Health Plan Payment and Reimbursement

Final rule appears to give a boost to providers in No Surprises Act arbitration cases

August 22, 2022 10:58 pm
  • A new final rule codifies updated criteria for deciding arbitration cases under the No Surprises Act, with providers potentially benefiting relative to last year’s interim final rule.
  • HHS sees a need to require more transparency from health plans in communications about qualifying payment amounts.
  • Since beginning in April, the arbitration process has bogged down under an unanticipated volume of cases.

As described in a newly released final rule, changes to the arbitration process that was implemented under the No Surprises Act are modestly favorable for healthcare providers in payment disputes with health plans.

The primary criterion in the arbitration process is the same as it was in an interim final rule with comment period (IFC) issued last October: the qualifying payment amount (QPA), meaning the median contracted rate for a given service in a given market.

However, the language in the final rule reduces the emphasis on the QPA. Arbitrators, formally known as independent dispute resolution (IDR) entities, won’t be instructed to generally choose the submitted offer that’s closest to the QPA — in regulatory parlance, they won’t be expected “to apply a presumption in favor of that offer.”

“Rather, these final rules specify that certified IDR entities should select the offer that best represents the value of the item or service under dispute considering the QPA and all permissible information submitted by the parties,” according to the new regulations published by the U.S. Departments of Health and Human Services (HHS), Labor and Treasury.

The changes from the IFC had been expected because a directive with similar guidance to the new final rule was issued in April, two months after a federal judge agreed with providers that the IFC inappropriately diverged from the No Surprises Act legislation by focusing too much on the QPA. Since then, arbitration cases have been proceeding — albeit slowly — using the updated guidance, so any significant deviation in the final rule would have been problematic.

How arbitrators should proceed

When deciding which party’s offer should be accepted as the final payment amount in the baseball-style arbitration cases, IDR entities have more leeway under the final rule to assess the following information if submitted by either party:

  • The provider’s level of training and experience, along with quality and outcomes data
  • The respective market shares of the provider and health plan
  • The acuity of the case
  • The provider’s teaching status, case mix and scope of services
  • Demonstration of good-faith efforts (or lack thereof) by either party to enter into a network agreement, along with contracted rates during the four preceding years if applicable

HHS still wants the QPA to be the default primary consideration in the absence of credible additional information. Hewing to the QPA, whenever possible, would promote “greater predictability in the federal IDR process” and, in turn, “encourage parties to settle disputes through open negotiation or earlier through the offer and acceptance of an adequate initial payment, which would increase efficiencies in how disputes are handled and ultimately lead to lower administrative costs associated with healthcare,” the final rule states.

HHS notes that arbitrators “should consider whether the additional information is already accounted for in the QPA.” If so, the submitted information should be discounted “to avoid weighting the same information twice.”

The regulations cite patient acuity and the complexity of providing a given service as factors that already may be incorporated in the QPA. But for outlier cases or instances when the parties disagree over the service code or modifier, additional information on acuity or complexity could be considered.

Factors that remain prohibited from consideration under the final rule include:

  • A provider’s usual and customary charges
  • Amounts that would have been billed if balance billing were permissible
  • Medicare and Medicaid payment rates

It remains to be seen whether consideration of additional factors makes a significant difference in arbitration outcomes. Examining outcomes in Texas, which in 2020 implemented a law prohibiting surprise billing, a JAMA study found that arbitrators appear to “anchor to a median in-network price benchmark” regardless of whether they are directed to do so.

More transparency regarding the QPA

One update in the final rule that may be particularly advantageous for providers is the emphasis on transparency in the QPA disclosures that are supposed to accompany out-of-network payment offers under the No Surprises Act.

Specifically, if plans down-code the billed claim when calculating the QPA, they must provide a statement that the service code or modifier billed by the provider was down-coded and an explanation of why. They also must alert the provider as to what the QPA would have been had the service code or modifier not been down-coded.

As stipulated in the original legislation, HHS, Labor and Treasury will conduct audits of plans’ QPA calculation methodologies.

“Without information on what the QPA would have been had the claim not been down-coded, the provider, facility or provider of air ambulance services may be at a disadvantage [in negotiations and arbitration] compared to the plan or issuer,” the regulations state.

Providers should be aware that the disclosures could be in a makeshift format in the short term.

The departments explained that plans “may need additional time to update their operating systems to amend the notices that are currently generated.”

Thus, “Plans and issuers may use reasonable methods to provide this additional disclosure with the initial payment or notice of denial of payment while plan or issuer systems and procedures are updated to provide the additional notice in a more streamlined and automated manner.”

Logjam of arbitration cases

The newly implemented IDR process is a key component of the No Surprises Act. Because patients in some scenarios no longer can be balance-billed for out-of-network care, the health plan and provider must settle on an amount to cover a disputed balance via either a 30-day negotiating period or arbitration.

Between April 15, when the IDR portal opened, and Aug. 11, more than 46,000 disputes were initiated, according to federal data. The departments noted that’s “substantially more” than the estimated annual total of just under 17,500.

A payment determination had been rendered in only 1,200 disputes through Aug. 11, suggesting significant delays. In addition, when this article was published, three of the 11 certified IDR entities were listed as not accepting new cases.

A big cause of the backlog, according to the departments, is confusion among participants over whether cases are eligible for arbitration. For example, more than 21,000 disputes were challenged by a party as being ineligible, and IDR entities found at least 7,000 of those cases were, in fact, ineligible.

“Eligibility for the federal IDR process turns on a number of factors, such as state/federal jurisdiction, correct batching and bundling, compliance with applicable time periods and completion of open negotiations,” the departments stated.

The departments hope that clarifying the disclosures that are required when health plans make their initial payments “will foster the exchange of necessary information within the federal IDR process, resulting in faster completion of the eligibility review.”

Key mistakes to avoid when initiating a dispute, according to a CMS tip sheet, include:

  • Incorrectly batching cases
  • Incorrectly submitting disputes involving bundled IDR items or services
  • Failing to use the contact information provided with the initial payment or notice of denial
  • Failing to include the QPA provided with the initial payment or notice of denial
  • Failing to provide documentation that open negotiations were initiated (for scenarios in which the non-initiating party reports that open negotiations did not occur)

For more guidance on the IDR process and other aspects of the No Surprises Act, see this updated FAQ.


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