Texas-based study raises questions about impact of using additional criteria in No Surprises Act arbitration cases

Arbiters in Texas have tended to issue judgments that mirror the median in-network rate even with guidance instructing them to consider other factors, researchers reported.

Results of a new study indicate that ongoing litigation over the independent dispute resolution (IDR) process established by the No Surprises Act may not have a major impact on IDR outcomes.

The study of IDR outcomes in Texas, which in 2020 implemented a law prohibiting surprise billing, suggests “arbiters may anchor to a median in-network price benchmark,” researchers reported in JAMA.

Initially, the U.S. Department of Health and Human Services issued regulations requiring arbiters to primarily consider the median in-network payment amount for a given service in a given market (i.e., the qualifying payment amount) when settling disputes between providers and health plans over out-of-network payments under the No Surprises Act.

Provider representatives have filed at least six different lawsuits challenging those regulations, saying Congress intended for arbiters to consider additional criteria. In the lone case to be decided thus far, a judge said the regulations deviated from legislative intent and IDR arbiters should assess other criteria as well.

HHS has been working on new regulations that purportedly will incorporate those criteria. A key finding of the new study calls into question whether such changes will have a substantial effect on outcomes.

Specifically, in Texas’s IDR process, final allowed amounts closely tracked the median in-network benchmark, with a median ratio of 1.06 between the two metrics. In comparison, the ratio of final allowed amounts to the 80^th-percentile-of-charges benchmark was 0.37.

Median in-network prices and 80^th percentile of charges both are among the criteria required to be used in Texas IDR cases. The two benchmarks are provided by the independent nonprofit FAIR Health.

The 80^th percentile of charges is not among the statutory criteria in the federal IDR process, and the absence of that metric might be a drag on final judgments relative to those seen in Texas and even more so in other states that have arbitration mechanisms.

“Final allowed amounts resulting from IDR in Texas were lower than in New York and New Jersey, where arbiters are not shown median in-network prices, and previous research found that mean awards reflected the 80th percentile of charges benchmark,” the researchers noted.

Study methodology and data

As reported in the study, researchers with the University of Southern California and the University of Pennsylvania examined Texas IDR cases spanning a 15-month period starting in January 2020.

Among more than 32,000 unique IDR cases involving clinicians, 80% of services fell under the category of emergency medicine and 12% were for anesthesia.

In the sample of disputed services, mean charges were $2,306 and mean initial allowed amounts were $192. The mean judgment was $635 — virtually identical to the average FAIR Health median allowed amount benchmark of $634.

Unlike the federal IDR system, Texas includes the option for disputes to be settled by teleconference before proceeding to arbitration. In the study sample, 74% of cases were settled via teleconference.

But that preliminary step may not make a huge difference in the arbitration outcomes. The researchers reported that the median ratio of final allowed amounts to FAIR Health median in-network allowed amounts was 1.12 for arbitrations compared with 1.03 for settlements.