DWC Overhauls Utilization Review Regulations

by Sure Log

Effective April 1, 2026, the Division of Workers’ Compensation (DWC) adopts a comprehensive and extensive set of new regulations governing utilization review (UR), independent medical review (IMR) and physician reporting. The regulations are available on the DWC’s rulemaking page.

The changes are primarily driven by the legislative mandates of Assembly Bill (AB) 1124 and Senate Bill (SB) 1160, which were enacted to address complaints of excessive UR delays and denials. The overarching goals of the new regulations are to align the review process with SB 1160 and AB 1124, and to improve the process of the delivering medical treatment within workers’ compensation.

The regulatory changes center on expediting early medical care, accelerating pharmaceutical approvals and strengthening regulatory oversight. The DWC also has taken this opportunity to completely overhaul its investigation and penalty procedures, and has implemented significant changes to treatment, both within and outside of medical provider networks (MPNs). The most significant changes are discussed below.

KEY CHANGES TO THE UTILIZATION REVIEW PROCESS

The new regulations refine the UR process for claims administrators. California Code of Regulation (CCR) 9785(h) now formally codifies the WCAB’s position that a request for authorization (RFA) can be made by either a primary treating physician (PTP) or a secondary physician.

The regulations clarify that the application of Labor Code § 4610(k) makes a UR denial effective for 12 months with regard to the same treatment recommendation by the same physician, unless the further recommendation is supported by a documented change in the facts material to the basis of the UR decision. The new CCR 9792.9.2(a)(2) clarifies that if a claims administrator determines that LC 4610(k) applies, she or he must send a UR deferral notice. UR cannot be deferred, but if the requesting physician expressly opines that there has been a material change in facts and provides supporting documentation, the request must be reviewed by a UR physician.

In addition, the content requirements for UR decisions have been expanded. CCR 9792.9.4 changes the requirements for a decision to approve a request for authorization. In addition to providing the date the request was received, the medical treatment service requested, the specific medical treatment service approved and the date of the decision, the written decision must include, if applicable, the date a request for information, exam or consultation was requested, and the date the information was received.

For a UR decision to modify or deny a request for authorization, CCR 9792.9.5 requires, in addition to maintaining or slightly modifying the prior mandatory information, this information:

1. If the time frame for the decision was extended, there must be a specific description of the information needed to make a medical necessity determination of the treatment request; the date(s) and time(s) request(s) for information, exam or consultation were requested; the manner in which the requests were made; and the date the information was first received.
2. A clear, concise and appropriate explanation in plain language must be provided, if possible, of the reasons for the reviewing physician’s decision, including the clinical reasons regarding medical necessity, or, if applicable, that the requesting physician did not provide sufficient information with the request in order to reasonably make a medical necessity determination. If so, the missing information must be identified, and a statement made that the requested treatment will be reconsidered on receipt of a new request for authorization containing the additional information, exam or test, or specialized consultation.
3. If the requesting physician has expressly opined that prerequisite treatment or criteria, as recommended under applicable treatment guidelines, should be overlooked or are irrelevant to the requested treatment, the reviewing physician must provide an explanation why the requesting physician’s explanation is insufficient.
4. The entity accredited by the Utilization Review Accreditation Commission (URAC) liable for the UR decision must be identified and approved by the DWC.

THE 30-DAY EXEMPTION FROM PROSPECTIVE REVIEW

The new regulations codify the rule from LC 4610(b) that allows a treating physician to render medically necessary treatment during the first 30 days after the date of injury without obtaining prior authorization. To qualify for the exemption under CCR 9792.9.7, the treatment must be for a body part or condition that has been accepted as compensable, must be consistent with the medical treatment utilization schedule (MTUS), and the physician must concurrently submit a doctor’s first report (DFR) and a request for authorization.

The exemption is not absolute. The regulations explicitly exclude certain services, which still require prospective UR. They include: (1) pharmaceuticals not expressly exempt under the MTUS drug formulary; nonemergency inpatient and outpatient surgery; psychological treatment services; home health-care services; imaging and radiology services (excluding X-rays); durable medical equipment (DME) if the cost exceeds $250; electrodiagnostic medicine; and spinal injections. The exceptions generally mirror those defined in LC 4610(c), except that the DWC added spinal injections to services that are subject to prospective utilization review within the first 30 days.

To prevent abuse of the exemption, the regulations grant claims administrators specific remedies. An administrator still may conduct retrospective review of treatment provided under the exemption. If such review reveals a “pattern and practice” of rendering treatment inconsistent with the MTUS, the administrator may petition for a change of physician, terminate the physician from its network or prohibit him or her from rendering any exempt treatment in the future. The regulations define “pattern and practice” with specificity — there must treatment inconsistent with the MTUS for 20 separate and unrelated recommended medical services or goods with 10 or more injured workers over the course of three months; or for eight separate and unrelated medical services or goods with two or fewer injured workers within a month.

