UR Nation End of Month Regulatory News Summary

| | Evidence Based Medicine, Technology & Integration, Utilization Review

As April begins, here’s a summary of some of the important regulatory news from March.

CA DWC Issues New Proposed Drug Formulary

On March 17, 2017, CA DIR issued proposed drug formulary rules that will replace or update C.C.R. Sec. 9792.27.1 et seq. A 45-day comment period will be in effect until May 1. These rules cite a list of 242 drugs that are preferred and non-preferred. The new rules have been anticipated by system participants for quite some time, so it’s nice to finally be able to review them.

Here is a summary of the new rules:  

  • Any drug dispensed for outpatient use after July 1, 2017 shall be subject to the MTUS Drug Formulary, regardless of DOI.
  • The drug formulary does not apply to physician administered drugs (such as steroid injections) but these drugs must still comply with MTUS.
  • For injuries occurring prior to July 1, 2017, the formulary should be phased in so that it does not harm an injured worker by an abrupt change to the course of treatment. A claims administrator shall not unilaterally terminate or deny a previous drug treatment. If an injured worker is receiving a course of treatment that includes non-preferred drugs, the existing procedures for submitting a treatment plan in accordance with MTUS, and for obtaining authorization in utilization review shall apply.
  • Where an insurer contracts with a pharmacy benefit manager (PBM), the drugs available must be consistent with the formulary, and cannot be restricted pursuant to contract.
  • Utilization review is required for all non-preferred drugs, unlisted drugs, or preferred drugs lacking MTUS recommendation for off-label use.
  • If a physician prescribes a brand name drug with “Do not substitute” or “Dispense as written” when a generic equivalent exists, the physician must document medical necessity for the brand name. The documentation must include patient-specific factors. The physician must obtain authorization through utilization review before a brand name will be dispensed.
  • Physician dispensing of non-preferred drugs is subject to utilization review, except for a limited situation designated “Special Fill” or “Perioperative Fill” as described below. A physician may dispense a preferred drug (up to a 7-day supply) as long as the drug is dispensed in accordance with MTUS. The dispensing of any preferred drugs shall be subject to retrospective review. Payment for the drug may be denied if the drug was not medically necessary.
  • Compounded drugs must be authorized through utilization review.
  • The formulary will identify a limited number of non-preferred drugs designated as “Special Fill.” These drugs can be prescribed without utilization review in very limited circumstances and for a short period of time. The drugs shall be prescribed at a single doctor visit within seven days of a workplace injury. This appears to replace the previous language of “First Fill.”
  • The formulary will identify perioperative (pre and post surgery) fill drugs. These drugs can be dispensed to the injured worker without utilization review if they are dispensed two days before surgery or four days after surgery. The supply of drugs cannot exceed the limit in the MTUS drugs list.
  • The Administrative Director (AD) may post and maintain a list of approved drugs by NDC code on the DIR web site. The AD will regularly update the list.
  • A Pharmacy and Therapeutics Committee shall serve the AD to advise the AD on drug efficacy and safety. The committee shall consist of six members (three pharmacists and three physicians).
CA DWC Issued a Report on the San Bernardino Terrorist Victims and the UR Process

The CA DWC, specifically AD George Parisotto, has done their own investigation into the allegations that the victims of the San Bernardino terrorist attack are being denied treatment via utilization review. Parisotto’s eight page report is generally positive about the utilization review process.

The report basically says:

  • Overall, denials have been rare.
  • Early on in the process, the county routinely approved nearly all requests for authorization (FRAs).
  • As time went by, the county began to deny or modify RFAs because providers failed to submit sufficient information with the RFA.
  • Individual case files were not available, so Parisotto and his team gleaned information from IMRs to get a better idea of what happened.

Of 2,146 requests for medical and psychological treatment and prescription medication, 2000 (90 percent) were approved. 65 requests were modified, while 144 requests were denied. This works out to less than one percent of requests modified or denied. Of the 144 requests that were denied and sent to IMR, IMR upheld the utilization review determination 135 times (a 93 percent uphold rate).

While the county has paid over $4 million thus far in benefits, it appears that the victims were frustrated from the denials because the providers did not adequately communicate why requests were denied or what the next steps might be. All the victims knew is that in their requests for treatment were denied. So Parisotto seems to suggest in the report that while it is reasonable to see why the victims were frustrated, even though very few of their requests were denied via utilization review, the process could have been better with improved communication between provider, victim and claims handler.

CWCI Has a New Report Showing IMR Uphold Rate at 91.2 Percent

A recent CWCI report shows two interesting facts. First, the number of IMRs processed in 2016 was up 6.5 percent over 2015. In other words, the IMR volume, already high, went up in 2016 to 176,002 IMRs. Second, IMR physicians (those employed by Maximus Federal Services) upheld the utilization review physicians’ denial or modification 91.2 percent of the time. This is significantly higher than the 88.4 percent uphold rate seen in 2015.

