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Massive Caseload Overwhelming No Surprises Act Payment Dispute Resolution System

by | Jan 18, 2023

According to a recent CMS report, the sheer volume of out-of-network payment disputes is overwhelming the system.

The No Surprises Act (Act) that took effect on January 1, 2022, was designed to protect privately insured patients from getting stuck in the middle when providers and payors disagree over reimbursement for out-of-network lab services and other health care. But while the law has reportedly spared 9 million Americans from surprise medical bills,1 it hasn’t made payment disputes go away. Of course, Congress anticipated this by establishing an arbitration system to resolve those payment disputes. Surprise! The sheer volume of disputes is overwhelming the system, according to a CMS report.2

The IDR System

Medicare and other federal healthcare program rules ban labs and other providers from billing privately insured patients for more than the in-network cost-sharing due under the patient’s insurance. The Act extends that ban to privately insured patients. But instead of stipulating a reimbursement rate, it establishes a process for providers and payors to resolve disputes over the payment amount. If the sides can’t negotiate a settlement within 30 days, the provider or payor can initiate a new independent dispute resolution (IDR), aka, “final offer” arbitration process, in which both parties submit their final payment offer and the arbitrator chooses which of the two is “reasonable.”

The regulations outlining the factors that the arbitrator must consider in deciding which payment is reasonable has been the subject of major controversy and litigation. (See, “Surprise Billing Regulations Cut Insurer Control—Sort of,” NLR, September 15, 2022.3)

The IDR System Bogs Down

Meanwhile, the IDR system has been encumbered by an unexpectedly large caseload. The federal Departments of Health and Human Services (HHS), Treasury, and Labor estimated that there would be 17,333 cases per year submitted to the IDR process.4 But according to the CMS report, over 90,000 IDR claims have been initiated—and that’s just for the first six months of 2022 when the system took effect. A report released by America’s Health Insurance Plans (AHIP) and the Blue Cross Blue Shield Association (BCBSA) two months later finds that there were at least 275,000 total claims submitted during the first three quarters of the year.1

Not only is dispute volume unexpectedly high, but individual disputes are taking longer than expected to resolve. “The primary cause of delays in processing disputes has been the complexity of determining whether disputes are eligible for the Federal IDR process,” the CMS report explains, noting that the party that didn’t initiate the dispute has challenged eligibility in 41,814 disputes, or nearly half of all disputes initiated between April 15 and September 30, 2022. When it was all said and done, only 22,194 of the over 80,000 disputes involving emergency and non-emergency items or services were closed during the period.

CMS also sheds light on who’s initiating the disputes. According to the report, many of the most frequent initiators are “large practice management companies, medical practices, or revenue management companies representing hundreds of individual practices, providers, or facilities.” For example, the party that initiated the most disputes, SCP Health, “represents thousands of clinicians across multiple states.”

Top 10 IDR Dispute Initiators (Out-of-Network Emergency and Non-Emergency Items or Services, April 15 – September 30, 2022)

Initiating Party or their
Representative
2022 Q22022 Q3OverallPercent of All
Emergency and Non-Emergency Services
Disputes
SCP Health2,13426,06228,19632%
R1 Revenue Cycle Management1,563

8,3049,86711%
LogixHealth2,9873,7506,7378%
Roundtable Medical Consultants1,6113,1784,7896%
TEAMHealth2043,3653,5694%
Envision Healthcare4662,3322,7983%
Providence Anesthesiology7401,9932,7333%
Singleton Associates, P.A.6701,4542,1242%
Gryphon Healthcare1,0789522,0302%
HCA Healthcare1,0218501,8712%
Source: Notices of IDR Initiation submitted to the Federal IDR portal, April 15 – September 30, 2022.
Notes: Parties and their representatives were identified and aggregated by the email domain of the initiating party on the Notice of IDR Initiation.2

Insurers are accusing providers of causing the backlog by abusing the system. Meanwhile, providers continue to contend that the IDR process is unfairly skewed in the favor of insurers to the extent that the regulations require arbitrators to look to the so-called “qualifying payment amount” (QPA), essentially, 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), as the primary factor for determining the reasonable payment amount for an item or service. Litigation over the issue continues, including a federal court case brought by the Texas Medical Association challenging the legality of the QPA rule.3

Takeaway

To say that the system created to provide fair resolution of provider-payor payment disputes under the No Surprises Act isn’t working the way it was supposed to would be a gross understatement. The controversy over the use of the QPA to determine reasonable payments continues despite the administration’s attempts to resolve providers’ concerns in the final rule. At the same time, it has become clear that the government underestimated both the number of payment disputes to be resolved and the difficulties and time involved in resolving each dispute.

References:

  1. https://ahiporg-production.s3.amazonaws.com/documents/202211_1P_Surprise_Billing.pdf
  2. https://www.cms.gov/files/document/initial-report-idr-april-15-september-30-2022.pdf
  3. https://www.g2intelligence.com/final-surprise-billing-regulations-cut-insurer-control-sort-of/
  4. https://www.dol.gov/sites/dolgov/files/ebsa/laws-and-regulations/laws/no-surprises-act/surprise-billing-part-ii-information-collection-documents-attachment-1.pdf

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