The California State Auditor conducted an audit of the Department of Industrial Relations’ Division of Workers’ Compensation and its oversight and regulation of QMEs, as directed by the Joint Legislative Audit Committee. The full 52 page report has been made available online.

The review found that from fiscal years 2013-14 through 2017-18, the total number of QMEs decreased by 12 percent while requests for QMEs increased by 37 percent. Consequently, the availability of QMEs has decreased during those years, indicating that the current number of QMEs is not meeting the demand for their services.

During this time period, the number of panels that were requested to be replaced because QMEs were unavailable more than quadrupled – from about 4,600 replacement panels in fiscal year 2013-14 to nearly 19,000 in fiscal year 2017-18.

Nevertheless, DWC has not taken sufficient action to address the QME shortage, such as establishing a process to recruit new QMEs and updating the 13-year-old rates on the fee schedule that QMEs use to charge for their services, which could help DWC attract and retain QMEs.

Furthermore, DWC inappropriately used its reappointment process to discipline certain QMEs alleged to have committed overbilling violations. This practice raises concerns about due process. Specifically, instead of having used its regulatory process to discipline QMEs at the time it identified alleged violations, DWC denied their reappointments because of the alleged violations.

Finally, DWC has not continuously reviewed medical-legal reports, prepared by QMEs and containing the findings of the examinations, for quality and has not tracked when workers’ compensation judges have rejected medical-legal reports because those reports failed to meet minimum standards. Because it did not perform these reviews or track when workers’ compensation judges rejected reports, DWC lacks the data to identify whether report quality is a systemic problem or whether individual QMEs are producing low-quality reports.

The auditor suggested that the Legislature should amend state law to specify that DWC review and, if necessary, update the fee schedule for compensating QMEs at least every two years based on inflation. And the Legislature should revise state law to increase the number of QMEs on the panels DWC provides.

The DWC should develop and implement a plan to increase the number of QMEs, prioritizing specialties with the greatest shortage relative to demand. It should also develop and implement separate written policies and procedures that define and specify its internal processes for disciplining and reappointing QMEs. As well as create and implement a plan to continuously review QME reports for quality and report its findings to its administrative director annually.

In response, the Division acknowledged and accepted the draft report’s recommendations, which it will work to implement by April 2020. It did however disagree with some of the conclusions

The DWC pointed out that the supply of primary care physicians in California is not sufficient to meet the population’s needs. Therefore, while attempts to increase the number of QMEs in our system can be made through outreach at medical and workers’ compensation conferences and in continued discussions with medical groups, the DWC faces headwinds in ending the persistent and ongoing decline.