Understanding Workers’ Compensation Medical Care in California June 2005 Understanding Workers’ Compensation Medical Care in California Prepared for CALIFORNIA HEALTHCARE FOUNDATION by Allard E. Dembe, Sc.D. June 2005 Acknowledgments The publication of Understanding Workers’ Compensation Medical Care in California was supported by a grant from the California HealthCare Foundation. Jill M. Yegian, Ph.D., director of the Health Insurance Program at the Foundation, was responsible for the overall guidance and direction of the project. We are grateful for the helpful comments and suggestions contributed by numerous reviewers including: Christine Baker; Kirsten Stromberg; and Irina Nemirovsky of the California Commission on Health and Safety and Workers’ Compensation; Juliann Sum of the Labor Occupational Health Program at the University of California, Berkeley; Jeffrey Harris of J. Harris Associates; Linda Rudolph of the state Medi-Cal Managed Care Division; Frank Neuhauser of the Survey Research Center at the University of California, Berkeley; and Kathy Dervin of the Division of Workers’ Compensation of the California Department of Industrial Relations. Additional assistance and materials were provided by Alex Swedlow of the California Workers’ Compensation Institute and Richard Victor of the Workers Compensation Research Institute. About the Author Allard E. Dembe is associate professor of Family Medicine and Community Health at the University of Massachusetts Medical School and senior research scientist at the University of Massachusetts Center for Health Policy and Research. He currently serves as deputy director of the Robert Wood Johnson Foundation’s Workers’ Compensation Health Initiative, and co-directs the doctoral degree program in Occupational Health Services Research at the Harvard University School of Public Health. About the Foundation The California HealthCare Foundation, based in Oakland, is an independent philanthropy committed to improving California’s health- care delivery and financing systems. Formed in 1996, our goal is to ensure that all Californians have access to affordable, quality health care. For more information about CHCF, visit us online at www.chcf.org. ISBN 1-932064-88-5 ©2005 California HealthCare Foundation Contents 4 I. Introduction 6 II. Basic System Characteristics Obtaining Initial Care for a Work-Related Injury or Illness Comparison with General Health Care for Nonoccupational Conditions 11 III. Regulation of WC Medical Care 12 IV. WC Medical Care Costs 17 V. WC Medical Utilization Trends Providers of WC Care Managed Care in California WC Twenty-Four-Hour Care 27 VI. Outcomes and the Quality of Care 30 VII. Worker Experiences and Satisfaction with Care 34 VIII. Prevention and Management of Work Disability 36 IX. WC Medical Care: Building a System for the 21st Century 38 Appendices A. Glossary B. Abbreviations C. Understanding Workers’ Compensation Costs 42 Endnotes I. Introduction DRAMATICALLY ESCALATING COSTS IN CALIFORNIA’S workers’ compensation (WC) system between 1995 and 2003 prompted the passage of sweeping reform legislation (SB 899) in April 2004. Because much of the inflation in the WC system was driven by rising medical costs and high use of medical services, policymakers adopted measures to restrict some types of services, allow employers to establish new forms of medical provider networks, and ensure that care conforms to a utilization review schedule tied to evidence-based treatment guidelines. The process of considering and enacting these changes sparked a broad reexamination of how the California WC system provides medical treatment to workers suffering workplace injuries and illnesses. Workers, employers, medical providers, insurers, lawmakers, and others in the state are struggling to understand the system’s operation and the ways that medical care for work injuries differs from conventional medical care that patients receive for nonwork- related conditions. They are finding that it is often difficult to locate and interpret reliable information about the function and performance of the system. Few comprehensive sources of infor- mation are available to guide individuals through the nuances of workers’ compensation medical benefits, medical costs, and delivery of WC medical services. This publication provides readers with essential information about medical care aspects of California’s workers’ compensation system, a summary of available research studies, and a guide to understanding recent changes. It is a companion to the four fact sheets on Workers’ Compensation published in August 2003 by CHCF and the California Commission on Health and Safety and Workers’ Compensation (available at: www.chcf.org). Some of the major recent system reforms affecting WC medical care in California are summarized in Table 1. A glossary of WC medical care terminology and list of abbreviations are available in the Appendices. 4 | CALIFORNIA HEALTHCARE FOUNDATION Table 1. Major Changes to WC Medical Care from Recent Reform Legislation in California (See “Appendix B. Abbreviations” for the meaning of acronyms.) AB 749 amended by AB486. AB 749 signed into law February 15, 2002 AB 227 and SB 228 signed into law AB 486 signed into law September 25, 2002 September 30, 2003 SB 899 signed into law April 19, 2004 • Eliminated the treating physician’s • Required that every employer • Authorized the formation and use of presumption of correctness, except establish a utilization review plan, medical provider networks (MPNs) when an employee predesignated based on the ACOEM treatment by WC insurers and self-insured a personal physician. guidelines (and for services not employers, and set standards for covered by ACOEM, on other MPNs with regard to geographic • Streamlined requirements for professionally recognized guidelines). coverage, availability of specialists, employer use of HCOs. Employers Establishes time frames for making and the mix of occupational and need to offer only one HCO to their and communicating utilization non-occupational physicians in the employees. Allows for up to 180 review decisions. network. Employees will generally days of employer control over choice be restricted to receive care from of treating physician within the HCO, • Limited chiropractic and physical network providers throughout the if non-occupational medical coverage therapy to no more than 24 visits for life of a claim. is also provided. Exempts HCOs that each service over the life of a claim. are licensed as Knox-Keene Health • Included provisions for employees • Retroactively repealed the treating Care Service Plans from the need to to obtain second and third medical physician’s presumption of correct- apply for certification from the DWC, opinions if they disagree with the ness for all dates of injury, unless but they still must file reports with treating physician within a MPN, and the physician was pre-designated. the DWC like other certified HCOs. allows for requesting an Independent • Abolished the Industrial Medical Medical Review (IMR) if there is still a • Mandated adoption of pharmaceutical Council (IMC) and transferred its disagreement after the third opinion. fee schedule by the state DWC and functions to the DWC. required pharmacies to offer generic • Specified that all treatment under drug equivalents when available. • Mandated that the DWC establish a WC must be in accordance with medical treatment utilization schedule the DWC’s utilization schedule or • Gave DWC authority to adopt an that is to be considered presump- (until the schedule is developed) outpatient surgical fee schedule. tively correct for legal purposes the ACOEM treatment guidelines. • Limited disclosure of WC medical regarding the extent and scope of Required that all guidelines adopted information to diagnosis, treatment, treatment. Adopted the ACOEM by the DWC are to be evidence- and information necessary for job guidelines until the DWC develops based, nationally recognized, and modification. the final utilization schedule. peer-reviewed. Provided that the Repealed the treatment guidelines guidelines can only be rebutted • Provided for electronic medical established previously by the IMC. in legal proceedings by scientific billing and a standardized billing form. Required conformity with • Mandated establishment of a new medical evidence. HIPPA confidentiality standards. official medical fee schedule (OMFS). • Required employers to authorize Established hospital and pharmaceuti- payment for initial care prior to • Required the DWC to develop cal fees based on fees used in the formal acceptance of the claim up educational materials for physicians Medicare and Medi-Cal systems. to $10,000. to help them understand the role Imposed an immediate reduction of of the treating physician, processes • Extended the 24 visit cap to visits 5% in fee rates for physician services. for evaluating permanent disability, for occupational therapy as well as and the writing of disability reports. • Mandated that second opinions be physical therapy and chiropractic required for spinal surgery. services. • Prohibited self-referrals by physicians • Clarified the medical-legal dispute to outpatient surgical centers in resolution process involving which they have a financial interest, examinations by agreed medical unless they disclose that relationship. evaluators (AMEs) and qualified • Expanded the requirement for medical evaluators (QMEs). generic drug alternatives from • Specified that physicians will deter- pharmacies to all dispensers (e.g., mine the level of permanent disability hospitals, clinics, doctors’ offices). based on the AMA Guidelines. • Required payment of medical bills to • Specified that the employer’s liability be made within 45 working days. will be based on a medical determi- nation about the proportion of disability that is attributable to a specific work injury. • Allowed for the establishment of 24-hour care plans within construc- tion and other industries. Understanding Workers’ Compensation Medical Care in California | 5 II. Basic System Characteristics VIRTUALLY ALL EMPLOYED INDIVIDUALS IN CALIFORNIA are covered under workers’ compensation, including immigrants, resident aliens, minors, and part-time workers. Only a few types of workers are excluded from coverage: certain domestic workers in private homes, unpaid volunteers in nongovernmental entities, casual laborers, and self-employed people who are not subject to the control and direction of an employer. California’s Labor Code requires employers to secure and pay for WC coverage for their employees. Employers can satisfy these requirements by purchas- ing the insurance from commercial WC insurance companies, or through the State Compensation Insurance Fund (SCIF), a publicly owned nonprofit organization. Some larger employers set up a self-insurance plan to cover their workforce rather than purchasing WC coverage from an insurance company. Regardless of source, the employer is obligated to pay for the entire cost of WC coverage, without cost sharing, deductibles, or copayments by employees. Under California state law, the employer’s WC coverage pays for medical care and provides wage-replacement (called indemnity benefits) for injuries and illnesses that arise “out of and in the course of employment.” To be eligible for WC benefits, a worker’s ailment must be medically determined to be caused or aggravated by job activities. WC is a no-fault system, which means that benefits are paid without the need for determining whether the employer’s or employee’s negligence caused the injury. This structure was intended to ensure that workers are able to receive medical attention and income replacement promptly, while shielding employers from potentially costly litigation. The WC insurance pays for medical services that are reasonably required to cure or relieve the effects of a worker’s injury or illness, and that conform to professionally recognized standards of care. In addition, WC pays for medical equipment, transportation to appointments, prescription medications, and medical care that help restore the injured worker’s capability to perform a job (e.g., physical therapy). Furthermore, WC also provides payment for medical providers to evaluate the extent of the injured worker’s physical impairments and work restrictions and to assess the worker’s readiness for return to work. 6 | CALIFORNIA HEALTHCARE FOUNDATION There are other common types of occupational Currently, about 15 million California workers are medical services that are not covered under workers’ covered by WC insurance and more than a half compensation, including: pre-placement examina- million claims are filed each year. According to the tions; routine medical surveillance; preventive Workers’ Compensation Insurance Rating Bureau services (e.g., vaccinations for health care workers); of California (WCIRB), WC premium costs paid drug testing; and on-site first aid. Typically, employ- by insured employers have risen from $5.8 billion ers purchase these services directly from commercial in 1995 to more than $20 billion in 2003.2 The vendors or provide them through the use of in- WCIRB has projected that total WC system costs house medical staff. for injuries occurring during 2004 (for benefits paid out over the entire expected life of these Besides medical care benefits, workers’ compensa- claims) will exceed $24 billion.3 The rise in WC tion provides four other types of benefits to injured costs has occurred despite a significant decline in workers: temporary disability benefits, permanent the incidence of occupational injuries and illnesses disability benefits, death benefits, and supplemental during the past decade (see Figure 1). job displacement benefits in the form of a voucher for education-related retraining and skill enhance- ment.1 The amount of these benefits depends on the nature and severity of the worker’s condition. The extent of the injured worker’s disability is typically determined by a medical provider in accordance with published disability evaluation guidelines. Figure 1. California OSHA Injury and Illness Reports; Cases Per 100 Employees, 1990– 2003 9.9 9.9 9.8 9.0 8.6 7.9 7.1 7.1 6.7 6.5 6.3 6.0 6.0 5.9 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: California Division of Labor Statistics and Research, Department of Industrial Relations. 