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July 05, 2023

Ongoing Confusion Plagues Implementation of the No Surprises Act

A Look at Challenges with the Payment Resolution Process for Physicians

By Emily Carroll and Christine Parkins Johnson

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The No Surprises Act (NSA) was enacted as part of the Consolidated Appropriations Act in December 2020. Though the law contained provisions aimed at price transparency, provider directories, and other related issues, the primary goal of the NSA was to establish protections for patients from “surprise medical billing” and a payment resolution process for physicians, hospitals, air ambulances, and other providers when such out-of-network care is given. Implementation of the law has been anything but smooth for the Departments with jurisdiction—the Departments of Health and Human Services, Labor, and the Treasury—and more than a year and a half since the surprise billing provisions took effect, resolution of outstanding issues and concerns, specifically related to the payment resolution process, seems far from certain.

One of the key pieces of the NSA, the Independent Dispute Resolution (IDR) process, continues to be in flux as court cases challenge IDR regulations and processes. Although the Centers for Medicare & Medicaid Services (CMS) has issued guidance in an attempt to address district court decisions, the Biden Administration recently announced that it plans to appeal the latest decision, and at least two court cases challenging the IDR process are still pending. In addition, reports about the IDR process released in December 2022 and April 2023 showed that the IDR process is overwhelmed by disputes, resulting in a slow process. Providers who are seeking fair arbitration of disputes with insurers over NSA-related payments face changing standards, increasing filing costs, and lengthy waiting times.

Status of Implementation

The surprise medical billing protections of the NSA took effect on January 1, 2022, preventing patients from receiving a surprise medical bill for emergency care and some out-of-network care at an in-network facility. On the provider side, the NSA requires an initial payment from the health plan to the provider within 30 calendar days, followed by the opportunity for either side to initiate a 30-day “open negotiations” process. If no agreement as to a higher or alternative payment level is reached during open negotiations, either party may initiate a formal IDR process, allowing both parties to submit their best offers and allowable supporting information to the Certified Independent Dispute Resolution Entity (IDRE), which then chooses the party’s offer closest to the appropriate out-of-network rate.

A condensed timeline and a change in administration were partially responsible for the initial use of interim final rules (IFRs) to implement the major parts of the NSA. IFRs in July 2021 and September 2021 established patient protections, including cost-sharing requirements through the calculation of the qualifying payment amount (QPA) and the payment resolution process, respectively.

While there was significant concern expressed by physicians and hospitals about the means by which the Departments directed plans to calculate the QPA in the July IFR, and specifically that the methodology would result in rates much lower than the true median in-network rates it was meant to represent, it was the treatment of the QPA in the IDR process outlined in the September IFR that created a firestorm of controversy and, ultimately, a series of consequential lawsuits.

IDR Lawsuits and Changing IDRE Guidance

Following issuance of the September 2021 IFR, several physician and other provider groups quickly filed lawsuits in various venues challenging portions of the rule that created a rebuttable presumption in favor of the QPA in the IDR process. Under the IFR, IDREs were to presume the QPA to be the appropriate out-of-network rate, and other allowable supporting factors relevant to payment, including those enumerated in the statute (e.g., the provider’s level of training, market share of the parties, and the acuity and complexity of the case), were to only to be considered in limited circumstances, despite, as the plaintiffs all argued, no statutory language creating this presumption. The first case to receive a ruling was filed by the Texas Medical Association (TMA) in the U.S. Federal District Court for the Eastern District of Texas. The judge ruled in favor of TMA and vacated the IFR provisions that created the rebuttable presumption.

In August of 2022, the Departments issued a final rule that attempted to correct issues related to the weighing of the QPA in the IDR process but did so in ways that many physicians and provider groups found too deferential to the QPA and outside the Administration’s statutory authority once again. For example, the Departments prohibited “double counting” of information submitted to the IDREs that may be accounted for in the QPA calculation. The final rule states that IDREs should consider whether the additional information included in the parties’ offers is already accounted for in the QPA or in other information submitted and then avoid weighting the same information twice. For physicians and other providers, such a standard was considered entirely unworkable given that providers were not privy to the data used to calculate the QPA, and it affords plans complete autonomy in reporting what factors were used to calculate the QPA. TMA again filed a lawsuit (TMA II) in the same district asking the judge to vacate provisions in the final rule that continued to overweight the QPA in the IDR process, and the judge issued a ruling on February 6, 2023, that did just that.

