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AMENDED IN ASSEMBLY AUGUST 31, 2012
AMENDED IN ASSEMBLY SEPTEMBER 8, 2011
AMENDED IN ASSEMBLY SEPTEMBER 7, 2011
AMENDED IN ASSEMBLY AUGUST 30, 2011
AMENDED IN SENATE MAY 31, 2011
AMENDED IN SENATE MAY 3, 2011
AMENDED IN SENATE APRIL 11, 2011
AMENDED IN SENATE MARCH 24, 2011

INTRODUCED BY Senator De León

FEBRUARY 18, 2011

An act to amend Section 5307.1 of the Labor Code,
relating to workers' compensation.
An act to add
Sections 100002 and 100043.5 to the Government Code, relating to
retirement savings plans.




LEGISLATIVE COUNSEL'S DIGEST


SB 923, as amended, De León. Workers' compensation:
official medical fee schedule: physician services.

Retirement savings plans.

SB 1234 of the 2011-12 Regular Session would establish the
California Secure Choice Retirement Savings Trust, to be administered
by the California Secure Choice Retirement Savings Investment Board,
containing 7 members.

This bill would, contingent upon the enactment of SB 1234, instead
expand the board membership to 9 members, as specified. The bill
would further prohibit the board from opening the trust program for
enrollment without a subsequent authorizing statute.

Existing law establishes a workers' compensation system,
administered by the Administrative Director of the Division of
Workers' Compensation, to compensate an employee for injuries
sustained in the course of his or her employment.

Existing law requires the administrative director, after public
hearings, to adopt and revise periodically an official medical fee
schedule that establishes reasonable maximum fees paid for medical
services, other than physician services, and other prescribed goods
and services in accordance with specified requirements.


Existing law, notwithstanding the above provisions, further
authorizes the administrative director, after public hearings, to
adopt and revise, no less frequently than biennially, an official
medical fee schedule for physician services, in accordance with
specified requirements.

This bill would instead require the administrative director, by
January 1, 2013, to adopt an official medical fee schedule for
physician services based on the resource-based relative value scale,
as defined, would authorize the administrative director no less
frequently than biennially, to revise the official medical fee
schedule for physician services, and would delete obsolete provisions
relating to the adoption of a medical fee schedule for inpatient
facility fees for burn cases. This bill would require the initial
resource-based relative value scale official medical fee schedule to
use a conversion factor or set of factors that is determined by the
administrative director, as prescribed, to result in no overall
increased costs to the workers' compensation system.


This bill would incorporate additional changes in Section 5307.1
of the Labor Code proposed by AB 378, that would become operative
only if AB 378 and this bill are both chaptered and become effective
on or before January 1, 2012, and this bill is chaptered last.

Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. Section 100002 is added to the
Government Code , to read:
100002. (a) (1) There is hereby created within state government
the California Secure Choice Retirement Savings Investment Board,
which shall consist of nine members, with the Treasurer serving as
chair, as follows:
(A) The Treasurer.
(B) The Director of Finance, or his or her designee.
(C) The Controller.
(D) An individual with retirement savings and investment expertise
appointed by the Senate Committee on Rules.
(E) An employee representative appointed by the Speaker of the
Assembly.
(F) A small business representative appointed by the Governor.
(G) A public member appointed by the Governor.
(H) Two additional members appointed by the Governor.
(2) Members of the board appointed by the Governor, the Senate
Committee on Rules, and the Speaker of the Assembly shall serve at
the pleasure of the appointing authority.
(b) All members of the board shall serve without compensation.
Members of the board shall be reimbursed for necessary travel
expenses incurred in connection with their board duties.
(c) A board member, program administrator, and other staff of the
board shall not do any of the following:
(1) Directly or indirectly have any interest in the making of any
investment made for the program, or in the gains or profits accruing
from any investment made for the program.
(2) Borrow any funds or deposits of the trust, or use those funds
or deposits in any manner, for himself or herself or as an agent or
partner of others.
(3) Become an endorser, surety, or obligor on investments by the
board.
(d) The board and the program administrator and staff shall
discharge their duties with respect to the trust solely in the
interest of the program participants as follows:
(1) For the exclusive purposes of providing benefits to program
participants and defraying reasonable expenses of administering the
program.
(2) By investing with the care, skill, prudence, and diligence
under the circumstances then prevailing that a prudent person acting
in a like capacity and familiar with those matters would use in the
conduct of an enterprise of a like character and with like aims.
(e) (1) The board shall annually prepare and adopt a written
statement of investment policy that includes a risk management and
oversight program. The board shall consider the statement of
investment policy and any changes in the investment policy at a
public hearing.
(2) The investment policy shall adhere to the following guiding
principles:
(A) The primary objective of the investment policy is to preserve
the safety of principal and provide a stable and low-risk rate of
return.
(B) The investment policy shall mitigate risk by maintaining a
balanced investment portfolio that provides assurance that no single
investment or class of investments will have a disproportionate
impact on the total portfolio.
(3) The following list represents the entire range of asset
categories that the board may consider and the only types of
investments which shall be permitted for the investment of funds:
(A) Domestic equities and international equities.
(B) Medium-term and long-term debt obligations of domestic
corporations.
(C) United States government and government sponsored entity debt
obligations.
(D) Real estate commingled funds that invest in publicly traded
real estate securities.
(E) Money market instruments, cash, and money market mutual funds
that are registered in the United States and denominated in United
States dollars.
(F) Investments in mutual funds, but limited to existing, rated
mutual funds, that are registered in the United States and
denominated in United States dollars.
(G) Insurance agreements.
(H) FDIC-insured bank products.
(4) Equities shall not exceed 50 percent of the overall asset
allocation of the fund.
(5) The investment policy shall also adhere to the following
restrictions:
(A) Borrowing for investment purposes, or leverage, is prohibited.

(B) Instruments known as variable rate demand notes, floaters,
inverse floaters, leveraged floaters, and equity-linked securities
are not permitted. Investment in any instrument, which is commonly
considered a "derivative" instrument, including, but not limited to,
options, futures, swaps, caps, floors, and collars, is prohibited.
(C) Contracting to sell securities not yet acquired in order to
purchase other securities for purposes of speculating on developments
or trends in the market is prohibited.
(6) The risk management and oversight program shall be designed to
ensure that an effective risk management system is in place to
monitor the risk levels of the California Secure Choice Retirement
Savings Program investment portfolio and ensure that the risks taken
are prudent and properly managed. The program shall be managed to
provide an integrated process for overall risk management on both a
consolidated and disaggregated basis, and to monitor investment
returns as well as risk to determine if the risks taken are
adequately compensated compared to applicable performance benchmarks
and standards.
(f) The board shall approve an investment management entity or
entities, the costs of which shall be paid out of funds held in the
trust and shall not be attributed to the administrative costs of the
board in operating the trust. Not later than 30 days after the close
of each month, the board shall place on file for public inspection
during business hours a report with respect to investments made
pursuant to this section and a report of deposits in financial
institutions. The investment manager shall report the following
information to the board within 20 days following the end of the each
month:
(1) The type of investment, name of the issuer, date of maturity,
and the par and dollar amount invested in each security, investment,
and money within the program fund.
(2) The weighted average maturity of the investments within the
program fund.
(3) Any amounts in the program fund that are under the management
of private money managers.
(4) Any amounts in the program fund that are under the management
of the Board of Administration of the Public Employees' Retirement
System.
(5) The market value as of the date of the report and the source
of this valuation for each security within the program fund.
(6) A description of compliance with the statement of investment
policy.

SEC. 2. Section 100043.5 is added to the
Government Code , to read:
100043.5. The board shall not open the program for enrollment
until a subsequent authorizing statute is enacted that expresses the
approval of the Legislature for the program to be fully implemented.

SEC. 3. This act shall become operative if this
bill and Senate Bill 1234 of the 2011-12 Regular Session of the
Legislature are both enacted and become law and this bill is enacted
last, in which case Section 100002 of the Government Code, as added
by this bill, shall become operative and Section 100002 of the
Government Code as added by Senate Bill 1234 shall not become
operative.

SECTION 1.
This act shall be known and may be
cited as the Fair Fee Schedule for Workers' Compensation Physicians
Act.