2005. Occupational Injuries and Illnesses Data. Understanding Workers’ Compensation Medical Care in California | 7 Obtaining Initial Care for a Work- third opinion from another network provider if the Related Injury or Illness worker disagrees with the diagnosis or treatment When a worker suffers a job-related injury or illness, offered by the primary treating clinician. If the the injured worker is expected to notify the diagnosis or treatment is still in dispute after that, employer promptly and submit a WC claims form. the worker can request an independent medical The employer completes the form and files it with review. Workers who were already receiving care its WC claims administrator (either the employer’s from specific medical providers prior to the WC insurer; or in the case of a self-insured employer’s establishment of an MPN can continue employer, with the employer’s in-house claims to use those providers if surgery is required, or if the manager or third-party administrator). The claims worker has a serious, chronic, or terminal condition. administrator is required to accept or deny the claim within 90 days after the claim is filed. Under Employees who prefer to be treated by their own California WC law, if a claim is not denied within personal physician initially can do so if they have that period, it is presumed to be compensable. notified the employer in writing about their prefer- Workers who have their claim denied are allowed ence prior to being injured (called pre-designation) to challenge the decision through an administrative and if the physician agrees to be pre-designated. adjudication process. Employers must authorize Pre-designation is only allowed if the worker’s payment up to a maximum of $10,000 for initial employer provides employees with non-occupational medical treatment (including emergency care) that group health coverage through a health maintenance the worker receives prior to the claim administra- organization (HMO), HCO, or other health care tor’s official acceptance of the claim, so long as the plan as described in the California Labor Code (sec. treatment given accords with the state’s utilization 4600.5). Workers may still pre-designate a personal schedule and treatment guidelines. physician for initial care even if the employer has established a MPN. Only licensed physicians and In California, the employer and its insurance surgeons are eligible for pre-designation; other administrator generally have the right to determine clinicians such as chiropractors and acupuncturists which medical provider the worker uses during cannot be pre-designated. the first 30 days of care. Thereafter, employees are free to select their own primary treating provider. California’s system for WC medical care presupposes Employers and employees who agree to have care that a designated health care provider will act as the delivered by a licensed health care organization injured worker’s primary treating physician. Current (HCO) are governed by other rules regarding the WC law allows chiropractors, acupuncturists, choice of provider. Generally, under HCO plans, psychologists, optometrists, dentists, podiatrists, and employers have additional time to control the osteopaths, as well as traditional medical doctors choice of the medical care provider. New rules (M.D.s), to serve as the primary treating physician. taking effect in 2005 allow employers to establish In addition, licensed nurse practitioners and physi- medical provider networks (MPNs), which are cians’ assistants, while not qualifying as “treating designated groups of providers approved by the physicians,” are permitted to perform various care state to offer WC medical services to injured functions, including providing medical treatment workers. In an MPN, the employer or its insurer of a work-related injury in accordance with their may select the worker’s initial treating provider. authorized scope of practice, qualifying a worker After the first visit, the worker may select a different for up to three days off work, and co-authoring and medical provider, but the provider must be in the signing the doctor’s reports needed to be submitted network. Additionally, a worker receiving care to the state WC agency. Other types of health care within an MPN has the right to get a second or specialists (e.g., physical therapists, audiologists) are 8 | CALIFORNIA HEALTHCARE FOUNDATION also permitted to provide care for injured workers, Table 2: Distribution of WC Medical Payments Among Top Ten Diagnostic Categories, normally through referrals from the primary treating 1993–2000 Claims physician. SHARE OF MEDICAL D I A G N O S T I C C AT E G O RY PAY M E N T S Back pain, without spinal cord involvement 21.6% Comparison with General Health Care Other injuries, poisonings and toxic effects 19.3% for Nonoccupational Conditions Sprain of shoulder, arm, knee, or leg 6.9% In general, workers’ compensation medical care Wound or fracture of shoulder, differs from nonoccupational medical care in two arm, knee, or leg 6.3% important ways: (1) WC medical care is financed Back pain, with spinal cord involvement 5.5% with exclusive purchasing by employers and requires Tendonitis, myositis, and bursitis 5.0% no patient cost-sharing, and (2) It provides a Joint disorders 4.8% broader array of treatment services due to the need Minor wounds 4.6% for clinicians to evaluate the patient’s disability and Cranial and peripheral nerve disorders 2.8% readiness to resume work and to provide medical Carpal tunnel syndrome 2.6% services for recovery of vocational function. While Other categories (<2.6% each) 20.6% general health insurance usually covers care only Source: Swedlow A, Gardner, L. 2003. Provider Experience and Volume-Based Outcomes in California Workers' Compensation. Oakland, California. during the time period specified in the health Workers’ Compensation Institute (CWCI). February 2003. insurance policy, WC insurance covers the costs of medical care for injuries that occur during the policy period, even if the duration of care provided to the patient extends beyond that period. This makes the ultimate cost of WC medical care less predictable and magnifies the importance to health systems and insurers of distinguishing between conditions that are job-related and those that are not. In addition, the mix of cases seen among WC patients contains a greater proportion of acute injury and musculoskeletal disorders, and relatively fewer infectious or chronic diseases. Common types of occupational disorders include musculoskeletal ailments, sprains and strains, fractures, cuts, contu- sions, and other traumatic conditions. Back pain is the most frequently treated and costly type of condition covered under WC in California (see Table 2). While WC patients are generally working- aged adults, the system also covers adolescents injured at work, as well as elderly patients whose conditions stem from past workplace exposures. Table 3 compares aspects of WC and general medical care. Understanding Workers’ Compensation Medical Care in California | 9 Table 3. Comparison of General Medical Care and California WC Medical Care General Medical Care California WC Medical Care Care Financing • Insurance can be purchased by employers, • Virtually all employers are required to provide individuals and other entities, or funding for WC coverage for their workers through care can be provided by public funding sources. commercial WC insurance, self-insurance, Many workers do not have health insurance. or the State Compensation Insurance Fund. • Cost sharing by patients is common. Most • There is no cost sharing, deductibles, or copay- employers that offer coverage require workers ments required by patients. WC provides first to pay a portion of the premium. dollar, 100% payment for care. • Payment to providers can be on a fee-for- • Almost all payment is on a fee-for-service basis. service, capitated, or prospective payment The use of capitated payment plans is uncom- basis. Fees are typically negotiated or mon in California’s WC system. Many fees are established by government payers like regulated by the state. Medicare or Medicaid. • WC policies are generally for one year, but • Health insurance policies are typically written medical care payment for injuries occurring on an annual contract basis. during that period can extend far into the future. Access to Care • Care is normally provided for a variety of • Care is provided only for injuries and illnesses conditions. Routine and preventive care is that are determined to be work-related. Care commonly included. often includes evaluation of disability, work capabilities, restoration of vocational function, • Patients can typically select a primary care and assessment of readiness to resume work. provider. In some plans, the provider must be chosen from a designated list or from • In California, the employer has control over members of a provider network. choice of the primary treating provider for the first 30 days after an injury (unless the worker pre-designates a personal provider). Thereafter the employee can choose. Beginning in 2005, employers can restrict all WC care to a desig- nated medical provider network. Quality of Care • Quality measurement standards exist (e.g., • Although a few quality standards have been HEDIS) and quality measurement and reporting proposed (e.g., URAC), systematic quality is performed by many provider organizations. measurement and reporting is uncommon. • Providers focus on providing appropriate care, • Along with conventional diagnostic and thera- achieving desired health improvement, alleviat- peutic care, providers also focus on vocational ing symptoms, and addressing patient needs. function, minimizing work disability, and Many providers have limited knowledge of addressing employer as well as patient needs. workplace demands, occupational health Providers are commonly familiar with job principles, and workers’ compensation. demands, occupational hazards, workers’ compensation, and return-to-work strategies. • Treatment guidelines are becoming more common, as increasing emphasis is placed • California WC regulations require adherence on evidence-based practice, but their use is to treatment guidelines that are specific to the rarely legally mandated. care of particular work-related conditions. 10 | CALIFORNIA HEALTHCARE FOUNDATION III. Regulation of WC Medical Care VARIOUS ASPECTS OF WORKERS’ COMPENSATION MEDICAL care in California are regulated by the Division of Workers’ Compensation (DWC) of the California Department of Industrial Relations (DIR). The administrative director of the DWC is ultimately responsible for developing and promulgating regulations governing the official medical fee schedule (OMFS); medical provider networks, and workers’ compensation HCOs; the state’s WC utilization schedule and treatment guidelines; and specific reporting requirements for medical providers delivering WC services. In 2004, the DWC also assumed responsibilities that were previously fulfilled by the Industrial Medical Council (which was abolished in 2003 by the passage of SB 228). Those functions include examining and appointing physicians to be qualified medical evaluators (QMEs) and overseeing the state’s medical-legal evaluation process. The Workers’ Compensation Appeals Board (WCAB), a unit of the DIR, has jurisdiction over the WC dispute resolution process. When a dispute cannot be settled, the case may be heard by a DWC administrative law judge. The WCAB is responsible for regulating the adjudication process and hearing appeals for reconsideration of decisions made by the administrative judges. The California Department of Insurance (CDI) has authority for regulating, investigating, and auditing insurance business practices to ensure that companies remain solvent and meet their obligations to insurance policyholders. With respect to workers’ compensation, the CDI primarily deals with rating and under- writing issues. The CDI reviews and approves WC rate filings, investigates potential WC insurance fraud, audits premium filings, and monitors WC insurer solvency. The Workers’ Compensation Insurance Rating Bureau (WCIRB) is not a state regulatory agency, but rather a nonprofit association comprised of all companies licensed to transact WC insurance in California. The WCIRB is a licensed rating organization and the designated statistical agent of the California Insurance Commissioner; it collects and analyzes WC statistical information regarding premiums, benefit payments, and administrative costs to help establish advisory premium rates for various business types. Understanding Workers’ Compensation Medical Care in California | 11 IV. WC Medical Care Costs HISTORICALLY, PAYMENTS FOR MEDICAL CARE HAVE comprised a smaller proportion (about 40 percent) of total workers’ compensation costs than have payments for indemnity benefits. Beginning in the early 1990s, WC payments for medical care of work injuries began to escalate sharply, exceeding the rate of growth in general (nonoccupational) medical care costs. California’s WC system, like those of most other states, adopted managed care and cost-control measures in the early 1990s in an attempt to stem this trend. But by the late 1990s and into the 2000s, the surge in WC medical care costs remained unchecked. Several factors contributed to the rise in medical costs, including: high utilization levels for physical therapy and chiropractic care; a relatively low use of managed care plans in California’s WC system, the absence of effective mechanisms to ensure that service use conforms with recognized treatment standards, increased use of outpatient surgical facilities that were not governed by WC fee regulations, and growth in pharmaceutical use and prices. Recent reform legislation passed between 2002 and 2004 aimed at curbing many of these cost drivers. Interpreting workers’ compensation cost estimates often can be confusing because of subtle distinctions involving the type of benefits provided (e.g., medical and indemnity), the timing of benefit payments (e.g., those already paid and those reserved for the future), the consideration of non-benefit expenses (e.g., legal, administrative, and cost containment), the inclusion of costs from self-insured as well as insured employers, and the date at which the cost estimates are made. An example to help clarify these distinctions is provided in Appendix C. WC System Cost Estimates Total California WC system costs — including medical payments and payments for indemnity benefits to injured workers, reserves for future payments, and administrative expenses — were estimated to be about $25.1 billion in 2003, representing an increase of 264 percent since 1995.4 The cost for employers to purchase WC insurance in 2003 (i.e., premiums) was about $21.4 billion, not including self-insured employer costs (see Figure 2 on the following page).5 As a percentage of payroll, employers spent 12 | CALIFORNIA HEALTHCARE FOUNDATION about $5.55 per $100 of payroll for WC insurance Figure 2. Growth in Written WC Insurance Premiums (excluding self-insured), 1996–2004 premiums in 2004, up from $2.30 in 1999 (see Figure 3).6 in billions System-wide, approximately $11.9 billion in WC 1996 $5.9 benefits were paid out in California in calendar year 1997 $6.4 2003, $6.09 billion for medical care and $5.79 billion for indemnity benefits (this estimate does not 1998 $6.6 include reserves for future payments). The average total incurred cost for a California WC indemnity 1999 $7.1 claim for accident year 2003 was estimated (as of 2000 $9.1 September 30, 2004) to be $50,441 (this estimate includes payments already made plus reserves for 2001 $12.0 future payments).7 2002 $15.5 The incurred cost of a WC claim is the estimated 2003 $21.4 total indemnity and medical benefits payments made over the entire life of a claim. For example, 2004 $24.1 a claim for a serious accident occurring in 2003 might incur payments for many years afterwards. Note: Value for 2004 is an estimate based on partial year data. Therefore, paid costs (costs paid for claims in a Source: Workers’ Compensation Insurance Rating Bureau of California (WCIRB). Report on September 30, 2004 Insurer Experience. particular year) will always be less than the incurred Figure 3. Average WC Insurance Premiums Per $100 of Payroll, 1995–2004, valued as of 9/30/04 $7 $6 $5 $4 $3 $2 $1 $2.59 $2.56 $2.47 $2.35 $2.30 $2.68 $3.53 $4.28 $4.86 $5.65 $6.35 $5.75 $5.34 $0 1995 1996 1997 1998 1999 2000 2001 Jan to Jul to Jan to Jul to Jan to Jul to Jun 2002 Dec 2002 Jun 2003 Dec 2003 Jun 2004 Sep 2004 Source: Workers’ Compensation Insurance Rating Bureau of California (WCIRB). Report on September 30, 2004 Insurer Experience. Understanding Workers’ Compensation Medical Care in California | 13 costs for claims originating in a particular year. An Figure 4. Total WC Paid Costs per Calendar Year, 1995–2003, valued as of June 2004 accident year refers to claims covering accidents occurring in a particular year. An illustration of Indemnity Medical (in billions) these concepts is available in Appendix C. 1995 $2.77 $2.02 WC Medical Cost Estimates 1996 $2.69 $1.97 In 2003, medical payments by insured employers (excluding self-insured) totaled about $4.87 billion, 1997 $2.73 $2.05 up 42 percent from 2001 and 147 percent from 1996 (see Figure 4). By comparison, during the 1998 $2.91 $2.25 same period (1996 to 2003), total national medical care costs rose by 62 percent ($1.68 trillion versus 1999 $3.08 $2.54 $1.04 trillion).8 Medical care expenses, in 2003, 2000 $3.75 $3.18 accounted for about 51.3 percent of all WC benefit payments (the remaining 48.7 percent were 2001 $3.82 $3.43 indemnity payments), up from 42.3 percent in 1996 (see Figure 5).9 2002 $4.32 $4.42 The average incurred medical costs of WC indem- 2003 $4.63 $4.87 nity claims for accident year 2003 were estimated (as of June 30, 2004) to be $28,532, which is 222 Source: Workers’ Compensation Insurance Rating Bureau of California (WCIRB). percent higher than the estimated incurred medical 2003 California Workers' Compensation Losses and Expenses (data based on insured employers excluding self-insured). cost of $8,856 for accident year 1993 claims.10 In Figure 5. Medical Payments as Percent of Total WC Payments, 1995–2003 54% 52% 50% 48% 46% 44% 42% 42.2% 42.3% 42.9% 43.6% 45.1% 45.9% 47.3% 50.6% 51.3% 40% 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: Workers’ Compensation Insurance Rating Bureau of California (WCIRB). 2003 California Workers’ Compensation Losses and Expenses (data based on insured employers excluding self-insured). 14 | CALIFORNIA HEALTHCARE FOUNDATION workers’ compensation, a small proportion of injuries and illnesses have fallen from an annual serious claims typically accounts for a large propor- rate of 9.9 per 100 employees in 1991 to 5.9 per tion of the total costs. For example, as indicated in 100 employees in 2003, a decrease of more than Figure 6, less serious claims involving less than 30 40 percent (see Figure 1).13 The annual number of days of medical treatment represent 60.7 percent of WC claims filings declined by more than 30 percent all claims but only 9.2 percent of the cost, whereas between 2001 and 2004 (see Figure 7).14 Thus, the serious claims involving more than a year of care growth of WC medical costs apparently is not a account for just 11.5 percent of claims but nearly result of rising injury rates, but rather is primarily two-thirds (64.0 percent) of total WC costs.11 The the result of increasing use of medical services and average (mean) costs of WC claims will thus usually growing medical costs for some services (e.g., be significantly larger than the median cost of a claim pharmaceuticals) in the WC system. (i.e., the mid point, with half the claims costing more than the median and half less). For example, a Figure 7. Estimated Annual WC Claims, 2000–2004 nationwide study of WC claims in the construction industry found that in 2000, the mean paid cost of 2000 825,448 a WC claim was $7,542 while the median paid cost was $3,360, less than half as much.12 2001 847,699 2002 801,488 Declining Frequency of WC Claims At the same time that WC costs have been increas- 2003 740,667 ing, the frequency of reported work-related injuries 2004 570,031 and illnesses in California and WC claims filings have been steadily declining. Cal-OSHA-reportable Source: California Division of Workers Compensation, Workers Compensation Information System Report, 2004. Includes insured and self-insured private employers and state government workers. Figures for 2000 and 2004 are annual Figure 6. Percentage of WC Claims by Duration of estimates based on partial-year data. Medical Treatment, 1993–1999 Claims Duration of Claims < 30 60.7% The Work Loss Data Institute (WLDI), a private days 9.2% medical database development company, reports Percent of: that, on average, California WC claims have longer 13.7% 31–90 WC Claims duration per claim than elsewhere in the United days 6.0% WC Medical States.15 A WLDI study found that, in 2000, the Payments median number of days missed from work per WC 7.1% 91–180 indemnity claim in California was eight, compared days 6.8% with a national median of six days per claim for the United States as a whole (ranging from a low of four 7.1% 181–365 days in Georgia, Indiana, and Virginia to a high of days 14.0% 17 days in Puerto Rico). Another study of insurance claims data found that, in 2000, a California WC 11.5% > 365 claim averaged 21.8 weeks of medical care, a days 64.0% duration considerably longer than in eight other states studied (in which the median average Source: California Workers’ Compensation Institute (CWCI). 2003. Duration of duration of medical care was 14.5 weeks).16 These Treatment and Medical Costs in California's Workers’ Compensation. studies suggest that California’s relatively high Understanding Workers’ Compensation Medical Care in California | 15 medical costs per claim may be driven, in part, by higher. The authors of that study concluded that the relatively long duration of WC claims in this most of the differences in cost between the WC and state. non-WC cases could be attributed to use of services and mix of providers, rather than to higher average prices per service.23 Costs of Medical-Legal Evaluations Medical-legal examinations are conducted by physi- A study of California WC inpatient cases from 1998 cians for the purpose of gathering evidence in and 1999, found the average payment for a WC disputes between insurers and injured workers about hospitalization was $9,637, compared with $7,428 whether the injury happened on the job, the extent per inpatient stay for similar diagnostic conditions of impairment, readiness to resume work, and other under group health insurance. For hospitalizations matters. Medical-legal examinations are performed involving spine surgery, the average amount paid for in approximately 22 percent of California WC a WC hospitalization was $12,459, compared with indemnity claims (with more than seven days of $8,280 for an inpatient case paid for under group lost time), about twice as often as in other states.17 health insurance, a difference of more than 50 Payments for WC medical-legal evaluations cost an percent. Compared with Medicare hospitalizations, estimated $160.4 million in 2003, representing WC inpatient cases cost on average 9 percent more about 2.6 percent of all medical care payments.18 ($9,637 versus $8,864) even though WC inpatient Orthopedists provided most of the medical-legal care involved fewer procedures per admission (1.95 evaluations (73 percent); psychiatrists conducted versus 2.04) and a shorter average length of stay roughly 9 percent.19 (5.04 versus 5.71 days).24 This study suggests (unlike the study cited in the previous paragraph) that the Comparing WC and Non-WC Medical Costs higher WC costs for hospitalized care may be due to Payment for medical care under workers’ compensa- comparatively higher hospital reimbursement rates tion is generally costlier than similar treatment rather than to greater use of services. Additional under other forms of health insurance (e.g., group research is needed to clarify the observed cost differ- health insurance, Medicaid, and Medicare). For ences for inpatient care. example, WC hospital stays cost 30 percent more on average than inpatient stays for the same diagnostic conditions covered under employer-based health insurance.20 Similarly, the prices paid for prescription drugs under WC are about 40 to 45 percent greater than what large employers in general health plans pay.21 Studies indicate that in general, WC medical treatment costs in California are 50 to 100 percent higher than treatments paid for similar disorders by group health insurance.22 A 1996 study comparing costs of care for WC patients to care provided through general health insurance found that WC medical care costs in California for specific kinds of work-related ailments (e.g., low-back pain; sprains, strains and lacerations; inflammation, laceration, and contu- sions; and fractures) were on average 2 to 5 times 16 | CALIFORNIA HEALTHCARE FOUNDATION V. WC Medical Utilization Trends IN CALIFORNIA, MOST WORKERS’ COMPENSATION medical services are provided on an outpatient basis. Compared with general health care, there is a low level of inpatient hospital- ization in WC.25 In 2003, hospital costs accounted for 27.5 percent of WC expenditures and accounted for 30.7 percent of all medical expenditures nationally. Similarly, the use of pharmaceu- ticals in WC medical care has historically been lower than in general health care 26 — although, since 2000, prescription drug costs and use have increased substantially in California’s WC system. Because workers’ compensation care is concerned with restoring vocational function and facilitating an injured worker’s successful return to work, there is typically a wider range of rehabilitation and therapeutic services involved in WC care than in general care for non-injured populations. Also, there is often a need in WC medical care for medical providers to perform special assessments to estimate the extent of workers’ physical impair- ments and functional capacities. These special aspects of WC medical care may contribute to the observed higher costs and greater use of care provided for injured workers under WC. Service Volume Interstate studies have shown that California exceeds other states both in the number of WC medical services provided per visit and the number of medical visits made per WC claim. A compar- ison of twelve states by WCRI, based on data from accident year 1999, found that the average number of medical visits per WC indemnity claim in California (with more than seven days lost time) was 59 percent higher than the average in eleven other states (29.7 versus 18.7 visits per claim). The study also found that California WC cases resulted in 12.5 percent more services provided on average per medical visit (3.6 versus 3.2), a consider- ably higher (75.2 percent) average number of services per claim (108.1 versus 61.7), about the same average medical payments per claim ($5,667 versus $5,814), and a 45 percent lower average price per service ($57 versus $104). Based on these data, the WCRI concluded that the number of visits per claim (and not the price per service) is principally responsible for driving medical costs in the California WC system.27 Understanding Workers’ Compensation Medical Care in California | 17 According to the WCRI study, the average medical somewhat lower with respect to the percentage of cost for all WC claims in California ($1,733) was patients with lower back injuries who received 14 percent higher than in the other states ($1,520); lumbar fusions and laminectomies.28 even though the average medical cost for claims with more than seven days of lost time was In another study comparing the medical care for 3 percent lower. The difference can be attributed similar conditions provided under general health to California’s higher percentage of claims with insurance, WC patients in California had on more than seven days of lost time. average 8.4 times more physician visits (11.8 versus 1.4), 3.6 times more chiropractor visits (13.0 versus Another study, which compared WC medical 3.6), and 2.5 times more surgeries (.20 versus .08). services in nine states, found that California ranked In addition, WC patients received 25 percent more substantially higher in pharmaceutical costs per lab tests (.69 versus .55), and 76 percent more x-rays claim; number of prescriptions per injured worker; (1.76 versus 1.0) per injury; and were 2.5 times number of office visits per claim; and the number more likely to see more than one physician per of services provided per claim, including manipula- injury (39 percent versus 15 percent).29 tions (chiropractic, osteopathic, etc.), physical medicine services, and electrophysiology tests (see Table 4). By contrast, California rated no higher than the other states with respect to the number of MRI scans provided per patient; it ranked Table 4. Comparison of Services Provided in California vs. an Eight-State Average (CO, FL, GA, KY, MN, NJ, OR, TX), 1997 Accident Year OTHER CALIFORNIA S TAT E S Average WC Pharmaceutical Cost Per Claim $320 $164 Average Number Per Injured Worker with Any of 10 Top WC Diagnoses: Prescriptions 8.0 5.1 Office Visits 7.6 5.1 Manipulations 23.7 12.7 Therapeutic Exercise Treatments 18.3 17.1 Physical Medicine Modalities 36.6 18.6 Injections 3.9 3.6 CT Scans 2.6 2.5 MRI Scans 1.8 1.9 Electrophysiology Tests 9.9 7.2 Those with Low Back Soft Tissue Injuries Who Received: Therapeutic Exercises 71.9% 43.5% Manipulations 39.0% 29.4% Lumbar Fusions 0.7% 1.0% Laminectomies 2.1% 3.3% Source: Harris J, Bengle A, Makens P. 2001. Striking the Balance: An Analysis of the Cost and Quality of Medical Care in the Texas Workers' Compensation System: A Report to the 77th Texas Legislature. Austin, Texas: Texas Research and Oversight Council on Workers' Compensation (TROCWC) and Med-FX, LLC. 18 | CALIFORNIA HEALTHCARE FOUNDATION Types of Procedures for a disproportionately lower share (35.7 percent) In 2001, the California Official Medical Fee of the total expenditures for OMFS procedures (see Schedule (OMFS) governed provider fees for more Figure 8, Payment). By contrast, surgical procedures than 7,000 medical procedures. A CWCI analysis made up only 2.6 percent of all OMFS procedures, found that between January 2000 and June 2002, but accounted for a disproportionately higher a small proportion of those treatments — the 150 proportion of OMFS costs (16.7 percent). It should most heavily used types — accounted for the major- be noted that the CWCI analysis excluded proce- ity (53.6 percent) of the total payments made for dures that were not covered by the OMFS during procedures covered by the OMFS.30 Physical the study period, which collectively accounted for medicine treatments (e.g., electrical stimulation, approximately 43 percent of all WC medical therapeutic exercise, and chiropractic manipulation) payments. were the most common type, accounting for two- thirds (66.9 percent) of all OMFS procedures (see Figure 8, Occurance). Other common types of procedures included radiology, surgery, and proce- dures required for evaluation and management of the patient’s condition. While the mean cost for all OMFS procedures was $47.41, the mean cost for physical medicine procedures was only $24.76. Therefore, physical medicine procedures accounted Figure 8. Distribution of WC Medical Procedures and Payments for Procedures Regulated by the Official Medical Fee Schedule, January 2000 to June 2002 Occurance Payment Anesthesia (0.4%) Pathology/Lab (1.4%) Anesthesia (1.5%) Surgery (2.6%) Pathology/Lab (0.8%) Medicine (3.4%) Radiology (4.6%) Surgery Special Services 16.7% 7.1% Medicine 7.8% 35.7% 13.5% Evaluation/ 66.9% Management 10.8% Radiology 20.6% Special Services Physical Medicine (6.1%) Evaluation/Management Physical Medicine Source: California Workers’ Compensation Institute (CWCI). 