Immediately following the TMA II decision, the Departments paused all IDR determinations and directed IDREs to recall any payment determinations issued on or after the date of the ruling. On February 27, 2023, IDREs resumed processing payment determinations for services provided before October 25, 2022, as they were not affected by the TMA II decision. On March 17, the Departments issued guidance that largely reflected the statutory language related to the QPA and other supporting information to be provided to the IDRE, reinstating the IDR process for all claims and applying the new guidance to those claims submitted after October 25, 2022.

Although many stakeholders assumed that the most recent guidance might be the end of the debate over the role of the QPA in the IDR process, on April 6, 2023, the Biden Administration filed a notice to appeal the TMA II decision, further extending the uncertainty around the process.  

Currently, the IDR process is operating under the March guidance.

Additional Lawsuits

TMA filed another lawsuit (TMA III) in November 2022 challenging the calculation methodology of the QPA under the rules as contrary to the statute. The lawsuit asks the court to vacate provisions of a July 2021 Interim Final Rule that, it claims, allow the inclusion of so-called ghost rates and rates of other specialties, exclude bonuses and other incentive payments, and allow QPAs to be calculated by individual plan sponsors. Stakeholders are awaiting a decision in this case.

A fourth lawsuit was filed by TMA in early 2023 (TMA IV) against the Departments arguing that a December 2023 600% increase (from $50 to $350) in the non-refundable administrative fee and the same-service-code batching rule are both procedurally and substantively unlawful, will be economically devastating for physicians, and will hinder access to the IDR process, impeding physicians’ ability to obtain adequate payment for their services.

December and April Reports Showed Substantial Number of Disputes Filed by Providers, Large IDRE Backlog

Providers intending to use the IDR process to secure out-of-network payment consistent with the NSA face a number of hurdles, with an overburdened, slow IDR process principal among them. The Departments released an initial report on the IDR process in December 2022 (the Initial Report), a second report in April 2023 (the Second Report), and a status update (the Status Update) in April 2023. Those reports show that the number of disputes has far exceeded what the Departments anticipated and that only a small proportion of disputes have been fully adjudicated. The Initial Report covered April 15, 2022, through September 30, 2022; the Second Report covered October 1, 2022 through December 31, 2022; and the Status Update provided a broader summary, covering April 15, 2022, through March 31, 2023. The Status Update found that disputing parties initiated 334,828 disputes in nearly twelve months. Moreover, the Second Report found that the number of disputes initiated in the second quarter grew 53% compared with the prior quarter.

The Initial Report found that 96% of the disputes were for out-of-network emergency or non-emergency items or services while only 3.4% were related to out-of-network air ambulance services. Significantly, the Initial Report found that for emergency and non-emergency services, providers initiated 84% of disputes, while healthcare facilities submitted 15% of disputes and health plans submitted fewer than 1% of disputes. Furthermore, the Status Update found that initiating parties were the prevailing party in approximately 71% of the disputes in which a payment determination was rendered.

The Initial Report also found that the majority of disputes submitted involved emergency services, accounting for 71,513 disputes, including 70,071 disputes for services provided in a hospital emergency room. The Second Report showed similar data with 77,213 disputes for emergency services, including 74,907 disputes for services provided in a hospital emergency room.

The chart below details the most common disputes by CPT code.

Dispute Type by CPT Code

Dispute Type by CPT Code

Source: Initial Report, p. 21; Second Report, p. 22

Similarly, the top disputes by service code were consistent in both reports:

  • Emergency department visit for life-threatening or functioning severity
  • Emergency department visit for problem of high severity
  • Emergency department visit for problem of moderate severity
  • Critical care, first 30–74 minutes
  • Continuous remote monitoring of nervous system during operation, each hour.