ACCELERATED REVIEW OF FORMULARY DRUGS

To speed up the delivery of necessary medications, a new regulation, CCR 9792.9.8, was adopted for drugs on the MTUS formulary. Drugs identified as “exempt,” “Special Fill” or “Perioperative Fill” may be dispensed without prospective review (CCR 9792.9.8(a)).

For nonexempt drugs that are on the MTUS list, a treating physician must issue a request for authorization, and prospective UR decisions for nonexempt drugs on the formulary must be made within five normal business days, a time frame that cannot be extended. If additional information is needed, it must be requested within four business days from the date of receipt of the request for authorization (CCR 9792.9.8(b)). This is a significant change from the standard UR process, which allows for extensions up to 14 days if additional information, testing or consultation is requested.

But, if a physician requests both drugs and nonpharmaceutical treatment related to the same injury or illness, the request will be reviewed under the normal UR time frames (CCR 9792.9.8(d)). So, if an RFA of treatment includes both a listed nonexempt drug and nondrug treatment, the entire request falls under the slower, standard UR time frames.

Moreover, drugs that are not listed on the MTUS drug list are subject to review under the normal time frames (CCR 9792.9.8(c)). The regulations make a distinction between drugs that are on the list that are not exempt from prospective review, and drugs that are not listed at all. Nonexempt drugs that are on the MTUS list must be reviewed in five business days. UR decisions on drugs not listed may be made up to 14 days after receipt of a request for authorization. The DWC determined that drugs not listed on the formulary may be those that are less frequently prescribed for work place injuries and, therefore, may require more time to determine medical necessity.

Consistent with LC 4610.5(h)(1), for disputes involving only a drug on the MTUS drug list, the deadline for an injured worker to file an IMR application is shortened from 30 to just 10 days from the service of the UR decision (CCR 9792.10.1(a)(2)). The period for a claims administrator to provide the IMRO with documents for a dispute involving only a drug or drugs listed on the MTUS formulary is limited to 10 days (CCR 9792.10.5(a)). Moreover, the IMR organization must complete its review and issue a final determination for these drug-only disputes within five business days of receiving the application and supporting documents (CCR 9792.10.6(g)(4)). These coordinated changes ensure that disputes over prescribed medications are resolved at a much faster pace through every stage of the review process.

MPN CARE COORDINATION AND REPORTING RULES

The new regulations introduced changes aimed at improving the functionality of MPNs. CCR 9767.6(f) imposes new affirmative duties on insurers and employers to facilitate continuity of care. Within 20 days of an employee selecting a PTP within the MPN, the claims administrator must deliver all relevant medical records, including the results of diagnostic and laboratory testing done in relation to the injured employee’s treatment, to that physician. For any subsequently chosen MPN physician, records must be provided on request. Claims administrators are also required to provide all selected MPN physicians with critical administrative information, including the MPN ID number and correct contact details for submitting RFAs and bills.

In addition, the regulations create a new tool for managing MPN providers who abuse the 30-day UR exemption. Generally, an employee has the right to choose a treating doctor within an MPN, and a claims administrator may not file a petition for change of primary treating physician for a doctor who is part of its own MPN. The amended CCR 9767.6(g) now directs that “good cause” for a petition to change is an MPN physician who has demonstrated a “pattern and practice” of failing to render treatment consistent with the MTUS under the 30-day exemption.

There are also changes that apply to all physicians. CCR 9785(d) was amended to allow a PTP to transmit reports by encrypted email or electronic transmission, such as through electronic data interchange (EDI). CCR 9785(e)(1) was amended to require a doctor’s first report of occupational injury or illness, form 5021, to be completed by physicians rendering first aid treatment as defined in LC 5401(a).

INCREASED OVERSIGHT OF UTILIZATION REVIEW PLANS

To carry out the legislative mandate of SB 1160, CCR 9792.7 now requires UR plans that modify or deny treatment to include proof of URAC accreditation. CCR 9792.7(c)(4) was amended to require all UR plans to file a plan modification with the administrative director within 30 days of a material modification, which is defined as occurring when the claims administrator changes the UR vendor; makes a change to the UR standards as defined in CCR 9792.7; or changes its medical director, address, company name or corporate structure (CCR 9792.6.1(n))

The new regulations give the administrative director new enforcement powers, with authority to approve, conditionally approve, deny, place on probation, suspend or even revoke a UR organization’s plan for noncompliance (CCR 9792.7(e)(h)). Moreover, violations established via the probation, suspension and revocation process do not bar penalties that result from an investigation of a utilization review entity (CCR 9792.7(k)).

REVAMPED INVESTIGATION AND PENALTY STRUCTURE

Perhaps the most impactful change for claims administrators and UR organizations is the complete overhaul of the DWC’s utilization review investigation and penalty system. The regulations eliminate the previous system of a “performance rating,” which allowed penalty waivers for entities that scored 85 percent or higher on a UR investigation. The new system provides no performance score and no waiver possibility (although mitigation will still be an option). The DWC believes the new system simplifies and clarifies an overly elaborate process. It acknowledges that the changes initially might result in an increase in penalties for UR investigation subjects, but it believes it’s justified because UR has been part of the system since 2004.

