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Department of Industrial Relations
Its Failure to Adequately Administer the Qualified Medical Evaluator Process May Delay Injured Workers’ Access to Benefits

Report Number: 2019-102


Audit Highlights . . .

Our audit of the DWC and its oversight and regulation of QMEs revealed the following:

Results in Brief

Qualified medical evaluators (QMEs) are physicians who examine injured workers when disputes arise between the workers and their employers regarding medical issues in workers’ compensation claims. Workers’ compensation benefits can include payment for medical treatment, paid time off during recovery, and compensation for any permanent disability incurred as part of a work‑related injury. The Department of Industrial Relations’ (department) Division of Workers’ Compensation (DWC), whose mission is to minimize the adverse impact of work‑related injuries on California employees and employers, is responsible for overseeing QMEs and administering the process for selecting QMEs to examine workers. It oversees QMEs by appointing physicians to be QMEs, investigating complaints against QMEs, and disciplining QMEs who violate the department’s regulations. It administers the QME selection process by generating a list of QMEs (known as a panel) from which a QME is selected to evaluate an injury. However, DWC has not adequately ensured that it has enough QMEs to meet demand and that QMEs are producing high‑quality reports containing the findings of the examinations. By not fulfilling these responsibilities, DWC may delay injured workers’ access to benefits and increase costs for employers.

Without an adequate number of available QMEs, injured workers can experience delays in receiving evaluations and therefore delays in receiving the benefits they need. Furthermore, employers can incur increased costs. Our 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. For example, 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. DWC’s data show that if a workers’ compensation case required one replacement panel because of an unavailable QME, the case was delayed more than two months nearly half of the time. 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.

Because QMEs have become more frequently unavailable, we believe changes to the panel selection process are also warranted. Injured workers represented by an attorney have a different selection process than unrepresented injured workers. Data show that the rate of replacement panel requests for represented cases is three times higher than the rate of requests for unrepresented cases, partly because unrepresented workers generally can select from among a panel of three QMEs while represented workers generally have to use the remaining QME after each party strikes one from a panel of three. Thus, unrepresented workers can select from more QMEs.

Furthermore, DWC inappropriately used its reappointment process to discipline some QMEs alleged to have committed overbilling violations, a practice that we believe raises due process concerns. Rather than following the department’s regulations to discipline QMEs at the time it identified alleged violations, DWC denied the QMEs’ reappointments, citing the alleged violations. The QMEs whose reappointments were denied were prohibited by law from performing QME services until the allegations were resolved, a process that can take months. Moreover, we found that DWC was slow to schedule hearings QMEs requested after DWC denied their reappointment appeals, or it did not schedule the requested hearings at all, which were deviations from its regulatory hearing process. Consequently, the QMEs had an incentive to settle with DWC so that they could resume providing QME services and earning income from those services. We found that DWC generally entered into settlement agreements with QMEs while they were unable to practice as QMEs. These agreements required the QMEs to make restitution payments to insurance companies for alleged overbilling violations instead of proceeding with the disciplinary process outlined in the department’s regulations. We believe DWC’s lack of sufficiently detailed, written policies and procedures for investigating and resolving complaints contributed to these concerns.

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. These reports must provide medical evidence to help judges resolve disputes related to workers’ compensation claims. The quality of these reports is especially important because reports that are inaccurate or incomplete can delay resolution of disputes and workers’ receipt of benefits, and the delays can increase costs for employers involved in the disputes. 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.

Summary of Recommendations


To ensure that DWC maintains a sufficient supply of QMEs and appropriately compensates these individuals, 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.

To reduce the delays that replacement panels cause in resolving workers’ compensation claims, the Legislature should revise state law to increase the number of QMEs on the panels DWC provides.


To ensure that DWC appoints enough QMEs to keep up with the demand for services, it should, by April 2020, develop and implement a plan to increase the number of QMEs, prioritizing specialties with the greatest shortage relative to demand.

To ensure consistency and transparency in overseeing QMEs, DWC should, by April 2020, develop and implement separate written policies and procedures that define and specify its internal processes for disciplining and reappointing QMEs.

To ensure that DWC monitors and reviews QME report quality and to ensure the efficient resolution of workers’ compensation claims, it should, by April 2020, create and implement a plan to continuously review QME reports for quality and report its findings to its administrative director annually.

Agency Comments

DWC accepted our recommendations but it disagreed with certain statements in our report. DWC’s response to our report begins in the response section and our comments on DWC’s response begins later in the response section.

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