IDR Process Lags Behind Dispute Submission

In its rulemaking, the Departments estimated that 17,333 claims would be submitted as part of the federal IDR process each year,  which was a substantial underestimation of the 334,828 disputes the IDR process received during the first nearly complete year. Although the Second Report showed that the IDREs were able to process more disputes in the second quarter, the IDREs are still unable to keep up with the volume of disputes. The Status Update indicated that during the reporting period only 106,615 disputes (32%) were closed.  Only 40% (42,158) of the disputes that have been closed resulted in a payment determination. Further, 37.4% (39,890) of closed disputes were found ineligible for the IDR process.

Although one of HHS’ guidance documents lays out expected timelines for the IDR process based on NSA regulations, the document notes that “due to the high volume of disputes being submitted and the complexity of making eligibility determinations, certified IDR entities are sometimes taking longer than the specified timelines.” The long wait times for dispute arbitration may be a particular hardship for providers because it slows the revenue cycle and creates uncertainty about payment. In addition, while awaiting dispute determination, providers and payers may also have repeated disputes related to similar claims. In fact, the IDR process includes a 90-day “cooling-off period,” during which the party that initiated the IDR process may not submit a subsequent Notice of IDR Initiation involving the same party with respect to a claim for the same or similar item or service that was subject of an initial Notice of IDR Initiation. However, a subsequent submission for the same or similar items or services is allowed if the end of the open negotiation period occurs during the 90-day cooling off period. These procedural limitations, again, may slow the revenue cycle.

Ineligible Disputes

Ineligible disputes have clogged the IDR process, with the Departments stating in the Initial Report that “determining the eligibility of disputes for the Federal IDR process is requiring significantly more review and processing by certified IDR entities than initially anticipated.” The Status Update reported that 12% of all of the disputes submitted were deemed to be ineligible for the IDR process. The Departments note that eligibility for the IDR process “depends on several factors, including determining state versus federal jurisdiction, correct batching and bundling, compliance with applicable time periods, and completion of open negotiations.”

Accordingly, eligibility includes both whether a dispute is appropriate for the IDR process based on NSA applicability to certain items, services, and payers, as well as whether the parties engaged in the proper administrative steps prior to submitting the dispute and in submitting the dispute, including but not limited to use of the open negotiation period, proper notice of initiation of the IDR process, and provision of required information.

According to the Initial Report and Status Update, nearly half of disputes include one party contending that the dispute is not eligible for the IDR process. In fact, the Status Update showed that 32% of the disputes that were challenged as ineligible by the non-initiating party were ultimately ruled by the IDRE to be ineligible for the IDR process. The Initial Report noted that determining eligibility for the IDR process is complex and, thus, is the “primary cause of delays in process disputes.”

The Departments have tried to speed the IDR process by making it easier for IDREs to determine whether a dispute is eligible for the process. On December 22, 2022, HHS updated a guidance document and made revisions to the Selection Response form on the IDR portal to require additional information from entities disputing the use of the IDR process. The required additional information includes, but is not limited to, citations to state law (if applicable), documentation confirming a particular law applies, and proof of health plan type. In addition, a federal technical assistance team has begun providing technical assistance to IDREs by performing research and outreach on disputes about eligibility for the IDR process. Although the technical assistance team will provide assistance, the IDRE will make the final determination about eligibility for the IDR process. The Second Report showed that the Departments’ efforts have helped: IDREs determined 9,525 disputes were ineligible in Q4 versus 14,164 during Q3.

Issues determining eligibility of a given claim for the IDR process can also pose a substantial hurdle for providers. Providers typically have limited resources to devote to IDR disputes, much less to analyze how NSA regulations and interact with state law in a given state.

The issue of state versus federal jurisdiction is particularly complicated. Congress drafted the NSA to defer to state-level surprise billing laws that may apply to state-regulated health insurance products. Where a state law “provides for a method for determining the total amount payable under such a plan, coverage, or issuer, respectively,” and subject to the preemption standard set forth in the federal Employee Retirement Income Security Act (ERISA), then the state process, not the federal IDR process, will control.  But the extent of state surprise billing laws and other state laws determining the total amount payable for a particular item of service under a particular state-regulated health plan, coverage or issuer, vary widely. Beginning in mid-2021, CMS began entering into letter agreements with states and territories to identify applicable specified state laws and to clarify when the federal IDR process will or will not be available. Regardless, whether IDR is available or whether payment for an item or service is governed by state law is an area of tremendous complexity.

