On August 19, 2022, the US Departments of Health and Human Services (HHS), Labor and Treasury posted a final rule revising portions of the federal No Surprises Act (NSA). Generally, the rule finalizes three aspects of the two-part interim final rule that the Departments published along with the Office of Personnel Management in 2021. First, the final rule expands the information about the qualifying payment amount (QPA) that plans and issuers (collectively, payers) must disclose to providers and facilities (collectively, providers). Second, it reinterprets the provisions of the NSA that govern the determination of the appropriate out-of-network rate through the federal independent dispute resolution (IDR) process, and prescribes how certified IDR entities are to weigh the QPA and other considerations when selecting one of the parties’ offers. The certified IDR entity must now consider the QPA first, and then give weight to other considerations only if those other considerations are not accounted for in the QPA. Third, the final rule expands the information that a certified IDR entity must provide in its written payment determination to include a statement explaining why the QPA did not already account for other considerations weighed by the IDR entity.

IN DEPTH

The Departments also released three pieces of related guidance:

• Affordable Care Act Implementation Frequently Asked Questions (FAQs) Part 55

• Federal Independent Dispute Resolution Process Status Update

• A page on the NSA website titled “Common Mistakes and Helpful Tips for Parties Initiating an IDR Dispute.”

The guidance address a wide range of NSA implementation issues, including how payers are to determine the provider specialties for which QPAs are required, and the model disclosure notice and required notice and consent documentation applicable to providers.

The changes will be effective within 60 days of publication in the Federal Register.

The final rule is extremely narrow in focus, responding to comments and making revisions on just a few issues. Scores of issues raised by commenters have not yet been addressed in formal rulemaking. The Departments note that they still intend to address the public comments on other aspects of the interim final rule at a later date. Moreover, there are whole aspects of the statute that have not yet been implemented by regulation, including processes for auditing payer QPAs or governing good faith estimates for insured individuals.

Background

The Consolidated Appropriations Act, 2021, signed into law on December 27, 2020, included the NSA, among other provisions. In July and October 2021, the Departments issued a two-part interim final rule implementing core aspects of the NSA (Requirements Related to Surprise Billing; Part I, 86 Fed. Reg. 36872 (July 13, 2021) (IFR Part I); Requirements Related to Surprise Billing; Part II, 86 Fed. Reg. 55980 (Oct. 7, 2021) (IFR Part II)). We previously described IFR Part I here, and IFR Part II here.

Pursuant to the NSA and IFR Part I, if a participant, beneficiary or enrollee (collectively, an enrollee) with benefits under a group health plan or group or individual health insurance coverage receives emergency services at an emergency department of a hospital or an independent freestanding emergency department, a nonparticipating provider or a nonparticipating emergency facility may not balance bill the enrollee for any amount in excess of the enrollee’s in-network cost-sharing amount. Similarly, if an enrollee receives nonemergency services provided by a nonparticipating provider in connection with a visit at a participating facility, a nonparticipating provider may not balance bill the enrollee in excess of the enrollee’s in-network cost-sharing amount, unless the nonparticipating provider provides the enrollee with notice and obtains consent to waive the balance billing protections in advance of the service (as long as the service provided is not an “ancillary” service for which consent to balance bill may never be obtained).

The NSA and IFR Part I also specify enrollees’ cost-sharing amounts for emergency services furnished by nonparticipating providers or facilities, as well as for nonemergency services furnished by nonparticipating providers at certain participating facilities. Specifically, an enrollee’s cost-sharing amount for such services must be calculated based on the “recognized amount,” which is defined as follows:

• An amount determined by an applicable All-Payer Model Agreement under Section 1115A of the Social Security Act

• If there is no applicable All-Payer Model Agreement, an amount determined by a specified state law

• If there is no such applicable All-Payer Model Agreement or specified state law, the lesser of the billed charge or the QPA.

The NSA and IFR Part I establish the methodology for calculating the QPA, which in most circumstances is the payer’s median contracted rate for that item or service.

The NSA also directs the Departments to specify the information that a payer must share with a nonparticipating provider, nonparticipating emergency facility or nonparticipating provider of air ambulance services after determining the QPA. The NSA and IFR Part I require payers to make certain disclosures about the QPA with each initial payment or notice of denial of payment, and to provide certain additional information to providers upon request when the QPA serves as the “recognized amount.”