CCR 9792.11 establishes the procedures for a UR investigation. In addition to issuing penalties for violations of the UR process, the administrative director may place a UR plan on probation or withdraw approval of a UR plan. If a plan is placed on probation, a return investigation will be performed within 180 to 360 days from the date of the issuance of the final report or, if applicable, final determination.

The DWC increased certain penalties and added new ones. It explains that some of the prior penalties were so insignificant as to render them ineffective in discouraging unlawful practices, so larger penalties were implemented for offenses considered to be more harmful or reflective of a brazen disregard of the law. CCR 9792.12 establishes the penalties that may be imposed. Key changes to the penalty structure include:

1. failure to obtain approval of a UR plan prior to operation: $30,000;
2. failure to obtain URAC accreditation: $10,000;
3. failure to comply with the laws prohibiting financial incentives or consideration to physicians conducting UR: $25,000;
4. failure to comply with the requirement that only a physician reviewer may deny requests for authorization of medical treatment when there has been a failure to obtain the necessary information, tests or consultation: $25,000;
5. failure to comply with the UR deferral requirements: $5,000;
6. failure to discuss and/or document attempts to discuss reasonable options for a care plan with the requesting physician, prior to denying authorization of or discontinuing medical care, in the case of concurrent review: $10,000;
7. improperly requiring prospective UR during the 30-day exemption period: $3,000;
8. failure to respond to a complete or accepted request for authorization: $3,000 for concurrent review; $2,500 for prospective review; and $750 for retrospective review.

Many penalties for timeliness violations have been changed from small, flat fees to escalating daily or hourly penalties with much higher maximums. For example, a failure to timely make or communicate a decision for prospective or concurrent review now accrues a penalty of $250 per day up to a maximum of $5,000. For expedited review, the failure to timely make and/or communicate a decision is $250 for each hour the response is untimely up to a maximum of $18,000.

In addition, the DWC added penalties for violations related to the investigation procedures. They are:

1. failure to timely provide a complete copy of any document, file or record requested by the administrative director: $500 for each day to a maximum of $10,000;
2. providing a backdated, altered or fraudulent document, or intentionally withholding a document: $5,000;
3. failure to timely comply with any and each compliance requirement listed in a final report, if no timely answer was filed, or any compliance requirement listed in the determination and order after any and all appeals have become final: $500 for each day up to a maximum of $20,000;
4. failure to timely serve the administrative director with documentation of compliance: $500 for each day up to a maximum of $20,000.

And, rather than imposing those penalties for violations related to the investigation procedures, the administrative director may issue a penalty of up to $50,000 and/or revoke approval or suspend the UR plan after considering the gravity of the violation; the characteristics or similarity of the violation to other violations listed in the penalty schedule; the history of previous violations; the frequency of violations uncovered during the investigation; the good-faith behavior of the investigation subject; and other causes.

ANALYSIS AND PRACTICAL IMPLICATIONS

These sweeping new regulations represent a paradigm shift in the administration of utilization review in California. The DWC’s stated goal is to get medically necessary treatment to injured workers faster while holding claims administrators to a higher standard of accountability.

For claims administrators, the changes necessitate an immediate and thorough review of all UR procedures. The 30-day exemption requires careful tracking to ensure prospective UR is not improperly performed for exempt services. The accelerated timelines for formulary drugs demand new calendaring protocols to avoid missing the shortened deadlines for both UR and IMR. Claims administrators must ensure that they comply with the new rules on UR deferrals, approvals and denials.

Furthermore, the elimination of the performance rating and the dramatic increase in penalties mean that even minor, previously waivable administrative errors now can result in significant financial liability. It is now critical to ensure that any contracted UR organization is both URAC-accredited and has its plan formally approved by the DWC. Overall, the new regulatory landscape signals the DWC’s commitment to strict enforcement. Compliance is no longer a matter of achieving a passing score — it is a requirement for every single transaction, with significant financial consequences for failure.

Stay ahead of the updates

If you work in claims, our on-demand Claims Practitioner in Workers’ Compensation (CPWC) builds the practical skills to respond to decisions like Difusco. For attorneys and legal teams, Workers’ Compensation for Legal Professionals (WCLP) dives into strategy, procedure, and real-world application. Explore CPWC and WCLP to keep your decisions compliant and your workflows efficient.

Sure S. Log is a seasoned specialist in workers’ compensation defense and related labor law, providing expert analysis on litigation and settlement strategies. His expertise includes conducting thorough legal research, reviewing case records to streamline discovery, and drafting comprehensive trial and appellate briefs.

A thought leader in the field, Mr. Log regularly develops seminar materials and co-authors influential white papers on critical workers’ compensation topics. His publications include “An Analysis of the New Regulations Regarding Disputes Over Medical-Legal Expense and Medical Treatment,” “Special Report: A First Look at SB 863” detailing the 2012 reforms to California’s workers’ compensation system, and “SB 863: Five Years Later.”

Mr. Log is also the co-author of Sullivan on Comp, a 16-chapter definitive analysis of California workers’ compensation law, which is updated monthly to ensure ongoing relevance and accuracy for industry professionals.