SEC. 2.
The Legislature finds and declares all
of the following:
(a) The amount payers are required to pay to physicians providing
primary care to injured workers in California is wholly dependent on
the statewide official medical fee schedule for physician services as
determined from time to time by the Administrative Director of the
Division of Workers' Compensation.
(b) California's official medical fee schedule for primary care
workers' compensation physician services is currently the second
lowest in the nation, even while California providers have the
highest cost of providing medical services to injured workers. The
current reimbursement rates for workers' compensation physicians in
California are nearly 50 percent lower than those in the nearby
states of Oregon and Washington.
(c) California's primary care workers' compensation physicians
have not had a meaningful fee schedule increase in over 11 years,
while the California Consumer Price Index has increased 33 percent
over that period. This has resulted in a steady decrease in real
income for the state's primary care workers' compensation physicians.

(d) This inequity is causing physicians to abandon the practice of
primary care occupational medicine, resulting in diminished access
to low-cost, high-quality care for California's injured workers.
Without fee schedule relief, primary care workers' compensation
physicians will continue to leave the occupational medicine practice,
resulting in increased use of far more costly alternatives,
including, but not limited to, hospital emergency rooms, and
increased time away from work. Once primary care providers leave the
occupational medicine practice, the damage to California's workers'
compensation system will be irreparable.
(e) California's primary care workers' compensation physicians are
the gatekeepers to the state's workers' compensation system, serving
as case managers for injured workers and returning them to gainful
employment as quickly as possible, thereby controlling total case
costs. Without fee schedule relief, California will suffer higher
total injury case costs that will result in increased insurance
premiums to employers throughout California.
(f) Subdivision (l) of Section 5307.1 provides the Administrative
Director of the Division of Workers' Compensation with authority to
adopt and revise, no less frequently than biennially, an official
medical fee schedule for physician services. Pursuant to this
authority, the Division of Workers' Compensation has developed a new
official medical fee schedule for physician services in California
based on the resource-based relative value scale (RBRVS). The RBRVS
is widely recognized as the best model for fair and proper allocation
of resources for physician payment. It is currently used by the
federal Centers for Medicare and Medicaid Services, and in 33 other
states' workers' compensation physician services fee schedules.
(g) It is the intent of the Legislature to address these issues by
adopting the Fair Fee Schedule for Workers' Compensation Physicians
Act.

