HMO Model to Be Tried for Job Injuries

In the long negotiations that led to the workers’ compensation reform package, one of the most contentious issues was who should pick the doctors treating injured workers.

In the end, the governor and lawmakers settled on a uniquely California approach: creating HMO-like networks of doctors. California was a pioneer in the formation of health maintenance organizations, and if the reform bill is approved today as expected, the state will launch a new cottage industry in managed care.

The bill would give employers more control over the system by allowing them to select the doctors in the networks. Traditional HMO plans could also handle workers’ comp cases, opening up the possibility that workers could see their regular doctors for work-related injuries. Workers’ ability to choose doctors would, as in group health plans, be confined largely to the networks.

Dozens of new networks of workers’ comp doctors probably would pop up in the state and significantly expand a relatively new line of business for healthcare giants like Kaiser Permanente and WellPoint Health Networks.

But many question whether the HMO model, which has a tortured history in California, would work effectively and generate significant savings in the workers’ comp arena.

Under current rules, workers injured on the job can pick their own doctors after 30 days of treatment by a physician selected by the company or insurance carrier.

Employers have complained that this has allowed workers and their lawyers to shop around for doctors who would provide a diagnosis leading to a disability claim. Employers wanted to stop that alleged abuse; labor groups sought to preserve doctor choice for workers.

Beginning in 2005, the bill would allow employers or workers’ comp insurers to establish a pool of medical providers composed of occupational doctors as well as other physicians. A worker injured on the job would be seen by a doctor from that network, and if the employee disagreed with the diagnosis or treatment prescribed, he or she could seek opinions from two other doctors in that group. If there was still a dispute after that, then the worker could request an independent medical review.

The bill contains one notable exception: If workers notify their employer in writing before an injury that they have a personal physician, they would be able to see that doctor for a workers’ comp case, regardless of whether that provider is in the employer network. But this provision would expire in May 2007 and would apply only to workers whose employers provide group health insurance, which is far from everyone.

Neither employers nor labor groups were happy with this final arrangement. Some businesses claimed that the second-opinion process would slow things down and add costs, and worker advocates argued that these networks would be inherently biased because doctors would be handpicked by and take their marching orders from employers.

“It’s tantamount to establishing a mandatory company doctor,” said Carroll Wills, a spokesman for the California Professional Firefighters, which represents 30,000 firefighters.

But it’s far from clear just how the creation of networks would come about and play out in the marketplace. At the outset, most agree, it’ll create headaches for all parties involved.

“You’re talking about re-educating everybody,” said Stanley Zax, president of Zenith National Insurance Co., a Woodland Hills-based carrier that provides workers’ comp coverage to about 25,000 employers in California.

Zax said his firm experimented with a network-based system in the mid-1990s and found that it didn’t result in any savings because workers’ comp cases required specialized reporting and support systems.

Zax suggested the doctor network provision was a “forerunner” to having around-the-clock medical services for workers’ comp through umbrella managed-care networks.

Other healthcare companies and proponents of managed care said they thought the doctor networks for workers’ comp could help contain costs.

“If you had an HMO network that had the right kind of controls ... I would say it could work and deliver quality healthcare and save money,” said Jim Zelko, director of workers’ compensation for Kaiser Permanente, the big health system based in Oakland. Kaiser currently offers workers’ comp services to employers on a fee-for-service basis, Zelko said.

Michael Chee, a spokesman for WellPoint, the Thousand Oaks-based parent of Blue Cross of California, said he expected the company to expand its existing HMO and other provider networks to include occupational doctors, thus broadening its network to attract workers’ comp business under the new law. “We think it’s a good thing,” he said.

Analysts predicted that many other, smaller networks would be set up. But unions, some doctor groups and others raised concerns about the quality and reach of such doctor pools.

“They’re only going to admit the doctors who do the bidding of the insurance company,” said Carlyle Brakensiek, executive vice president at the California Society of Industrial Medicine and Surgery, which represents 650 doctors. He said that under this bill the only way doctors could treat injured workers is if they were part of the network.

“The insurance company holds the key. They’re the gatekeeper now,” he said.

The bill doesn’t address the financial arrangements for doctors in these networks, whether they would be given a fixed payment per member per month as HMO plans or be paid on a fee-for-service basis. The measure, however, specifies that “physician compensation may not be structured in order to achieve a goal of reducing, delaying or denying medical treatment or restricting access to treatment.”

It also says doctor networks, which would be certified by the workers’ comp administrative director, should have enough doctors in various fields and sufficient geographic coverage.

John F. Burton, a professor at Rutgers University who is an expert on workers’ comp issues, said there was good reason to be skeptical about whether this part of the workers’ comp reform would generate much savings. For starters, he said, it would add another layer of bureaucracy.

Beyond that, Burton said, the performance of managed care had shown that although it resulted in lower premiums early on, its savings wore off over time as consumers complained about restrictions and lack of choice. “Those things have had some impact, but obviously not a lasting impact,” he said.