A report from a California State Auditor found much to be desired regarding the Division of Workers' Compensation (DWC)'s handling of Qualified Medical Evaluators.

Elaine M. Howle, CPA, dug deep into the QME system, finding three major areas in need of improvement. Fiercely critical of the DWC’s oversight, the report explains how the current system for medical-legal evaluation by QMEs fails employers, injured workers, and the evaluators themselves.

QME 101

The Auditor’s report pulls no punches, starting with its blunt-force trauma of a title: Department of Industrial Relations: Its Failure to Adequately Administer the Qualified Medical Evaluator Process May Delay Injured Workers’ Access to Benefits

The California Labor Code describes the situations in which a contested workers’ comp claim warrants a medical-legal evaluation, e.g. disputes regarding compensability, permanent disability, and Permanent and Stationary (P&S) status. Whatever the case, only a physician may conduct the medical-legal evaluation.

When the relevant Labor Codes bar the parties from settling on an AME, or Agreed Medical Evaluator (e.g. cases where the employee is not represented by an attorney), or when the parties are simply unwilling to agree on an AME —  the job falls to a state-sanctioned Qualified Medical Evaluator (aka the QME).

The state certifies each QME to conduct medical-legal evaluations, with education and licensure to evaluate specifically for the purpose of resolving workers’ comp disputes. To assign a QME to a given dispute, the DWC randomly generates a QME “panel”: a list of three QMEs from which the employee chooses one to conduct their medical-legal evaluation.

That means California needs a reliable pool of QMEs to help address workers’ comp disputes. But according to the report, the DWC has failed utterly to incentivize physicians to take on the role of QME.

Apparently, being a QME is more trouble than it’s worth — for three specific reasons:

QME Quandary #1: Not Enough Evaluators

“Although DWC is responsible for overseeing QMEs and administering the process for selecting QMEs to examine workers, it has not adequately ensured that it has enough QMEs to keep up with the demand for their services.”

According to the report, the number of QMEs is dropping as demand for QME evaluations is rising. Between 2013 and 2018, the total number of QMEs fell by 12 percent. In the same timeframe, requests for QME services rose 37 percent. The undersized pool of QMEs leads to more cases in which the QME chosen from the panel is unavailable, necessitating a replacement QME.

This creates delays —  by at least two months in almost half of all cases.

The problem is exacerbated by the fact that employees with attorney representation don’t actually choose their QME, in practice. When the employee has representation, the other parties reserve the right to strike physicians from the panel of three, often leaving only one for the employee to “choose.” By decreasing the choice of QME for the worker, this rule increases the odds of the “chosen” QME being unavailable.

The report notes a specific failure that may offer an explanation for the QME shortage: the DWC has not updated the Medical-Legal Fee Schedule for a mind-boggling 13 years.

QME Quandary #2: Corrupt Disciplinary Process

“DWC inappropriately used its reappointment process to discipline some QMEs alleged to have committed overbilling violations, a practice that we believe raises due process concerns.”

The report alleges that the DWC further shrinks the QME pool with a draconian approach to discipline. While the DWC maintains procedures and policies regarding the due process for QMEs accused of overbilling, those procedures and policies are insufficiently detailed and widely ignored.

Instead, the DWC simply denies the accused’s reappointment as a QME, citing the (technically unproven) allegations.

Worse, the report claims that when QMEs denied reappointment request a hearing to make their case for reappointment (as is their right), the DWC makes a point of taking its sweet time scheduling the hearings, if they do so at all. While awaiting their hearing, the accused physicians cannot conduct QME services and may lose revenue for months on end.

In other words, the DWC incentivizes accused physicians to settle their cases and pay restitution to the insurer —  with all the subtlety of a mafioso.

QME Quandary #3: Reporting Standards

“DWC has not continuously reviewed medical‑legal reports...for quality and has not tracked when workers’ compensation judges have rejected medical‑legal reports because those reports failed to meet minimum standards.”

Finally, the report laments the inconsistent QME reporting standards that may have a net adverse effect on dispute resolution. More of a frightening possibility than a direct accusation, the report ponders whether failure to comprehensively review how often judges reject QME reports leaves unnecessary friction in an already friction-prone process.

This lack of review doesn’t just leave the DWC bereft of any data to identify systemic reporting issues. It’s also out of compliance with state law.

As the report details, state law requires the DWC Medical Director to conduct regular review of QME reports and produce an annual report of the results. In addition, QMEs with more than five reports rejected by workers’ comp judges must be denied reappointment, as such rejections can cause delays in treatment and increased costs for employers.

Of course, defining and maintaining medical-legal reporting standards may be quite the undertaking, if the convolutions regarding billing for medical-legal reports are any indication. This audit report, in total, confirms what many a California QME already knows: the workers’ comp system heaps burdens on providers, to the detriment of employers and injured workers.

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