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AB-399 Workers’ compensation.(2021-2022)

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Date Published: 02/03/2021 09:00 PM
AB399:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 399


Introduced by Assembly Member Salas

February 03, 2021


An act to amend Sections 139.5, 4603.2, 4603.6, 4610, 4616, 4616.2, and 5307.1 of the Labor Code, relating to workers’ compensation.


LEGISLATIVE COUNSEL'S DIGEST


AB 399, as introduced, Salas. Workers’ compensation.
Existing law establishes a workers’ compensation system, administered by the Administrative Director of the Division of Workers’ Compensation, to compensate an employee for injuries sustained in the course of employment. Existing law requires the employer to provide medical, surgical, chiropractic, acupuncture, and hospital treatment that is reasonably required to cure or relieve the injured worker from the effects of the injury. Existing law requires the administrative director to adopt and revise periodically an official medical fee schedule establishing reasonable maximum fees paid for medical services other than physician services, drugs and pharmacy services, health care facility fees, home health care, and all other treatment, care, services, and goods. Existing law also establishes the Workers’ Compensation Appeals Board (appeals board) to exercise all judicial powers vested in it, including workers’ compensation proceedings for the recovery of compensation.
Existing law authorizes an insurer, employer, or entity that provides physician network services to establish or modify a medical provider network for providing medical treatment to injured employees and imposes various duties upon the insurer, employer, or entity in connection with the network. Existing law requires every medical provider network to post on its internet website a roster of all treating physicians in the medical provider network and requires every network to provide to the administrative director the internet website address of the network and of its roster of treating physicians. Existing law requires an insurer, employer, or entity that provides physician network services to submit a plan for the medical provider network to the administrative director for approval. Existing law requires the administrative director to adopt a medical treatment utilization schedule. Existing law authorizes the administrative director to investigate complaints and to conduct random reviews of approved medical provider networks.
This bill would impose new requirements on a medical provider network, including, among other things, requiring a participating provider to participate at each location at which they treat patients for 8 or more hours per week, on a monthly average. The bill would also prohibit authorizations or certifications issued by a carrier, claims administrator, medical provider network, or utilization review entity from providing instruction or imposing a requirement as to the location of where a treatment takes place or the provider who will perform the treatment. The bill would prohibit a vendor, provider, or group within the medical provider from being preferentially cited on an authorization or certification and would require the administrative director to impose a fine of $10,000 per authorization or certification that preferentially directs care within a medical provider network. The bill would require all treatment authorization or certification, adjuster correspondence, or billing explanation of review or explanation of benefits to include the medical provider network identification number, medical provider network name, and the name of the network covering the claimant provided in that correspondence. The bill would require the administrative director to fine a medical provider network $5,000 per document that fails to include the required medical provider network information.
This bill would require the administrative director to maintain a written record of compliance and approval for all plans and modifications and to approve the plan or modification in writing and with attestation of compliance. The bill would require the administrative director to fine a medical provider network $50,000 per occurrence, and to fine a carrier utilizing a medical network $50,000, if the administrative director determines that a medical provider network failed to meet the access standard for a given specialty and denied an injured worker the right to seek care outside of the medical provider network.
This bill would require the administrative director to adopt a medical fee schedule establishing reasonable minimum fees paid for medical services other than physician services, drug and pharmacy services, health care facility fees, home care facility fees, home health care, and all other treatment care, services, and goods. The bill would prohibit an insurance carrier, agent, or third party contracting entity from contracting with providers of medical services for rates less than the official medical fee schedule adopted by the administrative director.
Existing law requires each employer to establish a utilization review process to review and approve, modify, or deny treatment recommendations and establishes an independent medical review process to resolve disputes over a utilization review decision. Existing law requires various requirements to be met in determining whether to approve, modify, or deny requests by a physician for medical services. Existing law requires the administrative director to contract with one or more independent medical review organizations to conduct independent medical reviews.
This bill would require a provider to be reimbursed with all fees associated with the filing of the review if that provider is found to be owed additional reimbursement by an independent medical review organization. The bill would further require that if the reimbursement is not made, a penalty of $1,000 per month would accrue. The bill would require that if prospective or concurrent decision of a request for authorization is not made within 5 days from transmission of the request for authorization, or if a final decision is not properly communicated, as specified, that the request for authorization be presumed authorized. The bill would require the administrative director, no later than January 1, 2023, to ensure that the Electronic Adjudication Management System (EAMS) contains the medical provider network identification number for each injured worker contained in EAMS. The bill would require the administrative director, by July 1, 2023, to report to the Legislature on the status of the EAMS requirement.
This bill would provide a provider the right to file a petition for determination of nonindependent bill review for matters not eligible for independent bill review, as specified. The bill would require a defendant to be deemed to have waived all objections to a provider’s billing, if one of 2 conditions occurs. The bill would require that a defendant be liable for a fee of not less than $500 if the workers’ compensation appeals board determines that the defendant failed to comply with various requirements as a result of bad faith or tactics, as provided. The bill would require that a provider be liable for a fee of not less than $500 if the workers’ compensation appeals board determines that the provider improperly asserted that a defendant failed to comply with various requirements, as provided.
This bill would make related findings and declarations.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 (a) It is the intent of the Legislature to enact legislation known as the Medical Provider Network Transparency Act of 2021.
(b) The Legislature finds and declares the following:
(1) Responses to authorization requests for treatment of injured workers are delayed beyond the timelines outlined in the Labor Code, which lacks a firm deadline.
(2) Injured workers, providers, insurance carriers, and other parties are unable to determine the named medical provider network covering an injured worker and, without this information, injured workers cannot find necessary providers. Similarly, providers also cannot determine if they are authorized to treat an injured worker.
(3) Medical provider networks do not allow providers to update their business address to reflect a move or new location, which has diminished the number of providers available to treat patients, and forces medical care outside the medical provider network.
(4) Medical provider networks list third-party pricing and contracting entities, rather than providers, in their provider rosters, which can create a mechanism for some carriers to preferentially direct care to these entities rather than local providers that are also in the medical provider network. This practice requires patients to travel by plane for medical care with a favored vendor when that medical care could be provided by their doctor next door.
(5) Steep contractual discounts to the official medical fee schedule have created a race to the bottom in the worker’s compensation system with quality providers leaving the system. Injured workers are left with only low-quality, volume-based medical practices that are willing to accept the lowest rates.
(6) The lack of a genuine independent bill review process causes an increase in the frictional costs of the system through liens and petitions as a result of independent bill review for payment dispute adjudication.

SEC. 2.

 Section 139.5 of the Labor Code is amended to read:

