Worker's Compensation Reform SB 899/227/228/749

1. Worker's Compensation ReformSB 899/227/228/749 Presented by Mike Cohen MD Sutter Health @ Work

2. Overview • Employer pays first $10K of delayed claims • Employees can not pre-designate Chiropractors • Apportionment now applies to CAUSATION • Employers required to have Utilization Review • ACOEM Guidelines are presumed correct for ALL dates of injury • Permanent Disability (PD) Rating per AMA Guidelines 1-1-05 • Pharmacy Fee Schedule is Medi-Cal • Outpatient Surgery Fee schedule reimbursement @ 120% Medicare • Employer with MPN has lifetime medical control 1-1-05 • Employer entitled Diagnosis and Work Status HIPAA does NOT apply to WC 892\20\73196(ppt)

3. Agenda I. Background II. Medical Provider Network (MPN) Vision III. Creating an MPN IV. MPN Value V. Key Dates VI. Summary VII. Questions and Answers Appendix A – MPN Provider Requirements Appendix B – Contact Information 892\20\73196(ppt)

4. I. BackgroundIntroduction to SB 899 SB 899 is a comprehensive bill designed to tackle many of the cost drivers behind rising Workers’ Compensation costs in California. • To reduce the cost of Workers’ Compensation injuries, SB 899: • Provides incentives to employers who offer return to work programs. • Redesigns the legal process for resolving disputed claims. • Reduces benefits for minor permanent disabilities. • Limits employer liabilities to the portion of injury caused by work. • Authorizes Employers to establish an MPN. • An MPN is defined as: • A network of providers able to provide all the necessary goods and services to “cure and relieve” the effects of an industrial injury. • A network with providers selected by employers or insurers. • Employees will be limited to seeing only providers in their employers’ MPN. 892\20\73196(ppt)

5. I. BackgroundCompetitive Response An MPN has strategic value to Employer. MPN Defends against excessive medical utilization and promotes best outcomes to lower cost. • Worker’s Compensation costs rising exponentially • Loss of competitiveness in WC insurers due to bankruptcies and withdrawals • SCIF now dominates market with 60% share • Employers downsizing, relocating, outsourcing • Pre-SB 899 system rewards over-utilization, fraud and inflated disability • Post SB 899 puts Employer on equal footing with vested interests 892\20\73196(ppt)

6. I. BackgroundSutter MPN Attributes Sutter MPN provides an integrated care network and cost savings. Satisfies legal requirements for insurer or employer MPN. • Delivers quality care to employees. • No cost to Employer • No Discount to Provider • Provides cost savings over the alternative of purchasing access to another MPN • Fewer lost work days Fewer provider visits • Lower UR Costs Lower Case Management Cost • Lower PD Lower Premiums • By not requiring provider discounts, the MPN will: • Retain quality providers incentivized to deliver premier medical care. • Facilitate Employee access to specialists • Close claims FASTER. 892\20\73196(ppt)

7. I. BackgroundIntegrated MPN Advantages Each Employer could develop its own MPN; however, there are significant cost and operational advantages to a single MPN. • Sutter MPN has capacity and resources to provide all the necessary goods and services to “cure and relieve” from the effects of an industrial injury • MPNs must be approved by the Administrative Director of the Division of Workers’ Compensation; a single MPN affords significant administrative savings. • Sutter MPN provides software able to follow claim progress through MPN and report to Employer and Insurer. • Sutter MPN is equipped to provide the full complement of care. • Employees will have a greater geographic choice in Sutter MPN. • Sutter will serve regional employers with a centralized MPN. 892\20\73196(ppt)

8. II. MPN Vision Create a tightly managed alliance of physicians who are skilled in aggressively treating the Workers’ Compensation population in a manner that minimizes the costs of medical claims and lost work days. • Create an integrated, high-quality care delivery network for Employers/employees. • Provide effective medical care and case management. • Lower employer costs through aggressive injury management. • Defend Employer against litigation and labor issues. 892\20\73196(ppt)

9. II. MPN VisionFirst-Mover Advantages Sutter’s MPN will ensure Employer post SB 899 Workers’ Compensation market stability • As SB 899 reads, only HCOs, HMOs, and group health insurers are automatically approved as MPNs . • Employers and insurers are being allowed to create MPNs. • As a result of the confusion created by this legislation, several outcomes are expected: • Most employers recognize the effort required to create and manage an MPN and would rather not do it themselves. • Insurance companies will charge employers $$ for the service. • Many employers and providers will be left scrambling to enter into MPN contracts. 892\20\73196(ppt)

10. III. Creating an MPNStructural Requirements While the provision for MPNs does not take effect until January 1, 2005, the MPN must be submitted for approval by November 11, 2004 and must meet the following requirements: • 75% of MDs must be primarily engaged in treatment of occupational injuries. • 25% of MDs must be engaged in treatment of nonoccupational injuries. • There must be an adequate number of all types of MDs and allied health professionals. • Full complement of services to treat Workers’ Compensation injuries. • Minimum of three providers in each service. • Maintain continuity of care. • Medical treatment must be readily available at reasonable times. • The network must utilize and follow ACOEM guidelines. 892\20\73196(ppt)