2003. Top OMFS Procedures in California Workers’ Compensation. Bulletin No. 03-10. Understanding Workers’ Compensation Medical Care in California | 19 Prescription Drugs legislation (AB 227 and SB 228) taking effect in There are approximately 3 million pharmacy trans- 2004 extended that mandate to all dispensers actions each year in California paid by workers’ (hospitals, clinics, doctor’s offices). Those statutes compensation.31 WC pharmacy costs increased from also changed the reimbursement rates within WC $86.4 million in 1997 to $569.4 million in 2003, a by establishing a pharmaceutical fee schedule that rise of 559 percent.32 The estimated cost of prescrip- mirrored the one used in the Medi-Cal system. In tion drugs in the California WC system is now general, the Medi-Cal rates were considerably lower $569 million annually.33 Pharmaceuticals, as a share than the prevailing OMFS pharmacy rates (an of all WC medical expenditures, has grown steadily, average of 35 percent). This change raised concerns increasing from 3.8 percent in 1996 to 9.3 percent about whether patients would have proper access in 2003.34 The most common types of prescription to pharmaceutical care.36 A survey of California medications used in California’s WC system are: pharmacists conducted in 2004 found that 50 pain medications, muscle relaxants, and anti- percent of chain pharmacists and 58 percent of depressants (see Figure 9). About 90 percent of the independent pharmacists said that they would prescriptions written in California’s WC system are “often” or “always” refuse to accept WC patients for the treatment of musculoskeletal conditions.35 because of the reduction in allowable fees. WC legislation, which took effect in 2003 (AB 749), required that dispensing pharmacists substi- Providers of WC Care tute a generic drug for the brand-name equivalent if In DWC surveys, 63 percent of injured workers one is available, and if the physician has not specifi- reported that a licensed medical doctor (M.D.) cally countermanded that substitution. Additional provided most of the care for their injury; 15 percent said most of their care was provided by a physical therapist; 6.5 percent by a chiropractor; Figure 9. Distribution of WC Prescription Drug Usage (Number of Prescriptions), by Type, and 2 percent by a physician assistant.37 WCRI data 1998–1999 Pharmacy Transaction Data indicate that as of 1999, 90 percent of the primary treating providers for WC claimants were medical Antibiotic (0.7%) doctors, 5 percent were chiropractors, 1 percent Anxiety (1.2%) Ulcer/Heartburn (1.3%) were physical therapists, and 4 percent were other Sedative (3.1%) health care professionals.38 The differences between Anti-depressant the DWC and WCRI estimates are likely the result (5.1%) of the specific definitions used. WCRI distinguished Analgesic 7.8% primary providers from initial providers. Initial (non-narcotic) provider was defined as the first nonemergency 41.1% clinician to see the injured worker; the primary Muscle 13.3% Relaxant provider was defined as a clinician who is not an initial provider but who made the major decisions 26.4% about the care that the worker needed and either provided that care or directed the worker to a clini- Non-steroidal Anti-inflammatory cian who could provide the care. Thus, under the Narcotic Pain Medication WCRI definitions, physical therapists would be unlikely to be identified as primary or initial Source: Study of Cost of Pharmaceuticals in Workers’ Compensation. San Francisco: providers, even if they provided the “most” care as California Commission on Health and Safety and Workers’ Compensation. reported by respondents to the DWC survey. 20 | CALIFORNIA HEALTHCARE FOUNDATION Figure 10. Distribution of Paid Medical Costs by Figure 11. Chiropractors’ Proportion of WC Type of Charge, Calendar Year 2003 Medical Provider Costs, 1996–2003 Pharmacy 1996 11.4% 9.3% Other 1997 11.8% Payments 10.6% 1998 12.3% 1999 13.6% 52.6% Hospital 2000 15.1% 27.5% 2001 17.0% 2002 17.8% Providers 2003 21.6% Source: Workers’ Compensation Insurance Rating Bureau of California (WCIRB). Source: Workers’ Compensation Insurance Rating Bureau of California (WCIRB). June 2004. 2003 California Workers’ Compensation Losses and Expenses. 2003 California Workers’ Compensation Losses and Expenses (data based on Oakland: WCIRB (data based on insured employers excluding self-insured). insured employers excluding self-insured). More recent data suggest that chiropractors are Figure 12. Distribution of WC Medical Payments, playing an increasingly important role in providing by Type of Provider, Calendar Year 2003 care to WC claimants. The WCIRB reported that, as of 2003, the majority (52.6 percent) of WC Other Specialist MDs medical payments were for individual medical care General Surgery (4.9%) providers, 27.5 percent were for hospitals, and Orthopedists 9.3 percent for pharmacy services (see Figure 10). (6.6%) Chiropractors accounted for the largest share (21.6 Physical percent) of WC medical provider costs, a significant Therapists 11.6% 27.2% increase from 11.4 percent in 1996 (see Figure 11). Other types of medical providers providing WC care included general and family practice physicians General 13.5% and Family (accounting for 13.5 percent of medical provider Practice MDs 21.6% costs in 2003), clinic staff (16.8 percent), physical 16.8% therapists (11.8 percent), orthopedists (6.6 percent) Clinic Staff and general surgeons (4.9 percent) (see Figure 12).39 Chiropractors A 2003 study by the CWCI found that WC insur- ers’ payments to chiropractors rose 153 percent Source: Workers’ Compensation Insurance Rating Bureau of California (WCIRB). between 1996 and 2001.40 As of 2002, payments 2003 California Workers’ Compensation Losses and Expenses (data based on insured employers excluding self-insured). to chiropractors accounted for 17.8 percent of all WC medical expenditures, the largest share among medical specialty groups providing care within the California WC system. WCRI’s 2003 interstate study of WC claims in 12 states found that Understanding Workers’ Compensation Medical Care in California | 21 California physicians provided 49 percent more lasting more than one year (see Figure 13).44 The visits per WC claim (11.6) than physicians in the recent introduction of medical provider networks other states (7.8). WCRI researchers found similar may affect the number of unique providers seen by trends among other types of clinicians. For example, any particular WC patient. California chiropractors provided more than twice the number of visits per WC claim as chiropractors Figure 13. Average Number of Medical Providers in other states (34.1 versus 16.6); and physical and Per WC Claim, by Duration of Medical occupational therapists provided 39 percent more Treatment, 1993–1999 Claims visits per WC claim than therapists in the other states (17.0 versus 12.2). (The WCRI study was < 30 days 1.1 based on 1999 to 2000 indemnity claims with more than seven days of lost time.41) 31–90 1.8 days In 2004, with the enactment of AB 227 and SB 228 91–180 2.5 days (see Table 1), California became one of seven states to limit the number of visits to chiropractors permitted 181–365 days 3.5 under WC law. California now allows WC payment > 365 for a maximum of 24 chiropractor visits and a days 6.1 maximum of 24 physical therapy visits per injury claim. The new legislation is expected to moderate Source: California Workers’ Compensation Institute (CWCI). 2003. Duration of Treatment and Medical Costs in California’s Workers’ Compensation. the use of these services within the WC system. Number of Providers Per Claim Managed Care in California WC Many patients treated for work-related injuries and For many years, California workers’ compensation illnesses receive treatment from more than one medi- insurers and health care systems have used a variety cal provider. According to the WCRI, 14 percent of managed care and cost containment techniques, of California workers see a single nonemergency including case management, utilization manage- provider, while 79 percent see more than one; the ment, and bill review. However, the development of remaining 6 percent see an emergency provider formal managed care organizations for the delivery only. The percentage of multiple providers in of WC medical services has been relatively limited. California is considerably higher than in the three The use of structured managed care organizations in other states examined by the WCRI (Texas, Massa- California’s WC system has lagged behind their use chusetts, and Pennsylvania), where the percentages in general (nonoccupational) health care for several ranged from 69 to 72 percent.42 These estimates are reasons, including regulatory constraints; statutory consistent with survey data from the DWC, which limitations on insurers and health plans’ ability to indicated that 80 percent of injured workers see control provider choice throughout the course of more than one provider for treatment of their treatment; and difficulties in introducing new injury, and about 25 percent see five or more provider payment methods (e.g., capitation and case providers.43 On average, California injured workers rates) as alternatives to conventional WC fee-for- see 2.1 unique providers per WC claim. The service payment plans. Beginning in 2005, the number of medical providers per claim is greater introduction of medical provider networks, author- for more serious cases. For example, the average ized by SB 899, could vastly increase the importance number of providers treating claims with a duration of managed care for the delivery of WC medical of more than 180 days is 5.8 and 6.1 for claims services in California. 22 | CALIFORNIA HEALTHCARE FOUNDATION Certified Health Care Organizations MPN must be consistent with the utilization sched- Since 1993, California’s WC law has permitted care ule and treatment guidelines adopted by the DWC. to be provided within a certified workers’ compensa- MPNs must ensure that each covered employee has tion health care organization (HCO). HCOs include access to a primary care physician, and a hospital or health maintenance organizations (HMOs), hospital emergency care facility, within 30 minutes or 15 networks, preferred provider organizations (PPOs), miles of the employee’s residence or workplace. The and industrial medical clinic networks. Employers MPN must also ensure that appointments are avail- using HCOs have been allowed to control the selec- able promptly upon request (within three business tion of the employee’s treating physician beyond the days of the request for nonemergency care) and that customary 30-day period; in some cases, for up to medical specialists can be seen when needed. The 180 days. From their inception in 1993 until 2003, employer or insurer may select the initial treating enrollment in HCOs was relatively low, in part physician from within the MPN. Employees can because employers and health plans found the obtain a second and third opinion if there is a regulatory requirements cumbersome. Legislation disagreement about the diagnosis or treatment with taking effect in 2003 (AB 749) simplified the certifi- the primary treating provider. Additional regulations cation rules by requiring, for example, an employer for MPNs have been established by the DWC to offer its workforce only one (rather than two) pertaining to transfer and continuity of care. HCOs and exempting certain HMOs (those licensed by the CDI as Knox-Keene Health Care Medical Cost Containment Service Plans) from needing to apply for special In California, several techniques are used for WC certification by the DWC. As of 2004, about a half medical cost containment (MCC) including million California workers were covered by WC medical and hospital bill review, utilization manage- plans that provide managed health care services ment, treatment guidelines, and case management, through an approved workers’ compensation HCO. as well as medical provider networks and medical fee schedules. The WCRI estimates that 84 to 85 Medical Provider Networks percent of WC indemnity claims (with more than Beginning in 2005, insurers and self-insured seven days of lost time) have medical cost contain- employers may set up a medical provider network ment expenses.45 The CWCI evaluated the expenses (MPN) for delivery of WC medical services. The associated with medical cost containment in the MPN is an entity or group of providers that can be California WC system and found that, overall, a licensed HCO; a health care service plan, licensed MCC expenses accounted for 8 percent of WC according to the Knox-Keene Act; a preferred medical care costs in 1999, compared with 4.6 provided network; or other MCO. Insurers and self- percent in 1993, an increase of 74 percent.46 Studies insured employers desiring to set up an MPN must have not been conducted to evaluate the impact of submit a detailed application to the DWC for MCC on WC claims costs or patient outcomes. review and approval. The application must indicate the MPN’s plan to have a sufficient level and mix of Utilization Review