139.5.
 (a) (1) The administrative director shall contract with one or more independent medical review organizations and one or more independent bill review organizations to conduct reviews pursuant to Article 2 (commencing with Section 4600) of Chapter 2 of Part 2 of Division 4. The independent review organizations shall be independent of any workers’ compensation insurer or workers’ compensation claims administrator doing business in this state. The administrative director may establish additional requirements, including conflict-of-interest standards, consistent with the purposes of Article 2 (commencing with Section 4600) of Chapter 2 of Part 2 of Division 4, that an organization shall be required to meet in order to qualify as an independent review organization and to assist the division in carrying out its responsibilities.
(2) To enable the independent review program to go into effect for injuries occurring on or after January 1, 2013, and until the administrative director establishes contracts as otherwise specified by this section, independent review organizations under contract with the Department of Managed Health Care pursuant to Section 1374.32 of the Health and Safety Code may be designated by the administrative director to conduct reviews pursuant to Article 2 (commencing with Section 4600) of Chapter 2 of Part 2 of Division 4. The administrative director may use an interagency agreement to implement the independent review process beginning January 1, 2013. The administrative director may initially contract directly with the same organizations that are under contract with the Department of Managed Health Care on substantially the same terms without competitive bidding until January 1, 2015.
(3) (A) If a provider is found to be owed additional reimbursement by an independent medical review organization, all fees associated with the filing of that review shall be reimbursed to the provider, via the initial payment method, within five business days.
(B) If the reimbursement is not made pursuant to paragraph (A), a penalty of one thousand dollars ($1,000) shall accrue per month until the refund is made.
(b) (1) The independent medical review organizations and the medical professionals retained to conduct reviews shall be deemed to be consultants for purposes of this section.
(2) There shall be no monetary liability on the part of, and no cause of action shall arise against, any consultant on account of any communication by that consultant to the administrative director or any other officer, employee, agent, contractor, or consultant of the Division of Workers’ Compensation, or on account of any communication by that consultant to any person when that communication is required by the terms of a contract with the administrative director pursuant to this section and the consultant does all of the following:
(A) Acts without malice.
(B) Makes a reasonable effort to determine the facts of the matter communicated.
(C) Acts with a reasonable belief that the communication is warranted by the facts actually known to the consultant after a reasonable effort to determine the facts.
(3) The immunities afforded by this section shall not affect the availability of any other privilege or immunity which may be afforded by law. This section shall not be construed to alter the laws regarding the confidentiality of medical records.
(c) (1) An organization contracted to perform independent medical review or independent bill review shall be required to employ a medical director who shall be responsible for advising the contractor on clinical issues. The medical director shall be a physician and surgeon licensed by the Medical Board of California or the Osteopathic Medical Board of California.
(2) The independent review organization, any experts it designates to conduct a review, or any officer, director, or employee of the independent review organization shall not have any material professional, familial, or financial affiliation, as determined by the administrative director, with any of the following:
(A) The employer, insurer or claims administrator, or utilization review organization.
(B) Any officer, director, employee of the employer, or insurer or claims administrator.
(C) A physician, the physician’s medical group, the physician’s independent practice association, or other provider involved in the medical treatment in dispute.
(D) The facility or institution at which either the proposed health care service, or the alternative service, if any, recommended by the employer, would be provided.
(E) The development or manufacture of the principal drug, device, procedure, or other therapy proposed by the employee whose treatment is under review, or the alternative therapy, if any, recommended by the employer.
(F) The employee or the employee’s immediate family, or the employee’s attorney.
(d) The independent review organizations shall meet all of the following requirements:
(1) The organization shall not be an affiliate or a subsidiary of, nor in any way be owned or controlled by, a workers’ compensation insurer, claims administrator, or a trade association of workers’ compensation insurers or claims administrators. A board member, director, officer, or employee of the independent review organization shall not serve as a board member, director, or employee of a workers’ compensation insurer or claims administrator. A board member, director, or officer of a workers’ compensation insurer or claims administrator or a trade association of workers’ compensation insurers or claims administrators shall not serve as a board member, director, officer, or employee of an independent review organization.
(2) The organization shall submit to the division the following information upon initial application to contract under this section and, except as otherwise provided, annually thereafter upon any change to any of the following information:
(A) The names of all stockholders and owners of more than 5 percent of any stock or options, if a publicly held organization.
(B) The names of all holders of bonds or notes in excess of one hundred thousand dollars ($100,000), if any.
(C) The names of all corporations and organizations that the independent review organization controls or is affiliated with, and the nature and extent of any ownership or control, including the affiliated organization’s type of business.
(D) The names and biographical sketches of all directors, officers, and executives of the independent review organization, as well as a statement regarding any past or present relationships the directors, officers, and executives may have with any employer, workers’ compensation insurer, claims administrator, medical provider network, managed care organization, provider group, or board or committee of an employer, workers’ compensation insurer, claims administrator, medical provider network, managed care organization, or provider group.
(E) (i) The percentage of revenue the independent review organization receives from expert reviews, including, but not limited to, external medical reviews, quality assurance reviews, utilization reviews, and bill reviews.
(ii) The names of any workers’ compensation insurer, claims administrator, or provider group for which the independent review organization provides review services, including, but not limited to, utilization review, bill review, quality assurance review, and external medical review. Any change in this information shall be reported to the department within five business days of the change.
(F) A description of the review process, including, but not limited to, the method of selecting expert reviewers and matching the expert reviewers to specific cases.
(G) A description of the system the independent medical review organization uses to identify and recruit medical professionals to review treatment and treatment recommendation decisions, the number of medical professionals credentialed, and the types of cases and areas of expertise that the medical professionals are credentialed to review.
(H) A description of how the independent review organization ensures compliance with the conflict-of-interest requirements of this section.
(3) The organization shall demonstrate that it has a quality assurance mechanism in place that does all of the following:
(A) Ensures that any medical professionals retained are appropriately credentialed and privileged.
(B) Ensures that the reviews provided by the medical professionals or bill reviewers are timely, clear, and credible, and that reviews are monitored for quality on an ongoing basis.
(C) Ensures that the method of selecting medical professionals for individual cases achieves a fair and impartial panel of medical professionals who are qualified to render recommendations regarding the clinical conditions and the medical necessity of treatments or therapies in question.
(D) Ensures the confidentiality of medical records and the review materials, consistent with the requirements of this section and applicable state and federal law.
(E) Ensures the independence of the medical professionals or bill reviewers retained to perform the reviews through conflict-of-interest policies and prohibitions, and ensures adequate screening for conflicts of interest, pursuant to paragraph (5).
(4) Medical professionals selected by independent medical review organizations to review medical treatment decisions shall be licensed physicians, as defined by Section 3209.3, in good standing, who meet the following minimum requirements:
(A) The physician shall be a clinician knowledgeable in the treatment of the employee’s medical condition, knowledgeable about the proposed treatment, and familiar with guidelines and protocols in the area of treatment under review.
(B) Notwithstanding any other law, the physician shall hold a nonrestricted license in any state of the United States, and for physicians and surgeons holding an M.D. or D.O. degree, a current certification by a recognized American medical specialty board in the area or areas appropriate to the condition or treatment under review. The independent medical review organization shall give preference to the use of a physician licensed in California as the reviewer.
(C) The physician shall have no history of disciplinary action or sanctions, including, but not limited to, loss of staff privileges or participation restrictions, taken or pending by any hospital, government, or regulatory body.
(D) Commencing January 1, 2014, the physician shall not hold an appointment as a qualified medical evaluator pursuant to Section 139.2.
(5) Neither the expert reviewer, nor the independent review organization, shall have any material professional, material familial, or material financial affiliation with any of the following:
(A) The employer, workers’ compensation insurer or claims administrator, or a medical provider network of the insurer or claims administrator, except that an academic medical center under contract to the insurer or claims administrator to provide services to employees may qualify as an independent medical review organization provided it will not provide the service and provided the center is not the developer or manufacturer of the proposed treatment.
(B) Any officer, director, or management employee of the employer or workers’ compensation insurer or claims administrator.
(C) The physician, the physician’s medical group, or the independent practice association proposing the treatment.
(D) The institution at which the treatment would be provided.
(E) The development or manufacture of the treatment proposed for the employee whose condition is under review.
(F) The employee or the employee’s immediate family.
(6) For purposes of this subdivision, the following terms shall have the following meanings:
(A) “Material familial affiliation” means any relationship as a spouse, child, parent, sibling, spouse’s parent, or child’s spouse.
(B) “Material financial affiliation” means any financial interest of more than 5 percent of total annual revenue or total annual income of an independent review organization or individual to which this subdivision applies. “Material financial affiliation” does not include payment by the employer to the independent review organization for the services required by the administrative director’s contract with the independent review organization, nor does “material financial affiliation” include an expert’s participation as a contracting medical provider where the expert is affiliated with an academic medical center or a National Cancer Institute-designated clinical cancer research center.
(C) “Material professional affiliation” means any physician-patient relationship, any partnership or employment relationship, a shareholder or similar ownership interest in a professional corporation, or any independent contractor arrangement that constitutes a material financial affiliation with any expert or any officer or director of the independent review organization. “Material professional affiliation” does not include affiliations that are limited to staff privileges at a health facility.
(e) The division shall provide, upon the request of any interested person, a copy of all nonproprietary information, as determined by the administrative director, filed with it by an independent review organization under contract pursuant to this section. The division may charge a fee to the interested person for copying the requested information.
(f) The Legislature finds and declares that the services described in this section are of such a special and unique nature that they must be contracted out pursuant to paragraph (3) of subdivision (b) of Section 19130 of the Government Code. The Legislature further finds and declares that the services described in this section are a new state function pursuant to paragraph (2) of subdivision (b) of Section 19130 of the Government Code.

SEC. 3.

 Section 4603.2 of the Labor Code is amended to read:

