Here is a summary of legislative and regulatory developments and challenges for the second quarter of 2017 and their practical implications:

Pennsylvania

The Pennsylvania Bureau of Workers’ Compensation responded to a PA Supreme Court decision invalidating the AMA Guides to the Evaluation of Permanent Impairment as a standard for disability ratings by suspending all Independent rating evaluations. The Court ruled in Protz v. WCAB that statutory reliance on the AMA Guides was an unconstitutional delegation of legislative authority to the American Medical Association.

• Implications: The Supreme Court decision and the BWC’s reaction to it create two problems. First, there is no current active standard or system in Pennsylvania for determining permanent impairments. Second, the Court didn’t specify whether its ruling should apply only on a going-forward basis or retroactively, as well. Unless the BWC issues a clarifying policy statement, which hasn’t been its practice, closed cases may be reopened.

Texas

Texas has enacted legislation giving the Division of Workers’ Compensation greater control over work-hardening and work-conditioning programs. Senate Bill 1494 removes an automatic exemption from pre-authorization and concurrent review which CARF-credentialed facilities previously enjoyed. The amendment to Labor Code §413.014, effective September 1, 2017, permits the DWC by rule to reinstate exemptions for certified facilities if the agency determines exemptions are appropriate.

• Implications: The DWC has targeted work-hardening and work-conditioning programs as potential sources of fraud and abuse. Removal of the automatic statutory exemption from preauthorization gives the DWC regulatory discretion to set standards to control costs and prevent the administration of excessive or unnecessary treatments. The legislation was supported by insurers and the broader business community.

Arizona

The Industrial Commission of Arizona has proposed moving from a Fee Schedule based on comparisons with surrounding states’ WC medical payments to the RBRVS (resource-based relative value scale) reimbursement mechanism used by Medicare. Also included in this proposal is a rule that would require providers participating in a network to be reimbursed at 90% of either the fee schedule rate or of the full amount of any negotiated discount rate payable to the network.

• Implications: In general, Arizona Fee Schedule rates have increased over the last several years and now are higher than average. We expect to see moderate rate reductions if the ICA’s proposed RBRVS methodology is adopted, which is expected. The rule regulating network payments to participating providers, however, has drawn objections that restrictions on in-network providers’ reimbursement methodology runs counter to the ICA’s cost containment goals, and the ICA reportedly has dropped this part of the proposal.