Meeting_Body
FINANCE, BUDGET, AND AUDIT COMMITTEE
APRIL 16, 2026
Subject
SUBJECT: WORKERS’ COMPENSATION UTILIZATION AND PEER REVIEW SERVICES
Action
ACTION: APPROVE RECOMMENDATION
Heading
RECOMMENDATION
Title
AUTHORIZE the Chief Executive Officer to execute Modification No. 2 to Contract No. PS73428000 with Genex Services, LLC in the amount of $259,125 to continue to provide workers’ compensation utilization and peer review, physician consulting, and expedited review services, increasing the contract value from $609,090 to $868,215.
Issue
ISSUE
Metro’s current contract for workers’ compensation (WC) utilization and peer review services expires on June 30, 2027. There has been an increase in contract usage, attributed to the current open WC claims of 2,437, up from 1,429 at the start of FY21. This contract modification will ensure that WC utilization and peer review, physician consulting, and expedited review services can continue through June 30, 2027.
Discussion
BACKGROUND
Metro is a self-insured, self-administered employer that administers WC claims through the WC division of the Risk Management Department (RMD). RMD’s WC division processes thousands of WC related payments monthly for items such as medical services, equipment, pharmaceuticals, legal fees, indemnity benefits, and other expenses.
Consistent with industry best practices, RMD uses a variety of techniques to lower WC medical expenditures. Such techniques include bill review, utilization review (UR), Preferred Provider Organizations (PPO) discounts, and nurse case management services.
The California Labor Code specifies that insurers and self-insured employers may evaluate the appropriateness of medical care prescribed by an injured employee’s treating physician or other medical provider and may deny treatments inconsistent with accepted protocols. Types of treatment subject to review include surgeries, some diagnostic tests, physical therapy, and others. This UR process in California and other states has decreased medical and indemnity costs by reducing unnecessary medical treatments.
The WC division’s in-house occupational nurse certifies acceptable treatments or tests. Non-certified treatments are forwarded to a peer-review physician, as required by law, to review specific medical documentation and issue a report citing the guidelines under which the requested treatment complies or fails to comply. For complicated cases, a more extensive consultation with a physician regarding treatment options may be requested. Administrative rules specify a five-day timeframe for insurers and self-insured employers to respond to a treatment request. Hence, a very fast response time is necessary to complete reviews and avoid potential penalties or sanctions.
On May 26, 2021, the Board awarded a four year base term contract with two two-year options to Genex Services, LLC for WC utilization and peer review, physician consulting, and expedited review services.
Discussion
DISCUSSION
Due to system expansion, Metro’s workforce has increased by 20%, rising from 10,219 FTE employees in FY21 to 12,260 in FY26. Consequently, the WC division has seen an increase in the average monthly number of claims filed and open claims, leading to a higher volume of medical bills and an increase in the medical care prescribed.
Under California Division of Workers’ Compensation regulations, the WC Division refers non-certified medical care to UR to ensure compliance with the Medical Treatment Utilization Schedule, evidence-based medicine standards and Labor Code §4610 requirements. The WC division has increased its contract usage year over year, going from 153 UR referrals in the first contract year to 572 referrals in contract year 4.
Metro has implemented and is actively working to further implement various mitigation strategies to reduce WC claims and costs. Mitigative measures include the implementation of full bus barriers, bolstering Metro’s Return to Work program, implementation of Bus Riding Teams by Department of Public Safety, de-escalation training created by Corporate Safety, and partnering with Operations to enhance claims investigations. These efforts resulted in a 10% reduction of claims in FY25 compared to FY24.
Determination_Of_Safety_Impact
DETERMINATION OF SAFETY IMPACT
Receiving timely medical care is critical to injured Metro employees. Approval of this item will support the WC division’s ability to administer claims promptly.
Financial_Impact
FINANCIAL IMPACT
The FY26 Budget includes $3.01 million for Workers’ Compensation related professional and technical services in Project 100004, PRMA - Workers’ Compensation, under Cost Center 0531, Non-Departmental Operations Risk Management.
Since this is a multi-year contract, the cost center manager and the Chief Risk, Corporate Safety, and Asset Management Officer will be responsible for budgeting the cost in future years.
Impact to Budget
The source of funding for this action will come from federal, state, and local funding sources that are eligible for bus and rail operations.
Equity_Platform
EQUITY PLATFORM
The proposed action supports Metro’s ability to safely serve the communities and customers who rely on Metro’s transportation services and assets by supporting the use of industry best practices that reduce costs associated with the administration of Metro’s WC program. The WC program provides workers’ compensation medical benefits that allow injured employees to recover from an injury and maintain staffing levels that allow Metro to continue providing services. At the time of the solicitation, the Diversity and Economic Opportunity Department (DEOD) did not establish a Disadvantaged Business Enterprise (DBE) goal for this solicitation due to the lack of subcontracting opportunities. Genex Services, LLC did not make a DBE commitment.
Vehicle_Miles_Traveled_Outcome
VEHICLE MILES TRAVELED OUTCOME
Vehicle Miles Traveled (VMT) and VMT per capita in Los Angeles County are lower than national averages, the lowest in the SCAG region, and on the lower end of VMT per capita statewide, with these declining VMT trends due in part to Metro’s significant investment in rail and bus transit.* Metro’s Board-adopted VMT reduction targets align with California’s statewide climate goals, including achieving carbon neutrality by 2045. To ensure continued progress, all Board items are assessed for their potential impact on VMT.
While this item does not directly encourage taking transit, sharing a ride, or using active transportation, it is a vital part of Metro operations, as it provides WC utilization review services in accordance with the CA Labor Code and determines the highest level of savings to reduce medical expenditures. Because the Metro Board has adopted an agency-wide VMT Reduction Target, and this item supports the overall function of the agency, this item is consistent with the goals of reducing VMT.
*Based on population estimates from the United States Census and VMT estimates from Caltrans’ Highway Performance Monitoring System (HPMS) data between 2001-2019.
Implementation_of_Strategic_Plan_Goals
IMPLEMENTATION OF STRATEGIC PLAN GOALS
The recommendation supports strategic plan goals #1) “Provide high-quality mobility options that enable people to spend less time traveling,” and #5) “Provide responsive, accountable, and trustworthy governance within the Metro organization.” This Board action supports the use of industry best practices that reduce costs associated with the administration of Metro’s WC program.
Alternatives_Considered
ALTERNATIVES CONSIDERED
The Board may elect not to approve the recommendation. This option is not recommended since this service is legally mandated by the CA Labor Code to dispute treatment requests. A Utilization Review (UR) must be utilized for any treatment that may not be medically necessary. While Metro staff and the nurse case managers may approve warranted treatment, any denial based on medical necessity must, by law, be issued by a qualified medical professional through the UR process. Further, failing to approve would prevent Metro from realizing significant medical cost savings generated by UR services.
Next_Steps
NEXT STEPS
Upon Board approval, staff will execute Modification No. 2 to Contract No. PS73428000 with Genex Services, LLC to continue to provide WC utilization and peer review, physician consulting, and expedited review services.
Attachments
ATTACHMENTS
Attachment A - Procurement Summary
Attachment B - Contract Modification/ Change Order Log
Attachment C - DEOD Summary
Prepared_by
Prepared by: Claudia Castillo del Muro, Executive Officer, Risk Management, (213) 922-4518
Carolina Coppolo, Deputy Chief Vendor/Contract Management Officer, (213) 922-4471
Reviewed_By
Reviewed by: Kenneth Hernandez, Chief Risk, Corporate Safety, and Asset Management Officer, (213) 922-2990