Given that the IDREs are having trouble assessing this threshold issue of eligibility, it makes sense that providers similarly face substantial challenges determining which payment disputes to submit to the IDR process. According to the Departments, 22 states have specified state law or All-Payer Model Agreements, so the federal IDR process may not apply to claims that are covered by a specified state law or All-Payer Model Agreement. However, the state laws may only apply to certain items or services and certain state-regulated plans. State resolution processes generally would not apply, for instance, to ERISA plans or out-of-state plans. Dispute eligibility analysis can require a provider to assess whether a given dispute belongs in a state’s dispute resolution process or whether the NSA applies to a particular item, service, or payer. Myriad payer types—some of whom may correctly claim that the NSA is not eligible to them—may add to the confusion. It can be difficult, therefore, for providers to navigate the web of state and federal regulations.

Challenges with the state-federal authority analysis are coupled with administrative and procedural requirements to access the IDR process. Parties to the IDR process must adhere closely to timelines and notice and documentation requirements or their dispute may be deemed ineligible due to failure to follow a technical requirement.

For example, the Initial Report found that incorrect batching of claims has led to determinations of ineligibility. Under the statute, batching of multiple claims for the same provider for the same payer is permitted whenever “items and services are related to the treatment of a similar condition.” However, the Departments currently allow batching only if the “items and services are the same or similar items and services,” which are defined as an item or service that is “billed under the same service code, or a comparable code under a different procedural code system.” This narrower definition may have created some confusion among stakeholders and led to nonpermissible batching. It also means that fewer claims can be batched together for the IDR process, increasing volume, and perhaps leading to even greater backlog.

Difficulty with eligibility not only means that providers are expending resources conducting difficult legal analysis but also that providers may be expending resources on submitting claims that are ineligible. Although HHS has provided a website that details “common mistakes and helpful tips”  and a number of technical assistance guidance documents, the advice is focused on the administrative requirements of the IDR submission process and does not help providers analyze dispute eligibility in the context of the complex legal arena of NSA, ERISA, and state law.   

In addition to the accumulation of claims described in the Initial Report related to claims filed between April and December, the Departments also announced that claims continued to exceed expectation through the end of 2022. To fund efforts to resolve the backlog, on December 23, 2022, the Departments announced that the nonrefundable administrative fee used to cover the Departments’ costs associated with the IDR process would increase 600%, from $50 to $350 in 2023. There has been considerable push-back from physicians and other providers since the announcement of this increase, and the litigation challenging the increase (TMA IV) is pending. This increase has the potential to make the IDR process inaccessible for many physician practices, especially smaller practices that may not be able to overcome the fee increase through claims batching. Similarly, financially strained practices may not be able to withstand an IDR loss, cover the IDR fees, and the higher administrative fee, making pursuit of the dispute resolution process potentially too financially risky.

Future Areas of Potential Enforcement and Regulatory Action

Enforcement of IDR Decisions

A growing issue that seems ripe for increased enforcement is timely payment to the prevailing party after an IDR decision. The statute requires payment within 30 days following notice of the IDRE’s decision, and while some time periods in the federal IDR process can be extended for extenuating circumstances, “the timing of the payments to the provider, facility, provider of air ambulance services, or plan, as a result of a payment determination or settlement cannot be extended.”

Though an IDRE’s determination is legally binding, some physicians are reporting a high frequency of late payments or no payment at all following an IDR decision in their favor. There are obvious financial implications for parties, particularly physician practices, when the non-prevailing party does not meet the statutory deadlines for payment, and there are financial barriers to pursuing legal action to enforce an IDRE’s decision in such situations. Moreover, late or non-payment by the non-prevailing party could erode confidence in the IDR system and serve as a deterrent to participation in the IDR process by those parties who cannot afford the risk. As such, it is important that federal and state regulators move to better enforce IDR outcomes.

