A Workers’ Compensation Double Play: Governor Signs SB 1160 and AB 1244 To Squeeze Out More System Costs

SB 1160, introduced by Senator Mendoza and signed into law September 30, 2016, amends several Labor Code sections affecting authorized medical treatment, utilization review, and lien litigation. Its principal achievement is creation of an initial 30 day window for treatment without requiring Utilization Review in a broad range of circumstances.

Labor Code Section 4610 provides that beginning January 1, 2018, emergency treatment services and medical treatment requests for accepted injuries made by a provider who is part of a medical provider network (MPN), health care organization (HCO), has been predesignated by the employee or is a physician selected by the employer, shall not be subject to prospective utilization review during the first 30 days following the injury. However, the statute also identifies several categories of treatment which remain subject to prospective utilization review during the first 30 days of treatment, even if requested by a covered provider. These treatment categories include certain pharmaceuticals, nonemergency surgeries, psychological treatment, home health care, durable medical equipment valued in excess of $250.00, and electrodiagnostic medicine.

Once a prescription drug formulary is implemented (it is expected by July 1, 2017), SB 1160 provides that the time limit for prospective utilization review decisions for medications covered by the formulary will be 5 business days, with no extension to allow time to obtain additional information from the requesting physician. Likewise, SB 1160 shortens the timeline for Independent Medical Review of medications prescribed pursuant to the drug formulary to 5 working days.

SB 1160 adds Labor Code section 4615 to automatically stay litigation for recovery of liens filed for services provided by a physician or facility that is subject to criminal charges for offenses involving fraudulent practices. The section imposes a new obligation on each lien claimant to attest that the provider is part of the MPN, has been authorized to provide the treatment, determined that the employer does not have an MPN, “has documentation that medical treatment has been neglected or unreasonably refused,” can show that the treatment was for an emergency medical condition or is a certified interpreter providing services under the administrative director rules. This declaration is also required by July 1, 2017 from all lien claimants who filed before January 1, 2017. Failure to file the declaration is a basis for dismissal of the lien.

AB 1244, introduced by Assembly Members Gray and Daly and also signed by Governor Brown on September 30, requires prompt suspension of any physician or medical provider from participating in the workers’ compensation system upon conviction of a crime involving fraud, upon surrender or revocation of the provider’s license, or when the provider has been suspended from participation in Medicare or Medi-Cal due to fraud or abuse. If a criminal conviction or plea agreement includes dismissal or forfeiture of liens, they will be dismissed by operation of law as of the date of the final disposition of the criminal matter. If the criminal conviction or plea agreement is silent regarding workers’ compensation liens, all pending liens from that provider will be consolidated and adjudicated in a special proceeding.

Although the amendments to Labor Code section 4610 made by SB 1160 altering utilization review procedures during the first 30 days following an industrial injury do not take effect until January 1, 2018, employers, insurance companies, and third party administrators should begin planning changes in their utilization review programs and procedures well in advance of the effective date for implementation of the changes to ensure they are able to comply with the revised statute when it takes effect.

The legislation providing a stay of liens from health care providers who are the subject of a criminal complaint alleging fraud is a hopeful development for defendants, as a number of these providers have continued to pursue collection of liens for services. We anticipate a challenge to the legislation on constitutional grounds. Further, while defendants must analyze this disqualification as part of their defense strategy to liens filed by or on behalf of any medical providers or facilities who are the subject of ongoing criminal prosecution, it must be appreciated that convictions are rare and the new language does not address the effect of a plea of nolo contendre. Without a conviction the new language creates a stay, which delays resolution of the lien and does not dismiss it.

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October 5, 2016