Workers Comp 360: Utilization Review

By:Dan C Wynn, Former Worker’s Compensation Manager Goodwill of Southern California

I first came into contact with Utilization Review(UR) after it became a part of workers’ compensation process in California in the early 2000’s. Effective January 1, 2004, every claims administrator was required to establish and maintain a utilization review process for treatment rendered on or after January 1, 2004, regardless of date of injury, in compliance with Labor Code section 4610. Since then, it has become an integral part of workers compensation process and the subject of much debate. The intent was to ensure that recommendations are reviewed by a medical doctor instead of the claims handling examiner who most likely lacked the medical knowledge to make a determination whether to authorize, delay or reject a medical treatment recommendation. It has come a long way since the initial implementation as part workers’ compensation reform. Once again, as there is now debate about AB 44, the debate is on once more.

It made sense to have doctors review medical treatment instead of a Claim Adjuster. As a fledgling adjuster, I could not understand why the decision had not been made years prior.Medical evidence was becoming the standard for many decisions that were being made in worker’s compensation. Questions such as whether treatment was needed at all were being asked. What degree of treatment was required? Were there treatments that should be tried before moving to surgery? These are important questions that should be asked regardless of whether it is a workers’ compensation injury or not. It is a vital question that affects every single medical patient around the globe.

UR evolved out of the development of socialized medicine, influenced by the analyses of the CCMC, began a virtual social movement to organize and promote new kinds of "third-party" financing for health care—although they did not use the term explicitly  By the end of World War II, more than 30 million people had private hospital insurance, and employment-based insurance was becoming the norm in major companies.2 Also, as early as 1940, the movement for prepaid group practices (PGPs) had helped organize enough PGPs, such as Group Health Association of Washington, D.C. Thus, medical care as we know it began and evolved into that with which we are familiar today. (Anderson, 1968, 1975; Rorem, 1982; Somers and Somers, 1961).

On the face of it, one would think that UR would be a tremendous benefit to injured workers. After all, it was originally designed to ensure that Claimant received timely and appropriate medical care. But as with most things related to workers’ compensation things change and not always for the better. Eventually UR became a cost control tool to combat the spiraling cost of medical care. Then it became a tool for Applicant Attorneys to try to defeat UR. Only that strategy backfired and a lot of costly Independent Medical Reviews got done, but the result of UR Reviews was that 85% of the UR decisions were upheld. Between 2004 and 2015 medical costs rose between 5-6% per year. It has been a problem that has plagued national health care as well as the workers’ compensation system. Medical costs have been and continue be the foremost cost driver for workers’ compensation.

There are penalties, fines, and the Claimant automatically gets the requested treatment if time frames are not met for UR. Some Applicant Attorneys have told me that they feel that some companies deny treatment every time anyway. None of the organizations I have worked for has done that on my watch. As the Workers Compensation Manager at Goodwill Southern California, I gave direction to authorize treatment up to but not including surgery. It was my belief that it was in the Claimant’s best interest as well as Goodwill’s to do so. In some cases, for example, we were able to shorten the length of claims by authorizing MRIs early, avoiding unnecessary physical therapy and moving towards a surgical solution if the Claimant chose to pursue one. By avoiding the use of UR, it was actually possible to reduce claim costs by eliminating unnecessary treatment and, because every time UR is used, there is a fee of around $60.00-75.00 dollars. This in combination with some other practices dramatically reduces medical costs for claims.

In 2016, two key issues related to UR surfaced with the creation and development of SB1160 and AB44 Both are directly connected to what many have called the biggest problem in UR, expediting authorization and delivery of benefits. In SB1160, one of the key tools is to remove the need for pre-or prospective reviews during the first 30 days. Another is the mandate that no monetary or material instruments influence the number of delays and denials. The extension of the turnaround time to 14 calendar days for medications was eliminated. The other major highlight of SB1160was that a UR process that modifies or denies requests for authorization of medical treatment shall be accredited on or before July 1, 2018 and shall retain active accreditation while providing utilization review services, by an independent, nonprofit organization to certify that the utilization review process meets specified criteria. (Mitchell, Understanding SB1160 New California Utilization Review Requirements.)

While the first three key highlights will impact the delivery of benefits, it is the accreditation of a UR process that is expected to have the biggest impacts. It is costly and will cause change in the way the process works at this time.During the first thirty days cost saving controls will be lost inevitably driving up costs from the loss of prospective review. The other major impact will be TPA’s and UR companies attempting to obtain as well as maintain accreditation will also be costly. All of the costs will need to be paid for somehow and usually that routs back to the employer in the form of higher premiums.

The other wrinkle in the UR blanket, the debate over AB44 stemming from allegations of delayed delivery of treatment and medications to the survivors of the domestic terror attack in San Bernardino. Assembly member Eloise Reyes (D-San Bernardino) introduced legislation on December 16 of 2016 in light of delays in delivering treatment to the survivors of that tragedy. It was difficult to imagine this happening as that event was a compensable psychological injury even if the victim did not sustain any physical injury. Generally, the treatment guidelines are cognitive therapy and psychotropic medications for such cases, but again allegations surfaced in the media that seemed to support those accusations of withholding of care.

The key debates about UR has always been the delivery of benefits and the question of necessity versus cost. If the original intent of UR is followed this debate should not really exist, if the treatment is supported by accepted medical evidence then it should be rendered. However, cost is always a major factor, sometimes to the detriment of the injured worker. Third parties responsible for payments are battling tooth and nail to keep costs down. AB44 and SB1160 both impact the cost control process and the new requirements also lay down an additional layer of regulation that always is a cost driver as well.

To get the injured worker back to work by curing the effects of their injury or to compensate the injured worker for their permanent disability is a key tenant of the workers compensation process. This must remain the priority even as carriers, TPA’s, and UR companies battle with rising costs and increased regulation. My feeling is that if the spirit of the original legislation back in 2004 had been honored, we would not be mulling over the same issues 14 years later. I am not sure that creating a separate class or piling on more legislation will help the injured worker either.  In my experience, processes where less is more are the ones that allow all the stakeholders to succeed, not the cumbersome and unwieldy. Most likely we will be back to address this issue again. It will probably be sooner rather than later. 

1. Somers, Herman M., and Somers, Anne R., Doctors, Patients, and Health Insurance, Washington, DC: The Brookings Institution, 1961.

2. Anderson, Odin, Blue Cross Since 1929: Accountability and the Public Trust, Cambridge, MA: Ballinger, 1975.

3. Anderson, Odin, Health Care: Can There Be Equity? New York: Wiley, 1972.

4. Anderson, Odin, The Uneasy Equilibrium, New Haven, CT: College and University Press, 1968.

5. Rorem, C. Rufus, A Quest for Certainty: Essays on Health Economics, 1930-1970, Ann Arbor, MI: Health Administration Press, 1982.

6. Source: "National Health Expenditures Summary Including Share of GDP, CY 1960-2015," Centers for Medicare and Medicaid Services. "Inflation Rate by Year," The Balance.

7. ps://academic.udayton.edu/health/02organ/manage01c.htm Retrieved from the Web 08/02/17

8. Understanding SB1160—New California Utilization Review Requirements. http://www.mitchell.com/news/id/1433/understanding-sb1160new-california-utilization-review-requirements. Retrieved from the web 08/02/17