Health Plan Payment and Reimbursement

Surprise-billing arbitration updates include a lawsuit and new context on rate-setting approaches

September 23, 2022 8:36 pm
  • A provider association that earlier won a lawsuit over the No Surprises Act arbitration process is going to court again over the same issue.
  • Delays in resolving arbitration cases can be expected to continue.
  • Findings of a new study indicate the diverging impact of using a rate-setting approach as opposed to a percent-of-charges benchmark to resolve out-of-network payments.

Recent developments around the No Surprises Act’s independent dispute resolution (IDR) process include a new lawsuit and a study illustrating the impact of different criteria for deciding cases.

The Texas Medical Association (TMA) is going to court again, having prevailed earlier this year in a federal case over a 2021 interim file rule (IFR) that established procedures for the IDR process. This time, the dispute is about an August final rule that updated those procedures, but not in a way that the physician association deemed satisfactory.

The final rule did remove IFR provisions that set forth the qualifying payment amount (QPA, i.e., the insurer’s median in-network rate for a given service in a given market) as the overriding criterion in deciding out-of-network payment disputes between providers and health plans.

Based on those provisions, arbitrators had to select the offer closest to the QPA in the absence of compelling evidence that the appropriate out-of-network rate was “materially different” from the QPA. They also were required to submit a detailed written explanation in any instances in which they chose the other offer. The TMA successfully argued that Congress intended for several other factors, such as the acuity of the case and the expertise or teaching status of the provider, to receive equal weight to the QPA.

The TMA thinks rewritten provisions in the final rule will “have the same effect” as the guidance in the IFR. Among the association’s concerns are that the final rule requires arbitrators to:

  • Start the decision-making process by considering the QPA before taking into account additional information submitted by either party
  • Dismiss any additional information that is already accounted for in the QPA, which may preclude from consideration such factors as patient acuity and complexity of service, and include a written explanation if they decide that such factors should be evaluated
  • Gauge the credibility and relevance of any additional information submitted to them but exclude the QPA from such evaluation

The TMA stated that exempting the QPA from rigorous evaluation is unfair. The U.S. Departments of Health and Human Services (HHS), Labor and Treasury “did not grapple with the reality that, in most cases, the QPA will be an unaudited number calculated by the insurer,” the association said.

“And not only must the QPA be considered first, it is the lens through which all other information must be viewed” as indicated by language in the final rule, the TMA added.

In other litigation news, the American Hospital Association and American Medical Association on Sept. 20 moved to dismiss their lawsuit over similar concerns about the IDR process.

However, referring to “continued problems” with the regulations, the organizations said they “intend to make our voices heard in the courts very soon.” Next steps will include an amicus brief to be filed on behalf of the TMA in its new case, according to an AHA and AMA joint statement.

“The Texas court previously held that the interim final rule impermissibly rewrote clear statutory terms by placing a thumb on the scale in favor of commercial insurers. The final rule suffers from the same problems,” according to the statement.

IDR portal still operating below capacity

For many parties, IDR cases have been delayed due to factors that include multiple lawsuits and a volume of cases that has far exceeded initial projections. The delays may not subside anytime soon.

On Sept. 7, HHS, Labor and Treasury announced that they would be giving arbitrators “additional time” to determine the eligibility of disputes for the IDR process. Thus, providers and health plans should not count on resolutions of disputes in the 30-business-day time window specified by the regulations.

Some of the issues that may complicate decisions on whether a dispute is eligible are:

  • State vs. federal jurisdiction
  • Accuracy of batching and bundling
  • Submission of disputes within the required timetable
  • Completion of the full 30-day negotiating period prior to submission

“Submitting a complete dispute with all supporting documentation will help to expedite review,” the departments stated.

To weed out ineligible submissions, the departments have added three eligibility “screeners” at the beginning of the IDR initiation form:

  • The start date of the parties’ open negotiation period
  • A determination of whether a dispute was initiated within the 4-business-day time frame after the open negotiation ended
  • An attestation to be supplied by the initiating party when the item or service was provided in certain states where both state and federal IDR processes may apply

The impact of a QPA-like benchmark

A new study offers context as to why HHS may be seeking to emphasize the QPA in IDR cases if the goal is to decelerate healthcare spending.

As published in Health Affairs, researchers with the health insurer Elevance Health and Bentley University examined billed charges for out-of-network care in California, which in 2017 implemented rules prohibiting surprise billing. In that state, there is no arbitration process, with payment instead based on the median contracted rate for similar services in the market.

Looking at nonemergency inpatient hospitalizations where patients received care from out-of-network providers, the researchers reported that out-of-network charges in California dropped by $752 (24% below trend) compared with states that had no surprise-billing laws.

The researchers noted that the comparison group included only the seven states that are markets for Elevance Health’s commercial plans.

“Without data from other states not served by Elevance Health, we could not verify that the parallel trends that we observed held more broadly in other states,” they wrote. “However, parallel trends in a long pre-period [i.e., prior to California’s implementation of the regulations] in the states we did observe lend support to our findings.”

Using charges as a benchmark

Criteria that are barred from consideration in federal IDR cases include a provider’s usual and customary charges. But charges can factor into arbitration under New York’s model, which directs arbitrators to consider a set of factors that include the 80th percentile of billed charges.

In the same study that looked at California charges, the researchers compared final charges in New York with states that don’t have surprise billing regulations. They found a relative increase in charges of $1,157 (25% above trend). The difference was $815 when controlling for changes to network composition before and after the regulations were passed.

The increase appeared to be driven by out-of-network assistant surgeons, whose charges rose by $4,358 compared with such clinicians in the seven states without surprise billing regulations. The gap remained large — $3,802 — when controlling for changes to network composition.

“It is possible that over time, providers who might enter arbitration could selectively increase charges for infrequently performed (within a given geographic market) nonemergency procedure codes to receive higher payments during an independent dispute resolution process,” the researchers wrote.


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