4603.2.
 (a) (1) Upon selecting a physician pursuant to Section 4600, the employee or physician shall notify the employer of the name and address, including the name of the medical group, if applicable, of the physician. The physician shall submit a report to the employer within five working days from the date of the initial examination, as required by Section 6409, and shall submit periodic reports at intervals that may be prescribed by rules and regulations adopted by the administrative director.
(2) If the employer objects to the employee’s selection of the physician on the grounds that the physician is not within the medical provider network used by the employer, and there is a final determination that the employee was entitled to select the physician pursuant to Section 4600, the employee shall be entitled to continue treatment with that physician at the employer’s expense in accordance with this division, notwithstanding Section 4616.2. The employer shall be required to pay from the date of the initial examination if the physician’s report was submitted within five working days of the initial examination. If the physician’s report was submitted more than five working days after the initial examination, the employer and the employee shall not be required to pay for any services prior to the date the physician’s report was submitted.
(3) If the employer objects to the employee’s selection of the physician on the grounds that the physician is not within the medical provider network used by the employer, and there is a final determination that the employee was not entitled to select a physician outside of the medical provider network, the employer is not liable for treatment provided by or at the direction of that physician or for any consequences of the treatment obtained outside the network.
(b) (1) (A) A provider of services provided pursuant to Section 4600, including, but not limited to, physicians, hospitals, pharmacies, interpreters, copy services, transportation services, and home health care services, shall submit its request for payment with an itemization of services provided and the charge for each service, a copy of all reports showing the services performed, the prescription or referral from the primary treating physician if the services were performed by a person other than the primary treating physician, and any evidence of authorization for the services that may have been received. This section does not prohibit an employer, insurer, or third-party claims administrator from establishing, through written agreement, an alternative manual or electronic request for payment with providers for services provided pursuant to Section 4600.
(B) Effective for services provided on or after January 1, 2017, the request for payment with an itemization of services provided and the charge for each service shall be submitted to the employer within 12 months of the date of service or within 12 months of the date of discharge for inpatient facility services. The administrative director shall adopt rules to implement the 12-month limitation period. The rules shall define circumstances that constitute good cause for an exception to the 12-month period, including provisions to address the circumstances of a nonoccupational injury or illness later found to be a compensable injury or illness. The request for payment is barred unless timely submitted.
(C) The request for payment with an itemization of services provided and the charge for each service shall be submitted to the employer with the national provider identifier (NPI) number for the physician or provider who provided the service for which payment is sought in accordance with rules adopted by the administrative director pursuant to Section 4603.4. Failure to include the physician’s or provider’s NPI shall result in the request for payment being barred until the physician’s or provider’s NPI is submitted with the request for payment. This subparagraph does not preclude an employer, insurer, pharmacy benefit manager, or third-party claims administrator from requiring the physician’s or provider’s NPI at an earlier date. This subparagraph is declaratory of existing law.
(D) Notwithstanding the requirements of this paragraph, a copy of the prescription shall not be required with a request for payment for pharmacy services, unless the provider of services has entered into a written agreement, as provided in this paragraph, that requires a copy of a prescription for a pharmacy service.
(E) This section does not preclude an employer, insurer, pharmacy benefits manager, or third-party claims administrator from requesting a copy of the prescription during a review of any records of prescription drugs that were dispensed by a pharmacy.
(2) Except as provided in subdivision (d) of Section 4603.4, or under contracts authorized under Section 5307.11, payment for medical treatment provided or prescribed by the treating physician selected by the employee or designated by the employer shall be made at reasonable maximum amounts in the official medical fee schedule, pursuant to Section 5307.1, in effect on the date of service. Payments shall be made by the employer with an explanation of review pursuant to Section 4603.3 within 45 days after receipt of each separate itemization of medical services provided, together with any required reports and any written authorization for services that may have been received by the physician. If the itemization or a portion thereof is contested, denied, or considered incomplete, the physician shall be notified, in the explanation of review, that the itemization is contested, denied, or considered incomplete, within 30 days after receipt of the itemization by the employer. An explanation of review that states an itemization is incomplete incomplete, or that documentation is missing, shall also state all additional information required to make a decision. A claim shall not be denied as a duplicate claim without providing proof of payment of the original claim. A properly documented list of services provided and not paid at the rates then in effect under Section 5307.1 within the 45-day period shall be paid at the rates then in effect and increased by 15 percent, together with interest at the same rate as judgments in civil actions retroactive to the date of receipt of the itemization, unless the employer does both of the following:
(A) Pays the provider at the rates in effect within the 45-day period.
(B) Advises, in an explanation of review pursuant to Section 4603.3, the physician, or another provider of the items being contested, the reasons for contesting these items, and the remedies available to the physician or the other provider if the physician or provider disagrees. In the case of an itemization that includes services provided by a hospital, outpatient surgery center, or independent diagnostic facility, advice that a request has been made for an audit of the itemization shall satisfy the requirements of this paragraph.
An employer’s liability to a physician or another provider under this section for delayed payments shall not affect its liability to an employee under Section 5814 or any other provision of this division.
(3) Notwithstanding paragraph (1), if the employer is a governmental entity, payment for medical treatment provided or prescribed by the treating physician selected by the employee or designated by the employer shall be made within 60 days after receipt of each separate itemization, together with any required reports and any written authorization for services that may have been received by the physician.
(4) Duplicate submissions of medical services itemizations, for which an explanation of review was previously provided, shall require no further or additional notification or objection by the employer to the medical provider and shall not subject the employer to any additional penalties or interest pursuant to this section for failing to respond to the duplicate submission. This paragraph applies only to duplicate submissions and does not apply to any other penalties or interest that may be applicable to the original submission.
(5) (A) An employer may defer objecting to or paying any bill submitted by, or on behalf of, a provider whose liens are stayed pursuant to Section 4615, and the time limits for taking any action prescribed by paragraphs (2) and (3) shall not commence until the stay is lifted pursuant to Section 4615.
(B) An employer may object to any bill submitted by, or on behalf of, a provider who has been suspended pursuant to Section 139.21.
(c) Interest or an increase in compensation paid by an insurer pursuant to this section shall be treated in the same manner as an increase in compensation under subdivision (d) of Section 4650 for the purposes of any classification of risks and premium rates, and any system of merit rating approved or issued pursuant to Article 2 (commencing with Section 11730) of Chapter 3 of Part 3 of Division 2 of the Insurance Code.
(d) (1) Whenever an employer or insurer employs an individual or contracts with an entity to conduct a review of an itemization submitted by a physician or medical provider, the employer or insurer shall make available to that individual or entity all documentation submitted together with that itemization by the physician or medical provider. When an individual or entity conducting an itemization review determines that additional information or documentation is necessary to review the itemization, the individual or entity shall contact the claims administrator or insurer to obtain the necessary information or documentation that was submitted by the physician or medical provider pursuant to subdivision (b).
(2) (A) An individual or entity reviewing an itemization of service submitted by a physician or medical provider, including a medical provider network, an entity that provides ancillary services, as defined in Section 4616.5, or an entity providing services for or on behalf of the medical provider network or its providers, shall not alter the procedure codes listed or recommend reduction of the amount of the payment unless the documentation submitted by the physician or medical provider with the itemization of service has been reviewed by that individual or entity. If the reviewer does not recommend payment for services as itemized by the physician or medical provider, the explanation of review shall provide the physician or medical provider with a specific explanation as to why the reviewer altered the procedure code or changed other parts of the itemization and the specific deficiency in the itemization or documentation that caused the reviewer to conclude that the altered procedure code or amount recommended for payment more accurately represents the service performed.
(B) The amendments to subparagraph (A) made by the act adding this subparagraph are declaratory of existing law.
(e) (1) If the provider disputes the amount paid, the provider may request a second review within 90 days of service of the explanation of review or an order of the appeals board resolving the threshold issue as stated in the explanation of review pursuant to paragraph (5) of subdivision (a) of Section 4603.3. The request for a second review shall be submitted to the employer on a form prescribed by the administrative director and shall include all of the following:
(A) The date of the explanation of review and the claim number or other unique identifying number provided on the explanation of review.
(B) The item and amount in dispute.
(C) The additional payment requested and the reason therefor.
(D) The additional information provided in response to a request in the first explanation of review or any other additional information provided in support of the additional payment requested.
(2) If the only dispute is the amount of payment and the provider does not request a second review within 90 days, the bill shall be deemed satisfied and neither the employer nor the employee shall be liable for any further payment.
(3) Within 14 days of a request for second review, the employer shall respond with a final written determination on each of the items or amounts in dispute. Payment of any balance not in dispute shall be made within 21 days of receipt of the request for second review. This time limit may be extended by mutual written agreement.
(4) If the provider contests the amount paid, after receipt of the second review, the provider shall request an independent bill review as provided for in Section 4603.6.
(f) Except as provided in paragraph (4) of subdivision (e), the appeals board shall have jurisdiction over disputes arising out of this section pursuant to Section 5304.
(g) For matters not eligible for independent bill review as defined in Section 4603.6, the provider shall have the right to file a petition for determination of nonindependent bill review dispute.
(1) When applicable, independent bill review applies solely to disputes directly related to the amount payable to a provider under an official fee schedule in effect on the date the medical-legal goods or services were provided. Other expense disputes between a defendant and a provider are nonindependent bill review disputes. Such nonindependent bill review disputes shall include, but are not limited to, all of the following:
(A) A threshold issue that would entirely defeat an expense claim, including, but not limited to, employment, statute of limitations, insurance coverage, or personal or subject matter jurisdiction, however, for purposes of this section, a threshold issue shall not include a dispute over whether the employee sustained industrial injury or injury to a particular body part.
(B) Whether the claimed expense was incurred for the purpose of proving or disproving a contested claim.
(C) Whether the claimed expense was authorized, reasonably, actually, and necessarily incurred
(D) Whether the denial reason contained in the defense issued explanation of review was accurate, legitimate. or valid.
(E) An assertion by the provider that the defendant has waived any objection to the amount of the bill because the defendant allegedly failed to comply with the relevant requirements, timelines, and procedures set forth in Sections 4622, 4603.3, and 4603.6 and the related Rules of the Administrative Director.
(F) An assertion by the defendant that the provider has waived any claim to further payment because the provider allegedly failed to comply with the relevant requirements, timelines, and procedures set forth in Sections 4622 and 4603.6 and the related Rules of the Administrative Director.
(G) An assertion by the defendant that an interpreter who rendered services at an examination did not meet the criteria established by subdivision (d) of Section 4620, paragraph (2) of subdivision (b) of Section 5811, and the Rules of the Administrative Director, as applicable.
(H) An assertion by the defendant that an interpreter was not reasonably required at a medical-legal examination because the employee proficiently speaks and understands the English language.
(2) A defendant shall not, nor have an obligation to, file a petition for determination of nonindependent bill review dispute when payment is denied.
(3) A provider may file a petition for determination of nonindependent bill review dispute with respect to any expense dispute not subject to independent bill review.
(A) A declaration of readiness may, but is not required to, accompany the petition.
(B) A copy of the petition and any declaration of readiness shall be concurrently served on the following:
(i) A defendant or defendants.
(ii) The employee or dependent.
(iii) If any of these persons or entities in clause (i) or (ii) is represented, service shall also be made on the attorney or hearing representative.
(C) A provider is not required to file a claim of costs in the form of a lien in conjunction with the petition or declaration of readiness. However, if the provider elects to file such a lien, it shall pay a lien filing fee, if applicable.
(4) (A) Notwithstanding the filing of a declaration of readiness in accordance with the provisions of paragraph (2) or (3), if there is a threshold issue concerning the underlying authorization of the claim, the Workers’ Compensation Appeals Board may defer hearing and determining this issue until either of the following conditions occurs:
(i) The issue is presented for determination in the underlying claim of the employee or dependent.
(ii) The underlying claim of the employee or dependent has been resolved by a compromise and release agreement or has been abandoned.
(B) The declaration of readiness shall not be deferred for any other reason.
(h) (1) If a defendant has contested liability for any reason other than the amount payable under an official medical fee schedule, that issue shall be resolved prior to independent bill review.
(2) If a nonindependent bill review expense dispute is resolved in the provider’s favor, then any outstanding issue over the amount payable under an official fee schedule shall be resolved through independent bill review, if applicable.
(3) Any appeal of an independent bill review determination of the administrative director shall comply with the procedures of Section 10567 of Title 8 of the California Code of Regulations. A claim of costs in the form of a lien need not be filed, and a lien filing fee need not be paid, when a petition appealing an independent bill review determination is filed.
(i) Lien claims filed prior to January 1, 2013, under former subdivision (b) of former Section 4903 shall be subject to the lien conference and lien trial procedures established by regulations, subject to the timely payment of a lien activation fee, if applicable.
(j) (1) A defendant shall be deemed to have finally waived all objections to a provider’s billing, other than compliance with Sections 4620 and 4621, if either of the following occurs:
(A) The provider submitted a properly documented billing to the defendant and, within 30 days, either or both of the following occurred:
(i) The defendant failed to serve an explanation of review that complies with Section 4603.3 and any applicable regulations adopted by the administrative director.
(ii) The defendant failed to make payment consistent with that explanation of review within 45 days.
(B) The provider submitted a timely and proper request for a second review to the defendant in accordance with paragraph (1) of subdivision (b) of Section 4622 and, within 14 days, either or both of the following occurred:
(i) The defendant failed to serve a final written determination that complies with any applicable regulations adopted by the administrative director.
(ii) The defendant failed to make payment consistent with that final written determination.
(2) (A) A provider’s bill shall be deemed satisfied, and neither the employee nor the employer shall be liable for any further payment, if all of the following occurs:
(i) The defendant issued a timely and proper explanation of review consistent with Section 4603.3 and any applicable regulations adopted by the administrative director.
(ii) The defendant made payment consistent with that explanation of review within 45 days after receipt of the provider’s written billing and report.
(iii) The provider failed to make a timely and proper request for second review in the form prescribed by Rules of the Administrative Director within 90 days after service of the explanation of review.
(B) A provider shall be deemed to have waived any objection based on the amount payable under the fee schedule in effect on the date the services were rendered if, within 14 days after receipt of the provider’s request for second review, the defendant issued a timely and proper final written determination and made payment consistent with that determination and the provider failed to request independent bill review with 30 days, or file a petition for determination of nonindependent bill review within 60 days after service of this second review determination.
(k) If the Workers’ Compensation Appeals Board determines that, as a result of bad faith actions or tactics, a defendant failed to comply with the requirements, timelines, or procedures set forth in Section 4622, 4603.3, or 4603.6 and the related Rules of the Administrative Director, the defendant shall be liable for the provider’s reasonable fees and costs, if any, and for sanctions under Section 5813 of this code and Section 10421 of Title 8 of the California Code of Regulations. The amount of the fees, costs, and sanctions payable shall be determined by the appeals board in an amount not less than five hundred dollars ($500).
(1) For purposes of this subdivision, bad faith actions or tactics by a defendant may include, but are not limited to:
(A) Failing to timely pay any uncontested portion of a provider’s billing.
(B) Failing to make a good faith effort to timely comply with applicable statutory or regulatory medical-legal timelines or procedures.
(C) Contesting liability for the provider’s billing based on a dispute over injury, or injury to a particular body part.
(2) These fees, costs, and monetary sanctions shall be in addition to any penalties and interest that shall be payable under Section 4622 or other applicable provisions of law, and in addition to any lien filing fee, lien activation fee, or independent bill review fee that, by statute, the defendant might be obligated to reimburse to the medical-legal provider.
(3) If the appeals board determines that, as a result of bad faith actions or tactics, a provider has improperly asserted that a defendant failed to comply with the requirements, timelines, and procedures set forth in Sections 4622 and 4603.6 and the related Rules of the Administrative Director, the provider shall be liable for the defendant’s reasonable attorney’s fees and costs, if any, and for sanctions under Section 5813 of this code and Section 10421 of Title 8 of the California Code of Regulations. The amount of the attorney’s fees, costs, and sanctions payable shall be determined by the appeals board and for bad faith actions or tactics occurring on or after the effective date of this section, the monetary sanctions shall not be less than five hundred dollars ($500).

