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CWCI Analyzes the Impact of AB 1465

Oakland, CA – A California Workers’ Compensation Institute analysis finds that legislation (AB 1465) intended to increase injured workers’ access to medical care by requiring the state to create a medical provider network (CAMPN) as an alternative to private networks that render 90 percent of California workers’ compensation treatment would significantly increase medical costs and require millions of dollars in ongoing administrative and infrastructure expense.  Despite an estimated cost of at least $314 million a year, the analysis concludes that the proposal is unlikely to improve access to care.  

Workers’ compensation medical care costs are paid by employers, and in the 1990s the soaring cost of treating injured workers and concerns over the quality of care prompted California lawmakers to enact legislation that allowed employers to contract with Medical Provider Networks (MPNs) designed and administered by managed care organizations or workers’ comp payers to care for their employees who are injured on the job if they have not predesignated a personal physician to render their treatment.  MPNs give employers extended control over the care provided to their employees as MPN administrators monitor physician utilization patterns against the evidence-based standards of care in the state’s Medical Treatment Utilization Schedule and allow them to negotiate discounts with medical providers, thereby reducing workers’ compensation medical care costs.  CWCI notes that since MPNs began operating in 2005, multiple studies have documented their success in improving outcomes for injured workers in terms of the quality and consistency of care and faster return to work; and for employers through reductions in litigation as well lower medical and indemnity (lost time) payments.  To further protect injured workers, in 2012, state lawmakers included a number of provisions related to MPNs in SB 863: tightening the standards for developing, maintaining, and operating networks; revising notice requirements; mandating that MPNs have medical access assistants to help injured workers find appropriate care; establishing penalties for failure to adhere to the MPN requirements; and updating access standards to require that injured workers have a choice of three MPN primary care physicians within 15 miles of their home, and three medical specialists within 30 miles of their home.  Of the estimated 114,000 physicians licensed in California, about 51,000 (45 percent) treat workers’ compensation patients, but if an MPN cannot meet the access standards, injured workers may be treated by a non-network provider.

AB 1465 would require the Division of Workers’ Compensation (DWC) to create the CAMPN as a statewide network comprised of all California licensed physicians who are: 1) currently in any MPN; 2) in good standing with the California Medical Board (CMB); and 3) who agree to comply with the fee schedule and reporting regulations.  However, osteopaths, chiropractors, psychologists and other ancillary service providers not licensed by the CMB are not currently addressed in the legislation.  Under AB 1465, injured workers could choose to treat with a physician in their employer’s MPN or with a physician in the CAMPN, effectively eliminating the employer’s control over medical care afforded by their MPN.  In addition, the bill would set payments for CAMPN providers at the maximum allowed by the Official Medical Fee Schedule, rather than allowing for discounted rates such as those used in the existing MPNs.  Treatment requests from CAMPN providers would be subject to the utilization review and independent medical review dispute resolution process, but the bill specifically precludes any evaluation of a particular provider based in whole or in part on the cost or utilization of services associated with medical care provided or authorized by that provider, removing one of the key protections against treatment abuses that have plagued workers’ compensation medical treatment in the past. 

The stated intent of the bill is to improve injured worker access to care, so to assess the likelihood that the legislation can meet that goal, and to determine the potential cost impact to the workers’ compensation system, CWCI reviewed a sample of 181,309 work injury claims with 2019 and 2020 injury dates in which the injured workers were treated by MPN and non-MPN providers and found little evidence of poor access to care in either group.  Measuring the time to initial treatment, the Institute found that MPN claims averaged 5.9 days from employer notice of injury to initial treatment compared to 5.6 days for non-MPN claims, and that 90.6 percent of the MPN claims vs. 92.9 percent of the non-MPN claims received treatment within 14 days.  In addition, in 99 percent of the MPN claims and 98 percent of the non-MPN claims, the state’s access standards were met, as the injured workers had a choice of three workers’ compensation primary care providers within 15 miles of their home, while a review of access to surgical specialists found 96 percent of the MPN claimants and 95 percent of the non-MPN claimants had a choice of three workers’ compensation surgeons within 30 miles of their home.  While the analysis did confirm that injured worker access to care is heavily influenced by whether the patient lives in an urban, suburban, or rural area of the state -- an issue not only in workers’ compensation, but in group health and government medical programs as well -- it found little difference in the average distance that MPN and non-MPN patients within each regional category needed to travel to obtain primary or specialty care.  All of these findings strongly suggest that a CAMPN would not make a significant difference in improving access to care.

 As for the cost of building and administering the CAMPN, CWCI estimates that the combined cost of contracting with and credentialing medical providers ($12.8 million) and the infrastructure costs related to staffing, data processing, system integration, and medical access assistance would range from $15 million to $65 million per year.  In addition, because AB 1465 would effectively neutralize the contractual discounts now available through MPNs, the Institute estimates that workers’ compensation treatment payments would increase by $286.1 million per year, bringing the total estimated cost of the CAMPN to $314 million to $364 million per year.  Beyond those costs are the additional expenses associated with the potential (and highly likely) increases in medical utilization, frictional expenses (attorney involvement and medical-legal evaluations), medical dispute resolution, delayed return to work, and additional temporary and permanent disability costs.  While these are difficult to quantify in advance, they could result in cost increases to the system that would dwarf the additional costs noted in the analysis.    

CWCI has released its Impact Analysis Report “AB 1465 and Medical Provider Networks in the California Workers’ Compensation System,” which is posted under the Research tab at www.cwci.org.