A surprising resignation represents a chance for Governor Gavin Newsom to fix California’s broken workers’ comp system.

daisyNews has reported extensively on the abysmal performance of the California Division of Workers’ Compensation (CA DWC). The agency has violated state law, tacitly allowed (and arguably incentivized) abuse by payers, and failed to protect the rights of injured workers and providers.

Under the CA DWC, workers’ comp has devolved into a system that deters provider participation and impedes care. For the last decade, this indefensible status quo was under the authority of Administrative Director (AD) George Parisotto.

According to WorkCompCentral, Mr. Parisotto quietly retired. This is an opportunity for Governor Newsom to do something that can have a lasting, positive impact on Californians: appoint a new AD who’s ready to make serious change and protect the state’s employers and injured workers.

We urge California employers to pay close attention to the Governor’s choice. Under Mr. Parisotto, workers’ comp has degraded as premium rates have risen, funneling more employer dollars into a system that increasingly fails stakeholders.

Why Newsom’s Choice of AD Matters

The CA DWC AD has critical, substantive power to make the workers’ comp system function more effectively…or not.

Whoever takes the helm next will have direct, personal control over decisions regarding:

• Oversight of Utilization Review (UR), the process by which payers decide whether or not to allow the treatment that injured workers’ physicians recommend
• Medical Provider Networks (MPNs), by which employers and insurers control who can treat covered employees
• Workers’ comp fee schedules for provider reimbursement
• Provider medical billing and payment requirements

An AD committed to incentivizing provider participation, monitoring and meaningfully addressing abuse, and prioritizing injured worker care over payer, vendor, and private equity profits can steer California workers’ comp in a better direction.

No Consequences, No Compliance

Perhaps most importantly, the CA DWC and its AD have the power to investigate and impose consequences for violations of state laws and the agency’s regulations.

As daisyNews has reported on extensively, California workers’ comp laws and regulations are effectively optional for payers, thanks to the CA DWC’s failure to substantively address non-compliance, even in the face of reams of data exhaustively documenting years’ worth of sustained, systematic violations.

The CA DWC’s refusal to deter payer non-compliance is consistent with its own approach to compliance; the agency has flatly ignored state laws requiring it to:

• Establish electronic data reporting systems to track UR decisions and monitor for abuse
• Publish UR denial and modification rates
• Require claims data reporting to the Workers’ Compensation Information System (WCIS)
• Timely assign providers’ payment disputes to an independent reviewer
• Implement regulations that hold MPNs accountable  
• Protect providers from improper discounting by Preferred Provider Organizations (PPOs)

As a result of the CA DWC’s inaction under Mr. Parisotto’s leadership, California stakeholders lack visibility into whether injured workers receive the treatment they need and whether providers receive the reimbursement they earn for providing that treatment.

The result of this inaction is that California employers’ premium dollars fund private equity profits instead of injured worker care, ultimately driving up those employers’ costs.

The New AD’s Mandate

Soon, one person will have the legal authority to help fix California’s broken comp system. That person should immediately do everything in their power to implement meaningful changes, including (but not limited to):

Following state law: Create a system to report UR documentation as required by Senate Bill 1160 and compel payers to remit the required documentation under penalty of serious fines. End the current policy of “voluntary” reporting to WCIS and enforce existing penalties for non-compliance.

Standardizing UR decisions: To request authorization, the doctor must submit a correctly completed Request for Authorization (RFA) on the DWC RFA form. But the claims administrator may respond to the RFA however they choose, with predictable results.

Require claims administrators to respond to the RFA form on the RFA form or another standardized UR decision form. There should be no question as to what is authorized, and (absent fraud) no way to wriggle out of payment for authorized treatment.

Upholding authorization: California Labor Code Section 4610.3 states:

“...an employer that authorizes medical treatment shall not rescind or modify that authorization after the medical treatment has been provided based on that authorization for any reason…” [emphasis added]

Payers routinely violate this law, citing MPN non-participation, questioning liability, claiming that authorization “expired” after a certain time, or simply claiming that the treatment was not authorized despite clear proof to the contrary.

The CA DWC often deems these payment denials ineligible for Independent Bill Review (IBR). Where proof of authorization is present, all providers’ bills should be payable and eligible for IBR where necessary.

Enforcing MPN requirements: Ideally, state legislators would end the disastrous MPN system (as they attempted to a few years back, only to be thwarted in the 11th hour). But while we’re stuck with it, the new AD should:

• Maintain a functioning, current central database of MPNs and provider rosters that providers and injured workers can actually utilize, with a clear way to identify which MPNs apply to which employers.
• Require MPNs to actually keep their own websites current, accessible, and complete with all the required information.

Ending Preferred Provider Organization (PPO) abuse: Enforce California Labor Code Section 4609. If an Explanation of Review (EOR) does not include the specific network justifying a contractual discount, or the payer cannot furnish the contract in question justifying the discounts, the payer must reimburse at the full fee schedule amount. Period.

The above are not the only reforms an AD with stakeholders’ interests at heart could implement. Under George Parisotto, the CA DWC took an inexplicably passive approach to protecting employers, injured workers and providers.

By failing to hold payers accountable, Mr. Parisotto enabled behavior that ultimately degraded the system, as evidenced by the most salient data point: California employers’ premiums are up (even as employers in almost every other state enjoy premium rate decreases).

What happens next could impact countless lives for years to come.

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