wp horizontal dark

The No Surprises Act: Will Providers Hit the Home Run in the Baseball-Style IDR Arbitration?

October 17, 2023

By: Wolfe Pincavage Team

The Lead Off by Congress

Congress enacted the bipartisan No Surprises Act (“NSA”) to end surprise medical bills for emergency services. Among various protections for patients, the NSA also provides for an independent dispute resolution (“IDR”) arbitration process to resolve payment disputes between providers and payors for out-of-network emergency services and certain services furnished by out-of-network providers at in-network facilities.

Foul Ball by the Departments

Two years since the NSA became effective, the regulations promulgated by the Departments of Health and Human Services, Labor, and the Treasury (collectively, the “Departments’”) have faced numerous legal challenges with respect to the IDR process. One of the parties changing the course of this process by taking legal action is Texas Medical Association (referred to herein as the “TMA”).

This article provides a timeline of the instrumental TMA cases and the following changes made to the NSA regulations, focusing on the effects to providers engaging in the IDR process.

1. Providers Made it To First Base

In TMA I,[1] the Texas District Court vacated the portion of the regulation requiring that independent certified IDR entities presume that the qualifying payment amount (“QPA”)—the median of the contracted rates—is the appropriate out-of-network rate for the qualified item or service under consideration. IDR entities must use baseball-style arbitration to select one of the parties’ proposed payment offers, but the amount closest to the QPA is not presumed to be the appropriate rate. Further, the District Court reiterated that IDR entities must consider all additional credible factors, as listed in the NSA, in addition to the QPA. This change evened the playing field by allowing the IDR entities to consider all factors.  

2. The Departments Make a Double Play

After TMA I, the Departments filed its notice of appeal. However, the appeal was dismissed on October 24, 2022. Meanwhile, the Departments issued an Interim Final Rule in August 2022 (the “Rule”).[2] The Rule added two additional hurdles for providers to dodge as the Rule required arbitrators to: (i) consider the QPA first before considering the non-QPA factors, and (ii) presume the credibility of the QPA while evaluating the credibility of the non-QPA factors. The Rule also prohibited arbitrators from considering the non-QPA factors if the arbitrator believes those factors are accounted for by the QPA.

3. Providers Make it To Second Base

In TMA II,[3] the District Court found that the Rule violated the Administrative Procedure Act (“APA”) because the NSA unambiguously requires arbitrators to consider all the specified information, without weighing or otherwise treating one factor differently from the other factors. Because the Rule limited how arbitrators may consider that information, it was a violation of Congress’ intent that the QPA and all non-QPA factors should be treated equally.

The Court found yet again that the Departments unlawfully shifted the arbitration process in favor of the QPA by impermissibly altering the NSA’s unambiguous requirement for the arbitrator to consider each enumerated factor, and therefore deflating the out-of-network payment to providers.

4. Bases Are Loaded and Providers are On Deck

In TMA III,[4] the Texas District Court continued to hold that the Departments deviated from the plain language of the NSA, in violation of the APA. The District Court confirmed that the NSA strictly requires the QPA to be calculated based on rates for services and items actually performed by a provider and based on the provider’s specialty. Plans were calculating the QPA using “ghost rates” and out-of-specialty rates, therefore artificially delating the QPA.

Additionally, the District Court confirmed that self-insured group health plans cannot use rates from all plans administered by a third-party administrator in calculating the QPA. Rates used to calculate the QPA for the plan must be based on rates paid by the specific self-funded plan alone.

This was a win for providers because the out-of-network rates would reflect the rates for the same specialty and will be based on rates previously paid by the specific self-funded plan. This translates to higher out-of-network rates, in-line with providers’ costs and average reimbursement rates.

5. Stadium Prices Go Down

In TMA IV,[5] the Texas District Court vacated two key aspects of the IDR process that were preventing providers from engaging in the federal IDR process.

First, the Texas District Court vacated the $350 administrative fee per party. In light of the ruling, CMS has returned the administrative fee to $50 (the original fee) until further notice, which makes the federal IDR process more affordable and accessible to participating parties. The higher administrative fees prevented providers from initiating IDR.

