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california legislation > SB 923

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Date of Hearing: August 17, 2011

Felipe Fuentes, Chair

SB 923 (De Leon) - As Amended: May 31, 2011

Policy Committee:InsuranceVote:8 -

Urgency: No State Mandated Local Program:
No Reimbursable:


This bill 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,

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.


1)Administrative costs associated with this legislation would be
minor and absorbable as the AD has been studying the
feasibility of adopting an RBRVS-based schedule for at least
five years and is already statutorily required to periodically
update the OMFS for physician services.

2)Unknown, potentially significant increase in workers'
compensation costs to the extent the requirements of this bill
establish higher physician services rates. California, as an
employer would have higher costs, a portion of which would be
General Fund.

SB 923
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The state's share of medical spending for workers compensation
is in excess of $200 million per year. If this legislation
results in a one percent increase in those costs due to an
increase in provider rates, it would cost the state
approximately $2 million per year (general fund and various
special funds).


1)Rationale . This bill is intended to accelerate the adoption of
an RBRVS fee scale for workers compensation. According to the
sponsors of the bill, U.S. Health Works Medical Group, SB 923
will implement nearly 10 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)Background . The Resource-Based Relative Value Scale was
created in 1985. 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. To
date, over 30 states have adopted RBRVS-based reimbursement
systems for workers' compensation.

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.

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 studies done in 2002 that 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.

SB 923
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3)Lewin Group Study . A budget-neutral conversion to RBRVS, as
estimated in a study by Lewin, would result in overall
reimbursement that is 11.4 % above Medicare. Preliminary
information indicates the current reimbursement is 18 % above
Medicare. However, with a budget neutral single conversion
factor, some service categories may experience substantial
reduction. For example, surgery may decrease approximately 20
% and radiology may decrease approximately 31 %, raising
concerns about potential access problems which the AD must

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.

4)Opposition . The California Society of Industrial Medicine and
Surgery (CSIMS) and the California Society of Physical
Medicine and Rehabilitation (CSPMR) argue that adopting an
RBRVS system could result in a decrease in the reimbursement
rates for specialists, which has the potential to drive those
doctors out of the system, thus creating an access problem for
workers who have been injured and need treatment by
specialists for their injuries.

Analysis Prepared by : Julie Salley-Gray / APPR. / (916)