No Surprises Act: New Regulations Improve Dispute Resolution Process for Providers

August 25, 2022
Firm Publication

On August 19, the federal government issued a final rule addressing certain aspects of the No Surprises Act (NSA). The NSA was enacted in December 2020 to protect commercially insured patients from receiving surprise medical bills in emergency and certain other situations and to impose related compliance obligations on providers and payers. The regulations, released jointly by the Departments of Labor, Health and Human Services (HHS), and the Treasury (collectively, the Departments), finalize certain policies included in interim final rules issued last year (available here and here).

Most notably, the final rule updates regulations implementing the new federal independent dispute resolution (IDR) process available to settle payment disputes between payers and out-of-network (OON) providers. The Departments revised the instructions for how IDR entities should determine payment rates, addressing provisions invalidated through litigation and provider comments submitted in response to the interim rules. OON providers are likely to be pleased with the changes to the IDR process, although the changes do not go quite as far as many providers had hoped they would.

The final rule is effective 60 days after publication in the Federal Register, which is expected on August 26, 2022. Unfortunately, the final regulations do not address all areas of the NSA covered by the interim rules issued last year. The Departments indicated that they plan to finalize other provisions “at a later date.” Below, we summarize the three areas of regulations addressed in this final rule.

Payment Determination Standards Under Federal IDR Process

Providers have been anxiously waiting to see how the government would update the IDR process in light of a federal district court decision in February. In Texas Medical Ass’n v. U.S. Department of Health and Human Services, the federal district court in the Eastern District of Texas struck down provisions that instructed IDR entities to assume that the Qualifying Payment Amount (QPA) (i.e., typically the median in-network rate) is the appropriate payment amount and to generally choose the offer closest to the QPA. Providers argued that the interim rules favored payers by presuming the QPA is the appropriate amount, effectively setting the QPA as the benchmark for OON payment rates. Providers also report that payers are reducing in-network payment rates based on the presumption that the QPA is the appropriate payment amount.

Ruling in favor of the providers, the court held that the NSA directs IDR entities to consider both the QPA and additional information submitted by providers that may warrant a higher payment amount. As such, the provisions in the interim rules directing IDR entities to give greater weight to the QPA were inconsistent with the statute.

In light of this decision and comments submitted in response to the interim rules, the Departments are removing the problematic provisions.  Pursuant to this final rule, the regulations will no longer require IDR entities to presume that the QPA is the appropriate payment amount. Although the Departments indicated that the QPA would often be an appropriate OON rate, they also acknowledged that additional information submitted by providers might be relevant to determining the appropriate OON rate.

The final rule requires IDR entities to select the offer that the IDR entity determines “best represents the value of the qualified IDR item or service as the out-of-network rate.” In making this decision, IDR entities should consider the QPA and then consider all additional information submitted by the parties relating to the offer. Permissible factors that parties may submit for IDR entities to consider include the following:

  1. The level of training, experience, and quality and outcomes measurements of the provider or facility that furnished the qualified IDR item or service (such as those endorsed by the consensus-based entity authorized in section 1890 of the Social Security Act).
  2. The market share held by the provider or facility or that of the plan or issuer in the geographic region in which the qualified IDR item or service was provided.
  3. The acuity of the participant, beneficiary, or enrollee receiving the qualified IDR item or service, or the complexity of furnishing the qualified IDR item or service to the participant, beneficiary, or enrollee.
  4. The teaching status, case mix, and scope of services of the facility that furnished the qualified IDR item or service, if applicable.
  5. The demonstration of good faith efforts (or lack thereof) made by the provider or facility or the plan or issuer to enter into network agreements with each other, and, if applicable, contracted rates between the provider or facility, as applicable, and the plan or issuer, as applicable, during the previous four plan years.

In commentary, the Departments emphasize that each factor should be weighted only once, as some additional information providers may submit to support their offer may already be accounted for in the QPA. For example, if a provider submits additional information about patient acuity to support a higher payment rate and the IDR entity determines that the QPA is based on the in-network rate for a service code that already accounts for patient acuity, then the IDR entity should not consider the additional information.

