Thursday, June 30, 2011

CA AB 1168 - Creating Complexity Unnecessarily

Reported in WorkCompCentral News this morning was the forward legislative movement of California bill AB 1168 that seeks to add a new section to the California Labor Code, 5307.7, requiring the Division of Workers' Compensation to adopt by Jan. 1, 2013, a fee schedule that establishes the maximum fees paid for services provided by voc-rehab experts.

The need for this new regulatory environment, proponents say, is due to increasing costs necessitated by the Workers' Compensation Appeals Board's 2009 decision in Ogilvie v. City and County of San Francisco, that held parties can rebut the diminished future earnings capacity portion of the 2005 Permanent Disability Rating Schedule (PDRS) and provided a formula to do so. This requires expert testimony on both sides to either rebut the PDRS or rebut opposing expert testimony.

Testimony at Wednesday's hearing at the Senate Labor and Industrial Relations Committee was that there is an increasing number of bills from vocational experts after the Ogilvie decision and the bills have no limits on the hours worked or rates charged and that almost every other service in the workers' compensation system has a fee schedule, consequently a similar one is needed for voc-rehab.

Obviously vocational rehabilitation vendors object to this regulatory environment because no one likes what they can charge for service to be the subject of an artificial environment, and because vocational experts would then need to file liens to protect their reimbursement, then need to litigate to justify reimbursement, adding delay and costs to claims.

This situation is an example of how the simple concept of workers' compensation escalates to a mind-numbingly complex system and why I oppose AB 1168.

The interests in the contest have at their disposal powerful tools to control the costs in an Ogilvie dispute - market forces. In workers' compensation we seem to have lost the ability to utilize the price of services against competitors in order to control costs.

In particular, this is disturbing because those with the greatest ability to exert market control over costs - the insurance industry with its significant financial clout - do not seem willing to take responsibility for their part of the problem.

And vocational rehabilitation experts likewise have blame in the game for getting out of control with the amount of services allegedly provided, or the billing rate for those services, to prove or disprove an Ogilvie situation.

When I was a defense attorney the insurance industry was adept at controlling defense costs by simply using the competitive environment of shifting case loads to professionals who were more efficient with their time and billing practices. I assume that is still the case today, though most payers also utilize bill review services to determine appropriate pay rates.

So it is with Ogilvie experts - adding another layer of complexity to the system will not control costs and in fact likely will escalate costs. This concept has already been demonstrated with medical treatment utilization review - the abdication of responsibility for controlling costs away from the claims adjuster and onto either a third party vendor or a non-thinking schedule creates another layer of friction and removes control for getting a case closed away from the adjuster.

The biggest cost to employers is NOT the final cost of the claim, but how long that claim remains open! The need to finalize vendor billings by artificial means will provoke the duration of claims, which means the employer loses in the long run.

And, I might note, this bill may not even be necessary. Traditional vocational rehabilitation services were eliminated from the California workers' compensation system in 2004 and the 1st District Court of Appeal, which granted a writ of review in Ogilvie in August 2010 and has oral arguments June 22, may reverse the Workers' Compensation Appeals Board.

AB 1168 is unnecessary and will exacerbate costs.


  1. But without controls, won't applicant attorneys use the most costly voc rehab experts possible as another cost-driving pressure on the defense to cave and settle? No market control in that.

  2. That's not necessarily true Larry - where the discipline comes from is at the WCAB level - do the judges have the discipline to control costs when presented with adequate evidence of the value of services? In that context it is up to the carriers to present what is a reasonable value for expert testimony services. Analogy could be made to the ML schedule, or hourly charges of attorneys discounted for education and experience, etc. I just think that reliance on a fee schedule all of the time for everything abdicates responsibility and discipline ... but on the other hand I do see your point given that adjusters have too many files to deal with to worry about being disciplined on a single VR bill, etc. My inclination always tends towards less governmental interference though.

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