Other interesting statistics include the following: 48 percent of IMR disputes in 2016 were drug reviews compared to 49.2 percent in 2015. So we actually saw a slight drop in the number of drug reviews. And the uphold rate on drug reviews for 2016 was 92.5 percent. Physical therapy disputes accounted for the second-largest percentage of IMRs at 9.2 percent. Another interesting statistic is that 10 percent of California providers generate 85 percent of all IMR disputes. So we are really talking about a specific group of providers who generate the bulk of the IMR disputes.

Doctor Challenging CA DWC Provider Suspension Proceedings

Doctor Michael Barri pled guilty to one count of conspiracy to commit mail fraud in 2016. This was for $206,500 in kick backs he got between 2009 and 2013 for referring patients to Pacific Hospital. Fast forward to January of 2017. Provisions of SB 1160 and AB 1244 require the DWC to suspend providers who have committed crimes involving fraud from participating in the California workers’ comp system.

In late January, DWC notified Dr. Barri he would be suspended. Barri challenged it and requested a hearing on February 24th. At the hearing, the administrative law judge took testimony from both DWC officials and Dr. Barri. The administrative law judge is due to issue a ruling on Dr. Barri’s suspension sometime in April.

Dr. Barri has now sought a writ from the 1st District Court of Appeal to halt the DWC suspension process. This is in part because Dr. Barri has over $3 million in liens outstanding to various groups, and he wants to collect on those liens. Dr. Barri has an interesting legal argument. The argument is that the DWC suspension process is an unconstitutional ex post facto law that retroactively increases a penalty for a wrongdoing. The legal theory is that when Dr. Barri pleaded guilty to conspiracy, he did not know, nor could he know, that he would not be able to collect on his $3 million in liens because SB 1160 and AB 1244 came after his guilty plea.

The CA DWC has an interesting legal argument as well. CA DWC can and will argue that since no ruling has been made by the administrative law judge the case is not ripe for judicial review. This is because courts are required to review actual cases or controversies and are not allowed to give advisory opinions.

Louisiana Trial Judge Declares Form 1009 Medical Review Process Unconstitutional

As you may recall, in July of 2015 Judge Donald Johnson issued an injunction that declared the Louisiana workers’ comp medical review process unconstitutional. Specifically, Judge Johnson said the state was prohibited from using the regulations which established the system for administrative medical reviews using the Form 1009 (an injured worker, whose request is denied in utilization review, turns to the state for a medical review). Judge Johnson’s position was that the state scheme was a violation of the separation of powers doctrine.

Many system participants were horrified by this ruling. The Louisiana Workforce Commission was upset as well. But the good news is that Judge Johnson stayed the imposition of his ruling so the Louisiana Workforce Commission could appeal the decision. The case was first appealed to the Supreme Court of Louisiana. The Court said that the case should have been appealed to the Louisiana Court of Appeal first. So the Louisiana Workforce Commission appealed the case to the Court of Appeal.

In 2016 the Court of Appeal struck Judge Johnson’s injunction. In its opinion, the court said Judge Johnson should not have issued a preliminary injunction. In this context, a preliminary injunction would be something used to “maintain the status quo.” Here, Judge Johnson used it to substantively change the workers’ comp system. Thus, the preliminary injunction was improper. The preliminary injunction was defective in other areas as well. For example, a Louisiana judge may not declare a state statute unconstitutional in the context of a summary proceeding like a preliminary injunction hearing. Such a ruling should only come on the heels of a fully briefed and argued law and motion hearing or trial. The bottom line is that the Court of Appeal ruled that Judge Johnson’s preliminary injunction was procedurally defective, but it did not rule on the issue of constitutionality.

The Court of Appeal remanded the matter back to Judge Johnson. On February 7, a trial was conducted in which Judge Johnson issued a permanent injunction (as opposed to a preliminary injunction). He specifically found that the Louisiana medical review process was unconstitutional.

Now the Louisiana Workforce Commission must appeal Judge Johnson’s ruling again. The good news is that Judge Johnson has stayed the imposition of the ruling while the matter is again on appeal. And hopefully, the Court of Appeal, now that Judge Johnson’s procedural defects have likely been cured, can focus squarely on whether the Form 1009 medical review process is unconstitutional. And hopefully, at least from the perspective of most system participants, the court will rule it is constitutional.

Tom Swiatek

Tom Swiatek

As Assistant Vice President of Regulatory Services, General Counsel, and Editor in Chief of UR Nation, Tom Swiatek draws on his experience as an insurance attorney on both the general liability side, as well as on workers’ compensation matters. As a California Workers’ Compensation Section Member, Tom is leading the discussion with respect to the regulatory challenges and opportunities facing the workers’ compensation system.