providers, including providers who are competent to Effective, January 1, 2004, California adopted treat occupational injuries and illnesses along with utilization review requirements for all WC insurers providers who are primarily engaged in treatment of and self-insured employers. Insurers and self-insured nonoccupational conditions. employers must adhere to these standards when making decisions about what medical services to Generally, employees will be required to obtain authorize. Participating HCOs and MPNs are treatment from within the MPN throughout the required to describe their utilization review guide- course of their claim. The care provided by the lines as part of the HCO certification process. The Understanding Workers’ Compensation Medical Care in California | 23 utilization review plan must be based on the official medicine practice, including approaches for deter- utilization schedule adopted by the DWC, which will mining whether a condition is work-related, be derived from and be consistent with treatment disability prevention and management, conduct of guidelines that are evidence-based, peer-reviewed, independent medical examinations, pain manage- and nationally recognized. Upon initial enactment ment, and restoration of function. The guidelines of the utilization review requirements in 2004, also summarize accepted clinical practices for DWC adopted the ACOEM Guidelines as the basis diagnosing and treating (including surgical consider- for utilization decisions, and they will remain in ations) several categories of injuries and illnesses effect until the DWC either adopts or develops including: musculoskeletal complaints of the neck, other guidelines. If there are conditions or injuries upper back, shoulder, elbow, wrist, forearm, hand, that are not covered by the ACOEM Guidelines, low back, knee, ankle, and foot; stress-related condi- then the DWC regulations specify that utilization tions; and eye disorders. In November 2004, The decisions are made in accordance with other RAND Institute for Civil Justice and RAND evidence-based medical treatment guidelines that Health released a report (commissioned by the are generally recognized by the medical community. DWC and CHSWC) evaluating the ACOEM The utilization review decisions can be made Guidelines and 72 other widely used treatment prospectively (before care is rendered), concurrently guidelines with respect to their adequacy and (while care is administered) or retrospectively (after suitability for use in the California’s WC utilization care is provided), depending on the criteria estab- schedule.47 The RAND report concluded that no lished within the utilization plan. Prospective or single set of guidelines, including ACOEM’s, was concurrent utilization decisions need to be made comprehensive and valid for all clinical conditions within five working days from the receipt of written commonly treated in California’s WC system, and request for authorization, unless the seriousness of thus the state may eventually need to adopt a coher- the patient’s conditions requires an expedited review ent guideline set that draws from multiple existing process. Procedures have been established for guidelines. The report further recommended that patients to dispute utilization review decisions the DWC clarify issues regarding the application of through the DWC adjudication process. guidelines and the evidential criteria needed for authorizing a deviation from the guidelines. Treatment Guidelines Prior to 2004, the Industrial Medical Council had adopted voluntary treatment guidelines for various Twenty-Four-Hour Care common work-related conditions including asthma, Twenty-four-hour care plans attempt to coordinate dermatitis, post-traumatic stress syndrome; and or combine the medical care provided to patients injuries to the lower back, hand and wrist, knee, receiving care for work-related injuries and illnesses elbow, neck, and shoulder. Legislation taking effect more closely with general health care for nonoccu- in 2004 authorized the development of new treat- pational conditions. In a fully integrated version of ment guidelines and utilization standards. The twenty-four-hour care, medical services for both ACOEM Guidelines were initially adopted. Under work-related and nonwork-related conditions could the current California law, they are to be considered be given by the same providers (or health system) presumptively correct for use in adjudicating paid for under a single health insurance policy. disputes about the extent and scope of medical Other versions of twenty-four-hour care would treatment to be paid in WC cases. merely coordinate the administration, pricing, and marketing of the two types of medical benefits, The ACOEM Guidelines contain a description of while preserving separate workers’ compensation principles of professionally accepted occupational and general health insurance policies. Proponents of 24 | CALIFORNIA HEALTHCARE FOUNDATION twenty-four-hour care plans point to potential between patients participating in the twenty-four- administrative savings, efficiencies in care delivery, hour program and injured workers receiving care and possible reductions in legal disputes involving through conventional WC medical care plans.48 No occupational causation. Some labor advocates have significant differences in cost were found between seen twenty-four-hour care as a way of promoting care provided through the pilot program and care more widespread health coverage for workers who received through conventional WC plans. do not currently have employer-based health insur- ance. Opponents cite legal and regulatory barriers, Surveys of injured workers enrolled in California’s institutional resistance among employers and health twenty-four-hour pilot program found that 76.5 systems, and the complexity of awarding indemnity percent of respondents were satisfied with the benefits under a merged twenty-four-hour care medical care provided for their workplace injury system. After a flurry of activity in the early and or illness. Seventy-two percent were satisfied with mid 1990s to pass enabling legislation and create a their choice of provider, 59.3 percent were satisfied twenty-four-hour pilot program in several states, with the doctor-provider relationship, and 39.7 interest in twenty-four-hour care plans waned. By percent with the occupational medicine skills of the late 1990s, WC premiums had moderated and the treating provider.49 several initial pilot programs experienced technical problems and had lower-than-expected enrollment. The DWC evaluation also found that that nearly Then, in the early 2000s, there was a resurgence of all employers participating in the twenty-four-hour interest in twenty-four-hour care, owing to the rapid pilot program were generally satisfied with the rise in costs for WC medical care and growing program; they believed that it worked well and concerns about the decline in general health insur- should be extended. Employers cited the reduction ance coverage among employed individuals. of costs, improved communication with medical providers, and expanded duration of control over From 1994 to 1997, the California Division of medical care to their employees as positive features Workers’ Compensation conducted a pilot program of the program.50 Although the official pilot to test the concept of twenty-four-hour health care program ended in 1997, some California insurers coverage. Under the pilot program, workers could and employers have continued to experiment choose to receive twenty-four-hour care through one with versions of twenty-four hour care, albeit of several participating health care organizations. on a limited scale. Rate deregulation and falling About 65 employers in four counties enrolled in the premiums during the mid and late 1990s reduced program, covering about 8,000 employees. The employers’ motivation to test twenty-four-hour stated goal of the twenty-four-hour pilot program plans. However, sharply escalating WC costs since was to streamline the delivery of care, achieve 2000 are expected to spark renewed interest in administrative efficiencies, and reduce disputes twenty-four-hour care arrangements. concerning whether injuries were work related. In 2003, at the request of the California legislature, Evaluation of California’s Pilot Twenty-Four- the CHSWC commissioned the RAND Institute Hour Program for Civil Justice to conduct an independent study An evaluation of the twenty-four-hour pilot of the potential for twenty-four-hour care programs program commissioned by the DWC found that in California’s WC system.51 The RAND study, after adjusting for age, sex, marital status, education, published in 2004, concluded that the most feasible occupation, injury type, and other factors, there twenty-four-hour care options are those that only were no statistical differences in satisfaction or attempt to integrate (or coordinate) the delivery of patient-reported functional or emotional outcomes medical care services through a common service Understanding Workers’ Compensation Medical Care in California | 25 delivery arrangement, or plans which subsume both kinds of medical care under a common health insurance program, as might happen under a universal health insurance system. The study was less optimistic about attempts to combine the indemnity benefits available under WC with the income replacement benefits available through other disability insurance programs. RAND also indicated that substantial technical and legal challenges would be faced in designing and implementing an effective twenty-four-hour medical care program on a statewide basis. The study recommended that California policymakers use small-scale pilots to test the twenty-four-hour care model, placing an emphasis on effective design, implementation, and evaluation. Reform legislation passed in 2004 (SB 899) authorized twenty-four-hour integrated medical and benefit delivery programs to be part of any collective bargaining WC carve-out agreement established in the construction industry. 26 | CALIFORNIA HEALTHCARE FOUNDATION VI. Outcomes and the Quality of Care Evaluating WC Medical Care Assessing the outcomes and quality of medical care for injured workers is in many ways more complicated than evaluating outcomes in customary health care provided to the general popula- tion. It involves assessing the patients’ ability to successfully resume work activities, their risk of suffering reinjury at work, and their experiences with employers and the WC system, in addition to considering the alleviation of symptoms and other conventional indicators of clinical effectiveness. California has been a national leader in designing and conducting surveys of injured workers to assess their satisfaction with care. However, neither California state agencies nor purchasers currently have in place a system for regularly collecting medical care data by which to periodically monitor and evaluate the quality of care, patients’ care experience, or the effectiveness of the WC care delivery system. Most outcomes studies of workers’ compensation medical care have focused narrowly on measuring direct medical and indem- nity costs, time required for return to work, and patient satisfaction with care. Many authorities have advocated a broader approach to outcomes and quality assessment for workers’ compensation systems that would encompass other related concerns, such as the appropriateness of care and its conformity with recognized guidelines; timely and convenient access to care; vocational function upon resuming work; long-term economic consequences for the worker and employer; and social impacts on affected workers and their families.52 With financial support from the Robert Wood Johnson Foundation’s Workers’ Compensation Health Initiative, the California Department of Industrial Relations has conducted initial planning and feasibility studies for the creation of the “California Work Injury Resource Center.” Activities of the proposed center would include dissemination of quality-of-care information; educational programs for providers and insurers concerning quality of care; data collection and analysis to measure the quality of WC medical care in the state; and technical assis- tance to health systems, employers, providers, and workers regarding techniques for enhancing the quality of care received by injured workers.53 Understanding Workers’ Compensation Medical Care in California | 27 Quality-of-Care and Performance Measures based on telephone surveys and insurers’ claims Based in part on pilot testing performed at data. The study found that injured workers in California health care organizations, the American California and Texas generally had worse outcomes Accreditation HealthCare Commission (URAC) than in Massachusetts and Pennsylvania with disseminated a set of standardized quality and respect to perceived post-injury physical health and performance measures for WC medical care. The functioning, and ability to return to work (see Table URAC set contains 46 specific measures grouped 6). The average time needed for California injured into ten domains: access to care, coordination of workers to return to work was longer than in all the care, communication, work-related outcomes, other states, with a median time for the first return health-related outcomes, patient satisfaction, to work after the injury in California of eight weeks prevention, appropriateness of care, cost of care, compared to a median of six weeks in each of the and utilization of services (see Table 5).54 A similar three other states. Workers’ self-reported perceptions set of quality indicators had previously been of the severity of their injuries in California were published by the medical director of the California about the same as workers’ perceptions of severity Division of Workers’ Compensation in 1996.55 in the other states. The WCRI observed that Proposals have been made to adopt a standardized California workers had worse outcomes in all quality measurement process in California, but none categories compared to injured workers in have been adopted. Pennsylvania and Massachusetts despite receiving, on average, substantially more medical services per California WC Medical Outcomes Studies claim and incurring significantly higher average The Workers’ Compensation Research Institute medical costs per claim (California average costs per evaluated outcomes in California and three other claim were 113 percent higher than Massachusetts states (Texas, Massachusetts, and Pennsylvania) and 32 percent higher than Pennsylvania).56 Table 5. American Accreditation HealthCare Commission/URAC Workers’ Compensation Medical Care Performance Measures (AAHCC) MEASUREMENT DOMAIN E X A M P L E S O F P E R F O R M A N C E I N D I C AT O R S Access to Care • Getting needed care • Wait time to get care Appropriateness of Care • Work history taken • Job capabilities assessed Work-related Outcomes • Time needed to return to work • Ability to perform job after return Utilization of Services • Utilization of medical services • Appropriate services provided for specific conditions Medical Costs • Medical costs compared to benchmarks • Disability costs compared to benchmarks Patient Satisfaction • Satisfaction with overall care • Satisfaction with choice of provider Coordination of Services • Timely referral • Advice given on return to work Communications • Provider communicates well • Provider treats worker with respect Prevention • Injury prevention counseling Source: American Accreditation HealthCare Commission/URAC (AAHCC/URAC). 