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Final Surprise Billing Rules Seek to Provide Fairer Price Dispute Resolution

by | Aug 31, 2022 | Essential, Laboratory Industry Report, Reimbursement-lir

Revised final rule essentially disarms the threat of insurers having the advantage in out-of-network price disputes.

As we noted last month, the federal No Surprises Act (Act) legislation that took effect on January 1, 2022, included a provision that could have exploded in the face of labs and other providers that furnish out-of-network services to patients with commercial health insurance. The landmine was in the form of the regulations implementing the part of the Act that deals with how disputes over the pricing of such services are resolved. The good news is that on Aug. 26, the Biden administration issued a revised final rule that basically disarms the threat.

The Problem with the Original Regulations

The Act bans providers from billing commercially insured patients for more than the in-network cost-sharing due under the patient’s insurance. It also creates an independent dispute resolution (IDR) process that insurers and providers can use to resolve price disputes by “final offer” arbitration. The way it works: Each side submits its final payment offer and the arbitrator decides which of the two is more “reasonable.”

The controversy stems from the interim rules outlining the factors for the arbitrator to consider in making this determination. While there are multiple factors, arbitrators aren’t allowed to take them into account unless and until they consider which of the offers is closest to the so-called “qualifying payment amount” (QPA), i.e., the insurer’s median in-network rate for similar services in the geographic region as of 2019, indexed for inflation by the Consumer Price Index for All Urban Consumers (CPI-U).

Of course, it’s the insurer that dictates the QPA for particular services. So, making QPA the primary factor of reasonableness essentially makes the insurer judge, jury, and executioner of the IDR process. It also gives insurers an incentive to chop reimbursement rates in future negotiations.

The Provider Push Back

In February 2022, a federal judge sided with the Texas Medical Association in its lawsuit against the U.S. Department of Health and Human Services (HHS) regarding the IDR process, concluding that the IDR rules are unfair and in conflict with the intent of the Act. Nothing in the law “instructs arbitrators to weigh any one factor or circumstance more heavily than the others,” wrote Judge Jeremy Kernodle, criticizing the rule for “placing the thumb on the scale” and establishing the presumption that providers would have the burden of rebutting that the QPA is the reasonable price for a particular service. He also found that the HHS evaded the vital public notice and comment rules in promulgating the interim regulations [Texas Medical Association v. United States Department of Health and Human Services, et al., 2022 WL 542879, at *1 (E.D. Tex. Feb. 23, 2022)].

Buoyed by the Texas ruling, the American Medical Association (AMA) and American Hospital Association (AHA), which had filed their own lawsuit in December 2021 challenging the legality of the QPA rule in the US District Court for the District of Columbia, urged that court to act quickly on the matter.

“The [US government] Departments have neither acquiesced to the decision of the Eastern District of Texas vacating portions of the September Rule, nor suggested any intent to abandon their interpretation of the No Surprises Act in any final rule,” AHA and AMA said in a brief filed with the court in April 2022 and quoted in an AHA press release. “A decision from this Court can put an end to the government’s illegal interpretation once and for all. As such, Plaintiffs respectfully ask the Court to act as soon as practicable.”

Earlier, on November 9, 2021, a bipartisan group of 152 House members had also urged the secretaries of Health and Human Services, Treasury, and Labor to revise the IDR regulations “to align with the law as written by specifying that the certified IDR entity should not default to the median in-network rate and should instead consider all of the factors outlined in the statute without disproportionately weighting one factor.”

The Final Rule Pulls Back on the QPA Factor

While it’s not a total victory, the newly issued final rule goes a long way toward alleviating providers’ concerns. The QPA is still listed as the first factor in determining reasonableness since it’s a quantitative figure based on price data. However, the preamble to the final rule also says that once arbitrators consider the QPA, it’s “reasonable” for them to “then” look at “the additional, likely-qualitative factors, when determining the out-of-network rate.”

(Section 2590-716(iii)) of the final rule lists those additional factors, including:

  1. The level of training, experience, and quality and outcomes measurements of the provider or facility that furnished the qualified IDR item or service (which we’ll refer to as “service”);
  2. The market share held by the provider or facility or that of the plan or issuer in the geographic region in which the service was provided;
  3. The acuity of the patient receiving the service, or the complexity of furnishing the service to the patient;
  4. The teaching status, case mix, and scope of services of the facility that furnished the service; and
  5. 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.

The Practical Impact

In addition to leaving QPA as the primary factor, the new rule doesn’t tell arbitrators how to weigh the QPA against the additional “qualitative” factors. As a result, arbitration decisions in out-of-network price disputes are likely to be not only totally unpredictable but inconsistent from case to case. All of this casts significant uncertainty over the IDR process and whether it will generate fair decisions. Meanwhile, the AMA and AHA haven’t given any indication of whether they plan to drop their lawsuit or press on for further changes that would reduce the primacy of the QPA factor.

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