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Medical Provider Networks: The Newest Model
for Treatment of Injured Employees?
By Thomas
E. Jeffry, Jr. and Robyn Todd
[November 2004]
As part of Workers’ Compensation reform
enacted earlier this year by the California legislature, emergency
regulations were adopted to allow insurance carriers and self-insured
employers to create networks of health care providers who will
render diagnosis and treatment to injured employees. Beginning
January 1, employees will have to choose providers who are listed
in the network approved in advance by the Director of Workers’
Compensation. This is different than the current system (which
still applies to employers not offering medical provider networks),
in which employees are able to choose their own physicians after
30 days.
Although creation of such networks is voluntary,
most insurers and many self-insured employers are scrambling
to establish approved medical provider networks (MPN) in an
attempt to curb high health care costs. In order to satisfy
access requirements set forth in the regulations, networks will
need to contract with both occupational and non-occupational
physicians who are located within the general area where the
covered employees work and live. The networks will contract
for both primary care and specialty physicians and may include
ancillary health care providers.
As an alternative, these insurers and employers
can contract with certain types of alternative networks such
as HMOs or workers’ compensation Health Care Organizations
(HCOs) that are already licensed or registered with their own
network of physicians and ancillary providers in place.
Those self-insured employers (or the third-party
administrators who act on their behalf) and insurers who decide
to create their own networks will need to identify groups of
physicians in defined geographic areas who will participate.
These employer and insurers may find it easier to enter into
contracts with physician contracting organizations such as IPAs
or PPOs that have already contracted with physicians and other
providers for health care services. Such arrangements could
help simplify and expedite the approval of the network to the
extent such organizations have already credentialed and contracted
with physicians.
As health law attorneys experienced in provider
contracts and the creation of contracting networks, the lawyers
at Davis Wright Tremaine can assist in with the development
of contracts as well as the preparations and submission of applications
to approve these new networks.
MEDICAL PROVIDER NETWORKS
Legal background
Beginning Jan. 1, 2005, self-insured employers
and workers’ compensation insurers may voluntarily operate
MPNs to provide treatment to injured employees. MPNs were authorized
by the workers’ compensation reform bill enacted in April,
2004 (Senate Bill 899).
In accordance with a mandate under this new law,
the California Division of Workers’ Compensation (DWC)
released new regulations, effective Nov. 1, 2004, to implement
the creation of MPNs. Employers and insurers who use MPNs may
require employees to obtain treatment for work-related injuries
only from providers within the MPN, except in those instances
where the employee can show that out-of-network services are
medically necessary.
As a result, physicians who want access to workers’
compensation patients may need to become part of one or more
MPNs. Although physicians cannot apply to DWC for approval of
MPNs themselves, they can facilitate the application of a self-insured
employer or insurer to establish an MPN. Existing physician
contracting organizations can proactively pre-package themselves
into a network and approach employers and insurers themselves.
However, they first should understand the specific requirements
for an MPN as discussed below.
The basics
Employers and insurers are not required to establish
MPNs under the law and regulations; the creation and use of
MPNs is voluntary. However, it is likely that MPNs will become
the preferable way to arrange for the treatment of injured employees
because of the potential cost savings network organizations
can offer.
Before the MPN may begin operating, one of four
eligible entities must obtain apply and obtain approval of the
MPN by the DWC through the application process described in
§ 9767.3 of Title 8 of the California Code of Regulations
CCR). DWC began accepting applications on November 1. However,
MPN operations may begin no earlier than Jan. 1, 2005. The four
entities eligible to apply for MPN approval are (1) workers’
compensation insurers, (2) the state, (3) a joint powers authority,
and (4) self-insured employers. Providers cannot independently
apply to the DWC for approval of an MPN, but they (and others,
such as third-party administrators) may assist in the preparation
of an application. Ultimate responsibility for the contents
of the application rests with the applicant. An officer or employee
of the applicant – and only of the applicant – must
attest to the veracity of the application’s contents.
Some organizations are “deemed approved”
as part of an MPN as long as they offer the proper mix of physicians
required under the regulations (as more fully described below),
and as long as the entity’s network has not been modified
since its original certification by DWC. However, the employer
or insurer must still file abbreviated applications with the
DWC under 8 CCR § 9767.3(e) or (f). The “deemed approved”
entities are HCOs certified under Labor Code § 4600.5,
health care service plans licensed pursuant to Health and Safety
Code § 1340 et seq., group disability insurance policies
as defined in Insurance Code § 106(b), and a Taft-Hartley
health and welfare fund. Therefore, providers may become part
of an MPN if they already contract directly with a deemed entity.
The MPN application process – and subsequent
establishment and operation of MPNs – is quite comprehensive.
A complete application requires, among other things, a detailed
listing of every provider in the network, the identification
of the number of employees and geographical areas to be served
by the MPN, a continuity of care policy, a transfer of care
policy, an economic profiling policy, a detailed employee notification
process, a procedure for dealing with patient requests for second
and third opinions (as required under the law), a procedure
for employees to obtain treatment outside of the MPN, and the
geographical maintenance of providers according to certain time
and distance standards. Each MPN application must also include
the name, address, specialty, and tax identification number
for each physician and other provider in the network. The applicant
must confirm that a contractual arrangement exists between (1)
the MPN applicant and the individual physicians in the MPN,
or (2) the MPN applicant and the provider organization whose
members or groups are in the MPN.
