For the No Surprises Act arbitration process, 2023 brings a steep fee hike and continuing litigation

The No Surprises Act’s independent dispute resolution (IDR) process is about to become more expensive for healthcare stakeholders.

In 2023, the nonrefundable administrative fee due from each party involved in any payment dispute that goes to arbitration will increase from $50 to $350, according to a Dec. 23 memo from CMS’s Center for Consumer Information and Insurance Oversight. Given the volume of potential cases facing some providers, the $300 hike could put them in a no-win situation as they consider whether to formally dispute a health plan’s proposed out-of-network payment amount.

CMS “is making it almost impossible to employ the IDR process,” tweeted Jeffrey Davis, director of regulatory affairs for the American College of Emergency Physicians, after the memo was issued.

The U.S. Departments of Health and Human Services, Labor and Treasury (the tri-agencies), which together oversee implementation of the No Surprises Act, previously announced an increase in the fees payable directly to IDR entities in 2023.

Those arbitrators can set a fixed fee of as much as $700 per single dispute that they receive next year, up from $500 in 2022. For batched cases, the maximum allowed fee is increasing from $670 to $938. (The low ranges of the allowed fees remain $200 and $268, respectively.)

Unlike with the administrative fee, which is owed by both parties, the IDR entity fee is paid only by the party that loses a case. However, the parties must split the fee at the outset, with the winning party then receiving a refund.

The rationale for the increase

The hike in the administrative fee, which modifies an Oct. 31 announcement that the $50 fee would stay for next year, is being attributed to “increasing expenditures in carrying out the federal IDR process.”

A big issue is the logjam of cases that has developed, far exceeding the anticipated volume. The tri-agencies reported that nearly 164,000 cases were filed between April 15, when the IDR portal opened for business, and Dec. 5. That compares with a preliminary projection of about 17,500 for all of 2022.

In about 68,000 cases, the non-initiating party filed a dispute regarding the case’s IDR eligibility. Arbitrators found about 23,000 of the cases to be ineligible.

“The process of determining whether a dispute is eligible for the federal IDR process has been a more significant burden for certified IDR entities than either the departments or the certified IDR entities initially expected,” the memo states, adding that the situation “has resulted in low collections of the administrative fee relative to the volume of disputes processed in the portal.”

Addressing such problems entails taking a more proactive approach to assessing whether cases are eligible for arbitration. Among various details to be sorted out are:

• State vs. federal jurisdiction
• Correct batching and bundling
• Compliance with applicable timelines
• Completion of open negotiation as required

The work being undertaken in this effort, including outreach and technical assistance provided by a contractor and government staff, is part of the impetus for the fee increase, according to the memo.

Lawsuits continue to be filed

The criteria used by arbitrators to decide payment disputes has been the subject of litigation since initial guidance was issued in 2021. In February 2022, a judge ruled in favor of the Texas Medical Association (TMA) in its case against the federal government, agreeing with the TMA that the key benchmark for determining final payment deviated from legislative intent and unfairly favored health plans.

Since then, the TMA has filed two more lawsuits.

One suit was over new regulations issued by HHS in August 2022 in response to the initial case. Providers criticized the updated guidance for continuing to overemphasize the qualifying payment amount (QPA, i.e., the median in-network payment for a given service in a given market) as the deciding factor in cases.

The TMA subsequently returned to court in the fall to make essentially the same argument it had made before. A decision in that case, from the same court that ruled for the TMA in early 2022, is pending.

At the end of November, the TMA filed a third lawsuit with the court. The issue this time is not about how the QPA is applied to cases, but rather about how health plans are calculating the QPA in the first place. Among the TMA’s various concerns is that the regulations deviate from the No Surprises Act text by indicating that health plans can incorporate ghost rates, or rates covering providers that never furnish the service in question.

“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.

Such a methodology would continue to harm providers even if the TMA prevails in its other pending case, the association argued. That’s because the QPA would still be a factor in initial payment determinations, and arbitrators are required to choose between each party’s offer rather than attempting to negotiate a middle ground.

“Insurers often make initial payments that are equal to the applicable QPA,” the TMA wrote. “And if providers do not agree to that amount, insurers frequently refuse to negotiate during the open negotiation period and offer the QPA as their bid during the IDR process.”