MINUTES OF THE

      SENATE COMMITTEE ON COMMERCE AND LABOR

 

      Sixty-seventh Session

      February 15, 1993

 

 

The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Monday, February 15, 1993, in Room 207/208 of Cashman Field Center, Las Vegas, Nevada.  Exhibit A is the Meeting Agenda.  Exhibit B is the Attendance Roster.

 

COMMITTEE MEMBERS PRESENT:

 

Senator Randolph J. Townsend, Chairman

Senator Sue Lowden, Vice Chairman

Senator Ann O'Connell

Senator Raymond C. Shaffer

Senator Leonard V. Nevin

Senator Lori L. Brown

 

COMMITTEE MEMBERS ABSENT:

 

Senator Mike McGinness (Excused)

 

STAFF MEMBERS PRESENT:

 

Brian Davie, Senior Research Analyst

Sheri Asay, Committee Secretary

Linda Krajewski, Primary Secretary

Frank Krajewski, Senior Research Analyst

 

OTHERS PRESENT:

 

Danny Thompson, Lobbyist, Nevada State American Federation of Labor and Congress of Industrial Organizations

Randy Capurro, Insurance Broker, Layne & Associates Insurance

Bruce Layne, President, Layne & Associates Insurance

Richard Tetreault, Assistant General Counsel/Risk Management,      Southwest Gas

Scott Young, General Counsel, State Industrial Insurance System

Mark Habersack, Compensation & Benefits Specialist, Harrah's Las      Vegas

Don Jayne, General Manager, State Industrial Insurance System

Joe Lawrence, President, Managed Care Consultants

Lynn Grandlund, Grandlund, Watson, Clark & Associates

Terry Rankin, Commissioner of Insurance, State of Nevada Department       of Insurance

Terri Potts, Lobbyist, Nevada Physicians Caucus

Dominique Morrow, President, Nevada National Association of       Rehabilitation Professionals in the Private Sector

 

Ken Weeks, Program Coordinator, Cooley Associates

Leonard Cash, Owner/Director, American Rehabilitation Corporation

Kari Pappin, Private Citizen

Julie Williams, Private Citizen

Albert R. Capanna, M.D., Clinical Professor of Neurosurgery, Nevada       Spine Institute

Victor Albanese, Private Citizen

Dennis Nolan, Lobbyist, Las Vegas Chamber of Commerce

Richard Davis, Rehabilitation Specialist, Clark County School       District

Ed Rhett, Private Citizen

 

Senator Townsend opened the meeting and introduced Danny Thompson, Lobbyist, Nevada State American Federation of Labor and Congress of Industrial Organizations (AFL/CIO).

 

Mr. Thompson read a letter stating the Nevada State AFL/CIO position on closed panels (Exhibit C). He stressed that the AFL/CIO does not want anyone, other than a duly authorized member of Nevada State AFL/CIO, representing their position to the committee.

 

Randy Capurro, Insurance Broker, Layne & Associates Insurance, addressed the committee, and provided a handout regarding Managed Care (Exhibit D). Mr. Capurro gave background information on himself and Bruce Layne, President, Layne & Associates Insurance.

 

Mr. Capurro stated that managed care was the single most important issue, and cited the lack of it as one of the main reasons for the bankruptcy of the State Industrial Insurance System (SIIS).

 

Mr. Layne spoke regarding the managed care system. He suggested that the discounts need to be maximized, and proper control maintained, i.e, utilization review, peer review, and case management. Mr. Layne discussed willing provider, and defined the term as "...any doctor who'd provide service at any time, once he gets in a PPO (Preferred Provider Organization)." He cited a lack of managed care as a major cause of the SIIS insolvency problem.

Mr. Layne spoke on the issue of volume, and said that if more physicians come into the panel at a later date, the volume would be diluted, and there would be a lack of stability in the rates. Mr. Layne thought a closed panel would provide better cost control. 

 

Senator Nevin asked why there would be a problem, if the charges were mandated, with either a closed or open panel regarding rates.  In response, Mr. Capurro explained how the insurance industry is regulated, and how physicians must be regulated as well. He gave reasons for his support of a closed panel system.

 

Senator Lowden wondered whether physicians who could not get the volume they needed, could be competitive and lower their rates. She expressed concern that rates would, in fact, eventually go up in an open panel system. Mr. Capurro said that was very possible.

 

Senator Brown wanted to make sure the pursuit of volume did not include doctors scheduling unneccessary visits. Mr. Capurro stressed utilization and peer review as the solution to that problem. "A competitive PPO (Preferred Provider Organization) must keep these rates in line, because the profit structure is in there," he said. Mr. Capurro reiterated his opinion that managed care was the key area on which to focus, in resolving the problems the SIIS faces.

 

Richard Tetreault, Assistant General Counsel/Risk Management, Southwest Gas, addressed the committee. He explained Southwest Gas had a self-insurance program, and presented a graph of Permanent Partial Disability (PPD) awards (Exhibit E). Senator O'Connell discussed the difference between Nevada and neighboring states in how awards are computed. She pointed out that Nevada does not look into a worker's future earning capacity when computing awards. Mr. Tetreault referred the committee to Exhibit E, and suggested they adopt a formula of another state, i.e., Oregon, California or Arizona.