2001. Measuring Quality in Workers’ Compensation Managed Care Organizations: Technical Manual of Performance Measures. Washington, D.C.: AAHCC/URAC. 28 | CALIFORNIA HEALTHCARE FOUNDATION Table 6. WCRI Survey*: Selected Outcomes of WC Care in Four States OUTCOME CA TX MA PA Change in perceived health status from… before injury to the time of interview† – 12 – 13 –6 –8 before injury to directly postinjury (indicator of perceived injury severity)† – 29 – 27 – 30 – 29 directly postinjury to the time of interview (indicator of perceived recovery)† 18 14 24 21 Time from injury to the first return to work (median weeks) 8 6 6 6 Those with first return-to-work >1 year postinjury 8% 8% 5% 4% Those reporting they returned too soon after injury 38% 40% 36% 31% Those not returning to work due to the injury 15% 10% 8% 6% *Survey conducted in 2003 (Texas) and 2002 (other states) for injuries that occurred in 1998 (Texas) and 1999 (other states). †Change in SF-12 scores (positive numbers mean the patient improved, negative numbers mean the patient got worse). Source: Victor R, Barth P, Liu T. 2003. Workers’ Compensation Research Institute (WCRI). 2004. Outcomes for Injured Workers in California, Massachusetts, Pennsylvania, and Texas. Cambridge, MA: WCRI. December, 2003. The WCRI findings are consistent with other studies Table 7. Self-Reported Health Status After a Work Injury (Survey of 809 Injured California that have not found evidence of a clear relationship Workers, Average Eight Months After Injury) between the volume or duration of medical care PERCENT services provided to injured workers and the ITEM RESPONDING outcomes of care, as measured, for instance, by Health now vs. before injury indemnity costs and the length of work disability.57 Much worse 10.5% A little worse 22.4% California workers surveyed an average of eight About the same 48.8% months after being injured at work reported a A little better 10.2% significant level of lingering effects from their Much better 8.0% injuries. About one-third of the workers (32.9 How much does the injury affect your life today? percent) indicated that their overall health was Big effect 23.6% worse than before the injury; and nearly a quarter Some effect 34.0% (23.6 percent) said the injury still exerted a negative Very little effect 21.5% effect on their lives (see Table 7). Only 30 percent No effect 21.0% reported that they had fully recovered.58 Degree of recovery No improvement 10.6% Still room for improvement 59.0% Fully recovered 30.4% Source: Rudolph L, Dervin K, Cheadle A, Maizlish N, Wickizer T. 2002. “What do injured workers think about their medical care and outcomes after work injury?” Journal of Occupational and Environmental Medicine 44: 425–434. Understanding Workers’ Compensation Medical Care in California | 29 VII. Worker Experiences and Satisfaction with Care Concerns of California Injured Workers Evidence suggests that the California WC system generally has been successful in meeting workers’ needs to secure appropriate medical care for workplace injuries and illnesses and to provide income protection and other benefits to mitigate the financial consequences of job-related injuries. At the same time, some workers find the California WC system complicated and difficult to navigate. Relationships and communication among workers, employers, insurers, and health care providers are often strained and adversarial. The system is plagued by extensive litigation and distrust among groups is common. California workers report that the delivery of medical care is frequently compromised or delayed as a result. Minority, non-English speaking, and low-wage workers have been the most likely to experience these type of problems. Communications and Inadequate Information Surveys of injured California workers have consistently found that many workers are not well informed about the medical benefits available under WC, or how to obtain appropriate WC medical care. A significant proportion of injured workers experience delays in accessing care, barriers to care related to claims processing by employers and insurers, and disputes concerning their care.59 About one-third of the respondents to a 1998 DWC injured worker survey indicated they had little or no involvement in making decisions about their medical care. Roughly 30 to 40 percent of survey respondents reported that physicians rarely obtained job descriptions, talked about return to work, or discussed ways of preventing reinjury.60 Most of the injured workers participating in a recent series of California focus groups reported receiving inadequate information from their employers about how to obtain medical care for their work injuries. A sizable proportion of the workers expressed feelings of distrust and suspicion surrounding their care or believed that their doctors were oriented “against” injured workers. Several focus group participants commented that the treating physician caused further injury to them, did not know how to treat their particular injuries, or failed to understand the nature of their jobs.61 30 | CALIFORNIA HEALTHCARE FOUNDATION Confidentiality of WC claims information is a key Table 8. Overall Satisfaction with Care and Choice of Physicians (Survey of 809 Injured California concern among many workers. Workers’ compensa- Workers) tion insurers and third-party administrators in S AT I S FA C T I O N W I T H California are generally prohibited from disclosing CARE CHOICE medical information about an employee who files Very Satisfied 41.9% 38.6% for workers’ compensation, except when such infor- Somewhat Satisfied 34.6% 33.9% mation is needed for medical treatment or is Somewhat Dissatisfied 14.2% 16.6% necessary for an employer to modify the worker’s Very Dissatisfied 9.3% 10.9% job duties.62 Recent attempts to create a new Source: Rudolph L, Dervin K, Cheadle A, Maizlish N, Wickizer T. 2002. “What do injured workers think about their medical care and outcomes after work injury?” statewide WC data collection system have sparked Journal of Occupational and Environmental Medicine 44: 425–434. renewed fears about potential improper release and use of employee WC medical records.63 WCRI outcomes studies compared injured workers’ satisfaction with WC medical care in California to Satisfaction with Care satisfaction with WC care in Texas, Pennsylvania, Surveys of injured California workers conducted by and Massachusetts. Satisfaction was measured along the Division of Workers’ Compensation found that eight dimensions including satisfaction with overall 76.5 percent of workers were either “very satisfied” or care, satisfaction with the initial provider and the “somewhat satisfied” with the medical care received primary treatment provider, and the desire of for their job-related injury (see Table 8). Most of the patients to change providers because of dissatisfac- surveyed workers were also very or somewhat satisfied tion with care (see Table 9). On all measures, with their choice of provider (72.5 percent); and felt California workers were generally satisfied with the that the provider listened well (77.8 percent); showed care received — 80 percent reported that they were them courtesy and respect (73.5 percent); explained “somewhat or very” satisfied with care (consistent care understandably (70.3 percent); made a thorough with the DWC findings mentioned above), 68 and careful examination (63.7 percent); and devel- percent were satisfied with the initial nonemergency oped an appropriate diagnosis and treatment (64.9 provider, and 84 percent were satisfied with the percent). Approximately 25 percent of respondents primary treating provider. However, on six of the expressed dissatisfaction with overall care and with eight measures reported by WCRI, California had the choice of provider. Respondents who were the lowest satisfaction ratings of all four states.65 younger, Spanish-speaking, non-white, and of lower income or education were more likely to be dissatis- fied with care.64 Table 9: Comparison of Workers’ Satisfaction with Care in California vs. Three-State Average (TX, MA, PA) CALIFORNIA O T H E R S TAT E S Satisfied (somewhat or very) with their overall care 80% 83% Very dissatisfied with their overall care 10% 9% Satisfied (somewhat or very) with their initial provider 68% 80% Very dissatisfied with their initial provider 19% 12% Satisfied (somewhat or very) with their primary (noninitial) provider 84% 87% Very dissatisfied with their primary (noninitial) provider 10% 8% Ever wanting to change their initial provider due to dissatisfaction 33% 23% Ever wanting to change their primary (noninitial) provider due to dissatisfaction 18% 18% Note: Survey conducted in 2003 (Texas) and 2002 (other states) for injuries that occurred in 1998 (Texas) and 1999 (other states). Source: Victor R, Barth P, Liu T. 2003. Workers’ Compensation Research Institute (WCRI). 2004. Outcomes for Injured Workers in California, Massachusetts, Pennsylvania, and Texas. Cambridge, MA: WCRI. December, 2003. Understanding Workers’ Compensation Medical Care in California | 31 The evidence indicates that patient satisfaction with Table 10. Comparison of Injured Workers’ Survey* Responses Regarding Access to Care: WC medical care in California is generally quite California vs. Three-State Average (TX, similar to reported satisfaction levels for patients MA, and PA) receiving care for nonwork-related conditions. For OTHER CALIFORNIA S TAT E S example, 83.6 percent of adult patients receiving Reporting problems getting care through Medi-Cal managed care plans in the medical services 14% 11% San Diego area reported positive ratings for their Reporting problems getting personal doctor or nurse and 76.4 percent rated providers they request 13% 11% their overall health care positively (a positive score Satisfied with timeliness of initial provider visit 84% 85% by Medi-Cal was considered 7 or higher on a 10- Satisfied with initial visit to point scale).66 Most patients (88 percent) receiving subsequent (noninitial) provider 67% 76% care at California managed care organizations rated *Survey conducted in 2003 (Texas) and 2002 (other states) for injuries that occurred in their care positively (at least 6 on a 10-point scale 1998 (Texas) and 1999 (other states). on which 0 is the worst health care possible and 10 Source: Victor R, Barth P, Liu T. 2003. Workers’ Compensation Research Institute (WCRI). 2004. Outcomes for Injured Workers in California, Massachusetts, is the best health care possible).67 Pennsylvania, and Texas. Cambridge, MA: WCRI. December, 2003. Access to Care About 13 percent of injured workers responding to Although WC is supposed to pay the full cost of the DWC survey indicated they had experienced necessary medical care for job-related conditions, “some or a lot of trouble getting medical care” when many injured workers report incurring significant they were first injured; 77 percent reported having out-of pocket expenditures. For example, it may be no trouble at all in accessing care.68 Injured workers necessary to pay for prescription drugs with cash participating in DWC focus groups identified before getting reimbursement from the WC insurer. several barriers to accessing appropriate and timely In other cases, out-of pocket medical expenses are WC care including: lack of a sufficient number of incurred because employees are afraid to file claims physicians or specialists in some regions of the state or because claims have been denied. In one study, who are willing to accept WC patients; delays in 16 percent of injured workers indicated they had to obtaining insurer authorization for treatment; and make out-of-pocket payments, and 2 percent of problems in obtaining referrals to specialists.69 workers reported paying in excess of $500 for their However, there is little solid information available medical care.71 The need to make out-of-pocket about the actual extent or distribution of these payments may dissuade some injured workers from problems within the state. obtaining needed care. A survey of injured workers in four states Disputes and Litigation (California, Texas, Massachusetts, and Pennsylvania) Disputes and litigation concerning WC claims have conducted by the WCRI found that only a small been common in California. About 20 percent of proportion of injured California workers (14 WC claims are contested and more than 14 percent percent) reported problems in getting medical involve at least one attorney. CWCI data show services for their job injuries. However, compared to that the amount of WC claims involving litigation the other three states, the California workers were grew substantially between 1993 and 1999 (see slightly more likely to report problems accessing Figure 14).72 Attorneys’ fees are set by the Workers’ initial medical care and expressed lower satisfaction Compensation Appeals Board and are usually with their initial visits (see Table 10).70 12 to 15 percent of the award or settlement. Litigation costs for insured WC claims in 2002 were estimated by the CWCI to be $646 million, 32 | CALIFORNIA HEALTHCARE FOUNDATION or about 8 percent of total benefit payments. Non-Reporting of WC Claims Employee attorneys received nearly $400 million Among a group of immigrant workers interviewed during 2000-2001, and employer attorneys were by the UCLA Labor Occupational Safety and paid about $588 million during that two-year Health Program, the majority (57 percent) had period.73 experienced a work-related injury or illness, but only 63 percent of those workers had reported these Figure 14. Percentage of California WC Cases with injuries and illnesses to their employer.76 Many Litigation, 1993–1999 chose not to report the injury owing to fear of employer reprisal. Workers’ generally must report 20.4% the condition and file a WC claim to be eligible for WC medical care benefits. 13.8% In a survey of garment workers interviewed at a 9.7% community clinic in Northern California, nearly one-third of those with previous work-related musculoskeletal injuries had not received medical care for their injury, and only 3 percent had filed a workers’ compensation claim for their work injury. 