Note: See the bottom of this article for the latest updates.
The U.S. Departments of Health and Human Services (HHS), Labor and Treasury on Friday temporarily shut down the system for settling disputes over out-of-network payment amounts under the No Surprises Act.
A day earlier, a federal judge gave the Texas Medical Association (TMA) the latest in a string of legal victories involving the independent dispute resolution (IDR) process. The judge ruled that a 2023 change in the administrative fee from $50 to $350 per IDR case was unlawful because HHS did not use a notice-and-comment period before enacting the increase.
Less than 24 hours later, a notice said the portal was closed to all business while CMS makes necessary updates to IDR processes, templates and systems. There was no indication of when operations would resume.
HHS, Labor and Treasury — the three agencies that oversee implementation of the No Surprises Act — also froze some portal operations for five weeks in February and March after the TMA prevailed in litigation involving the criteria used to decide IDR cases. This time is different in that all activity has been halted, whereas in the earlier instance stakeholders could still send disputes to the system. That likely exacerbated a backlog of cases that was said to be approaching 200,000 even before the February stoppage.
A litigation winning streak
The TMA repeatedly has succeeded in challenging aspects of the IDR process, which is available in instances when the No Surprises Act protects patients from being balance-billed and providers and insurers cannot agree on the appropriate amount.
First the medical association won two cases involving IDR criteria, specifically over what providers said was an excessive emphasis on the qualifying payment amount as a deciding factor (the QPA is the median contracted rate for a given item or service in a given market). The second victory (TMA II) not only triggered the earlier shutdown of the portal but also required HHS, Labor and Treasury to issue a second update of the criteria that had been provided to arbitrators.
A third case (TMA III), which has not been decided, contests the QPA formulation process used by insurers.
TMA IV, the most recent case to be filed, was decided Thursday and vacated both the 600% increase in the administrative fee and restrictions on batching similar disputes with a single insurer into one case.
Why the fee bump was nullified
HHS, Labor and Treasury said the massive increase in the administrative fee was justified because the volume of IDR cases during the portal’s first year vastly exceeded expectations.
In Thursday’s ruling, Judge Jeremy D. Kernodle said the change was significant enough to merit a notice-and-comment period, whereas the departments had argued no such process was necessary because the fee increase constituted interpretive rather than substantive guidance.
One problem with such an argument, Kernodle said, is that the increase was based in part on the cost of the pre-eligibility review process, which HHS has ramped up in an effort to ease the backlog of cases. However, no such process was mentioned in the September 2021 interim final rule that established the IDR portal.
The ruling was not a complete victory for the TMA because the judge said providers aren’t entitled to a refund of fees that they’d paid this year. The court could compel a refund only if there were a statutory mandate entitling the plaintiffs to repayment or if the refund entailed a return of confiscated property, according to the decision.
Nor did the court agree to temporarily waive the standard four-day deadline for filing a payment dispute in the IDR portal. For providers that had refrained from disputing out-of-network payment amounts this year due to concerns about the fee, such an accommodation could have allowed them to move forward with arbitration for those cases.
A win for batching
With respect to the batching issue, the court said the September 2021 regulations, which restrict batching to items or services sharing the same service code, “severely” constrain the option. The general inability to batch cases requires providers to pay separate administrative fees — “a costly and sometimes cost-prohibitive consequence of the rule,” Kernodle wrote.
Thus, the regulations are considered substantive rather than procedural and should have been subject to a notice-and-comment period. Comments might have shown the wisdom of allowing for batching by service-code section or by subspecialty, i.e., “broader batching criteria that would give providers increased opportunity to bring their claims to arbitration,” the judge wrote.
In vacating the relevant portion of the regulations, the court stated that it does not anticipate a chaotic situation in which providers go on a batching spree. Such concerns, as expressed by the defendants, ignore that the No Surprises Act text and the September 2021 regulations “limit batching in other ways unchallenged here,” including by requiring that batched items relate to the treatment of a similar condition.
Much to be settled
The TMA III case about the QPA methodology is unresolved. In addition, HHS has appealed the TMA II ruling that the IDR process remained tilted in favor of insurers even after the departments updated the process in an August 2022 final rule.
Following the decision in February, HHS issued new criteria that more closely mirror the language in the No Surprises Act legislation and are more likely to bolster providers in arbitration. In July, though, HHS petitioned the Fifth Circuit Court of Appeals to overturn the TMA II ruling and allow for reinstatement of the disputed provisions in the August 2022 rule. Those terms kept the QPA as the leading consideration for arbitrators, although it was no longer set as a rebuttable presumption as it was in the September 2021 rule.
Stakeholders also expect the departments to issue a potentially sweeping proposed rule on the IDR process in the coming weeks. HHS earlier this year affirmed its intention to publish such a rule, which likely will affect batching policies amid a scramble to make the IDR portal more efficient. The QPA methodology also could be addressed.
It remains to be seen how any QPA-related regulations line up with the pending TMA III litigation. Along with possibly tilting the IDR process more toward providers, a big change to the methodology could affect patient cost-sharing for out-of-network care, since allowed cost-sharing amounts are linked to the QPA under the No Surprises Act’s current rules.
Aug. 11 update: HHS released guidance to arbitrators formalizing reimplementation of the $50 administrative fee for new cases. In addition, for cases filed between Jan. 1 and Aug. 2, if the arbitrator sent an invoice for $350 but the fee has not been paid, the arbitrator should send a new invoice for the lower amount. As noted above, the court decision nullifying the higher fee does not provide for refunds of fees that have been paid this year.
HHS has not yet reopened the portal to new cases but said that will be happening “soon.”
Aug. 9 update: Arbitrators on Aug. 8 could resume processing any 2022 case, any 2023 case for which the fee was paid before Aug. 3, and any 2023 batched case for which the fee was paid and the arbitrator deemed the case eligible for batching. The portal remains closed to new cases.