There will be complexities with enforcement as some state regulators have agreed to enforce, to the extent possible, the outcome of the federal IDR process, while in other states, enforcement has been left up to federal regulators. Should enforcement be, at least initially, complaint-driven, it is key that information is received by the appropriate regulator in a timely way. For now, the federal NSA Help Desk is the clear place to submit complaints, but work will have to be done to ensure timely responses and engage state regulators where appropriate.  

Contract Terminations and Network Adequacy

In enacting the NSA and removing patients from the middle of surprise billing disputes, Congress recognized that a meaningful and balanced IDR process would be needed to allow providers and health plans the opportunity to make their case for fair out-of-network amounts. However, the NSA could also result in payers terminating provider contracts in favor of using the IDR process. There have been reports of national and local payers communicating take-it-or-leave-it in-network rates cuts to physicians of up to 50%, with some citing the NSA as the impetus for the change. Termination of physician and hospital contracts could result in narrower or inadequate networks, impacting patient access to care.

IDR Process Has Limited Effects, Not Linked to Enforcement

The IDR process is limited in the extent of the protections it offers to physicians and other providers and its ability to protect these providers from ongoing or future NSA-related payment issues. The IDR process can result in a better payment for a specific claim submitted to the IDR process. However, the IDR process is not directly linked to enforcement actions, meaning that, theoretically, a payer can continue to deny or underpay certain types of claims, even if an IDRE previously determined a similar dispute in favor of a provider. In fact, the Departments state that the IDR process is not meant to determine whether the QPA is inaccurate, resolve issues of medical necessity, or review denials of coverage. A disputing party or an IDRE may, however, report to the Departments if they believe there are issues with the QPA calculation. The lack of a linkage between enforcement and the IDR process means that physicians may face an uphill, long-term battle related to out-of-network payment amounts.

Likely recognizing the potential disconnect, Congress required that two years and four years after implementation of the IDR process, the Departments will submit to Congress an interim report and final report, respectively, on whether any payers “have a pattern or practice of routine denial, low payment, or down-coding of claims, or otherwise abuse the 90-day period [cooling-off period for filing disputes in the IDR process] described in such clause, including recommendations on ways to discourage such a pattern or practice.” While unclear how Congress or the Departments will use the reports, the findings may provide direction for future policymaking.

Approaching NSA Reimbursement

As the IDR process evolves, physicians should seek to stay abreast of changes by regularly checking the CMS NSA website. When deciding whether to submit claims to the IDR process, we recommend reviewing the law—to the extent possible—to determine whether the dispute belongs in a state process or is eligible for the federal IDR process. Furthermore, the open negotiations period is required, and physician should engage in it in good faith and use it as an opportunity not only to negotiate claim payment but also to work with the payer, if possible, to understand the claim payment and the payer’s explanation for the claim payment. If the claim is eligible for the federal IDR process and an agreement has not been reached, providers can then use the information gained during open negotiation to meaningfully engage in the IDR process. In addition, to the extent it is financially feasible, providers should strongly consider initiating the IDR process when appropriate, since the Status Update found that initiating parties prevailed in 71% of the disputes in which a payment determination was made. Finally, despite reported delays in responses, it will prove important for physicians to report NSA problems and noncompliance to the Departments, including through the NSA Help Desk, so that the Departments are able to provide assistance at both an individual and systemic level. 

    Emily Carroll, Esq.

    American Medical Association, Chicago, IL

    Emily Carroll is an attorney in the American Medical Association’s advocacy department in its Chicago office. She focuses her work largely on state and national managed care reforms that impact physician practices and patient access to care. She can be reached at [email protected]


    The thoughts and opinions expressed in this article are those of the authors and should not be interpreted as official AMA policy.

    Christine Parkins Johnson, Esq.

    Davis Wright Tremaine LLP, Los Angeles, CA

    Christine Parkins Johnson is an attorney in Davis Wright Tremaine LLP’s Los Angeles office. She focuses her practice on healthcare regulatory law with a particular emphasis on operations, compliance, and licensing issues. She can be reached at [email protected]. Follow Davis Wright Tremaine on Twitter @dwtlaw.

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