MINUTES OF THE ASSEMBLY COMMITTEE ON LABOR AND MANAGEMENT Sixty-eighth Session March 9, 1995 The Committee on Labor and Management was called to order at 3:30 p.m., on Thursday, March 9, 1995, Chairman Dennis Nolan presiding in Room 321 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Ms. Saundra (Sandi) Krenzer, Chairman Mr. Dennis Nolan, Chairman Mr. David Goldwater, Vice Chairman Mr. Lynn Hettrick, Vice Chairman Mr. Bernie Anderson Mr. Douglas A. Bache Mr. John C. Carpenter Mr. Pete Ernaut Mr. Mark Manendo Mr. Brian Sandoval STAFF MEMBERS PRESENT: Mr. Vance A. Hughey, Senior Research Analyst Mr. Fred W. Welden, Chief Deputy Research Director OTHERS PRESENT: Edward Barnard, President, Nevada Physical Therapy Association Angelo Sakelaris, Physical Therapist James Wilcher, President, National Assoc. Of Rehabilitation Professionals Kim Van Dyck, National Assoc. Of Rehabilitation Professionals David DeVinney, DeVinney Career and Vocational Services, Ltd. Cecilia Colling, Assistant General Manager, SIIS Gayle Sherman, Chief of Benefit Services, SIIS Chairman Nolan welcomed those in attendance and apologized for the late start. He explained time was limited but he would allow testimony from Edward Barnard, President, Nevada Physical Therapy Association, and Angelo Sakelaris, physical therapist, who were unable to make an earlier time. Mr. Barnard read prepared testimony expressing his recommendations and concerns regarding workers' compensation and Managed Care. See (Exhibit C). He recognized two effective changes resulting from last session's reforms: formation of the Fraud Unit and the requirement for objective evidence of disability to receive Vocational Rehabilitation. In spite of these improvements, Mr. Barnard stated there are still inefficiencies which prevent the system from becoming even better. The first concern is the timely authorization for treatment. He explained it can sometimes take up to two weeks once a referral is made to begin treatment. Many managed care organizations (MCO's) inappropriately authorize three to five treatments and then require additional paperwork for follow up treatment. He recited an incident where authorization for extended treatment had been delayed by a MCO. During this time the patient was not receiving physical therapy and his condition exacerbated. Mr. Barnard feels if there had not been that interruption in treatment the flare up in condition could have been prevented. He explained several years ago, the Nevada Physical Therapy Association along with the Nevada State Medical Association was involved in developing detailed descriptions of treatment parameters and guidelines for injured workers. He believes use of these guidelines by the MCO entities as well as involving physical therapists in the MCO treatment authorization processes or peer review panels would help eliminate many delays. Mr. Barnard testified the second concern is the confusion over the roles of the MCO's as compared to SIIS. There have been instances in which treatment has been provided upon referral and MCO authorization only to have SIIS deny the claim at a later date. This effects the quality, timeliness of care and an increase in costs. He suggested a more streamlined method of investigation and an immediate notification by SIIS whether the case is denied or accepted. The next area of concern is the diversion of patients by some of the MCO's to their own therapy clinics or clinics in which they have a financial interest. Mr. Barnard stated they fill their own clinics first and then refer to outside clinics. He recited an example of a therapist who resided on six or seven MCO panels and for the first five months of the MCO institution she received four patients. He felt this was an indication of "channeling" by the MCO's. Mr. Barnard concluded his last concern being timeliness of payment. He stated there is confusion over bill paying roles by the MCO's and SIIS. Minor bill paying problems are being passed back and forth resulting in nonpayment. He suggested one solution would be to follow centralized bill paying procedures used by other major companies. Other techniques such as full use of the HCFA 1500 billing form, electronic billing and transfer of funds could make the system more efficient. Assemblyman Carpenter inquired if he has had any of these same problems with self-insureds. Mr. Barnard replied when people are self-insured and not going through a managed care system they tend to be more efficient. There is not the duplication of bureaucracy. Mr. Angelo Sakelaris interjected his experience has been they are more cooperative in regards to prescribed treatment and the access to the treatment is easier. Assemblyman Anderson recognized long delays in reaching treatment was a criticism leved against SIIS under the previous system so a solution is still needed to this problem. Referring to Mr. Barnard's example of "channeling" patients, he asked how many similar providers were present on that panel. Mr. Barnard explained that each MCO creates their own panel, some being quite extensive and others being limited. He could not give Mr. Anderson specific figures but stated she would