Introduction
Background
California workers who experience injuries or illnesses caused by their employment generally have the right to receive workers’ compensation benefits, including employer‑paid medical care, temporary wage replacement during recovery, and compensation for any permanent disability that is work‑related, as well as other potential benefits. Workers injured in California during fiscal year 2017–18 submitted 684,000 workers’ compensation claims. When disputes between employees and their employers arise over medical issues in workers’ compensation claims, medical professionals—including qualified medical evaluators (QMEs)—conduct medical‑legal evaluations and generate reports that play a major role in determining the benefits to which injured workers are entitled. Medical professionals also include agreed medical evaluators (AMEs), who both parties may agree to have perform the medical evaluation without going through the QME selection process. However, because the DWC generally does not oversee AMEs in the same way it oversees QMEs, we did not include AMEs in our analysis. In fiscal year 2017–18, 100,000 new requests were submitted for QMEs to resolve disputes, or about 15 percent of claims. This audit report focuses on QMEs and the process for selecting QMEs to examine workers overseen by the Division of Workers’ Compensation (DWC) within the Department of Industrial Relations (department). In fiscal year 2017–18, DWC had about 2,800 participating QMEs in the State in more than 30 specialties, including chiropractic, dentistry, internal medicine, neurology, pain medicine, psychology, and hand and spine issues.
Medical-Legal Evaluations and Reports
QMEs conduct evaluations and issue medical-legal reports to determine the following for an injured worker:
- Eligibility for workers’ compensation benefits.
- Ability to return to work.
- Permanent and stationary status (when the medical condition reaches the maximum medical improvement).
- Existence and extent of permanent disability.
- Ability to engage in his or her usual occupation.
- Need for future medical treatment.
- Existence of new and further disability.
Source: Analysis of documents obtained from the department.
QMEs generate medical‑legal reports to help clarify disputed medical issues. Contested claims may involve a dispute over whether work caused an injury, the total period of temporary disability, the existence and extent of permanent disability, or the need for future medical care. The text box lists the various issues that QMEs may consider as part of their evaluations and reports. To make these determinations, QMEs review medical records, examine injured workers, perform tests if necessary, and write medical‑legal reports that can be used as evidence before workers’ compensation judges. The medical‑legal reports must address the issues in dispute and include the QME’s findings that a workers’ compensation judge may need to resolve a dispute.
DWC Oversees QMEs and Administers the QME Selection Process
DWC’s mission is to minimize the adverse impact of work‑related injuries on California employees and employers, and it is responsible for overseeing QMEs, as Figure 1 summarizes. Those responsibilities include appointing and reappointing QMEs. To become QMEs, physicians must be licensed to practice in California, spend at least one‑third of their time providing direct medical treatment, report specified financial interests, take at least a 12‑hour course on writing medical‑legal reports, and pass a competency exam. Certain types of medical providers may have other requirements. DWC schedules competency exams at least twice each year. After passing the exam, physicians must pay an annual fee to DWC before it appoints them as QMEs for a two‑year term. This fee ranges from $110 to $1,150 based on the number of office locations they maintain as well as the number of evaluations they performed within the past year, if applicable.
Figure 1
DWC Oversees QMEs
Source: Analysis of state law and the department’s regulations.
DWC’s oversight responsibilities also include receiving and investigating complaints against QMEs and disciplining those found to have violated the department’s regulations. Although DWC also determines violations of state law through Labor Code section 139.2, the violations we reviewed for the purposes of this report are mostly related to the medical‑legal fee schedule, which is described in the regulations. Its QME Investigations and Enforcement Section (investigations section) has 12 staff who investigate and help resolve complaints filed against QMEs.In addition to DWC’s investigations section conducting investigations of QMEs, DWC has an audit unit—separate from the investigations section—that consists of 29 filled staff positions and three vacant positions and is responsible for auditing insurers, self‑insured employers, and third‑party administrators by conducting routine reviews at least once every five years to determine whether they met their obligations under state law. These audits do not include reviews of QMEs. Anyone may file a complaint against a QME, and the DWC’s medical director may file a complaint on his or her own initiative. For instance, an injured worker could file a complaint alleging that a QME did not treat the worker professionally or discriminated against the worker, or that he or she experienced a wait time exceeding one hour at a QME’s office before being examined. Also, an insurance company, for example, could submit a complaint alleging that a QME billed for services he or she did not provide. The investigations section investigates such complaints and forwards evidence of alleged violations to DWC’s administrative director, who then may issue a statement of charges (accusation) to the QME specifying which regulations he or she allegedly violated and notifying the QME of his or her right to a hearing. After a hearing, DWC may pursue disciplinary actions including terminating the QME’s appointment.