SEC. 3.
Section 5307.1 of the Labor Code is
amended to read:
5307.1. (a) The administrative director, after public hearings,
shall adopt and revise periodically an official medical fee schedule
that shall establish reasonable maximum fees paid for medical
services other than physician services, drugs and pharmacy services,
health care facility fees, home health care, and all other treatment,
care, services, and goods described in Section 4600 and provided
pursuant to this section. Except for physician services, all fees
shall be in accordance with the fee-related structure and rules of
the relevant Medicare and Medi-Cal payment systems, provided that
employer liability for medical treatment, including issues of
reasonableness, necessity, frequency, and duration, shall be
determined in accordance with Section 4600. Commencing January 1,
2004, and continuing until the time the administrative director has
adopted an official medical fee schedule in accordance with the
fee-related structure and rules of the relevant Medicare payment
systems, except for the components listed in subdivision (j), maximum
reasonable fees shall be 120 percent of the estimated aggregate fees
prescribed in the relevant Medicare payment system for the same
class of services before application of the inflation factors
provided in subdivision (g), except that for pharmacy services and
drugs that are not otherwise covered by a Medicare fee schedule
payment for facility services, the maximum reasonable fees shall be
100 percent of fees prescribed in the relevant Medi-Cal payment
system. Upon adoption by the administrative director of an official
medical fee schedule pursuant to this section, the maximum reasonable
fees paid shall not exceed 120 percent of estimated aggregate fees
prescribed in the Medicare payment system for the same class of
services before application of the inflation factors provided in
subdivision (g). Pharmacy services and drugs shall be subject to the
requirements of this section, whether furnished through a pharmacy or
dispensed directly by the practitioner pursuant to subdivision (b)
of Section 4024 of the Business and Professions Code.
(b) In order to comply with the standards specified in subdivision
(f), the administrative director may adopt different conversion
factors, diagnostic related group weights, and other factors
affecting payment amounts from those used in the Medicare payment
system, provided estimated aggregate fees do not exceed 120 percent
of the estimated aggregate fees paid for the same class of services
in the relevant Medicare payment system.
(c) Notwithstanding subdivisions (a) and (d), the maximum facility
fee for services performed in an ambulatory surgical center, or in a
hospital outpatient department, shall not exceed 120 percent of the
fee paid by Medicare for the same services performed in a hospital
outpatient department.
(d) If the administrative director determines that a medical
treatment, facility use, product, or service is not covered by a
Medicare payment system, the administrative director shall establish
maximum fees for that item, provided that the maximum fee paid shall
not exceed 120 percent of the fees paid by Medicare for services that
require comparable resources. If the administrative director
determines that a pharmacy service or drug is not covered by a
Medi-Cal payment system, the administrative director shall establish
maximum fees for that item. However, the maximum fee paid shall not
exceed 100 percent of the fees paid by Medi-Cal for pharmacy services
or drugs that require comparable resources.
(e) Prior to the adoption by the administrative director of a
medical fee schedule pursuant to this section, for any treatment,
facility use, product, or service not covered by a Medicare payment
system, including acupuncture services, or, with regard to pharmacy
services and drugs, for a pharmacy service or drug that is not
covered by a Medi-Cal payment system, the maximum reasonable fee paid
shall not exceed the fee specified in the official medical fee
schedule in effect on December 31, 2003.
(f) Within the limits provided by this section, the rates or fees
established shall be adequate to ensure a reasonable standard of
services and care for injured employees.
(g) (1) (A) Notwithstanding any other law, the official medical
fee schedule shall be adjusted 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 both of the
following conditions are met:
(i) The annual inflation adjustment for facility fees for