1993–94 1995–96 1997–99 Although only 22 percent had employer-paid health Source: California Workers’ Compensation Institute (CWCI). 2003. Attorney Involvement in California Workers’ Compensation, 1993–2000. insurance, almost all the interviewed workers were unaware of the option to file a WC claim to receive care for their injuries. The most frequently cited A multi-state study by the WCRI found that barrier to accessing care was language (46 percent), between 1996 and 1999, litigation and claims- followed closely by concerns about the cost of care adjustment expenses accounted for 6.9 percent of (40 percent). Fear of job loss or reprisal was total California WC claim costs, more than twice reported by about 10 percent of these workers.77 the average (3.2 percent) in other states. Defense attorney fees represented 2.3 percent of total WC claims costs in California compared to about 1.5 percent in other states.74 Overall, administrative costs in the California WC system constituted 12 percent of total WC costs, 50 percent higher than the average (8 percent) in other states examined by the WCRI.75 Understanding Workers’ Compensation Medical Care in California | 33 VIII. Prevention and Management of Work Disability Providers’ Role in Facilitating Return-to-Work Medical care providers have a potentially important role to play in helping workers prevent workplace injuries and illnesses, reducing the risk of reinjury upon return to work, and facilitating a smooth transition back to full vocational function. The American College of Occupational and Environmental Medicine highlighted the need for “active linkages between injury and illness [medical] care services, prevention strategies, and disability reduction programs” in its 1998 position statement, which lists the eight best ideas for workers’ compensation reform.78 During 2000, the DWC and the CHSWC conducted a series of focus group studies involving injured workers, employers, health care providers, nurse case managers, claims adjusters, applicants’ attorneys, WC administrative judges, union representatives, and WC information assistance representatives. Focus group partici- pants generally agreed that services aimed at restoring vocational function and facilitating the patients’ return to work ought to be important components of the medical care provided to injured workers. Numerous obstacles hindering successful and sustained return-to-work were identified, including: medical providers not being informed about the injured worker’s job or about alterna- tive jobs that could be safely performed by recovering workers; clinicians not knowing how to write useful medical reports and formulate clear and specific work restrictions; and no requirement for medical providers to take proactive steps to offer specific services to facilitate the worker’s successful return to work.79 The California Low Back Pain Claimant Cohort study of 433 workers with low back injuries found that between 60 to 70 percent of providers talked with injured workers about the their job requirements, avoiding reinjury, job changes that might facili- tate return to work, and the workers’ readiness to resume work (see Table 11 on the following page). Cases in which medical providers initiated such conversations with the worker during the first 30 days after injury had, on average, a 20 to 36 percent shorter duration of disability than cases in which the provider did not initiate such conversations.80 34 | CALIFORNIA HEALTHCARE FOUNDATION Table 11. Primary Treating Physicians’ Communi- Disability ratings vary considerably, depending on cation with California Injured Workers whether the medical-legal evaluation was performed About Return-to-Work; California Low Back Pain Claimant Cohort by a medical provider selected by the employee or DID THE PHYSICIAN… A F F I R M AT I V E the insurer. A study conducted by the RAND Discuss your job requirements? 60.6%* Institute for Civil Justice found that the average Understand what you did on the job? 69.1%† disability rating made by an employee-selected Tell you how to avoid reinjury? 64.9%‡ provider was 36 percent (out of 100 percent total Suggest changes in your job to help you heal? 60.0%‡ disability), and the average rating made by a Specify what restrictions could help you return? 67.3%‡ provider selected by the employer was 26.8 percent Tell you that you were ready to go back to work? 64.5%‡ for cases in which the same injured worker received * “a lot” or “some” medical-legal evaluations from both kinds of evalua- † “very well” or “fairly well” tors. Additionally, the variance in disability ratings ‡ “yes” between the two types of providers differed by Source: Dasinger L, Krause N, Deegan L, Brand R, Rudolph L. 2001. “Doctor proactive communications, return to work recommendations, and duration of disability after a region, ranging from 12 percent in Southern compensated low back injury.” Journal of Occupational and Environmental Medicine 43 (6), 515-525. Survey conducted in 1997 for claims occurring in 1994–1996. California to 3 percent in Northern California. These variations have made some commentators question the objectivity and fairness of the current Medical Reports and Disability Evaluation disability evaluation system.82 The primary treating provider is required to send medical reports to the claims administrator. The report details the worker’s injury and renders an opinion on all medical issues necessary to determine eligibility for compensation, including the extent of recovery, temporary and permanent disability, required medical treatment, and readiness to resume work. If there are disagreements about the treating provider’s report, additional medical evaluations may be conducted by a qualified medical evaluator (QME) or an agreed medical evaluator (AME). Evidence suggests that the ability of providers to perform such evaluations varies widely. A CHSWC study concluded that reports written by the primary treating provider are of substantially poorer quality than reports submitted by either a QME or an AME — who are specially trained in performing disability evaluations.81 The study found that only 25 percent of reports written by providers who are not certified as medical evaluators contained suffi- cient information from which to derive a valid disability rating compared to 67 to 84 percent of reports from QMEs or AMEs. Understanding Workers’ Compensation Medical Care in California | 35 IX. WC Medical Care: Building a System for the 21st Century CALIFORNIA HAS CREATED A SYSTEM FOR DELIVERING needed medical care services to more than a half-million workers each year who suffer workplace injuries and illnesses. Despite the complexities and problems of the system, the evidence shows that the overwhelming majority of injured California workers are able to obtain appropriate medical services and are satisfied with the care they receive. The system has evolved by balancing the sometimes competing interests of patients, employers, clinicians, insurers, and state officials. Through these efforts, clinicians are usually able to supply essential medical care services and provide credible medical information necessary for delivering income protection benefits. The system also has its problems. High system costs threaten the financial health of California employers and insurers, and may jeopardize employees’ jobs and wages.83 Administrative processes are perceived as burdensome by many providers, employers, and injured workers. The system frequently pits workers and their attorneys against employers and their insurers with medical providers, too often, caught in the middle of disputes. The deliv- ery of WC medical services is inadequately coordinated with a worker’s routine health care. Some workers experience barriers to reporting WC claims or to obtaining timely and appropriate care. Immigrants, minorities, and low-wage workers are at greatest risk of encountering such problems. Recent legislative reforms hold the potential for lowering costs by tightening controls over service use, reducing allowable provider and hospital fees, and restricting care to delivery networks that employ techniques to manage care. But careful monitoring will be needed to ensure that the reforms do not deny or delay patients’ access to needed services, inappropriately restrict their ability to see qualified providers, or discourage providers from accepting WC cases. As summarized in this publication, a great deal of information is currently available about the California workers’ compensation medical care system. However, this report also highlights the significant gaps in knowledge about medical care services for injured workers in California. For example, there is more to learn 36 | CALIFORNIA HEALTHCARE FOUNDATION about the effectiveness and cost of various medical Additional planning and study will be required to treatments and their impacts on costs, recovery, and determine how best to expand the use of managed return to work. Also, little is known about providers’ care approaches in California’s WC system, and how conformity with treatment guidelines and the effect most effectively to structure managed care plans in of their compliance on patient outcomes. There a way that will enhance the quality of care while have not yet been systematic, statewide attempts to containing costs. Quality assurance systems used in measure the quality of care or to devise an ongoing general health care may have potential application process for collecting basic data about the experi- in the workers’ compensation setting. Additional ence of patients and the care they receive. The measures to ensure that high-quality care is provided ultimate effects of fee schedules, utilization review, to injured workers may be needed, using both managed care, and twenty-four-hour plans on regulatory approaches (i.e., mandatory certification California workers’ compensation are still unknown. standards) and nonregulatory approaches (e.g., voluntary health system accreditation) to ensure As California continues to examine and improve its quality. Employers will need to understand the workers’ compensation system, it will be critical to economic advantages of demanding high-quality base decisions on solid information about medical medical care in their contracts with WC insurers care practices and results. Processes will need to be and medical provider networks.84 put into place to monitor and evaluate the types of services provided and to measure the outcomes of Renewed interest in better coordinating care for care. Performance standards and quality-assessment occupational disorders with general non-WC medical criteria will need to be established to provide a care may prompt a re-examination of the potential common vocabulary and set of attainable goals for for twenty-four-hour care plans. Policy makers will system participants. Credible information about undoubtedly be looking closely into the possibility system performance and practical techniques for of integrating these systems of care and exploring optimizing care must be communicated clearly whether that could help expand workers’ access to throughout the state. group health care coverage without raising businesses’ overall employee benefits costs. Enhanced training This will not be possible without a collaborative of primary care clinicians in the assessment of effort involving workers and labor groups, employers occupational disorders, work capability, and disability and business organizations, WC and general health evaluation might help to facilitate the formation of insurers, medical professionals and health care delivery effective twenty-four-hour integrated plans. systems, attorneys, researchers, and state government officials, legislators, and regulators. Community- California’s system for providing workers’ compen- based coalitions hold promise of being able to bring sation medical care to injured workers has been together the perspectives of diverse groups and foster growing and evolving for nearly 100 years. As it cooperative approaches to overcoming system moves into the 21st century, success will depend on problems. Ideally, workers will be able participate viewing the WC system within the larger context of more fully in the design and selection of WC health employment, health care, and disability management. care delivery arrangements. Alternative dispute resolu- In that respect, it will be important to consider tion processes may need to be expanded to reduce the specific system enhancements while keeping broader need for litigation about medical issues. Systems to social goals in mind, most especially the need to encourage communications between providers, insur- ensure access to quality health care, appropriate ers, workers, and employers — possibly adopting disability benefits, and protection from known Internet technology — might be helpful in bridging hazards for all Californians, both on and off the job. the existing communications gaps. Understanding Workers’ Compensation Medical Care in California | 37 Appendix A. Glossary Accident Year (or Policy Year): Generally refers to WC Indemnity Claim: A WC claim in which payment of claims for work-related injuries and illnesses that have indemnity benefits are made. An indemnity claim occurred in a specific 12-month period. may or may not also involve payment of medical benefits. ACOEM Guidelines: The American College of Occupational and Environmental Medicine Independent Medical Review (IMR): A medical Occupational Medicine Practice Guidelines. A set evaluation conducted by an independent physician of treatment guidelines pertaining to various types appointed by the DWC, based on the state-adopted of work-related injuries and illnesses. utilization schedule and treatment guidelines. Employees receiving care in an MPN can request an Agreed Medical Evaluator (AME): A medical provider IMR after receiving a third opinion from a network selected through agreement between the claims provider. As a result of the IMR, the DWC may administrator and the worker’s attorney to perform decide that the employee can receive care outside a WC medical-legal evaluation. of the MPN. AMA Guidelines: The American Medical Association’s Litigation Costs: Attorney fees, payments for WC Guides to the Evaluation of Permanent Impairment, medical-legal examinations, and legal administrative Fifth Edition, 2000. This book contains specific expenses for depositions, court reporting, photocopy- protocols for medical providers to use in determining ing, etc. the extent of a patient’s permanent physical impair- ments. Some states, including California, have Managed Care: (1) The use of various cost-containment adopted these procedures as a basis for determining and care management techniques such as case disability awards under state WC law. management, utilization management, bill review, and treatment guidelines. (2) Care provided