be eligible to see six of the seven enrollees and in terms of access to market share she would have access to most all of them. Assemblyman Krenzer disclosed she works for Sierra Health Services, a MCO. As there is no bill before the committee, she would participate in the discussion. She also disclosed she is a certified rehabilitation counselor and would be participating in the later discussions. Ms. Krenzer asked can physical therapists be a first stop. Mr. Barnard replied they could not. He stated according to the med-fee schedule created by the Department of Industrial Relations (DIR), a referral would be needed from a treating physician. Ms. Krenzer asked what the process of authorization was before S.B. 316. Mr. Barnard explained before S.B. 316, there was a short time period allowed to accept or deny a claim, in the order of two working weeks. Now, SIIS has 30 working days which translates into six working weeks. Mr. Barnard reiterated there is a problem with "tentative" approvals as well as with employers' challenges of the claim resulting in further delays and interruptions of treatment. He stated it is not unusual to be notified by the client that their claim was denied many weeks before receiving a formal notification by SIIS or the MCO. When Ms. Krenzer asked if he expected the patient to wait for treatment, Mr. Barnard responded if the patient is not eligible for workers' compensation they would need to make alternate arrangements. This would be hampered by a delay in authorization. He also expressed for those claims which are not being challenged authorization should be more swift. Assemblyman Sandoval inquired about Mr. Barnard's collection experience with those situations where treatment had been started but later the claim was denied. Mr. Barnard stated hopefully the patient has alternate health insurance because otherwise it is very difficult to collect. Mr. Sandoval further inquired how many cents on the dollar does he collect. Mr. Barnard responded optimistically, 30 cents on the dollar. Chairman Nolan remarked non-standardization of forms and timeliness of approval were laments the committee had heard from other providers. He requested that Mr. Barnard explain the forms used by MCO's. Mr. Barnard referred to Mr. Sakelaris. Mr. Sakelaris stated there is no consistency in forms except when asking for continuation of treatment in which case SIIS has a form. Mr. Barnard added each entity does their own form and therefore similar documents have different names and/or numers. He stated this creates confusion in regards to which process to follow for each patient. Mr. Anderson asked what percentage of additional treatments are rejected from SIIS as compared to a MCO. Mr. Barnard replied with SIIS, before MCO's, he could complete the full number of treatments prescribed without any additional paperwork. With MCO's, he has to fill out more paperwork after a small percentage of the suggested number of treatments. Mr. Anderson further asked if Mr. Barnard has seen a difference between SIIS claimants and patients under regular health insurance in regards to the way a claim is treated. He answered it depends mostly on the entity but he does see a difference in the amount of time allowed before a justification for additional treatment is needed. With patients under industrial insurance justification is needed every one to two weeks. Those who are personally insured need justification only every three to four weeks. Mr. Anderson inquired if Mr. Barnard thought this was due to the insurance carrier recognizing quicker treatment equals less costs in the long run. Mr. Barnard explained a slowing of treatment does not always mean an increase in medical expenditures but with those patients under workers' compensation he must also pay their wage indemnity for the time they are out of work. Chairman Nolan questioned Mr. Barnard's experience with self-insureds and their approval process. He replied it is a more efficient system. They retain tight control of the treatment process but believe efficiency can keep costs down. Mr. Sandoval questioned how the uncollectable expenses are covered. Mr. Barnard stated it definitely affects the bottom line as well as the rates for others. Ms. Krenzer inquired if a provider could call SIIS directly for approval. Mr. Barnard explained SIIS does not submit written notification of an acceptance of a claim. More often, it happens in reverse. He stated the onus has been with the provider to search out which claims have and have not been accepted but there can still be a long delay in response time. Mr. Barnard noted with the self-insured, the person who approves the treatment also approves the claim. Chairman Nolan thanked the witnesses and stated the committee would proceed with the scheduled orders of business. Mr. James Wilcher, President of National Association of Rehabilitation Professionals (NARPPS), read his prepared testimony, (Exhibit D), for the record. Mr. Wilcher also referred to articles, "Privatizing Vocational Rehabilitation", by The American Enterprise Institute and "Workers' Compensation: Issues for Rehabilitation", from the Journal of Rehabilitation