBRVS
model, it quickly encountered significant opposition from
specialists in the medical field, as their reimbursements
would be lowered, in some cases significantly. For example,
the 2010 Lewin Group study estimated that surgery








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reimbursements would be cut by nearly 10% and radiology
(between 3.5% and 12%), while physical medicine would see
reimbursement rates increase significant amount (between 12%
and 16%). This opposition, plus the reality of an upcoming
new administration, eventually halted these efforts.

Support. Proponents argue that this bill will require a
long-overdue conversion of the workers' compensation fee
schedule to a schedule based on the system utilized by the
Medicare system. Proponents note that the existing system is
antiquated and based on valuations and assumptions that are
out-of-date and place primary treating physicians at a
disadvantage. Proponents also note that an RBRVS-based
schedule would be simpler and easier for employers and payors
to comply with.

Opposition . Opponents argue that RBRVS is an unnecessary and
costly method to update the OMFS, and that it has been shown
by use in other states to harm access to care for injured
workers. It is unnecessary because the AD already has the
authority to adopt an RBRVS system if, in the expert judgment
of the AD that is the appropriate approach. There is also the
concern that the mandate could be understood to require
revenue neutrality, which would necessitate reductions in
compensation for specialists to make up for increases to
primary care providers when there is no evidence specialists
are overpaid.

Related legislation . SB 127 (Emmerson), which will be heard
on the same day as this bill, addresses the OMFS for physician
services, as well as requires the use of current Current
Procedural Terminology (CPT) codes.

REGISTERED SUPPORT / OPPOSITION :

Support

California Occupational Medicine Physicians
Kaiser Permanente
U.S. HealthWorks Medical Group
Western Occupational and Environmental Medical Association

Opposition

California Society of Industrial Medicine and Surgery








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California Society of Physical Medicine and Rehabilitation
Coalition for Access to Care
Coalition of Diagnostic Services

Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086