Payer Disclosure Requirements

The final rule also addresses the information that payers must share with providers regarding the QPA. Last year’s interim rules required payers to respond to claims billed by OON providers within 30 days and disclose to providers certain information along with the initial payment or denial of payment. In cases where the QPA will be the basis for determining a patient’s cost-sharing obligation for a service, the required disclosures included the QPA.

In response to feedback submitted by stakeholders, the Departments concluded that payers must disclose additional information to providers in the context of “downcoding” so that providers would not be disadvantaged in negotiating rates and filing disputes under the IDR process. Downcoding occurs when the payer determines a different service code or modifier that is likely to result in lower reimbursement is more appropriate than the one billed by the provider. Because downcoding could result in a lower QPA, providers had requested that the Departments require the payers to inform providers when they have downcoded a claim so that providers can evaluate whether a higher QPA may be warranted.

The Departments agreed. As a result, if an OON provider bills a payer and the payer responds with a QPA based on a downcoded service code or modifier, the final rule requires the payer to provide the following additional information about the QPA along with the initial payment or denial of payment:

  • A statement that the service code or modifier billed by the provider was downcoded.
  • An explanation of why the claim was downcoded, including a description of which service codes were altered, if any, and which modifiers were altered, added, or removed, if any.
  • The amount that would have been the QPA if the service code or modifier has not been downcoded.

The Departments indicated that they are continuing to evaluate whether payers must disclose other information related to the QPA calculation. In the meantime, the new requirements related to sharing information on downcoded claims apply to items or services rendered on or after 60 days after the final rule’s publication in the Federal Register. However, the Departments recognize that payers may need time to update systems to include the additional notifications and payers may use reasonable methods to meet the disclosure rules while systems are being updated.

IDR Entity Written Decisions

The other area in which the final rule makes changes to the interim rules initially implemented last year relates to information that IDR entities must include in their written decisions to be shared with the parties and the Departments. The Departments will rely on information received from the IDR entities to publish information about the IDR process, including how often the payment amounts determined by IDR entities are greater than the QPA.

The interim rules required IDR entities to explain their decision in cases where the IDR entity chooses the offer furthest from the QPA. The Departments agreed with commenters that IDR entities should explain their decisions in all cases and updated the regulations accordingly.

The Departments also added additional transparency requirements, requiring that the IDR entity’s written decision indicate what information the IDR entity identified that demonstrated that the offer chosen best represented the value of the item or service, as well as the weight given to the QPA and any additional information submitted by the parties. In cases where the IDR entity based its decision on additional information submitted by the parties, the written decision must explain why the IDR entity concluded that the QPA did not already account for the additional information.

Implications for Providers and Next Steps

Providers will likely be pleased with the final rule, given that there is no longer a presumption that the QPA is the appropriate payment amount. However, providers did not quite get everything they had asked for: the Departments declined to direct IDR entities to give equal weight to the QPA and additional information submitted by providers. Although the final rule requires IDR entities to consider additional information shared by providers, they must do so only after first considering the QPA and only if the additional information is credible, related to the service in question, and not already accounted for in the calculation of the QPA.

Further, instead of giving “equal weight” to the QPA and additional information submitted by the parties, the Departments directed IDR entities to consider and give additional information “appropriate weight” based on the information provided by the parties. The Departments do not elaborate on what constitutes appropriate weight, so for now, it seems to give the IDR entity more discretion.

The updated disclosure requirements related to downcoding are also probably a net positive for providers, as the information may provide additional avenues to support a higher payment amount during negotiations or the IDR process. Based on statements made by the Departments in the final rule and comments submitted by providers, the Departments are likely to address payer disclosure requirements in future regulations further.

The Departments are also expected to issue final rules addressing other NSA provisions addressed in last year’s interim rules, such as the ban on balance billing, payer and provider disclosure requirements, and requirements to furnish good faith estimates of expected charges. HHS is also expected to issue a proposed rule regarding requirements related to the advanced explanation of benefits and other provisions in the Consolidated Appropriations Act of 2021, which included the NSA.

We will continue to monitor developments related to the NSA and the Departments’ implementation. Please contact the authors if you have any questions.