Administration. See (Exhibit E). Mr. Wilcher pointed out both these articles make a strong case for the privatization of vocational rehabilitation and illustrate the cost effectiveness of the vocational rehabilitation benefit. Mr. Wilcher proceeded with his presentation stating his concern was SIIS's position of elimating the 51 percent referral to the private sector requirement. Mr. Wilcher stated the position of NARPP's is the referral of all vocational rehabilitation cases to certified rehabilitation professionals in the private sector. They are qualified given their education, certification credentials and experience in workers' compensation. Utilization of the private sector may also benefit public agencies by increasing competition. He added that vocational rehabilitation is a part of the treatment process beginning with medical treatment and ending with the re-employment of the injured worker. Chairman Nolan asked for clarification regarding the decrease of referrals to the private sector. Mr. Wilcher explained there are no statistics available to him which quantify 51 percent of the referrals have been made to the private sector. He added there are other factors involved in the process of the elimination of referrals however prior to S.B. 316, there was a competitive marketplace with the private sector able to compete for 100 percent of the referrals. He reiterated 49 percent has been "cut off the top". Kim Van Dyck, Treasurer of NARPPS and co-owner of James Wilcher & Associates, Inc., testified. She stated as a professional counselor in the private sector, she is concerned with proposed legislation that will eliminate vocational rehabilitation services to injured workers with less than a six percent PPD rating. She cited an example of a construction worker who injures his back. She stated he could be given a PPD rating lower than six percent but because of the physical restrictions placed on him by his physician such as lifting or bending, it would be difficult for him to return to work in the same capacity. Due to the low PPD rating he would not be eligible for vocational rehabilitation and probably have no immediate skills to fall back on. Ms. Van Dyck stressed this would place strain on other state agencies, such as the Bureau of Vocational Rehabilitation, to provide rehabilitation when this worker should have received services through the workers' compensation system. She summarized a PPD rating is not the sole indicator of vocational disability that an injured worker can incur. Mr. Carpenter inquired about the self-insureds. Ms. Van Dyck answered the 51 percent referral requirement does not relate to them but she believes they use, primarily, the private sector for rehabilitation services. Mr. Carpenter requested clarification in regards to determining a person's PPD rating. Ms. Van Dyck expressed she is not an expert on PPD ratings but she frequently sees ratings that are not indicative of the physical restrictions placed on them by their treating physician. She also stated, typically, the physical restrictions are permanent. Mr. Wilcher commented on the cost comparison between the public and private sector. He stated the public sector does not take into consideration their rent or their counselors' time in the provision of services and therefore it is like comparing apples to oranges. Mr. Wilcher added when comparing costs through benefits analysis the private sector is coming out ahead. Ms. Krenzer reiterated Ms. Van Dyck's position regarding the relationship between PPD ratings and actual physical disability. Mr. Carpenter explained his comments stemmed from his understanding that past legislation provided for certain exceptions. Ms. Van Dyck clarified her concerns, regarding the elimination of vocational rehabilitation services due to a certain PPD rating, arise from proposed legislation not from the present state. Chairman Nolan commented if a person has a degree or other vocational skills he could draw upon, he would be denied vocational rehabilitation. Ms. Van Dyck agreed. David DeVinney, certified vocational evaluator and certified rehabilitative counselor, testified. He stated he has been in this business for 15 years in Nevada, 12 years in private practice in Reno. Mr. DeVinney expressed support for Mr. Wilcher's and Ms. Van Dyck's views asking the committee for their continued support of the vocational rehabilitation benefit regardless of who provides the services. He suggested the committee review S.B. 316 as he feels even now, services are being limited on the basis of a disability rating. He pointed out people with a nine percent rating are entitled to a six months program and 12 percent qualifies for nine months. Mr. DeVinney stated those who are considered severely disabled which is a 25 percent rating are entitled up to one year of services. He said the ratings are based strictly on an objective loss of motion not on physical activities necessary for a person to do his work. Chairman Nolan thanked the witnesses for their testimony. He introduced Cecilia Colling, Assistant General Manager for SIIS. Ms. Colling clarified in regards to the testimony of the