inpatient hospital services provided by acute care hospitals and for
hospital outpatient services shall be determined solely by the
estimated increase in the hospital market basket for the 12 months
beginning October 1 of the preceding calendar year.
(ii) The annual update in the operating standardized amount and
capital standard rate for inpatient hospital services provided by
hospitals excluded from the Medicare prospective payment system for
acute care hospitals and the conversion factor for hospital
outpatient services shall be determined solely by the estimated
increase in the hospital market basket for excluded hospitals for the
12 months beginning October 1 of the preceding calendar year.
(B) The update factors contained in clauses (i) and (ii) of
subparagraph (A) shall be applied beginning with the first update in
the Medicare fee schedule payment amounts after December 31, 2003.
(2) The administrative director shall determine the effective date
of the changes, and shall issue an order, exempt from Sections
5307.3 and 5307.4 and the rulemaking provisions of the Administrative
Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of Title 2 of the Government Code), informing the
public of the changes and their effective date. All orders issued
pursuant to this paragraph shall be published on the Internet Web
site of the Division of Workers' Compensation.
(3) For the purposes of this subdivision, the following
definitions apply:
(A) "Medicare Economic Index" means the input price index used by
the federal Centers for Medicare and Medicaid Services to measure
changes in the costs of a providing physician and other services paid
under the resource-based relative value scale.
(B) "Hospital market basket" means the input price index used by
the federal Centers for Medicare and Medicaid Services to measure
changes in the costs of providing inpatient hospital services
provided by acute care hospitals that are included in the Medicare
prospective payment system.
(C) "Hospital market basket for excluded hospitals" means the
input price index used by the federal Centers for Medicare and
Medicaid Services to measure changes in the costs of providing
inpatient services by hospitals that are excluded from the Medicare
prospective payment system.
(h) This section does not prohibit an employer or insurer from
contracting with a medical provider for reimbursement rates different
from those prescribed in the official medical fee schedule.
(i) Except as provided in Section 4626, the official medical fee
schedule shall not apply to medical-legal expenses, as that term is
defined by Section 4620.
(j) The following Medicare payment system components shall not
become part of the official medical fee schedule until January 1,
2005:
(1) Inpatient skilled nursing facility care.
(2) Home health agency services.
(3) Inpatient services furnished by hospitals that are exempt from
the prospective payment system for general acute care hospitals.
(4) Outpatient renal dialysis services.
(k) Notwithstanding subdivision (a), for the calendar years 2004
and 2005, the existing official medical fee schedule rates for
physician services shall remain in effect, but these rates shall be
reduced by 5 percent. The administrative director may reduce fees of
individual procedures by different amounts, but shall not reduce the
fee for a procedure that is currently reimbursed at a rate at or
below the Medicare rate for the same procedure.
(l) (1) Notwithstanding subdivision (a), the administrative
director shall, by January 1, 2013, adopt an official medical fee
schedule for physician services that is based on the resource-based
relative value scale. The initial resource-based relative value scale
official medical fee schedule for physician services adopted under
this subdivision shall use a conversion factor, or set of conversion
factors, that is determined by the administrative director to result
in no overall increased costs to the workers' compensation system as
compared to the prior year's official medical fee schedule. The
administrative director may adopt multiple conversion factors in the
initial fee schedule required by this paragraph over a three-year
period to account for the impact of the initial fee schedule on
providers. The administrative director may, no less frequently than
biennially, revise the official medical fee schedule for physician
services based on the resource-based relative value scale.
(2) For purposes of this subdivision, "resource-based relative
value scale" means 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.