SEC. 4.

 Section 4603.6 of the Labor Code is amended to read:

4603.6.
 (a) If the only dispute is the amount of payment and the provider has received a second review that did not resolve the dispute, the provider may request an independent bill review within 30 calendar days of service of the second review pursuant to Section 4603.2 or 4622. If the provider fails to request an independent bill review within 30 days, the bill shall be deemed satisfied, and neither the employer nor the employee shall be liable for any further payment. If the employer has contested liability for any issue other than the reasonable amount payable for services, that issue shall be resolved prior to filing a request for independent bill review, and the time limit for requesting independent bill review shall not begin to run until the resolution of that issue becomes final, except as provided for in Section 4622.
(b) A request for independent review shall be made on a form prescribed by the administrative director, and shall include copies of the original billing itemization, any supporting documents that were furnished with the original billing, the explanation of review, the request for second review together with any supporting documentation submitted with that request, and the final explanation of the second review. The administrative director may require that requests for independent bill review be submitted electronically. A copy of the request, together with all required documents, shall be served on the employer. Only the request form and the proof of payment of the fee required by subdivision (c) shall be filed with the administrative director. Upon notice of assignment of the independent bill reviewer, the requesting party shall submit the documents listed in this subdivision to the independent bill reviewer within 10 days.
(c) The provider shall pay to the administrative director a fee determined by the administrative director to cover no more than the reasonable estimated cost of independent bill review and administration of the independent bill review program. The administrative director may prescribe different fees depending on the number of items in the bill or other criteria determined by regulation adopted by the administrative director. If any additional payment is found owing from the employer to the medical provider, the employer shall reimburse the provider for the fee in addition to the amount found owing.
(d) Upon receipt of a request for independent bill review and the required fee, the administrative director or the administrative director’s designee shall assign the request to an independent bill reviewer within 30 days and notify the medical provider and employer of the independent reviewer assigned.
(e) The independent bill reviewer shall review the materials submitted by the parties and make a written determination of any additional amounts to be paid to the medical provider and state the reasons for the determination. If the independent bill reviewer deems necessary, the independent bill reviewer may request additional documents from the medical provider or employer. The employer shall have no obligation to serve medical reports on the provider unless the reports are requested by the independent bill reviewer. If additional documents are requested, the parties shall respond with the documents requested within 30 days and shall provide the other party with copies of any documents submitted to the independent reviewer, and the independent reviewer shall make a written determination of any additional amounts to be paid to the medical provider and state the reasons for the determination within 60 days of the receipt of the administrative director’s assignment. The written determination of the independent bill reviewer shall be sent to the administrative director and provided to both the medical provider and the employer.
(f) The determination of the independent bill reviewer shall be deemed a determination and order of the administrative director. The determination is final and binding on all parties unless an aggrieved party files with the appeals board a verified appeal from the medical bill review determination of the administrative director within 20 days of the service of the determination. The medical bill review determination of the administrative director shall be presumed to be correct and shall be set aside only upon clear and convincing evidence of one or more of the following grounds for appeal:
(1) The administrative director acted without or in excess of his or her the administrative director’s powers.
(2) The determination of the administrative director was procured by fraud.
(3) The independent bill reviewer was subject to a material conflict of interest that is in violation of Section 139.5.
(4) The determination was the result of bias on the basis of race, national origin, ethnic group identification, religion, age, sex, sexual orientation, color, or disability.
(5) The determination was the result of a plainly erroneous express or implied finding of fact, provided that the mistake of fact is a matter of ordinary knowledge based on the information submitted for review and not a matter that is subject to expert opinion.
(g) If the determination of the administrative director is reversed, the dispute shall be remanded to the administrative director to submit the dispute to independent bill review by a different independent review organization. In the event that a different independent bill review organization is not available after remand, the administrative director shall submit the dispute to the original bill review organization for review by a different reviewer within the organization. In no event shall the appeals board or any higher court make a determination of ultimate fact contrary to the determination of the bill review organization.
(h) Once the independent bill reviewer has made a determination regarding additional amounts to be paid to the medical provider, the independent bill reviewer shall refund all fees associated with the filing of that review to the provider, via the initial payment method, within five business days, and the employer shall pay the additional amounts per found to be owed within 30 days of the timely date of the final finding. If payment requirements set forth in Sections 4603.2 and 4603.4. is not issued within 30 days of that determination, the employer shall pay a five-hundred-dollar ($500) fine for each delinquent payment to the provider.

SEC. 5.

 Section 4610 of the Labor Code is amended to read:

