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News | Billing and Collections

New rule describes the penalty associated with regulations on surprise billing

News | Billing and Collections

New rule describes the penalty associated with regulations on surprise billing

  • A new rule from HHS sets forth the maximum penalty for violations of patient-billing regulations that take effect Jan. 1, 2022.
  • Enforcement starts at the state level and could carry implications for out-of-state telehealth providers.
  • The rule describes aggravating and mitigating factors in the determination of penalties for violations.

Healthcare providers could face penalties of up to $10,000 for each violation of regulations that prohibit surprise billing of patients starting in 2022.

The penalty amount and related procedures were confirmed in a newly issued proposed rule, the bulk of which pertains to insurers and air ambulance providers.

All providers will want to take note of the proposed enforcement procedures associated with the new regulations, which were established by passage of the No Surprises Act in late 2020. A previously issued interim final rule with comment period will implement core provisions of the law, including restrictions on out-of-network cost sharing and balance billing, along with the notice-and-consent procedures required to bill patients for out-of-network care.

Comments on the newly proposed rule are due 60 days after the rule’s publication in the Federal Register, which likely will happen within the next week.

Enforcement will start with the states

As with other sets of healthcare regulations, such as HIPAA, provisions are supposed to be enforced at the state level. “If HHS determines that a state has failed to substantially enforce an applicable provision, HHS enforces that provision in the state,” the proposed rule says. Research posted by the Commonwealth Fund shows 33 states have comprehensive or partial surprise-billing protections.

A key point in the proposed rule is that a state’s enforcement of surprise-billing regulations can apply to providers that offer telehealth services to residents of that state “even in circumstances where the provider or facility is located in a different state.”

“While many states require licensure of out-of-state telehealth providers furnishing care to individuals within the state, HHS understands that this is not always true, and that many states have relaxed licensure requirements in response to the COVID-19 public health emergency,” the proposed rule adds. “HHS seeks comment on whether the approach taken in this proposed rule presents challenges with respect to providers or facilities furnishing telehealth services.”

Factors in determining the penalty amount

Enforcement at the federal level will fall under the purview of CMS. If a violation of the new billing regulations is alleged, “CMS would consider all relevant documentation provided when determining whether to impose a civil money penalty, including information from the complainant, provider or facility,” the proposed rule states.

If CMS decides a penalty is called for, it would evaluate various factors when determining the amount. Aggravating factors, which could result in a maximum or near-maximum penalty, include evidence of a pattern of violations; significant financial harm inflicted on the affected individuals or health plans; and failure to provide documentation of corrective steps.

The penalty amount could be reduced by mitigating circumstances, including an absence of previous complaints and steps already taken to adjust business practices to comply with the regulations.

The penalty could be canceled if the violation was unintentional and the provider withdraws the inaccurate bill and reimburses the affected plan or enrollee for the erroneous amount, plus interest at a rate determined by the HHS secretary.

An exemption to the penalty could be extended to providers that are dealing with financial hardship arising from extraordinary circumstances such as a natural disaster or — as has been an issue for the last 18 months — a public health emergency.

Procedures for assessing a penalty

Under the proposed rule, CMS would notify providers of an alleged violation in writing, including a description of any complaints and supporting information, along with the proposed penalty.

The notice would include instructions on how the provider can respond and would describe the provider’s right to a hearing. At the hearing, the provider could be represented by counsel, present witnesses and cross-examine witnesses.

The notice also would state that failure to request a hearing within 30 days of receipt allows CMS to implement the proposed penalty “without right of appeal.” However, any final decision on a penalty could be challenged in U.S. appellate court.

If a penalty is issued, CMS would notify certain organizations, including the state or local medical or professional association, the state health department, the appropriate state or local licensing agency and the applicable utilization and quality control peer-review organization.

Penalties cannot be issued if more than six years has elapsed since the time of the alleged violation.

More about the new rule and what’s to come

The proposed rule has many provisions that apply specifically to providers of air ambulance services and to health plans. See this fact sheet for a summary.

Still pending are regulations to establish the arbitration process that will be used to determine health plan payments for out-of-network care if the parties can't agree during negotiations.

About the Author

Nick Hut

is a senior editor with HFMA, Westchester, Ill. (nhut@hfma.org).

Sign up for a free guest account and get access to five free articles every month.

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