 

Mr. Tetreault noted that, in his experience, an attorney is involved in nearly every award that is given. He pointed out the radical difference in physician rating of disability percentages. Mr. Tetreault explained that every time an appeal is filed, the higher rating is used. He asked that the committee consider the rating systems of other states, and suggested that PPD awards need to be revised. Mr. Tetreault pointed out that PPD awards exhibit the most radical increase in expense.

 

Senator Townsend cited 1984 figures regarding total disability and PPD compensation by SIIS. He noted that PPDs were the largest single growth area in compensation, a 451 percent increase in a 10-year period.

 

Scott Young, General Counsel, State Industrial Insurance System (SIIS), testified before the committee. He thought the graph shown in Exhibit E was misleading, because it did not reflect the severity of the claims. Mr. Young pointed out that injuries were being rated several times. He said that the higher rating was usually chosen after appeal, and he thought the committee should  examine that area.

 

Mark Habersack, Compensation & Benefits Specialist, Harrah's Las Vegas, testified regarding Harrah's position on the proposed change from gross to net monthly wage in lost-time wages, when compensating PPDs (Exhibit F). Mr. Habersack said that some of Harrah's PPD awards are appealed, and the higher rate is used. He added that they are able to sit down with the attorneys and negotiate the rating. Mr. Habersack explained how the change from gross to net in the compensation method would hurt the employees, and offered the light duty program as a better solution. 

 

There was further discussion on the issue of changing from gross to net monthly wage.

 

Mr. Habersack commented on open and closed panels. He foresaw a  problem with higher rates being charged, because of a lack of volume in an open panel. Mr. Habersack commented, "The advantage with us (Harrah's) is, as a self-insured, the group that we're using is the same group that we use for our regular health insurance. So therefore, the volume is already in place..."

 

Senator Lowden asked Mr. Habersack how the PPDs could be rated fairly within the system. She suggested having a doctor do the rating, on whom the attorneys, employee, and employer could agree. Mr. Habersack replied that according to law, a rotating panel must presently be used. 

 

Don Jayne, General Manager, State Industrial Insurance System (SIIS), responded to a question by Senator Townsend. Mr. Jayne explained the rotating panel system, and said he thought the PPD should be rated within the managed care organization (MCO). He thought this would be the best way to control the costs, as long as quality care was provided.

 

There was further discussion on how to get the rating done by a single doctor.

 

Joe Lawrence, President, Managed Care Consultants, testified at the request of Senator Townsend, regarding managed care. He thought the key was a cooperative effort between the claims administrator, the employee, the employer, and the provider. Mr. Lawrence discussed willing providers. He explained how to evaluate them and ensure their quality performance. "In the best world, there would be fewer physicians, but there would be tighter qualifications," he said, "and perhaps some ruling on how many appeals one could have." 

 

Mr. Jayne spoke about PPD ratings. He reiterated his opinion that PPD awards should be able to be resolved within the managed care system.

 

Lynn Grandlund, Grandlund, Watson, Clark & Associates, addressed the committee regarding PPD awards. Ms. Grandlund had observed the problem of PPDs being rated initially at 2 percent, and ending up at a 12 percent rating. Ms. Grandlund quoted appeals officers as saying they "always chose the highest rating." She thought something had to be done to control the litigation before the rating got that high.

 

Terry Rankin, Commissioner of Insurance, State of Nevada Department of Insurance, testified before the committee. She thought a difference should be noted between managed care and managing a claim, and discussed both. Ms. Rankin gave an example of a Health Maintenance Organization (HMO), which failed because they could not control the costs and manage what the physicians were doing. She discussed licensing an HMO through the Department of Insurance. Ms. Rankin spoke about open and closed panels in rural areas.

 

Senator Townsend suggested using the HMO statute as the mechanism for the bidding process, if the committee voted to choose a closed panel system. 

 

Terri Potts, Lobbyist, Nevada Physicians Caucus, testified on the PPD awards. She explained the training physicians must receive before they can rate awards, and discussed some of the problems they have with doing the rating.

 

Ms. Potts suggested a 5-day course for training rating physicians, and a 3-month monitoring period for any new Department of Industrial Insurance Regulation (DIIR) rating physicians. She also suggested "...a rotating doctor arbitration panel, or a more standardized method of resolving disputes in the PPD arena." Ms. Potts recommended other changes for dealing with PPD awards.

 

Ms. Potts said her committee is putting together standards for rating, and explained the difficulty in standardizing evaluations.

 

Dominique Morrow, President, Nevada National Association of

Rehabilitation Professionals in the Private Sector, read from prepared testimony (Exhibit G).

 

Ken Weeks, Program Coordinator, Cooley Associates, addressed the committee regarding rehabilitation in other states. Mr. Weeks said he was asked to address this hearing, because of his work in Washington State. He discussed the problems that Oregon had encountered with vocational rehabilitation, and the eventual transition from state rehabilitation to the private sector. Mr. Weeks noted that Washington State had followed a similar path. He discussed the problems that often result when vocational rehabilitation is transferred to the Bureau of Vocational Rehabilitation (BVR). Senator O'Connell asked if this transition has worked successfully in any other state. Mr. Weeks said he knew of no state that has successfully transferred vocational rehabilitation to the BVR. 