4610.
 (a) For purposes of this section, “utilization review” means utilization review or utilization management functions that prospectively, retrospectively, or concurrently review and approve, modify, or deny, based in whole or in part on medical necessity to cure and relieve, treatment recommendations by physicians, as defined in Section 3209.3, prior to, retrospectively, or concurrent with the provision of medical treatment services pursuant to Section 4600.
(b) For all dates of injury occurring on or after January 1, 2018, emergency treatment services and medical treatment rendered for a body part or condition that is accepted as compensable by the employer and is addressed by the medical treatment utilization schedule adopted pursuant to Section 5307.7, by a member of the medical provider network or health care organization, or by a physician predesignated pursuant to subdivision (d) of Section 4600, within the 30 days following the initial date of injury, shall be authorized without prospective utilization review, except as provided in subdivision (c). The services rendered under this subdivision shall be consistent with the medical treatment utilization schedule. In the event that the employee is not subject to treatment with a medical provider network, health care organization, or predesignated physician pursuant to subdivision (d) of Section 4600, the employee shall be eligible for treatment under this section within 30 days following the initial date of injury if the treatment is rendered by a physician or facility selected by the employer. For treatment rendered by a medical provider network physician, health care organization physician, a physician predesignated pursuant to subdivision (d) of Section 4600, or an employer-selected physician, the report required under Section 6409 and a complete request for authorization shall be submitted by the physician within five days following the employee’s initial visit and evaluation.
(c) Unless authorized by the employer or rendered as emergency medical treatment, the following medical treatment services, as defined in rules adopted by the administrative director, that are rendered through a member of the medical provider network or health care organization, a predesignated physician, an employer-selected physician, or an employer-selected facility, within the 30 days following the initial date of injury, shall be subject to prospective utilization review under this section:
(1) Pharmaceuticals, to the extent they are neither expressly exempted from prospective review nor authorized by the drug formulary adopted pursuant to Section 5307.27.
(2) Nonemergency inpatient and outpatient surgery, including all presurgical and postsurgical services.
(3) Psychological treatment services.
(4) Home health care services.
(5) Imaging and radiology services, excluding X-rays.
(6) All durable medical equipment, whose combined total value exceeds two hundred fifty dollars ($250), as determined by the official medical fee schedule.
(7) Electrodiagnostic medicine, including, but not limited to, electromyography and nerve conduction studies.
(8) Any other service designated and defined through rules adopted by the administrative director.
(d) (1) Except for emergency treatment services, any request for payment for treatment provided under subdivision (b) shall comply with Section 4603.2 and be submitted to the employer, or its insurer or claims administrator, within 30 days of the date the service was provided.
(2) (A) In the case of emergency treatment services, any request for payment for treatment provided under subdivision (b) shall comply with Section 4603.2 and be submitted to the employer, or its insurer or claims administrator, within 180 days of the date the service was provided.
(B) For the purposes of this subdivision, “emergency treatment services” means treatment for an emergency medical condition defined in subdivision (b) of Section 1317.1 of the Health and Safety Code and provided in a licensed general acute care hospital, as defined in Section 1250 of the Health and Safety Code.
(e) If a physician fails to submit the report required under Section 6409 and a complete request for authorization, as described in subdivision (b), an employer may remove the physician’s ability under this subdivision to provide further medical treatment to the employee that is exempt from prospective utilization review.
(f) An employer may perform retrospective utilization review for any treatment provided pursuant to subdivision (b) solely for the purpose of determining if the physician is prescribing treatment consistent with the schedule for medical treatment utilization, including, but not limited to, the drug formulary adopted pursuant to Section 5307.27.
(1) If it is found after retrospective utilization reviews that there is a pattern and practice of the physician or provider failing to render treatment consistent with the schedule for medical treatment utilization, including the drug formulary, the employer may remove the ability of the predesignated physician, employer-selected physician, or the member of the medical provider network or health care organization under this subdivision to provide further medical treatment to any employee that is exempt from prospective utilization review. The employer shall notify the physician or provider of the results of the retrospective utilization review and the requirement for prospective utilization review for all subsequent medical treatment.
(2) The results of retrospective utilization review may constitute a showing of good cause for an employer’s petition requesting a change of physician or provider pursuant to Section 4603 and may serve as grounds for termination of the physician or provider from the medical provider network or health care organization.
(g) Each employer shall establish a utilization review process in compliance with this section, either directly or through its insurer or an entity with which an employer or insurer contracts for these services.
(1) Each utilization review process that modifies or denies requests for authorization of medical treatment shall be governed by written policies and procedures. These policies and procedures shall ensure that decisions based on the medical necessity to cure and relieve of proposed medical treatment services are consistent with the schedule for medical treatment utilization, including the drug formulary, adopted pursuant to Section 5307.27.
(2) (A) Unless otherwise indicated in this section, a physician providing treatment under Section 4600 shall send any request for authorization for medical treatment, with supporting documentation, to the claims administrator for the employer, insurer, or other entity according to rules adopted by the administrative director. The employer, insurer, or other entity shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 or 2450 of the Business and Professions Code. The medical director shall ensure that the process by which the employer or other entity reviews and approves, modifies, or denies requests by physicians prior to, retrospectively, or concurrent with the provision of medical treatment services complies with the requirements of this section. This section does not limit the existing authority of the Medical Board of California.
(B) A request for authorization, including its supporting documentation, shall not be altered or amended by any entity other than the requesting physician or provider prior to the submission of the request to the claims administrator in accordance with subparagraph (A). This subparagraph is declaratory of existing law.
(3) (A) A person other than a licensed physician who is competent to evaluate the specific clinical issues involved in the medical treatment services, if these services are within the scope of the physician’s practice, requested by the physician, shall not modify or deny requests for authorization of medical treatment for reasons of medical necessity to cure and relieve or due to incomplete or insufficient information under subdivisions (i) and (j).
(B) (i) The employer, or any entity conducting utilization review on behalf of the employer, shall neither offer nor provide any financial incentive or consideration to a physician based on the number of modifications or denials made by the physician under this section.
(ii) An insurer or third-party administrator shall not refer utilization review services conducted on behalf of an employer under this section to an entity in which the insurer or third-party administrator has a financial interest as defined under Section 139.32. This prohibition does not apply if the insurer or third-party administrator provides the employer and the administrative director with prior written disclosure of both of the following:
(I) The entity conducting the utilization review services.
(II) The insurer or third-party administrator’s financial interest in the entity.
(C) The administrative director has authority pursuant to this section to review any compensation agreement, payment schedule, or contract between the employer, or any entity conducting utilization review on behalf of the employer, and the utilization review physician. Any information disclosed to the administrative director pursuant to this paragraph shall be considered confidential information and not subject to disclosure pursuant to the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code). Disclosure of the information to the administrative director pursuant to this subdivision shall not waive the provisions of the Evidence Code relating to privilege.
(4) A utilization review 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, including, but not limited to, timeliness in issuing a utilization review decision, the scope of medical material used in issuing a utilization review decision, peer-to-peer consultation, internal appeal procedure, and requiring a policy preventing financial incentives to doctors and other providers based on the utilization review decision. The administrative director shall adopt rules to implement the selection of an independent, nonprofit organization for those accreditation purposes. Until those rules are adopted, the administrative director shall designate URAC as the accrediting organization. The administrative director may adopt rules to do any of the following:
(A) Require additional specific criteria for measuring the quality of a utilization review process for purposes of accreditation.
(B) Exempt nonprofit, public sector internal utilization review programs from the accreditation requirement pursuant to this section, if the administrative director has adopted minimum standards applicable to nonprofit, public sector internal utilization review programs that meet or exceed the accreditation standards developed pursuant to this section.
(5) On or before July 1, 2018, each employer, either directly or through its insurer or an entity with which an employer or insurer contracts for utilization review services, shall submit a description of the utilization review process that modifies or denies requests for authorization of medical treatment and the written policies and procedures to the administrative director for approval. Approved utilization review process descriptions and the accompanying written policies and procedures shall be disclosed by the employer to employees and physicians and made available to the public by posting on the employer’s, claims administrator’s, or utilization review organization’s internet website.
(h) The criteria or guidelines used in the utilization review process to determine whether to approve, modify, or deny medical treatment services shall be all of the following:
(1) Developed with involvement from actively practicing physicians.
(2) Consistent with the schedule for medical treatment utilization, including the drug formulary, adopted pursuant to Section 5307.27.
(3) Evaluated at least annually, and updated if necessary.
(4) Disclosed to the physician and the employee, if used as the basis of a decision to modify or deny services in a specified case under review.
(5) Available to the public upon request. An employer shall only be required to disclose the criteria or guidelines for the specific procedures or conditions requested. An employer may charge members of the public reasonable copying and postage expenses related to disclosing criteria or guidelines pursuant to this paragraph. Criteria or guidelines may also be made available through electronic means. A charge shall not be required for an employee whose physician’s request for medical treatment services is under review.
(i) In determining whether to approve, modify, or deny requests by physicians prior to, retrospectively, or concurrent with the provisions of medical treatment services to employees, all of the following requirements shall be met:
(1)  (A)  Except for treatment requests made pursuant to the formulary, prospective or concurrent decisions shall be made in a timely fashion that is appropriate for the nature of the employee’s condition, not to exceed five normal business days from the receipt of a request for authorization for medical treatment and supporting information reasonably necessary to make the determination, but in no event more than 14 days from the date of the medical treatment recommendation by the physician. Prospective decisions regarding requests for treatment covered by the formulary shall be made no more than five normal business days from the date of receipt of the medical treatment request. The request for authorization and supporting documentation may be submitted electronically under rules adopted by the administrative director.
(B) If a prospective or concurrent decision of a request for authorization pursuant to this section is not made and communicated to the requesting provider within five days from transmission of the request for authorization, or a final decision is not properly communicated pursuant to subparagraph (A) of paragraph (4), the request for authorization is presumed authorized.
(2) In cases where the review is retrospective, a decision resulting in denial of all or part of the medical treatment service shall be communicated to the individual who received services, or to the individual’s designee, within 30 days of the receipt of the information that is reasonably necessary to make this determination. If payment for a medical treatment service is made within the time prescribed by Section 4603.2, a retrospective decision to approve the service need not otherwise be communicated.
(3) If the employee’s condition is one in which the employee faces an imminent and serious threat to the employee’s health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the employee’s life or health or could jeopardize the employee’s ability to regain maximum function, decisions to approve, modify, or deny requests by physicians prior to, or concurrent with, the provision of medical treatment services to employees shall be made in a timely fashion that is appropriate for the nature of the employee’s condition, but not to exceed 72 hours after the receipt of the information reasonably necessary to make the determination.
(4) (A) Final decisions to approve, modify, or deny requests by physicians for authorization prior to, or concurrent with, the provision of medical treatment services to employees shall be communicated to the requesting physician within 24 hours of the decision by telephone, facsimile, or, if agreed to by the parties, secure email.
(B) Decisions resulting in modification or denial of all or part of the requested health care service shall be communicated in writing to the employee, and to the physician if the initial communication under subparagraph (A) was by telephone, within 24 hours for concurrent review, or within two normal business days of the decision for prospective review, as prescribed by the administrative director. If the request is modified or denied, disputes shall be resolved in accordance with Section 4610.5, if applicable, or otherwise in accordance with Section 4062.
(C) In the case of concurrent review, medical care shall not be discontinued until the employee’s physician has been notified of the decision and a care plan has been agreed upon by the physician that is appropriate for the medical needs of the employee. Medical care provided during a concurrent review shall be care that is medically necessary to cure and relieve, and an insurer or self-insured employer shall only be liable for those services determined medically necessary to cure and relieve. If the insurer or self-insured employer disputes whether or not one or more services offered concurrently with a utilization review were medically necessary to cure and relieve, the dispute shall be resolved pursuant to Section 4610.5, if applicable, or otherwise pursuant to Section 4062. A compromise between the parties that an insurer or self-insured employer believes may result in payment for services that were not medically necessary to cure and relieve shall be reported by the insurer or the self-insured employer to the licensing board of the provider or providers who received the payments, in a manner set forth by the respective board and in a way that minimizes reporting costs both to the board and to the insurer or self-insured employer, for evaluation as to possible violations of the statutes governing appropriate professional practices. Fees shall not be levied upon insurers or self-insured employers making reports required by this section.
(5) Communications regarding decisions to approve requests by physicians shall specify the specific medical treatment service approved. Responses regarding decisions to modify or deny medical treatment services requested by physicians shall include a clear and concise explanation of the reasons for the employer’s decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. If a utilization review decision to deny a medical service is due to incomplete or insufficient information, the decision shall specify all of the following:
(A) The reason for the decision.
(B) A specific description of the information that is needed.
(C) The date and time of attempts made to contact the physician to obtain the necessary information.
(D) A description of the manner in which the request was communicated.
(j) (1) Unless otherwise indicated in this section, a physician providing treatment under Section 4600 shall send any request for authorization for medical treatment, with supporting documentation, to the claims administrator for the employer, insurer, or other entity according to rules adopted by the administrative director. If an employer, insurer, or other entity subject to this section requests medical information from a physician in order to determine whether to approve, modify, or deny requests for authorization, that employer, insurer, or other entity shall request only the information reasonably necessary to make the determination.
(2) If the employer, insurer, or other entity cannot make a decision within the timeframes specified in paragraph (1), (2), or (3) of subdivision (i) because the employer or other entity is not in receipt of, or in possession of, all of the information reasonably necessary to make a determination, the employer shall immediately notify the physician and the employee, in writing, that the employer cannot make a decision within the required timeframe, and specify the information that must be provided by the physician for a determination to be made. Upon receipt of all information reasonably necessary and requested by the employer, the employer shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1), (2), or (3) of subdivision (i).
(k) A utilization review decision to modify or deny a treatment recommendation shall remain effective for 12 months from the date of the decision without further action by the employer with regard to a further recommendation by the same physician, or another physician within the requesting physician’s practice group, for the same treatment unless the further recommendation is supported by a documented change in the facts material to the basis of the utilization review decision.
(l) Utilization review of a treatment recommendation shall not be required while the employer is disputing liability for injury or treatment of the condition for which treatment is recommended pursuant to Section 4062.
(m) If utilization review is deferred pursuant to subdivision (l), and it is finally determined that the employer is liable for treatment of the condition for which treatment is recommended, the time for the employer to conduct retrospective utilization review in accordance with paragraph (2) of subdivision (i) shall begin on the date the determination of the employer’s liability becomes final, and the time for the employer to conduct prospective utilization review shall commence from the date of the employer’s receipt of a treatment recommendation after the determination of the employer’s liability.
(n) Each employer, insurer, or other entity subject to this section shall maintain telephone access during California business hours for physicians to request authorization for health care services and to conduct peer-to-peer discussions regarding issues, including the appropriateness of a requested treatment, modification of a treatment request, or obtaining additional information needed to make a medical necessity decision.
(o) The administrative director shall develop a system for the mandatory electronic reporting of documents related to every utilization review performed by each employer, which shall be administered by the Division of Workers’ Compensation. The administrative director shall adopt regulations specifying the documents to be submitted by the employer and the authorized transmission format and timeframe for their submission. For purposes of this subdivision, “employer” means the employer, the insurer of an insured employer, a claims administrator, or a utilization review organization, or other entity acting on behalf of any of them.
(p) If the administrative director determines that the employer, insurer, or other entity subject to this section has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the administrative director may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected. The administrative penalties shall not be deemed to be an exclusive remedy for the administrative director. These penalties shall be deposited in the Workers’ Compensation Administration Revolving Fund.
(q) The administrative director shall contract with an outside, independent research organization on or after March 1, 2019, to evaluate the impact of the provision of medical treatment within the first 30 days after a claim is filed, for a claim filed on or after January 1, 2017, and before January 1, 2019. The report shall be provided to the administrative director, the Senate Committee on Labor and Industrial Relations, and the Assembly Committee on Insurance before January 1, 2020.