SEC. 3.5.
Section 5307.1 of the Labor Code is
amended to read:
5307.1. (a) The administrative director, after public hearings,
shall adopt and revise periodically an official medical fee schedule
that shall establish reasonable maximum fees paid for medical
services other than physician services, drugs and pharmacy services,
health care facility fees, home health care, and all other treatment,
care, services, and goods described in Section 4600 and provided
pursuant to this section. Except for physician services, all fees
shall be in accordance with the fee-related structure and rules of
the relevant Medicare and Medi-Cal payment systems, provided that
employer liability for medical treatment, including issues of
reasonableness, necessity, frequency, and duration, shall be
determined in accordance with Section 4600. Commencing January 1,
2004, and continuing until the time the administrative director has
adopted an official medical fee schedule in accordance with the
fee-related structure and rules of the relevant Medicare payment
systems, except for the components listed in subdivision (j), maximum
reasonable fees shall be 120 percent of the estimated aggregate fees
prescribed in the relevant Medicare payment system for the same
class of services before application of the inflation factors
provided in subdivision (g), except that for pharmacy services and
drugs that are not otherwise covered by a Medicare fee schedule
payment for facility services, the maximum reasonable fees shall be
100 percent of fees prescribed in the relevant Medi-Cal payment
system. Upon adoption by the administrative director of an official
medical fee schedule pursuant to this section, the maximum reasonable
fees paid shall not exceed 120 percent of estimated aggregate fees
prescribed in the Medicare payment system for the same class of
services before application of the inflation factors provided in
subdivision (g). Pharmacy services and drugs shall be subject to the
requirements of this section, whether furnished through a pharmacy or
dispensed directly by the practitioner pursuant to subdivision (b)
of Section 4024 of the Business and Professions Code.
(b) In order to comply with the standards specified in subdivision
(f), the administrative director may adopt different conversion
factors, diagnostic-related group weights, and other factors
affecting payment amounts from those used in the Medicare payment
system, provided estimated aggregate fees do not exceed 120 percent
of the estimated aggregate fees paid for the same class of services
in the relevant Medicare payment system.
(c) Notwithstanding subdivisions (a) and (d), the maximum facility
fee for services performed in an ambulatory surgical center, or in a
hospital outpatient department, shall not exceed 120 percent of the
fee paid by Medicare for the same services performed in a hospital
outpatient department.
(d) If the administrative director determines that a medical
treatment, facility use, product, or service is not covered by a
Medicare payment system, the administrative director shall establish
maximum fees for that item, provided that the maximum fee paid shall
not exceed 120 percent of the fees paid by Medicare for services that
require comparable resources. If the administrative director
determines that a pharmacy service or drug is not covered by a
Medi-Cal payment system, the administrative director shall establish
maximum fees for that item. However, the maximum fee paid shall not
exceed 100 percent of the
fees paid by Medi-Cal for pharmacy services or drugs that require
comparable resources.
(e) (1) Prior to the adoption by the administrative director of a
medical fee schedule pursuant to this section, for any treatment,
facility use, product, or service not covered by a Medicare payment
system, including acupuncture services, the maximum reasonable fee
paid shall not exceed the fee specified in the official medical fee
schedule in effect on December 31, 2003, except as otherwise provided
in this subdivision.
(2) Any compounded drug product shall be billed by the compounding
pharmacy or dispensing physician at the ingredient level, with each
ingredient identified using the applicable National Drug Code (NDC)
of the ingredient and the corresponding quantity, and in accordance
with regulations adopted by the California State Board of Pharmacy.
Ingredients with no NDC shall not be separately reimbursable. The
ingredient-level reimbursement shall be equal to 100 percent of the
reimbursement allowed by the Medi-Cal payment system and payment
shall be based on the sum of the allowable fee for each ingredient
plus a dispensing fee equal to the dispensing fee allowed by the
Medi-Cal payment systems. If the compounded drug product is dispensed
by a physician, the maximum reimbursement shall not exceed 300
percent of documented paid costs, but in no case more than twenty
dollars ($20) above documented paid costs.
(3) For a dangerous drug dispensed by a physician that is a
finished drug product approved by the federal Food and Drug
Administration, the maximum reimbursement shall be according to the
official medical fee schedule adopted by the administrative director.

