New legislation seeks to take unwelcome surprises out of patient billing

• A new law called The No Surprises Act is designed to prevent healthcare consumers from getting stuck with potentially large bills after receiving out-of-network care.
  
• Starting in 2022, patients will have to pay only their in-network cost-sharing amount for emergency care and some nonemergency services.
• In a win for provider advocates, the determination of payment for out-of-network services will be decided by arbitration instead of the benchmarking approach favored by health plans.

Although new price transparency regulations may have drawn more attention as the year ended, legislation that addresses surprise billing likewise will affect interactions between the healthcare industry and consumers.

After on-and-off negotiations that spanned the 2019-20 congressional term, the bipartisan, bicameral No Surprises Act was included in a sweeping legislative package that became law in late December. There could be far-reaching effects when the main provisions begin in 2022.

“This is going to have a tremendous impact on the way that companies see revenue flow and have the ability to collect revenue in connection with services,” said Chad Fuller, a partner in the Consumer Financial Services practice of Troutman Pepper.

Addressing a longstanding concern

The primary aim of the No Surprises Act is to ensure patients have to pay only their in-network cost-sharing amount, including deductibles, for emergency care and in nonemergency situations when choosing an in-network provider isn’t an option.

The law thus leaves health plans and providers to settle out-of-network payments among themselves. “The patient is out of the mix,” Fuller said.

Healthcare stakeholders almost universally have supported the core goals of the legislation. “No patient should receive an unexpected bill,” said Rick Gundling, senior vice president for healthcare financial practices with HFMA. “Patients need to be informed of their out-of-pocket expenses as soon as possible in their care treatment.”

Out-of-network providers will be prohibited from balance-billing patients unless they follow strict notice-and-consent procedures. Those include providing an estimate of charges at least 72 hours before the delivery of services.

Some providers won’t be able to balance-bill patients even with consent. That group includes anesthesiologists, pathologists and radiologists.

Crucially, the legislation addresses out-of-network billing for air-ambulance services.

“Air-ambulance fees are a huge, huge cost driver. They account for some of the biggest emergency bills out there,” Fuller said.

“You read a story about some guy that’s out in the middle of nowhere and got picked up [by an air ambulance]. And the next thing you know, they’ve got a $100,000 bill, and they’re getting chased for it.”

Ground-ambulance services are not addressed in the law, but that may not represent a big loophole because those services often are paid at a contracted rate.

Determining payment for out-of-network care

To resolve payment for out-of-network bills, the first step will be negotiations between providers and insurers that can last up to 30 days. If negotiations fail, an independent dispute resolution (IDR) process will be utilized.

Leading up to passage of the No Surprises Act, providers wanted such situations to be resolved via arbitration. Insurers favored a rate-benchmarking approach.

To the extent that the issue came down to lobbying, providers prevailed.

“Providers tended to favor the arbitration approach because theoretically it could lead to higher rates,” said Matthew Goldman, an associate with Sheppard Mullin and a member of the firm’s healthcare practice team. “There are incentive mechanisms as well in the dispute resolution process that, practically speaking, could come to bear in facilitating the negotiation and a negotiated result that might appeal a little bit more to providers than to payers.”

How arbitration will work

During the IDR process, both the provider and insurer will submit an offer. The arbitrator will rule based on:

• Median in-network rate
• Information related to the provider’s training and experience
• Market share of the parties
• Previous contracting history of the parties
• Complexity of the services provided
• Any other submitted information

The mechanism calls for baseball-style arbitration, meaning the arbiter must choose one offer or the other rather than landing on a compromise figure.

“It really encourages payers and providers to work together to find a solution,” said Virginia Bell Flynn, a partner in the Consumer Financial Services practice of Troutman Pepper.

The IDR process drafted in the legislation isn’t totally what providers were seeking. For example, advocates had hoped out-of-network payments could be based on chargemaster prices.

However, late lobbying did secure an important change for providers: The arbitrator may not consider Medicare and Medicaid payment rates when assessing the median in-network rate for the service.

The absence of a minimum payment threshold also is favorable for providers, allowing them to bring disputes over any payment amount to arbitration.

Authors of the legislation also allowed claims to be batched together to reduce administrative burdens for all parties.

“I think there were some pieces of it that some payers may not agree with,” said Flynn, whose healthcare client base primarily consists of health plans. “And I think there’s some pieces that some providers don’t agree with, but that might mean it’s a decently fair resolution.”

Avoiding a rate-benchmarking approach

In the run-up to passage of the bill, health plans had pushed for out-of-network payments to be based strictly on the median contracted rate in a given market.

The American Hospital Association (AHA) estimated that determining payments for out-of-network care via rate benchmarking could cut provider payments by between $17 billion and $20 billion.

Such an approach “could destabilize provider financing and threaten their ability to continue providing services to their communities,” AHA President and CEO Rick Pollack wrote in a comment letter.

Based on her conversations with health plans, Flynn doesn’t expect them to be overly disappointed with the finalized IDR process.

“There’s always a hope that there’s a clear line on what things cost,” she said. “It certainly makes everyone’s life easier if someone says, ‘Here are the proposed rates.’ But I also think payers feel good about [addressing] balance billing. There was a lot of good from their perspective.”

Looking ahead to implementation

With a year until the law takes effect, hospital leaders should “talk to attorneys, talk to your compliance department and just be prepared for implementation of the new law and for further developments,” Goldman said.

“Hospitals that are looking at what the requirements are, figuring out internal processes, thinking about revenue impact, thinking about logistics and billing and price transparency and provision of information — the key is to just not be caught unawares and to keep in mind that there will be further opportunities for input through the rulemaking process. So stay engaged.”

Additional resources for stakeholders

HFMA has extensive tools that can help providers and health plans educate consumers about out-of-pocket expenses. See “Understanding Healthcare Prices: A Consumer Guide” and “Avoiding Surprises in Your Medical Bills: A Guide for Consumers.”