SEC. 6.

 Section 4616 of the Labor Code is amended to read:

4616.
 (a) (1) An insurer, employer, or entity that provides physician network services may establish or modify a medical provider network for the provision of medical treatment to injured employees. The network shall include physicians primarily engaged in the treatment of occupational injuries. The administrative director shall encourage the integration of occupational and nonoccupational providers. The number of physicians in the medical provider network shall be sufficient to enable treatment for injuries or conditions to be provided in a timely manner. The provider network shall include an adequate number and type of physicians, as described in Section 3209.3, or other providers, as described in Section 3209.5, to treat common injuries experienced by injured employees based on the type of occupation or industry in which the employee is engaged, and the geographic area where the employees are employed.
(2) Medical treatment for injuries shall be readily available at reasonable times to all employees. To the extent feasible, all medical treatment for injuries shall be readily accessible to all employees. With respect to availability and accessibility of treatment, the administrative director shall consider the needs of rural areas, specifically those in which health facilities are located at least 30 miles apart and areas in which there is a health care shortage.
(3)  (A)  A treating physician shall be included in the network only if, at the time of entering into or renewing an agreement by which the physician would be in the network, the physician, or an authorized employee of the physician or the physician’s office, provides a separate written acknowledgment in which the physician affirmatively elects to be a member of the network. Copies of the written acknowledgment shall be provided to the administrative director upon the administrative director’s request. This paragraph shall not apply to a physician who is a shareholder, partner, or employee of a medical group that elects to be part of the network.
(B) (i) Any provider participating in a medical provider network shall be participating at each location at which they treat patients eight or more hours per week, on a monthly average. Medical provider networks shall not restrict address updates and address additions for a provider who works at a location eight or more hours per week.
(ii) Providers may be participating at locations that do not meet the eight-hour requirement of clause (i), but those locations shall not count towards the medical provider network’s access standard.
(4) (A) (i) Commencing July 1, 2021, every medical provider network shall post on its internet website a roster of all participating providers, which includes all physicians and ancillary service providers in the medical provider network, and shall update the roster at least quarterly. Every network shall provide to the administrative director the internet website address of the network and of its roster of participating providers. The roster of participating providers shall include, at a minimum, the name of each individual provider and their office address and office telephone number. If the ancillary service is provided by an entity rather than an individual, then that entity’s name, address, and telephone number shall be listed.
(ii) The medical provider network internet website shall also publish a prominent list of those treating physician specialties and medical services that on the date and at the time of posting do not meet the required access standards. The medical provider network shall update the internet website whenever there is a change to the availability of these providers under the access standards, or every quarter, whichever is sooner.
(iii) The medical provider network shall list only individual provider names. The medical provider network shall not list entities, third-party administrators, subnetworks, or groups of any kind.
(iv) (I) Authorizations or certifications issued by a carrier, claims administrator, medical provider network, or utilization review entity shall not provide any instruction or requirement as to the location where treatment is to take place, or the provider whom is to perform the treatment. An authorization or certification may provide instruction or require that the treatment be performed by a provider, and at a location, within the medical provider network if the medical provider network meets access standards.
(II) A vendor, provider, or group within the medical provider network shall not be preferentially cited on an authorization or certification. The administrative director shall fine any authorizing entity ten thousand dollars ($10,000) per authorization or certification issued that preferentially directs care within a medical provider network.

(ii)

(v) The administrative director shall post, on the division’s internet website, the internet website address of every approved medical provider network.
(B) Every medical provider network shall post on its internet website and distribute in writing to each employee covered by the medical provider network, and provider participating within the network, information about how to contact the medical provider network contact and medical access assistants, and information about how to obtain a copy of any notification regarding the medical provider network that is required to be given to an employee by regulations adopted by the administrative director.
(C) (i) Any treatment authorization or certification, adjuster correspondence, or billing explanation of review or explanation of benefits shall include the medical provider network identification number, medical provider network name, and the name of the network covering the claimant provided in that correspondence.
(ii) The administrative director shall fine any medical provider network five thousand dollars ($5,000) per document described in clause (i) that fails to list this medical provider network information.
(D) (i) On or before January 1, 2023, the administrative director shall ensure that the Electronic Adjudication Management System (EAMS) contains the medical provider network identification number for each injured worker contained in the Electronic Adjudication Management System.
(ii) On or before July 1, 2023, the administrative director shall report to the Legislature on the status of the requirement of clause (i). The report shall be submitted in compliance with Section 9795 of the Government Code.
(5) Every medical provider network shall provide one or more persons within the United States to serve as medical access assistants to help an injured employee find an available physician of the employee’s choice, and subsequent physicians if necessary, under Section 4616.3. Medical access assistants shall have a toll-free telephone number that injured employees may use and shall be available at least from 7 a.m. to 8 p.m. Pacific standard time, Monday through Saturday, to respond to injured employees, contact physicians’ offices during regular business hours, and schedule appointments. The administrative director shall promulgate regulations governing the provision of medical access assistants.
(b) (1) An insurer, employer, or entity that provides physician network services shall submit a plan for the medical provider network to the administrative director for approval. The administrative director shall approve the plan for a period of four years if the administrative director determines that the plan meets the requirements of this section. If the The administrative director does not act on the plan within 60 days of submitting the plan, it shall be deemed approved. Commencing January 1, 2014, existing approved plans shall be deemed approved for review all plans and all modifications of any existing and approved plan and shall maintain a period written record of four years from the compliance and approval date of the most recent application or modification submitted prior to 2014. Plans with all applicable statutes and regulations. Plans shall be resubmitted for reapproval for medical provider networks shall be submitted at least six no later than nine months before prior to the expiration of the its most recent four-year approval period. Commencing January 1, 2016, a modification that updates an entire medical provider network plan pursuant to bring the plan into full compliance with all current statutes and regulations shall be deemed approved for a period of four years from the modification approval date. An approved modification that does not update an entire medical provider network plan to bring the plan into full compliance with all current statutes and regulations shall not alter the expiration of the medical provider network’s four-year approval period. Upon a showing that the medical provider network was approved or deemed approved procedure established by the administrative director, there director. A plan or modification of an existing approved plan shall not be a conclusive presumption on deemed approved without the part administrative director’s written approval and attestation of the appeals board that the medical provider network was validly formed. compliance with all applicable statutes and regulations.
(A) All plans shall submit a plan modification in compliance with paragraph (4) of subdivision (a). After review and approval of each such plan modification, the administrative director shall maintain a consumer-friendly written record of compliance and shall post that consumer-friendly written record of compliance on its internet website that is accessible to the public.
(B) The administrative director shall fine a medical provider network found to have simultaneously failed to meet the access standard for a given specialty and to have denied an injured worker the right to seek care outside of the medical provider network for that specialty, fifty thousand dollars ($50,000) per occurrence.
(C) Upon a showing that the medical provider network was approved by the administrative director, there shall be a conclusive presumption on the part of the appeals board that the medical provider network was validly formed.
(2) Every medical provider network shall establish and follow procedures to continuously review the quality of care, performance of medical personnel, utilization of services and facilities, and costs.
(3) Every medical provider network shall submit geocoding of its network network, including each provider as described in clause (i) of subparagraph (A) of paragraph (4) of subdivision (a), for reapproval to establish that the number and geographic location of physicians in the network meets the required access standards.
(4) Approval of a plan may be denied, revoked, or suspended if the medical provider network fails to meet the requirements of this article. Any person contending that a medical provider network is not validly constituted may petition the administrative director to suspend or revoke the approval of the medical provider network. The administrative director may adopt regulations establishing a schedule of administrative penalties not to exceed five thousand dollars ($5,000) per violation, or probation, or both, in lieu of revocation or suspension for less severe violations of the requirements of this article. Penalties, probation, suspension, or revocation shall be ordered by the administrative director only after notice and opportunity to be heard. Unless suspended or revoked by the administrative director, the administrative director’s approval of a medical provider network shall be binding on all persons and all courts. A determination of the administrative director may be reviewed only by an appeal of the determination of the administrative director filed as an original proceeding before the reconsideration unit of the workers’ compensation appeals board on the same grounds and within the same time limits after issuance of the determination as would be applicable to a petition for reconsideration of a decision of a workers’ compensation administrative law judge.
(c) Physician compensation may not be structured in order to achieve the goal of reducing, delaying, or denying medical treatment or restricting access to medical treatment.
(d) If the employer or insurer meets the requirements of this section, the administrative director may not withhold approval or disapprove an employer’s or insurer’s medical provider network based solely on the selection of providers. In developing a medical provider network, an employer or insurer shall have the exclusive right to determine the members of their network.
(e) All treatment provided shall be provided in accordance with the medical treatment utilization schedule established pursuant to Section 5307.27.
(f) Only a licensed physician who is competent to evaluate the specific clinical issues involved in the medical treatment services, when these services are within the scope of the physician’s practice, may modify, delay, or deny requests for authorization of medical treatment.
(g) Every contracting agent that sells, leases, assigns, transfers, or conveys its medical provider networks and their contracted reimbursement rates to an insurer, employer, entity that provides physician network services, or another contracting agent shall, upon entering or renewing a provider contract, disclose to the provider whether the medical provider network may be sold, leased, transferred, or conveyed to other insurers, employers, entities that provide physician network services, or another contracting agent, and specify whether those insurers, employers, entities that provide physician network services, or contracting agents include workers’ compensation insurers.
(h) On or before November 1, 2004, the administrative director, in consultation with the Department of Managed Health Care, shall adopt regulations implementing this article. The administrative director shall develop regulations that establish procedures for purposes of making medical provider network modifications.
(i) The administrative director has the authority and discretion to shall investigate complaints, conduct random reviews, and take enforcement action against medical provider networks, an entity that provides ancillary services, or an entity providing services for or on behalf of the medical provider network or its providers regarding noncompliance with the requirements of this section or Section 4603.2 or 4610. If the administrative director determines that a medical provider network simultaneously failed to meet the access standard for a given specialty and also denied an injured worker the right to seek care outside of the medical provider network for that specialty, the administrative director shall impose a fine of fifty thousand dollars ($50,000) against the carrier utilizing that medical provider network.

