On August 26, 2022, the Departments of Health and Human Services, Labor, and Treasury (the “Departments”) issued the highly anticipated Requirements Related to Surprise Billing (“August 2022 Final Rule”) and associated guidance materials concerning the independent dispute resolution (“IDR”) process established by the No Surprises Act. The August 2022 Final Rule is narrow in scope and responds to two recent decisions by the Eastern District of Texas vacating portions of the October 2021 Interim Final Rule, Requirements Related to Surprise Billing: Part II (“IFR II”), and incorporates stakeholder comments solicited by the Departments.

Importantly, as discussed more below, the August 2022 Final Rule removes the qualifying payment amount (“QPA”) as the presumptive factor in IDR payment decisions and requires health plans to submit additional information in the IDR process for cases where a claim at issue was “downcoded” by the plan.   

The August 2022 Final Rule will take effect October 25, 2022, 60 days after its publication in the Federal Register

Overview of the No Surprises Act IDR Process

The No Surprises Act and its implementing regulations establish an IDR process to address disputes between out-of-network providers and health plans over the out-of-network rate for items or services paid by the plans to the providers. Prior to initiating the IDR process, the parties enter into an open negotiation period when one party submits notice to the other party, within 30 business days of receiving an initial payment or notice of denial of payment, disputing the payment amount.

If the parties are unable to come to an agreed-upon out-of-network rate within the 30-day open negotiation period, a party can then initiate the IDR process. The initiating party proposes an IDR entity and, if the non-initiating party rejects the proposal and the parties are unable to agree upon another IDR entity, the Departments will select an IDR entity for the dispute.

August 2022 Final Rule Changes to the IDR Process

Prior to two federal court rulings IFR II dictated that the parties submit offers proposing the out-of-network rate, and unless the parties submitted information that demonstrated that the QPA was materially different from the appropriate out-of-network rate, the IDR entity was required to select the offer closest to the QPA – in other words, the QPA functioned as the default payment rate in such disputes. The QPA is defined as the health plan’s median contracted rates for the same or similar items or services in the same geographic area with percentage increases over 2019, 2020, and 2021 based on the consumer price index for all urban consumers.

The two court decisions, Texas Medical Association v. HHS, 6:21-cv-425-JDK (E.D. Tex. Feb. 23, 2022) and Lifenet, Inc. v. HHS, 6:22-cv-162-JDK (E.D. Tex. Jul. 26, 2022) questioned the Departments’ ability to establish the QPA as the presumptive rate of reimbursement in such disputes under a Chevron analysis, vacating those provisions of IFR II as inconsistent with the statutory requirements of the Act and for failure to satisfy notice and comment period requirements for rulemaking.

In response, under the August 2022 Final Rule, the IDR entity must consider the QPA, but is no longer required to select the offer closest to the QPA. Rather, the IDR entity must select the offer that best represents the value of the item or service by first considering the QPA and then considering additional information submitted by the parties or requested by the IDR entity. A non-exhaustive list of additional information the parties can consider submitting includes:

  • The provider’s or facility’s level of training, experience, and quality and outcomes measurements;
  • The market share of the provider or facility or health plan or insurer in the geographic region;
  • The acuity of the patient receiving the item or service, or the complexity of furnishing the item or service to the patient;
  • The teaching status, case mix, and scope of services of the facility, if applicable; and
  • Demonstration of good faith efforts (or lack thereof) made by the provider or facility or the plan or issuer to enter into network agreements, and, if applicable, contracted rates between the parties during the previous 4 plan years.

Information submitted by the parties or requested by the IDR entity must be related to the offers submitted by the parties, credible, and not already accounted for in the QPA. Put differently, there will be no “double counting” of factors included in the definition of the QPA.

Upon consideration of the QPA and additional information submitted by the parties, the IDR entity must determine which offer contains the appropriate out-of-network rate and issue a written decision that describes its rationale and any additional information it considered in reaching its conclusion, including how that the additional information was not already reflected in the QPA.

Additional Information Required to Be Disclosed by Plans

The August 2022 Final Rule also establishes new disclosure requirements for health plans when the plans “downcode” claims included in calculating the QPA. Downcoding is defined as the alteration of a service code to another service code, or the alteration, addition, or removal of a modifier by a health plan, if the changed code or modifier is associated with a lower QPA than the service code or modifier billed by the provider.

Where a QPA is based on a downcoded service code or modifier, health plans must include, in addition to the information already required to be provided with the initial payment or denial of payment, the following: (i) a statement informing the provider that the billed service code or modifier was downcoded; (ii) an explanation for downcoding, which identifies the service codes that were altered and the modifiers that were altered, added, or removed; and (iii) the QPA, if the service code or modifier not been downcoded. Notably, this information must be provided without requiring a separate request for the explanation by the provider.

Guidance Materials

In addition to the August 2022 Final Rule, the Departments released guidance materials to assist providers and health plans with the implementation of the No Surprises Act, the IFRs, and the August 2022 Final Rule. A short summary of each is provided below.

  • FAQs About Affordable Care Act and Consolidated Appropriations Act, 2021 Implementation Part 55: The Departments released a series of FAQs to address stakeholder comments and provide additional clarity on a variety of subject matters, including: (i) payments and notices of denial, (ii) the IDR process, (iii) the application of the No Surprises Act to no-network and closed-network plans, (iv) air ambulance services, (v) emergency services in behavioral health crisis facilities, (vi) required notices and disclosures, (vii) QPA methodology, and (viii) the payer transparency rule. In addition, the FAQs linked to revised versions of the Standard Notice and Consent and Model Disclosure Notice, which if used by providers, will be considered good faith compliance with the notice and consent requirements under the No Surprises Act and implementing regulations.
  • : Summarizes current status and use of IDR process, to date. Additionally, the Departments acknowledge that their emphasis will continue to be on developing guidance and training materials to assist parties in their compliance efforts.
  • Fact Sheet: The Fact Sheet provides a short, general overview of IFRs I and II and the August 2022 Final Rule and the associated requirements for providers, health plans and insurers, and IDR entities.
  • Chart Regarding Applicability of IDR Process in Bifurcated States: CMS developed this resource to assist providers, health plans and insurers, and IDR entities in determining whether the appropriate out-of-network rate will be determined in accordance with the IDR process, a specified state law, or an All-Payer Model Agreement in states where self-insured plans have subjected themselves to a specified state law or an All-Payer Model Agreement.

CMS also debuted a new page on the No Surprises Act section of its website, which contains written guidance and links to a number of resources for providers and IDR entities to assist in understanding and complying with the revised IDR process requirements.

Conclusion

The release of the August 2022 Final Rule addresses one of providers’ primary concerns – that the presumptive use of the QPA in the IDR process favored health plans and insurers and mooted the process itself. Of note, however, the August 2022 Final Rule does not set forth any changes to the patient protections and other provider obligations under the No Surprises Act and IFRs I and II. For more information on the patient protections, other provider obligations, and a summary of the Texas Medical Association case, see Reed Smith’s previous blog posts on the balance billing and surprise billing patient protections and the February 2022 ruling for more information.

Surprise, surprise! – further rulemaking from the Departments is expected. In the August 2022 Final Rule, the Departments indicated that they plan to issue future rulemaking to address comments on the patient protections and other provider obligations.

Reed Smith will continue to track developments related to the No Surprises Act and its implementation. Please reach out to the health care attorneys at Reed Smith if you have any questions about how the August 2022 Final Rule might affect your organization or about any aspect of the implementation of the law.