(4) For a dangerous device dispensed by a physician, the
reimbursement to the physician shall not exceed either of the
following:
(A) The amount allowed for the device pursuant to the official
medical fee schedule adopted by the administrative director.
(B) One hundred twenty percent of the documented paid cost, but
not less than 100 percent of the documented paid cost plus the
minimum dispensing fee allowed for dispensing prescription drugs
pursuant to the official medical fee schedule adopted by the
administrative director, and not more than 100 percent of the
documented paid cost plus two hundred fifty dollars ($250).
(5) For any pharmacy goods dispensed by a physician not subject to
paragraph (2), (3), or (4), the maximum reimbursement to a physician
for pharmacy goods dispensed by the physician shall not exceed any
of the following:
(A) The amount allowed for the pharmacy goods pursuant to the
official medical fee schedule adopted by the administrative director
or pursuant to paragraph (2), as applicable.
(B) One hundred twenty percent of the documented paid cost to the
physician.
(C) One hundred percent of the documented paid cost to the
physician plus two hundred fifty dollars ($250).
(6) For the purposes of this subdivision, the following
definitions apply:
(A) "Administer" or "administered" has the meaning defined by
Section 4016 of the Business and Professions Code.
(B) "Compounded drug product" means any drug product subject to
Article 4.5 (commencing with Section 1735) of Division 17 of Title 16
of the California Code of Regulations or other regulation adopted by
the State Board of Pharmacy to govern the practice of compounding.
(C) "Dispensed" means furnished to or for a patient as
contemplated by Section 4024 of the Business and Professions Code and
does not include "administered."
(D) "Dangerous drug" and "dangerous device" have the meanings
defined by Section 4022 of the Business and Professions Code.
(E) "Documented paid cost" means the unit price paid for the
specific product or for each component used in the product as
documented by invoices, proof of payment, and inventory records as
applicable, or as documented in accordance with regulations that may
be adopted by the administrative director, net of rebates, discounts,
and any other immediate or anticipated cost adjustments.
(F) "Pharmacy goods" has the same meaning as set forth in Section
139.3.
(7) To the extent that any provision of paragraphs (2) to (6),
inclusive, is inconsistent with any provision of the official medical
fee schedule adopted by the administrative director on or after
January 1, 2012, the provision adopted by the administrative director
shall govern.
(8) Notwithstanding paragraph (7), the provisions of this
subdivision concerning physician-dispensed pharmacy goods shall not
be superseded by any provision of the official medical fee schedule
adopted by the administrative director unless the relevant official
medical fee schedule provision is expressly applicable to
physician-dispensed pharmacy goods.
(f) Within the limits provided by this section, the rates or fees
established shall be adequate to ensure a reasonable standard of
services and care for injured employees.
(g) (1) (A) Notwithstanding any other law, the official medical
fee schedule shall be adjusted 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 both of the
following conditions are met:
(i) The annual inflation adjustment for facility fees for
inpatient hospital services provided by acute care hospitals and for
hospital outpatient services shall be determined solely by the
estimated increase in the hospital market basket for the 12 months
beginning October 1 of the preceding calendar year.
(ii) The annual update in the operating standardized amount and
capital standard rate for inpatient hospital services provided by
hospitals excluded from the Medicare prospective payment system for
acute care hospitals and the conversion factor for hospital
outpatient services shall be determined solely by the estimated
increase in the hospital market basket for excluded hospitals for the
12 months beginning October 1 of the preceding calendar year.
(B) The update factors contained in clauses (i) and (ii) of
subparagraph (A) shall be applied beginning with the first update in
the Medicare fee schedule payment amounts after December 31, 2003.
(C) The maximum reasonable fees paid for pharmacy services and
drugs shall not include any reductions in the relevant Medi-Cal
payment system implemented pursuant to Section 14105.192 of the
Welfare and Institutions Code.
(2) The administrative director shall determine the effective date
of the changes, and shall issue an order, exempt from Sections
5307.3 and 5307.4 and the rulemaking provisions of the Administrative
Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of Title 2 of the Government Code), informing the
public of the changes and their effective date. All orders issued
pursuant to this paragraph shall be published on the Internet Web
site of the Division of Workers' Compensation.
(3) For the purposes of this subdivision, the following
definitions apply:
(A) "Medicare Economic Index" means the input price index used by
the federal Centers for Medicare and Medicaid Services to measure
changes in the costs of a providing physician and other services paid
under the resource-based relative value scale.
(B) "Hospital market basket" means the input price index used by
the federal Centers for Medicare and Medicaid Services to measure
changes in the costs of providing inpatient hospital services
provided by acute care hospitals that are included in the Medicare
prospective payment system.
(C) "Hospital market basket for excluded hospitals" means the
input price index used by the federal Centers for Medicare and
Medicaid Services to measure changes in the costs of providing
inpatient services by hospitals that are excluded from the Medicare
prospective payment system.
(h) This section does not prohibit an employer or insurer from
contracting with a medical provider for reimbursement rates different
from those prescribed in the official medical fee schedule.
(i) Except as provided in Section 4626, the official medical fee
schedule shall not apply to medical-legal expenses, as that term is
defined by Section 4620.
(j) The following Medicare payment system components shall not
become part of the official medical fee schedule until January 1,
2005:
(1) Inpatient skilled nursing facility care.
(2) Home health agency services.
(3) Inpatient services furnished by hospitals that are exempt from
the prospective payment system for general acute care hospitals.
(4) Outpatient renal dialysis services.
(k) Notwithstanding subdivision (a), for the calendar years 2004
and 2005, the existing official medical fee schedule rates for
physician services shall remain in effect, but these rates shall be
reduced by 5 percent. The administrative director may reduce fees of
individual procedures by different amounts, but shall not reduce the
fee for a procedure that is currently reimbursed at a rate at or
below the Medicare rate for the same procedure.
( l
) (1) Notwithstanding subdivision (a), the
administrative director shall, by January 1, 2013, adopt an official
medical fee schedule for physician services that is based on the
resource-based relative value scale. The initial resource-based
relative value scale official medical fee schedule for physician
services adopted under this subdivision shall use a conversion
factor, or set of conversion factors, that is determined by the
administrative director to result in no overall increased costs to
the workers' compensation system as compared to the prior year's
official medical fee schedule. The administrative director may adopt
multiple conversion factors in the initial fee schedule required by
this paragraph over a three-year period to account for the impact of
the initial fee schedule on providers. The administrative director
may, no less frequently than biennially, revise the official medical
fee schedule for physician services based on the resource-based
relative value scale.
(2) For purposes of this subdivision, "resource-based relative
value scale" means 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.
SEC. 4.
Section 3.5 of this bill incorporates
amendments to Section 5307.1 of the Labor Code proposed by both this
bill and Assembly Bill 378. It shall only become operative if (1)
both bills are enacted and become effective on or before January 1,
2012, (2) each bill amends Section 5307.1 of the Labor Code, and (3)
this bill is enacted after Assembly Bill 378, in which case Section 3
of this bill shall not become operative.