SEC. 7.

 Section 4616.2 of the Labor Code is amended to read:

4616.2.
 (a) A medical provider network shall file a written continuity of care policy with the administrative director.
(b) If approved by the administrative director, the provisions of the written continuity of care policy shall replace all prior continuity of care policies. A medical provider network shall file a revision of the continuity of care policy with the administrative director if it makes a material change to the policy.
(c) The medical provider network shall provide all employees entering the workers’ compensation system notice of the medical provider network’s written continuity of care policy and information regarding the process for an employee to request a review under the policy and, upon request, a copy of the medical provider network’s written continuity of care policy.
(d) (1) At the request of an injured employee, completion of treatment shall be provided by a terminated provider as set forth in this section.
(2) The completion of treatment shall be provided by a terminated provider to an injured employee who, at the time of the contract’s termination, was receiving services from that provider for one of the conditions described in paragraph (3).
(3) The employer or its claims administrator shall provide for the completion of treatment for the following conditions subject to coverage through the workers’ compensation system:
(A) An acute condition. An acute condition is a medical condition that involves a sudden onset of symptoms due to an illness, injury, or other medical problem that requires prompt medical attention and that has a limited duration. Completion of treatment shall be provided for the duration of the acute condition.
(B) A serious chronic condition. A serious chronic condition is a medical condition due to a disease, illness, or other medical problem or medical disorder that is serious in nature and that persists without full cure or worsens over an extended period of time or requires ongoing treatment to maintain remission or prevent deterioration. Completion of treatment shall be provided for a period of time necessary to complete a course of treatment and to arrange for a safe transfer to another provider, as determined by the employer or its claims administrator in consultation with the injured employee and the terminated provider and consistent with good professional practice. Completion of treatment under this paragraph shall not exceed 12 months from the contract termination date.
(C) A terminal illness. A terminal illness is an incurable or irreversible condition that has a high probability of causing death within one year or less. Completion of treatment shall be provided for the duration of a terminal illness.
(D) Performance of a surgery or other procedure that is authorized by the employer or its claims administrator as part of a documented course of treatment and has been recommended and documented by the provider to occur within 180 days of the contract’s termination date.
(4) (A) The employer or its claims administrator may require the terminated provider whose services are continued beyond the contract termination date pursuant to this section to agree in writing to be subject to the same contractual terms and conditions that were imposed upon the provider prior to termination. If the terminated provider does not agree to comply or does not comply with these contractual terms and conditions, the employer or its claims administrator is not required to continue the provider’s services beyond the contract termination date.
(B) Unless otherwise agreed by the terminated provider and the employer or its claims administrator, the services rendered pursuant to this section shall be compensated at rates and methods of payment similar to those used by the medical provider network for currently contracting providers providing similar services who are practicing in the same or a similar geographic area as the terminated provider. The employer or its claims administrator is not required to continue the services of a terminated provider if the provider does not accept the payment rates provided for in this paragraph.
(C) Subsequent treatment requests by the provider that are to be performed by, or incident to, the provider shall not be directed to any other provider or group by the medical provider network, claims administrator, carrier, or any third party.
(5) An employer or its claims administrator shall ensure that the requirements of this section are met.
(6) This section shall not require an employer or its claims administrator to provide for completion of treatment by a provider whose contract with the medical provider network has been terminated or not renewed for reasons relating to a medical disciplinary cause or reason, as defined in paragraph (6) of subdivision (a) of Section 805 of the Business and Professions Code, or fraud or other criminal activity.
(7) Nothing in this section shall preclude an employer or its claims administrator from providing continuity of care beyond the requirements of this section.

SEC. 8.

 Section 5307.1 of the Labor Code is amended to read:

5307.1.
 (a) (1) The administrative director, after public hearings, shall adopt and revise periodically an official medical fee schedule that shall establish reasonable maximum minimum fees paid for medical services other than physician services, drugs and pharmacy services, health care facility fees, home health care, and all other treatment, care, services, and goods described in Section 4600 and provided pursuant to this section. Except for physician services, all fees shall be in accordance with the fee-related structure and rules of the relevant Medicare and Medi-Cal payment systems, provided that employer liability for medical treatment, including issues of reasonableness, necessity, frequency, and duration, shall be determined in accordance with Section 4600. Commencing January 1, 2004, and continuing until the time the administrative director has adopted an official medical fee schedule in accordance with the fee-related structure and rules of the relevant Medicare payment systems, except for the components listed in subdivision (j), maximum minimum reasonable fees shall be 120 percent of the estimated aggregate fees prescribed in the relevant Medicare payment system for the same class of services before application of the inflation factors provided in subdivision (g), except that for pharmacy services and drugs that are not otherwise covered by a Medicare fee schedule payment for facility services, the maximum minimum reasonable fees shall be 100 percent of fees prescribed in the relevant Medi-Cal payment system. Upon adoption by the administrative director of an official medical fee schedule pursuant to this section, the maximum minimum reasonable fees paid shall not exceed be less than 120 percent of estimated aggregate fees prescribed in the Medicare payment system for the same class of services before application of the inflation factors provided in subdivision (g). Pharmacy services and drugs shall be subject to the requirements of this section, whether furnished through a pharmacy or dispensed directly by the practitioner pursuant to subdivision (b) of Section 4024 of the Business and Professions Code.
(2) An insurance carrier, agent, or third-party contracting entity shall not contract with providers of medical services for rates less than the official medical fee schedule adopted pursuant to this section. Contractual day, service, or current procedural coding ceilings shall not result in payment less than otherwise would be accurately calculated at the rates outlined in the official medical fee schedule.

(2)