Providers within MPNs are required to provide
treatment according to a medical treatment utilization schedule
adopted by the DWC or, prior to its adoption, the American College
of Occupational and Environmental Medicine’s (ACOEM) Occupational
Medicine Practice Guidelines. For injuries not covered by the
ACOEM Guidelines or the DWC’s schedule, treatment must
be in accordance with “other evidence based medical treatment
guidelines generally recognized by the national medical community
and that are scientifically based.”
Providers and MPNs
Providers who wish to become part of an
MPN can do one of two things: (1) join an existing network either
individually or through a deemed approved network, or (2) create
a group that will contract to participate in MPNs. Providers
proactively creating new networks can then approach an insurer
or self-insured employer with their pre-packaged network of
qualified providers and offer to enter into a contract to provide
services to employees covered by the insurer or employer.
Providers who plan to self-organize and
approach potential MPN applicants should be prepared to offer
the following information to the applicant, all of which is
required to be included in the application:
| 1. |
The geographic
area(s) to be served by the proposed network. The
DWC wants to have an understanding of the exact areas in
California to be served by the MPN, which can be described
by, for example, zip codes, counties, cities, regions, or
a combination of these. |
| 2. |
The following information about
each network “physician” or “provider”
providing occupational medicine services (defined
as the diagnosis or treatment of any injury or disease
arising out of and in the course of employment): |
- Individual’s name (not a clinic
or practice group name);
- Individual’s state license number;
- Individual’s taxpayer identification
number, or, if individual does not have one and operates under
a medical group’s number, the medical group’s
taxpayer identification number;
- Individual’s specialty;
- Individual’s location; and
- If the physician is part of a medical
group practice, the name and taxpayer identification number
of the medical group.
“Physician” and “provider”
are defined as those physicians and providers described
in Labor Code §§ 3209.3 and 3209.5. Therefore,
“physicians” and “providers” include
physicians and surgeons holding an M.D. or D.O. degree,
psychologists, acupuncturists, optometrists, dentists, podiatrists,
chiropractors, and physical therapists.
| 3. |
For ancillary service
providers providing medical services not
covered under the “physician” and “provider”
definitions, the same information required about
“physicians” and “providers” above,
except that the individual’s specialty or type of
service must be identified. |
| 4. |
A description of how the network arranges
to provide ancillary services to employees,
and which ancillary services will be covered by providers
in the network. |
| 5. |
A description of the proportion
of physicians primarily engaged in the treatment of occupational
injuries and those primarily engaged in the treatment of
non-occupational injuries. The MPN must
consist of at least 25 percent of physicians primarily engaged
in the treatment of non-occupational injuries, which means
they must spend more than 50percent of their practice time
providing non-occupational medical services. |
| 6. |
A description of the types
of physicians and providers in the network, sufficient
to to demonstrate that the MPN includes an “adequate
number and type” of physicians or other providers
to “treat common injuries experienced by injured employees
based on the type of occupation or industry in which the
employee is engaged.” |
| 7. |
A description of the accessibility
and availability of the providers, sufficient
to to meet the following standards:
- The MPN must have a primary care
physician and a hospital for emergency health care services
within 30 minutes or 15 miles of each employee’s
residence or workplace. If emergency health care services
are separate from the hospital, the MPN must have a
provider of all emergency health services that satisfies
this standard.
- The MPN must have providers of
occupational health services and specialists within
60 minutes or 30 miles of an employee’s residence
or workplace.For non-emergency services, an appointment
for initial treatment must be available within 3 business
days of the applicant’s receipt of a request for
treatment within the MPN.
- For non-emergency specialist services
to treat common injuries experienced by employees based
on the type of occupation or industry in which the employee
is engaged, an appointment for treatment must be available
within 20 business days of the applicant’s receipt
of a referral to a specialist within the MPN.
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Based on the broad requirements for various types of physicians,
and availability and accessibility standards, physicians self-organizing
into networks that will contract with MPNs would be wise to
include a broad range of specialists in addition to primary
care physicians, as well as a sufficient number of physicians
to be available and accessible to employees as required.
For further information, please contact:
Robert
G. Homchick, Seattle, (206) 622-3150, roberthomchick@dwt.com
Paul
T. Smith, San Francisco, (415) 276-6500, paulsmith@dwt.com
Kent
B. (Bernie) Thurber, Portland, (503) 241-2300, berniethurber@dwt.com
This Advisory is a publication
of the Health Law Department of Davis Wright Tremaine LLP. Our
purpose in publishing this Advisory is to inform our clients
and friends of recent developments in health law. It is not
intended, nor should it be used, as a substitute for specific
legal advice as legal counsel may only be given in response
to inquiries regarding particular situations.
Copyright © 2004, Davis Wright
Tremaine LLP.
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