Key Parties Involved in
Workers’ Compensation Claims
Injured workers—Employees who have a work‑related injury or illness and are seeking workers’ compensation benefits.
Applicant attorneys—Attorneys who represent injured workers in their workers’ compensation cases. “Applicant” refers to the injured worker.
Claims administrators—Individuals or companies who handle workers’ compensation claims for employers. Most claims administrators work for insurance companies or other organizations that handle claims for employers, but some work directly for large employers.
Defense attorneys—Attorneys who help insurance companies and self‑insured employers defend against workers’ compensation claims.
Source: DWC’s Physician’s Guide to Medical Practice in the California Workers’ Compensation System, and the department’s Guidebook for Injured Workers and website.
DWC also administers the QME selection process. When an injured worker or employer has a dispute and requests a QME, as Figure 2 shows, DWC creates a panel—or list—of three QMEs. It also generates a replacement panel when necessary. DWC uses a computer program to randomly generate these panels based on the requested specialty of the QME and the proximity to the injured worker’s residence. The next step in the process differs for represented workers (those represented by an attorney) and unrepresented workers. Generally, for a represented worker, after the injured worker and employer each strike one QME from the list, the injured worker makes an appointment with the one remaining QME. In the case of an unrepresented worker, the injured worker generally selects one QME from the list and makes an appointment. In both cases, state law requires the selected QME to see the injured worker for an evaluation within 60 days of the request for an appointment; however, parties can agree to extensions of up to 30 additional days, or waive the 90‑day time limit. If the chosen QME is not available within the required or extended time frame, the parties may ask DWC to generate a replacement QME or QME panel, from which the parties select a new QME. After conducting an evaluation of the injured worker, the QME has 30 days to write the medical‑legal report and provide it to both the injured worker and the employer, who then may use it to resolve the dispute. DWC received more than 145,000 requests for new and replacement QME panels during fiscal year 2017–18. Injured workers and applicant attorneys made 57 percent of these requests, while claims administrators and defense attorneys made the remaining 43 percent of requests. The text box defines these parties.
Figure 2
Injured Workers and Their Employers Use the QME Selection Process to Resolve Certain Disputes
Source: Analysis of state law and the department’s regulations.
DWC is also responsible for adopting and revising a medical‑legal fee schedule—the fee schedule QMEs use to charge for their services, and it last updated the rates for this fee schedule in 2006. Based on this schedule, which the department includes in its regulations, QMEs can bill entities, which may include insurance companies, for their evaluations in several different categories, including a basic comprehensive medical‑legal evaluation, a complex comprehensive medical‑legal evaluation, a comprehensive medical‑legal evaluation involving extraordinary circumstances, and a supplemental medical‑legal evaluation. Generally, when an insurance company does not pay a QME or does not pay in full, the QME may dispute the payment by going through DWC’s independent bill review process. DWC generally is required to conduct a preliminary review of requests for independent bill review, and if eligible for review, DWC’s independent bill review contractor will review the QME’s bill and determine whether the claims administrator owes the QME additional compensation. DWC’s contract requires it to monitor the performance of its independent bill review contractor and oversee the entire independent bill review process.
The department’s regulations also outline an appeals process for resolving QME applicants’ disputes over denials of appointments or reappointments. DWC may deny a QME’s reappointment for a number of reasons, such as delivering reports late or performing a QME evaluation without a valid QME certification. If DWC denies a QME applicant’s appointment or denies a QME’s reappointment, DWC sends a notice of denial containing the reasons for the denial. In accordance with regulations, the QME or QME applicant may submit a specific, written response to the notice of denial within 30 days. DWC may then overturn or uphold its denial. If it upholds the denial, it provides a statement of issues specifying the reasons for denial and notifies the QME or QME applicant of the right to a hearing. If the QME wants to further contest DWC’s denial, he or she must request a hearing within 15 days, and DWC may assign the case to an administrative law judge from the Office of Administrative Hearings, or at its discretion, a DWC hearing officer.
Since 2017 QMEs have filed at least three lawsuits against DWC regarding the denial or potential denial of certain QME reappointments. The three lawsuits all included allegations that DWC denied some QMEs’ reappointments without a hearing. Two alleged that DWC based some denials on regulations that were not approved in accordance with the State’s Administrative Procedures Act. The third lawsuit also alleged that DWC made some reappointment decisions based on whether insurance companies viewed QMEs as tending to make medical conclusions that favored injured workers or that favored the employers/insurance companies, and whether the QME prepared medical‑legal reports that were billed at a higher rate than appropriate. According to the department’s acting chief counsel, DWC resolved the three lawsuits in 2018.