New guidance for No Surprises Act arbitration looks like an improvement for providers

Responding to a recent court ruling, the U.S. Department of Health and Human Services (HHS) has updated the application of criteria for deciding No Surprises Act (NSA) independent dispute resolution (IDR) cases.

Certified IDR entities (i.e., arbitrators) received guidance March 17 instructing them to more directly consider multiple factors when deciding on an out-of-network payment amount. And after a delay of nearly six weeks since the court ruling, payment determinations were set to resume immediately.

Relative to past guidance, most recently a final rule that took effect in October 2022, the instructions give less weight to the qualifying payment amount (QPA) as a factor in arbitration cases.

The QPA, essentially defined as the median in-network payment rate for a given service in a given market, remains a key part of an arbitrator’s deliberations. But new language states that arbitrators also “must consider all information submitted” by either party when determining which side’s offer is appropriate.

The road to get here

In an interim final rule issued in 2021, the QPA was established as, in effect, a rebuttable presumption. Unless compelling evidence was submitted by either party, arbitrators were supposed to choose the offer that was closest to the QPA.

The Texas Medical Association (TMA) in February 2022 won a challenge in which it argued the regulations deviated from the intent of the NSA. The decision led HHS and the Departments of Labor and Treasury (the tri-agencies) to update the guidance when publishing the 2022 final rule.

That revamped guidance instructed arbitrators to first consider the QPA and to evaluate other factors only if certain conditions were met. For example, additional factors could be considered if the information was deemed to be credible and to relate directly to either party’s offer. Also, the criteria could be excluded if an arbitrator interpreted them as already factoring into the QPA.

Last month, however, the TMA’s second court victory in as many years apparently left the tri-agencies with no recourse but to rewrite the regulations to mirror the legislation more closely.  

A look at the criteria

The additional factors have been in place since the 2021 interim final rule spelled out the arbitration process. This is the first time, however, that guidance has stated they must be considered if submitted by either party.

The factors are:

• Level of training and experience, along with quality and outcome measures, of the provider
• Market share of the provider
• The acuity of the patient or the complexity of furnishing the service
• Teaching status, case mix and scope of services of the provider
• Demonstration of good-faith efforts (or lack thereof) by either side to enter into a network agreement, along with contracted rates between the sides during the previous four years, if applicable

Stricken from the new guidance is language such as “Credible information should demonstrate the experience or level of training of a provider was necessary for providing the qualified IDR item or service to the patient”; and “Credible information should demonstrate how market share affects the appropriate OON rate.”

Factors prohibited from consideration in IDR cases remain the same:

• The provider’s usual and customary charges
• The amount the provider would have billed in the absence of No Surprises Act provisions
• Medicare and Medicaid payment rates

Issues with QPA calculations

The guidance instructs arbitrators not to assess whether health plans have calculated the QPA correctly (IDR entities also can’t make rulings about medical necessity and coverage denials).

Subsequent to filing the lawsuit that was decided in February, the TMA turned its attention to litigation in which it seeks to modify the process for determining the QPA.

Among the plaintiffs’ concerns with the calculation protocol is that the regulations deviate from the No Surprises Act text by seemingly allowing health plans to incorporate ghost rates — or reimbursement rates covering providers that never furnish the service in question — as long as any such rates are above $0.

“Unsurprisingly, these ghost rates are generally lower than they would be if providers had an incentive to meaningfully negotiate them, and therefore their inclusion artificially drives down QPAs,” the TMA wrote in its court filing.

Other concerns cited in the lawsuit are that the QPA can be based on contracted rates with in-market providers from dissimilar specialties, that incentive-based payments are excluded from the formula, and that self-insured group health plans can apply the median contracted rate for all such plans that use the same third-party administrator in the market.

A process in flux

The backlog of cases in the IDR portal had reached an estimated 200,000 even before the recent court ruling led to a halt in payment determinations starting Feb. 10 (along with the retraction of any determinations that had been made in the four days since the ruling).

On Feb. 27, arbitrators could resume making payment determinations for disputes involving services provided before Oct. 25, 2022, the effective date of the final rule that was the subject of the litigation. The new guidance allows for all adjudications to recommence.

Citing the inefficiencies that have beset the IDR portal, the Heritage Foundation, a conservative think tank, released a report proposing that Congress scrap the arbitration process. In its place, protocols could be implemented to hold providers and health plans accountable if they charge out-of-network rates that contravene the NSA.

“Instead of establishing a complex and poorly defined dispute-resolution process to set reimbursement levels on an ad hoc basis, Congress could adopt a truth-in-advertising approach to enforce consumer protections,” the report states. “In cases where a consumer faces a balance bill from a non-network physician at a network hospital or an emergency department, both the insurance company and the hospital should be subject to civil monetary penalties.”

With penalties of $10,000 per violation, the report suggests, the IDR process would be rendered moot because both sides would be motivated to adhere to in-network payment rates.

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March 21 update: CMS also announced a new email address for sending payment determination notices to stakeholders via the IDR portal: [email protected]. Providers should make note of the new address to ensure such notices aren’t blocked.