 

Leonard Cash, Owner/Director, American Rehabilitation Corporation, addressed the committee in response to a question by Senator Shaffer. He stated that his company recently negotiated a contract with SIIS. Mr. Cash explained the fee schedules for managed care.

He said, "We manage the case, manage the money we charge for that, and manage our company." Mr. Cash further explained managed care, and the process a person goes through to get rehabilitation services.

 

Senator Nevin asked about follow-up procedures on these workers. He said there was a problem with injured workers eventually returning to the line of work they were injured in, because that is where they receive higher wages. Mr. Weeks responded that if the job is done well by the provider, the majority of workers will not return to their former line of work. He talked about developing transferable skills as a solution to the problem.

 

There was further discussion about retraining injured workers within the same pay scale. Mr. Weeks said that 65 percent of the those referred to a vocational rehabilitation provider are successfully returned to suitable employment, at an acceptable wage. He listed reasons for the 35 percent who were not returned to suitable employment.

 

Senator Lowden asked Mr. Cash if his firm had independent utilization review to oversee what they do. He replied, "...basically within our industry, we manage care in terms of managing the case...so we use the term manage care and manage the claim consecutively and interchangeably...we have a vendor manager who oversees what we're doing,...and manages the firm that's assigned to that client."

 

In response to a question by Senator Townsend, Mr. Cash responded, "As early as the rehab (rehabilitation) professional gets involved in the process, the better the outcome." He described his company's early intervention program.

 

Mr. Weeks explained the certification and training requirements for a rehabilitation counselor. Mr. Cash discussed some of the problems with which the vocational rehabilitation providers deal. He concluded with the statement, "If you're looking for the mechanism, by which you want to rehabilitate injured workers, that managed care mechanism for vocational rehabilitation is in place now. There's been a contract negotiated to do those services, and we're doing it now."

 

Kari Pappin and Julie Williams, Private Citizens, addressed the committee. Ms. Pappin spoke about willing providers and the managed care system. She discussed problems she has encountered as the person responsible for billing and collections in a chiropractor's office.  Ms. Pappin asserted that her office has been excluded from closed panels and therefore "...we are very limited in our ability to care for patients who have those insurances." Ms. Williams elaborated on this problem.

 

Albert Capanna, M.D., Clinical Professor of Neurosurgery, Nevada Spine Institute, testified regarding managed care. He said there were four elements to the injured worker (1) the patient (2) the insurer and SIIS (3) medical providers (4) the legal system. He said the answer is not just "throwing more money at the problem," and stated that the legal system was partly responsible for the problems SIIS faces. Dr. Capanna pointed out that after paying attorney fees, many injured workers end up with very little of their settlements. He discussed the injured workers and the medical providers. Dr. Capanna said he had a problem with the fact that "none of the physical therapists, or physical medicine doctors, rather, say these people can go back to work." He explained that he sends them back to work himself and they do not get the benefit of physical therapy. At Senator Lowden's request, Dr. Capanna explained why it takes some patients a long time to get an appointment with a specialist, and discussed providers who give patients unneccessary tests. He gave suggestions on how to eliminate these abuses.

 

Victor Albanese, Private Citizen, testified before the committee. He referred to a memorandum from the Department of Industrial Relations (DIR), regarding the subsequent injury fund (Exhibit H).

Mr. Albanese highlighted a statement on page 4 of Exhibit H. He referred to the second part of the exhibit, from the Nevada Self Insurers Association, which deals with proposed legislation concerning calculation of assessments. He highlighted and discussed  areas of Exhibit H.

 

Ed Rhett, Private Citizen, read from prepared testimony (Exhibit I), regarding an injury and subsequent involvement with SIIS.

 

Dennis Nolan, Lobbyist, Las Vegas Chamber of Commerce, testified regarding injured workers and the problems they have with getting rehabilitation and then returning to work. He thought savings to the system would occur as a result of introducing vocational rehabilitation early on, through managed care. Mr. Nolan said the chamber of commerce opposes the idea of putting all vocational rehabilitation under the auspices of the BVR. He discussed the Americans with Disabilities Act (ADA) and the "reasonable accommodations" required by employers to return disabled persons to work. Mr. Nolan stated his opinion that rehabilitation should be left to fair market competition and to private providers.

 

Richard Davis, Rehabilitation Specialist, Clark County School District, testified about returning people back to work at the same level. Mr. Davis is an injured worker and a former SIIS employee.

He also discussed the ADA and light duty tasks.

 

There being no further business, Senator Townsend adjourned the meeting at 11:55 a.m.

 

 

 

            RESPECTFULLY SUBMITTED:

 

 

 

                                    

            Sheri Asay,

            Committee Secretary

 

 

 

APPROVED BY:

 

 

 

 

                                     

Senator Randolph J. Townsend, Chairman

 

 

DATE:                                

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Senate Committee on Commerce and Labor

February 15, 1993

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