within Apportionment: A process of determining the amount an organized delivery system that typically features of permanent disability caused by a particular work- restricted provider choice and some form of related injury or illness. discounted fees or negotiated payments to participat- ing providers, along with the use of certain cost Case Management: A managed care technique in which control and quality assurance approaches. a qualified individual (e.g., case manager) or organiza- tion coordinates and facilitates a patient’s care to Managed Care Organization (MCO): A business entity ensure that appropriate and necessary medical and that finances and delivers health care using a specific rehabilitative services are provided to the patient in a provider network and that aims to manage care and cost-effective manner. costs through the use of guidelines, case management, utilization review, bill review, credentialing require- Health Care Organization (HCO): A health care system ments, and other techniques. licensed under California Labor Code section 4600.5 that contracts with an employer or insurer to provide Medical Cost Containment (MCC): Managed care managed medical care within the WC system. techniques used for minimizing the costs of medical care including medical and hospital bill review, utiliza- Incurred Cost: An estimate made at a particular point tion review and management, case management, and in time of the expected total indemnity and medical use of provider networks accepting discounted fees. benefits payments over the life of a WC claim. The estimate includes benefit payments already paid out Medical-Legal Evaluation: A medical assessment provid- as well as future payments (for which reserves have ing evidence for proving or disproving medical issues been established). in a contested WC claim. It is generally performed by an evaluating physician other than the primary Indemnity Benefits: Cash benefits paid to injured treating physician, and results in the writing of a workers under WC as compensation for temporary medical-legal report that is admissible as evidence in disability, salary continuation to cover lost wages legal proceedings. and income, permanent disability benefits, and death benefits. 38 | CALIFORNIA HEALTHCARE FOUNDATION Medical-Only Claim: A WC claim involving payment of insurance policy from a commercial insurance medical care benefits but no indemnity benefits. carrier. Self-insured employers typically use in-house staff or a commercial third-party administrator to Medical Provider Network (MPN): A medical care pay claims and otherwise manage their WC self- delivery system that is set up by WC insurers and insurance programs. self-insured employers and that generally limits employees to receiving care from network providers Third-Party Administrator (TPA): A commercial (enacted by SB 899 beginning January 1, 2005). insurance services organization that administers claims and manages an employer’s self-insurance program. Official Medical Fee Schedule (OMFS): The rates or fees authorized by the DWC that may be charged Treatment Guideline: A systematically developed state- to hospitals and clinicians providing WC medical ment that is intended to assist medical practitioners care services. and patients in reaching decisions about appropriate health care for specific clinical circumstances and Paid Cost: The medical and indemnity benefits actually conditions. Evidence-based guidelines are those paid out for a WC claim at a particular point in time. developed based on a systematic review of available Paid costs can also be considered over a period of time studies published in medical journals. (for example, annual paid costs) or for particular groups of claims (for example, paid costs for claims Twenty-Four-Hour Care: Twenty-four hour care plans involving injuries and illnesses occurring in a particu- attempt to coordinate or combine the medical care lar calendar year). provided for patients receiving care for work-related injuries and illnesses more closely with general health Predesignation: The process that allows employees to care for nonoccupational conditions. choose their personal physician as a care provider prior to a WC claim. Predesignation is allowed only if the Utilization Review (or “Utilization Management”): employer provides nonoccupational group health The system used to review and authorize patient coverage and if the physician is the employee’s primary care through case-by-case assessments of the medical care doctor who has previously directed the employee’s reasonableness or medical necessity of the frequency, medical care and agrees to be predesignated. duration, level and appropriateness of medical care and services, based upon professionally recognized Presumption of Correctness: An opinion or position that standards of care. Utilization review may include is considered to be correct and enforceable in legal prospective, concurrent, and retrospective review proceedings within the workers’ compensation system. of a request for authorization of medical treatment. Prior to the passage of AB 749 and SB 228, the opinion of the employee’s primary treating physician Utilization Schedule: A statement of policies and proce- carried a presumption of correctness. As of 2005, the dures adopted by the DWC indicating the extent and medical treatment guidelines adopted by the DWC types of services that are considered to be appropriate will be considered to be presumptively correct on for specific types of medical circumstances and condi- issues regarding the scope and extent of medical tions, based on nationally recognized, evidence-based, treatment, and they can only be rebutted by a peer-reviewed treatment guidelines. preponderance of the medical evidence. WC Carve-Out: An agreement that is developed through Primary Treating Provider or Primary Treating employer-union collective bargaining providing an Physician (PTP): The medical provider who alternative to the dispute resolution procedures in has overall responsibility for treatment of a WC the state workers’ compensation system. California claimant’s injury or illness. law allows employers in the construction industry to develop carve-out agreements with any benefit- Qualified Medical Evaluator (QME): An independent delivery system for injured workers, including medical provider certified by the state DWC to twenty-four hour care plans, so long as employees are perform WC medical-legal evaluations. eligible for group health benefits and nonoccupational disability benefits through the employer. Self-Insurance: An insurance method by which an employer sets aside money to cover possible losses rather than by purchasing a conventional WC Understanding Workers’ Compensation Medical Care in California | 39 Appendix B. Abbreviations AB Assembly Bill AME Agreed Medical Evaluator AMA American Medical Association CHSWC Commission on Health and Safety and Workers’ Compensation CWCI California Workers’ Compensation Institute CDI California Department of Insurance DIR California Department of Industrial Relations DWC California Division of Workers Compensation HCO Health Care Organization HMO Health Maintenance Organization IMR Independent Medical Review MPN Medical Provider Networks OMFS Official Medical Fee Schedule QME Qualified Medical Evaluator PTP Primary Treating Physician RWJF Robert Wood Johnson Foundation SB Senate Bill SCIF State Compensation Insurance Fund TPA Third-party Administrator URAC American Accreditation HealthCare Commission WC Workers’ Compensation WCAB Workers’ Compensation Appeals Board WCIRB Workers’ Compensation Insurance Rating Bureau of California WCRI Workers’ Compensation Research Institute WLDI Work Loss Data Institute 40 | CALIFORNIA HEALTHCARE FOUNDATION Appendix C. Understanding Workers’ Compensation Costs Example: The ABC Company Company Info: Manufacturer, 100 employees, buys commercial WC insurance (not self insured) Policy Year: January 1, 2004 to December 31, 2004 (same as calendar year) WC Annual Premium: $100,000 (the amount ABC Company pays for its 2004 WC policy) Claims History (assume during 2004 there were three WC claims): Claim A: Injury date: 2/1/04, 10 lost work days, 2 medical visits Return-to-work (RTW) date: 2/15/04 Loss (medical & indemnity benefits) paid in 2004 (so-called paid loss): $ 3,000 Claim B: Injury date: 12/1/04, 120 lost work days, 6 medical visits Return-to-work (RTW) date: 4/1/05 Loss (medical & indemnity benefits) paid in 2004: $ 5,000 Loss (medical & indemnity benefits) paid in 2005: $ 15,000 Claim C: Injury date: 2/1/04, numerous medical visits, still out of work (It is estimated that the worker will be out as long as three years.) Estimated return-to-work (RTW) date: 12/31/06 Loss (medical & indemnity benefits) paid in 2004: $ 50,000 Loss (medical & indemnity benefits) paid to date in 2005: 20,000 Reserves for estimated future losses in calendar year 2005: 30,000 Reserves for estimated future losses in calendar year 2006: 50,000 Total incurred loss for claim, valued as of 6/1/05: $ 150,000 ABC Company Perspective: 2004 Premium: $100,000 2004 Paid Losses (medical & indemnity) (3K+5K+50K): $ 58,000 2004 Incurred Losses (paid and reserved, valued as of 6/1/05) $173,000 (58K+15K+20K+30K+50K): Insurance Company’s or State’s Perspective: 2004 Benefit Payments: $ 58,000 2004 Related Administrative Expenses*: $ 12,000 2004 Total Calendar Year Paid Losses: $ 70,000 2004 Incurred Losses: $173,000 2004 Eventual Total Related Administrative Expenses*: $ 37,000 2004 Total Ultimate Losses: $ 210,000 *Assuming about 20% for administrative expenses including legal, claims adjustment, cost containment services (utilization review vendors, bill review vendors), etc. Bottom Line: 2004 Premium: $100,000 2004 Paid Benefits: $ 58,000 2004 Incurred Loss: $173,000 2004 Total “System” Paid Benefits: $ 70,000 2004 Total Ultimate System Costs: $ 210,000 Understanding Workers’ Compensation Medical Care in California | 41 Endnotes 1. For injuries on or after January 1, 2004, vocational 12. The Center to Protect Workers’ Rights (CPWR). rehabilitation benefits were replaced by a The Construction Chart Book, Third Edition, Supplemental Job Displacement Benefit in the form Chapter 49. September, 2002. Available at: of a voucher for education-related retraining and skill www.cpwr.com. enhancement. 13. California Division of Labor Statistics and Research, 2. Workers’ Compensation Insurance Rating Bureau of Department of Industrial Relations (DLSR). 2004. California (WCIRB). 2004. 2003 California Workers’ Occupational Injuries and Illnesses, 2002 Data. Compensation Losses and Expenses. Oakland: WCIRB. Available at www.dir.ca.gov/dlsr. 3. Workers’ Compensation Insurance Rating Bureau of 14. California Commission on Health and Safety and California (WCIRB). 2003. Proposed January 1, 2004 Workers’ Compensation (CHSWC). 2004. 2002- Pure Premium Rates. Oakland: WCIRB. 2003 Annual Report. San Francisco: CHSWC. 4. Victor R, Barth P, Liu T. 2003. Workers’ 15. Work Loss Data Institute (WLDI). 2003. State Report Compensation Research Institute (WCRI). 2004. Cards for Workers’ Comp. San Diego: WLDI. Results Outcomes for Injured Workers in California, are based on data from 44 states. Data were not Massachusetts, Pennsylvania, and Texas. Cambridge, available from Colorado, Idaho, Mississippi, New MA: WCRI. December, 2003; California Hampshire, North Dakota, Ohio, Pennsylvania, Commission on Health and Safety and Workers’ South Dakota, and Wyoming. Compensation (CHSWC). 2004. 2002–2003 Annual Report. San Francisco: CHSWC. 16. Harris J, Bengle A, Makens P. 2001. Striking the Balance: An Analysis of the Cost and Quality of Medical 5. Workers’ Compensation Insurance Rating Bureau of Care in the Texas Workers’ Compensation System: A California (WCIRB). 2003. Report on Q1 Insurer Report to the 77th Texas Legislature. Austin, Texas: Experience. Oakland: WCIRB. Available at: Texas Research and Oversight Council on Workers’ wcirbonline.org/wcirb_wire/2003/2003_22.asp. Compensation (TROCWC) and Med-FX, LLC. 6. Ibid. 17. Telles C, Laszlo A, Liu T. 2003. CompScope Benchmarks: Multistate Comparisons, 1994–2000. 7. Workers’ Compensation Insurance Rating Bureau of Cambridge, Massachusetts: Workers’ Compensation California (WCIRB). 2003. WCIRB Bulletin No. Research Institute. 2003–24. Summary of June 30, 2003 Experience. Oakland: WCIRB. 18. Workers’ Compensation Insurance Rating Bureau of California (WCIRB). 2004. 2003 California Workers’ 8. California Department of Insurance (DOI). 2003. Compensation Losses and Expenses. Oakland: WCIRB; Testimony delivered by insurance commissioner California Commission on Health and Safety and John Garamendi to the Workers’ Compensation Workers’ Compensation (CHSWC). 2005. Conference Committee, September 5, 2003, San 2003–2004 Annual Report. San Francisco: CHSWC. Francisco: DOI. Available at: The WCIRB reports that insured employers paid out www.insurance.ca.gov/docs/WC_Testimony090503.htm. $128.3 million in medical-legal expenses in 2003. 9. Workers’ Compensation Insurance Rating Bureau of CHSWC’s estimate of $160 4 million is based on California (WCIRB). 2003. 2002 California Workers’ assuming that insured employers’ payments represent Compensation Losses and Expenses. Oakland: WCIRB. 70 percent of the total statewide cost and self-insured employers payments comprise the remaining 10. Workers’ Compensation Insurance Rating Bureau of 30 percent. California (WCIRB). 2003. WCIRB Bulletin No. 2003–24. Summary of June 30, 2003 Experience. 19. Workers’ Compensation Insurance Rating Bureau of Oakland: WCIRB. California (WCIRB). 2004. 2003 California Workers’ Compensation Losses and Expenses. Oakland: WCIRB. 11. California Workers’ Compensation Institute (CWCI). 2003. Duration of Treatment and Medical Costs in 20. Kominski G, Gardner L. 2001. 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Available Workers’ Compensation. at: www.dir.ca.gov/dwc/pharmcare.pdf. 25. Dembe A, Mastroberti M, Fox S, Bigelow Banks S. 32. Workers’ Compensation Insurance Rating Bureau of 2003. “Inpatient hospital care for work-related California (WCIRB). 1997–2003. Annual Reports. injuries and illnesses.” American Journal of Industrial Oakland: WCIRB. Medicine, 44 (4):331-342. Nationally, WC pays for only 0.62 percent of inpatient hospital stays. Most of 33. California Commission on Health and Safety and the commonest reasons for inpatient care (serious Workers’ Compensation (CHSWC). 2005. 2003– chronic heart disease; diabetes; labor, childbirth and 2004 Annual Report. San Francisco: CHSWC. post-partum care; and end-of-life care) are not related 34. Workers’ Compensation Insurance Rating Bureau of to occupational conditions covered under workers’ California (WCIRB). 1997–2002. Annual Reports. compensation. Oakland: WCIRB; Neuhauser F, Swedlow A, Gardner 26. 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