(3) (A) The administrative director, after public hearings, shall adopt and review periodically an official medical fee schedule based on the resource-based relative value scale for physician services and nonphysician practitioner services, as defined by the administrative director, provided that all of the following apply:
(i) Employer liability for medical treatment, including issues of reasonableness, necessity, frequency, and duration, shall be determined in accordance with Section 4600.
(ii) The fee schedule is updated annually to reflect changes in procedure codes, relative weights, and the adjustment factor provided in subdivision (g).
(iii) The maximum reasonable fees paid shall not exceed 120 percent of estimated annualized aggregate fees prescribed in the Medicare payment system for physician services as it appeared on July 1, 2012, before application of the adjustment factor provided in subdivision (g). For purposes of calculating maximum reasonable fees, any service provided to injured workers that is not covered under the federal Medicare program shall be included at its rate of payment established by the administrative director pursuant to subdivision (d).
(iv) There shall be a four-year transition between the estimated aggregate maximum allowable amount under the official medical fee schedule for physician services prior to January 1, 2014, and the maximum allowable amount based on the resource-based relative value scale at 120 percent of the Medicare conversion factors as adjusted pursuant to this section.
(B) The official medical fee schedule shall include payment ground rules that differ from Medicare payment ground rules, including, as appropriate, payment of consultation codes and payment evaluation and management services provided during a global period of surgery.
(C) Commencing January 1, 2014, and continuing until the time the administrative director has adopted an official medical fee schedule in accordance with the resource-based relative value scale, the maximum reasonable fees for physician services and nonphysician practitioner services, including, but not limited to, physician assistant, nurse practitioner, and physical therapist services, shall be in accordance with the fee-related structure and rules of the Medicare payment system for physician services and nonphysician practitioner services, except that an average statewide geographic adjustment factor of 1.078 shall apply in lieu of Medicare’s locality-specific geographic adjustment factors, and shall incorporate the following conversion factors:
(i) For dates of service in 2014, forty-nine dollars and five thousand three hundred thirteen ten thousandths cents ($49.5313) for surgery, fifty-six dollars and two thousand three hundred twenty-nine ten thousandths cents ($56.2329) for radiology, thirty dollars and six hundred forty-seven ten thousandths cents ($30.0647) for anesthesia, and thirty-seven dollars and one thousand seven hundred twelve ten thousandths cents ($37.1712) for all other before application of the adjustment factor provided in subdivision (g).
(ii) For dates of service in 2015, forty-six dollars and six thousand three hundred fifty-nine ten thousandths cents ($46.6359) for surgery, fifty-one dollars and one thousand thirty-six ten thousandths cents ($51.1036) for radiology, twenty-eight dollars and six thousand sixty-seven ten thousandths cents ($28.6067) for anesthesia, and thirty-eight dollars and three thousand nine hundred fifty-eight ten thousandths cents ($38.3958) for all other before application of the adjustment factor provided in subdivision (g).
(iii) For dates of service in 2016, forty-three dollars and seven thousand four hundred five ten thousandths cents ($43.7405) for surgery, forty-five dollars and nine thousand seven hundred forty-four ten thousandths cents ($45.9744) for radiology, twenty-seven dollars and one thousand four hundred eighty-seven thousandths cents ($27.1487) for anesthesia, and thirty-nine dollars and six thousand two hundred five ten thousandths cents ($39.6205) for all other before application of the adjustment factor provided in subdivision (g).
(iv) For dates of service on or after January 1, 2017, 120 percent of the 2012 Medicare conversion factor as updated pursuant to subdivision (g).
(b) In order to comply with the standards specified in subdivision (f), the administrative director may adopt different conversion factors, diagnostic-related group weights, and other factors affecting payment amounts from those used in the Medicare payment system, provided estimated aggregate fees do not exceed 120 percent of the estimated aggregate fees paid for the same class of services in the relevant Medicare payment system.
(c) (1) Notwithstanding subdivisions (a) and (d), the maximum facility fee for services performed in a hospital outpatient department, shall not exceed 120 percent of the fee paid by Medicare for the same services performed in a hospital outpatient department, and the maximum facility fee for services performed in an ambulatory surgical center shall not exceed 80 percent of the fee paid by Medicare for the same services performed in a hospital outpatient department.
(2) The department shall study the feasibility of establishing a facility fee for services that are performed in an ambulatory surgical center and are not subject to a fee paid by Medicare for services performed in an outpatient department, set at 85 percent of the diagnostic-related group (DRG) fee paid by Medicare for the same services performed in a hospital inpatient department. The department shall report the finding to the Senate Labor Committee and Assembly Insurance Committee no later than July 1, 2013.
(d) If the administrative director determines that a medical treatment, facility use, product, or service is not covered by a Medicare payment system, the administrative director shall establish maximum fees for that item, provided that the maximum fee paid shall not exceed 120 percent of the fees paid by Medicare for services that require comparable resources. If the administrative director determines that a pharmacy service or drug is not covered by a Medi-Cal payment system, the administrative director shall establish maximum fees for that item. However, the maximum fee paid shall not exceed 100 percent of the fees paid by Medi-Cal for pharmacy services or drugs that require comparable resources.
(e) (1) Prior to the adoption by the administrative director of a medical fee schedule pursuant to this section, for any treatment, facility use, product, or service not covered by a Medicare payment system, including acupuncture services, the maximum reasonable fee paid shall not exceed the fee specified in the official medical fee schedule in effect on December 31, 2003, except as otherwise provided in this subdivision.
(2) Any compounded drug product shall be billed by the compounding pharmacy or dispensing physician at the ingredient level, with each ingredient identified using the applicable National Drug Code (NDC) of the ingredient and the corresponding quantity, and in accordance with regulations adopted by the California State Board of Pharmacy. Ingredients with no NDC shall not be separately reimbursable. The ingredient-level reimbursement shall be equal to 100 percent of the reimbursement allowed by the Medi-Cal payment system and payment shall be based on the sum of the allowable fee for each ingredient plus a dispensing fee equal to the dispensing fee allowed by the Medi-Cal payment systems. If the compounded drug product is dispensed by a physician, the maximum reimbursement shall not exceed 300 percent of documented paid costs, but in no case more than twenty dollars ($20) above documented paid costs.
(3) For a dangerous drug dispensed by a physician that is a finished drug product approved by the federal Food and Drug Administration, the maximum reimbursement shall be according to the official medical fee schedule adopted by the administrative director.
(4) For a dangerous device dispensed by a physician, the reimbursement to the physician shall not exceed either of the following:
(A) The amount allowed for the device pursuant to the official medical fee schedule adopted by the administrative director.
(B) One hundred twenty percent of the documented paid cost, but not less than 100 percent of the documented paid cost plus the minimum dispensing fee allowed for dispensing prescription drugs pursuant to the official medical fee schedule adopted by the administrative director, and not more than 100 percent of the documented paid cost plus two hundred fifty dollars ($250).
(5) For any pharmacy goods dispensed by a physician not subject to paragraph (2), (3), or (4), the maximum reimbursement to a physician for pharmacy goods dispensed by the physician shall not exceed any of the following:
(A) The amount allowed for the pharmacy goods pursuant to the official medical fee schedule adopted by the administrative director or pursuant to paragraph (2), as applicable.
(B) One hundred twenty percent of the documented paid cost to the physician.
(C) One hundred percent of the documented paid cost to the physician plus two hundred fifty dollars ($250).
(6) For the purposes of this subdivision, the following definitions apply:
(A) “Administer” or “administered” has the meaning defined by Section 4016 of the Business and Professions Code.
(B) “Compounded drug product” means any drug product subject to Article 4.5 (commencing with Section 1735) of Division 17 of Title 16 of the California Code of Regulations or other regulation adopted by the State Board of Pharmacy to govern the practice of compounding.
(C) “Dispensed” means furnished to or for a patient as contemplated by Section 4024 of the Business and Professions Code and does not include “administered.”
(D) “Dangerous drug” and “dangerous device” have the meanings defined by Section 4022 of the Business and Professions Code.
(E) “Documented paid cost” means the unit price paid for the specific product or for each component used in the product as documented by invoices, proof of payment, and inventory records as applicable, or as documented in accordance with regulations that may be adopted by the administrative director, net of rebates, discounts, and any other immediate or anticipated cost adjustments.
(F) “Pharmacy goods” has the same meaning as set forth in Section 139.3.
(7) To the extent that any provision of paragraphs (2) to (6), inclusive, is inconsistent with any provision of the official medical fee schedule adopted by the administrative director on or after January 1, 2012, the provision adopted by the administrative director shall govern.
(8) Notwithstanding paragraph (7), the provisions of this subdivision concerning physician-dispensed pharmacy goods shall not be superseded by any provision of the official medical fee schedule adopted by the administrative director unless the relevant official medical fee schedule provision is expressly applicable to physician-dispensed pharmacy goods.
(f) Within the limits provided by this section, the rates or fees established shall be adequate to ensure a reasonable standard of services and care for injured employees.
(g) (1) (A) Notwithstanding any other law, the official medical fee schedule shall be adjusted to conform to any relevant changes in the Medicare and Medi-Cal payment systems no later than 60 days after the effective date of those changes, subject to the following provisions:
(i) The annual inflation adjustment for facility fees for inpatient hospital services provided by acute care hospitals and for hospital outpatient services shall be determined solely by the estimated increase in the hospital market basket for the 12 months beginning October 1 of the preceding calendar year.
(ii) The annual update in the operating standardized amount and capital standard rate for inpatient hospital services provided by hospitals excluded from the Medicare prospective payment system for acute care hospitals and the conversion factor for hospital outpatient services shall be determined solely by the estimated increase in the hospital market basket for excluded hospitals for the 12 months beginning October 1 of the preceding calendar year.
(iii) The annual adjustment factor for physician services shall be based on the product of one plus the percentage change in the Medicare Economic Index and any relative value scale adjustment factor.
(B) The update factors contained in clauses (i) and (ii) of subparagraph (A) shall be applied beginning with the first update in the Medicare fee schedule payment amounts after December 31, 2003, and the adjustment factor in clause (iii) of subparagraph (A) shall be applied beginning with the first update in the Medicare fee schedule payment amounts after December 31, 2012.
(C) The maximum reasonable fees paid for pharmacy services and drugs shall not include any reductions in the relevant Medi-Cal payment system implemented pursuant to Section 14105.192 of the Welfare and Institutions Code.
(2) The administrative director shall determine the effective date of the changes, and shall issue an order, exempt from Sections 5307.3 and 5307.4 and the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), informing the public of the changes and their effective date. All orders issued pursuant to this paragraph shall be published on the Internet Web site internet website of the Division of Workers’ Compensation.
(3) For the purposes of this subdivision, the following definitions apply:
(A) “Medicare Economic Index” means the input price index used by the federal Centers for Medicare and Medicaid Services to measure changes in the costs of a providing physician and other services paid under the resource-based relative value scale.
(B) “Hospital market basket” means the input price index used by the federal Centers for Medicare and Medicaid Services to measure changes in the costs of providing inpatient hospital services provided by acute care hospitals that are included in the Medicare prospective payment system.
(C) “Hospital market basket for excluded hospitals” means the input price index used by the federal Centers for Medicare and Medicaid Services to measure changes in the costs of providing inpatient services by hospitals that are excluded from the Medicare prospective payment system.
(D) “Relative value scale adjustment factor” means the annual factor applied by the federal Centers for Medicare and Medicaid Services to the Medicare conversion factor to make changes in relative value units for the physician fee schedule budget neutral.
(h) This section does not prohibit an employer or insurer from contracting with a medical provider for reimbursement rates different from those prescribed in the official medical fee schedule.
(i) Except as provided in Section 4626, the official medical fee schedule shall not apply to medical-legal expenses, as that term is defined by Section 4620.
(j) The following Medicare payment system components shall not become part of the official medical fee schedule until January 1, 2005:
(1) Inpatient skilled nursing facility care.
(2) Home health agency services.
(3) Inpatient services furnished by hospitals that are exempt from the prospective payment system for general acute care hospitals.
(4) Outpatient renal dialysis services.
(k) Except as revised by the administrative director, the official medical fee schedule rates for physician services in effect on December 31, 2012, shall remain in effect until January 1, 2014.
(l) Notwithstanding subdivision (a), any explicit reductions in the Medi-Cal fee schedule for pharmacy services and drugs to meet the budgetary targets provided in Section 14105.192 of the Welfare and Institutions Code shall not be reflected in the official medical fee schedule.
(m) On or before July 1, 2013, the administrative director shall adopt a regulation specifying an additional reimbursement for MS-DRGs Medicare Severity Diagnostic Related Groups (MS-DRGs) 028, 029, 030, 453, 454, 455, and 456 to ensure that the aggregate reimbursement is sufficient to cover costs, including the implantable medical device, hardware, and instrumentation. This regulation shall be repealed as of January 1, 2014, unless extended by the administrative director.