Second, the court’s ruling vacated the batching rule that required providers to batch items and services that were “the same or similar items and services”, meaning the items and services must be billed under the same service code. This batching rule created hurdles for initiating disputes because it forced providers to initiate separate disputes per service code, resulting in a greater administrative burden on providers and a higher volume of disputes. 

The Departments suspended the IDR process in early August. Currently, Providers are essentially at a standstill as we all await the new proposed regulations.

6. Seventh Inning Stretch – Shifting the Game Strategy

On September 19, 2023, the House Committee on Means and Ways held a hearing to address the flawed implementation of the NSA, and the major negative impacts it has on providers.  The Committee invited major league witnesses to help the Committee understand the gap between the intent and implementation of the NSA.[6] The witnesses touched on the following points:

  1. Plans and providers should ideally be in-network and compensation for all healthcare services should be fair. The NSA was not drafted to tip the scales and it should not be used to allow plans to reimburse out-of-network providers at a significantly lower rate or to encourage plans from excluding emergency providers in their networks.
  2. Narrow provider networks contribute to surprise bills and higher healthcare costs. Providers are forced into the IDR process and have no leverage to encourage plans to accept it into networks. Existing network adequacy protections do not apply to self-insured plans and the NSA implementation made it difficult for providers to receive appropriate reimbursement through negotiating network contracts.
  3. The minimum payment rate for out-of-network services is unregulated and it is set by plans. Establishing a minimum payment rate based on the out-of-network rate before the NSA was enacted would help even the playing field and result in fair compensation to providers.
  4. Only a third of claims are paid after an IDR determination. Enforcement legislation would go a long way to ensure providers are able to continue providing life-saving treatments to patients.
  5. The current batching process does not conform to how bills are submitted or how payments are made. If line items can be bundled and batched according to customary billing practices, the administrative burden and volume of disputes would decrease.
  6. CMS does not provide uniform guidance to IDR entities regarding the process and expectations. Each IDR acts independently, and the result is that disputes may result in different outcomes depending on the IDR entity used.
  7. The IDR process has been “stop and go,” because of CMS’ failure to pitch the NSA effectively. The stop and go operation of the IDR process negatively impacts all parties. Providers are lacking payments that they need to continue to provide effective health care services to patients. Additionally, providers, plans, and IDR entities must prepare for the backlog of disputes because of the IDR process hold.

Even though the Departments have temporarily suspended all Federal IDR process operations, Congress has taken the first step to even the baseball field for all players and bring the NSA back to its original intent. When the parties return to the baseball diamond, the hope is that the IDR process will be free of foul balls so that ultimately the patients get the win.

[1] Texas Med. Ass’n v. United States Dep’t of Health & Hum. Servs., 587 F. Supp. 3d 528 (E.D. Tex. 2022), appeal dismissed, No. 22-40264, 2022 WL 15174345 (5th Cir. Oct. 24, 2022).

[2] See Requirements Related to Surprise Billing; 86 Fed. Reg. 55,980 at 56,061.

[3] Texas Med. Ass’n v. United States Dep’t of Health & Human Services, No. 6:22-CV-372-JDK, 2023 WL 1781801 (E.D. Tex. Feb. 6, 2023).

[4] Texas Med. Ass’n v. United States Dep’t of Health & Hum. Servs., No. 6:23-CV-59-JDK, 2023 WL 4977746 (E.D. Tex. Aug. 3, 2023).

[5] Texas Med. Ass’n v. United States Dep’t of Health & Hum. Servs., No. 6:22-CV-450-JDK, 2023 WL 5489028 (E.D. Tex. Aug. 24, 2023).

[6] Hearing on Reduced Care for Patients: Fallout From Flawed Implementation of Surprise Medical Billing Protections, Sept. 19 2023, https://waysandmeans.house.gov/event/hearing-on-reduced-care-for-patients-fallout-from-flawed-implementation-of-surprise-medical-billing-protections/ (last visited Sept. 23 2023).