11. III. Creating an MPNNetwork Composition Medical Partners @ Work provides superior service to Sutter employees and employers through a select group of specially trained providers. • The MPN includes Employer’s current occupational health (OH) providers. • The MPN will be supplemented by providers from other groups as necessary to provide requisite levels of coverage in geographic areas. • The providers in the network will be handpicked based on: • Quality of care (clinical care and case management). • Conformance to Workers’ Compensation standards (ACOEM and Sutter MPN). • Adherence to stringent criteria including: patient access, treatment protocols, and reporting requirements. • Cost-effectiveness. 892\20\73196(ppt)

12. III. Creating an MPNNetwork Customization The MPN can be tailored to meet EMployer needs. To ensure quality of care and case management in the network, a stringent credentialing process is in place to add providers to the MPN. • Employers will be asked to submit a list of additional preferred providers, as well as their current OH providers. • Additional providers will be reviewed based on their conformance to MPN standards. • Providers who meet predetermined levels of care and case management will be approved. • Employers will participate in provider selection and addition to the MPN. • A process will be provided to resolve issues between employers and the network regarding the inclusion of specific providers. 892\20\73196(ppt)

13. III. Creating an MPNBusiness Model Medical Partners @ Work will be funded by Sutter Health for its first 2 years. This will allow the MPN to demonstrate the value that will validate future fee arrangements. • For the first 2 years there will be no fee for employers, insurers, or providers (Sutter or non-Sutter) to use the network. • After 2 years, once value has been demonstrated, Medical Partners @ Work will establish fee arrangements with its clients. Examples of potential arrangements include: • Fee-for-service and risk sharing for employers • Fee-for-service for insurers • Subscription fees for providers. • The immediate value of the MPN will be decreased claims costs. 892\20\73196(ppt)

14. III. Creating an MPNIT Infrastructure Sutter has identified an IT solution enabling the MPN to provide unparalleled clinical management and communication with providers and clients. • Track the status of a claim. • Track a patient’s progress through the system. • Track and report on the total medical cost of a claim. • Provide real-time information to employers and insurers, including: • Medical reporting. • Work status. • Access to claim data (within HIPAA guidelines). • Track outlier patients/doctors based on established criteria. • Electronically manage the referral process between providers. MedfoNet 892\20\73196(ppt)

15. IV. MPN ValueReporting of Quality Indicators With the assistance of MedfoNet, Medical Partners @ Work will provide regular reporting to affiliates, employers, and insurers on preestablished quality indicators, such as: • Percentage of patients returned to full work duty in 30 days. • Average number of modified and lost work days • Average time to close a claim. • Average medical cost of a claim. • PD rating per Diagnosis by provider. • Time to access Specialist • Complication rate • 2nd/3rd opinion request rate • Medical utilization rate (PT, MRI ) 892\20\73196(ppt)

16. IV. MPN ValueCost and Outcomes = + Medical Partners @ Work allows EMployer to more closely manage Workers’ Compensation injuries, thereby minimizing the cost of injuries while ensuring quality outcomes. • Monitoring providers’ compliance with MPN standards will encourage providers to more actively manage cases, thereby: • Returning patients to work sooner, reducing the cost of lost days. • Reducing patient visits, which then reduces the cost of medical treatment. • MPN protocols and case management will also ensure quality patient outcomes and improve patient satisfaction. 892\20\73196(ppt)

17. V. Key Dates By November 1 the MPN application must be submitted to the Administrative Director, complete with a list of providers and contracted employers. • September – Requests for preferred providers to participate in the MPN. • October – Employer forums; sign-up for Sutter MPN. • November 1 – The employer or insurer shall submit a plan for the MPN to the Administrative Director of the Division of Workers’ Compensation for approval. • January 1, 2005 – An insurer or employer may establish or modify an MPN for the provision of medical treatment to injured employees. 892\20\73196(ppt)

18. VI. Summary Medical Partners @ Work will allow Employer, Insurer and Provider to partner together to optimize outcomes. • Significant savings can be realized through a single Sutter MPN. • An MPN composed of the best doctors will deliver cost savings to employers through fewer lost days of work, less medical treatment and less permanent disability. • Sutter MPN will collect and analyze medical treatment data during treatment in order to effect optimum outcomes. • Sutter MPN Executive Director and Medical Director are experienced and committed to providing successful cost containment solutions while simultaneously providing optimum medical care to employees. 892\20\73196(ppt)

19. VII. Questions and Answers & Questions Answers 892\20\73196(ppt)

20. Appendix AMPN Provider Requirements The MPN must include all providers necessary to treat Workers’ Compensation injuries. • Primary treating physicians. • Specialists. • Chiropractors and acupuncture. • Psychologists, dentists, and podiatrists. • Ancillary care providers (PT, OT, audiologist, speech pathologist). • ED/inpatient/outpatient services, including surgery. • Pharmacy. • Laboratory. • Diagnostic imaging. • Home health services. • Durable medical equipment (DME). A-1 892\20\73196(ppt)

21. Ms. Judi Monday/CEO 916-565-8660 MondayJ@sutterhealth.org Mike Cohen MD / Medical Director 916-565-8613 CohenMi@sutterhealth.org Jeff Lanterman JD/ Executive Director 916-565-8773 Matt R. Sturm/Project Manager 206-689-2200 MSturm@ecgmc.com Appendix BContact Information B-1 892\20\73196(ppt)