rehabilitation counselors, SIIS does utilize the private rehabilitation services. She stated they play an important role in out of state services, rural areas where access to the injured worker is difficult and problem cases when a concentrated effort is needed. She stated by law, SIIS is required to provide rehabilitation counselors, early intervention and a job bank for the claimants and yet the caseload has decreased. She remarked therefore, it is not cost effective for SIIS to refer out. Chairman Nolan asked Ms. Colling to clarify the 51 percent provision of S.B. 316. She explained it requires SIIS to send out one-half of their rehabilitation programs. At the time this law was passed, SIIS's caseload was tremendous and this was not a problem however that is not the case now. Ms. Krenzer asked for clarification regarding the intent of this provision. Assemblyman Hettrick opined there was a concern about costs, specifically that the private sector was cheaper. He remarked the other concern was caseloads and whether to add more staff or refer out to the private sector. Ms. Colling mentioned her reviews show the private sector costs about $26 more per visit. She recognized there may be several reasons for this, one being the types of cases they are handling. Chairman Nolan questioned if Ms. Colling had provided any statistics concerning costs involved with in-house rehabilitation as compared to referring out. Ms. Colling stated she would make those statistics available to the committee. Assemblyman Bache noted he had been involved in the issue of vocational rehabilitation and pointed out one of the concerns had been a lack of certified counselors in the system whereas the private sector consisted of many more. He expressed hope the system did increase their numbers since then. Ms. Colling referred to Gayle Sherman, Chief of Benefit Services. Ms. Sherman stated currently the northern region has seven certified counselors. She explained that to be certified they must have several years of experience and SIIS is paying for that process trying to encourage more of their employees to be involved. She did not have the exact numbers for the southern region. Mr. Carpenter inquired if SIIS included building costs and those other expenses mentioned by Mr. Wilcher when he referred to (Exhibit E.) Ms. Colling explained the expenses used in calculating the total expenditures would differ at times. She continued they would have maintenance costs but because they own the building that would not be one of their expenses. They would also include the salaries of their rehabilitation counselors. Chairman Nolan asked what the current caseload was per vocational rehabilitation counselor. Ms. Colling answered it ranges from 19 to 25. Ms. Colling began her presentation on the SIIS MCO program. Referring to the Executive Summary beginning on page 1, (Exhibit F), she summarized the main issues and concerns of participants, both injured workers and physicians. She continued her presentation with the Business Health Services Audit. See (Exhibit G). Ms. Colling maintained each MCO is different, some doing things better than others but as each MCO has more experience with workers' compensation insurance the system is improving. Chairman Nolan inquired if Ms. Colling was experiencing any problems with the standardization of forms. She stated she was and stressed this was one of the issues SIIS, together with the MCO's , was trying to make more "user-friendly" for the providers. Ms. Colling referred the committee to pages 4-6 of (Exhibit G), an official response to some of the complaints the providers are making and then to page 7, amounts paid to MCO's up to October, the south on top and the north on the bottom. Referring back to page 5, Mr. Hettrick drew attention to the statement, "SIIS is required by law to pay bills within 60 days of receiving the bill." He inquired if SIIS was fulfilling this obligation. Ms. Sherman interjected when the program first began there were many problems with MCO's understanding how to process bills according to the relative values for physicians, the NRS and the NAC. In order to improve it, SIIS provided their bill paying staff on-site to the MCO's to instruct them and later, provided feedback as to how they were doing in terms of timeliness. She stated the latest statistics show the south process 93 percent of their bills within 60 days and the north process 83 percent. Ms. Colling concluded her presentation pointing out a report on MCO timeliness of medical referrals and dispute resolution, high level claim flow chart, case management before and after S.B. 316, reserve analysis and a MCO cost comparative analysis. Mr. Hettrick asked if the $2,316 on page 36 included the deductible. Ms. Colling responded the figure shows the cost per claim including the deductible. Chairman Nolan thanked Ms. Colling for her testimony and as there was no further business the meeting was adjourned at 5:00 p.m. RESPECTFULLY SUBMITTED: Jennifer Carnahan, Committee Secretary APPROVED BY: Assemblyman Saundra Krenzer, Chairman Assemblyman Dennis Nolan, Chairman Assembly Committee on Labor and Management March 9, 1995 Page