In addition to implementing other components of the NSA, as discussed in greater detail here, IFR Part II expanded on the federal IDR process that payers and providers are to use to determine the out-of-network rate for items and services to which the NSA applies, where an All-Payer Model Agreement or specified state law does not apply. IFR Part II provided that each party submit to the certified IDR entity an offer for a payment amount for the item or service in dispute and other information related to the offer as may be requested by the certified IDR entity. To determine which payment offer to select, the certified IDR entity should “begin with the presumption that the QPA is the appropriate out-of-network rate” (86 Fed. Reg. at 55984) for the qualified IDR item or service under consideration, and then select the offer “closest to the QPA” unless the certified IDR entity determined that credible information submitted by either party clearly demonstrated that the QPA was “materially different from the appropriate out-of-network rate,” according to the implementing regulations.

Within months of the Departments issuing the regulations, various stakeholders sued in federal district court, alleging, among other things, that the regulatory instructions to certified IDR entities were inconsistent with the statute. Two federal courts vacated the regulatory text favoring the QPA in the determination of the out-of-network rate on the ground that it was contrary to the text of the NSA. Tex. Med. Ass’n v. U.S. Dep’t of Health and Human Services, No. 6:21-cv-425-JDK, 2022 WL 542879, at *8-9 (E.D. Tex. Feb. 23, 2022); LifeNet, Inc. v. U.S. Dep’t of Health and Human Services, No. 6:22-cv-162-JDK, 2022 WL 2959715, at *8-9 (E.D. Tex. July 26, 2022). Two of the three changes that the Departments included in the final rule are intended to respond to the litigation.

Summary of Final Rule

As noted, the final rule finalizes three discrete aspects of IFR Parts I and II. First, it expands the information about the QPA that payers must disclose to providers. Second, it reinterprets the provisions of the NSA that govern the determination of the appropriate out-of-network rate through the federal IDR process, and prescribes how certified IDR entities are to weigh the QPA and other considerations when selecting one of the parties’ offers. Third, it requires that the certified IDR entity’s written payment determination explain why the QPA did not already account for other considerations weighed by the IDR entity.

QPA Disclosure Requirements

The NSA and IFR Part I require that with an initial payment or notice of denial of payment, a payer must provide the QPA for each item or service involved, as well as a statement certifying that the QPA applies for purpose of the recognized amount. The Departments stated in the preamble to the final rule that many commenters on IFR Part I stressed that the methodology of calculating the QPA should be more transparent, and that the Departments should expand the range of information that is shared with providers with respect to the QPA.

Along the same lines, commenters expressed concern that some payers might review claims and alter the service code or modifier submitted by the provider to another service code or modifier that the payer determines to be more appropriate (a practice referred to as “downcoding” when the adjustment results in a lower reimbursement). Commenters stated that providers need to be apprised when a payer downcodes a particular claim that is subject to the balance billing prohibitions in the NSA to ensure they receive sufficient information that may be relevant to the open negotiation and federal IDR processes.

In response to these comments, the Departments expanded the information that payers must furnish with an initial payment or notice of denial of payment in instances where the payer has downcoded the billed claim. The Department also defined the word “downcode” in regulatory text to mean “the alteration by a plan or issuer of a service code to another service code, or the alteration, addition, or removal by a plan or issuer of a modifier, if the changed code or modified is associated with a lower QPA than the service code or modified billed by the provider, facility, or provider of air ambulance services.” If a QPA is based on a downcoded service code or modifier, a payer must now provide a statement that the service code or modifier billed by the provider was downcoded; an explanation of why the claim was downcoded (including a description of which service codes were altered, if any, and which modifiers were altered, added or removed, if any); and the amount that would have been the QPA had the service code or modifier not been downcoded.

The Departments are still considering whether additional disclosures related to the QPA calculation methodology should be required to be provided with an initial payment or notice of denial of payment, or upon request. They stressed that their view is that payment determinations in the federal IDR process should center on a “determination of a total payment amount for a particular item or service based on the facts and circumstances of the dispute at issue, rather than an examination of a plan or issuer’s QPA methodology.”

Determination of Out-of-Network Payment in the Federal IDR Process

The final rule replaces the regulatory text that favored the QPA in IFR Part II with new regulatory text that directs IDR entities on how to weigh the QPA and information about other circumstances when selecting one of the parties’ offers as the appropriate out-of-network rate. The certified IDR entity is now to “select the offer that the certified IDR entity determines best represents the value of the qualified IDR item or service as the out-of-network rate.” To make that selection, the certified IDR entity must consider the QPA and “then consider” other information submitted by a party that relates to circumstances set forth in the statute. See 42 CFR §§ 149.510(c)(4)(iii)(A)-(D) (providers and facilities), 149.520(b)(1) (applying 42 CFR § 149.510 to air ambulance) (emphasis added). In this way, the Departments suggested a sequential review by the IDR entity: first the QPA, then other considerations. In weighing those considerations, “the certified IDR entity should evaluate whether the information is credible and relates to the offer submitted by either party,” 42 CFR §§ 149.510(c)(4)(iii)(E) (providers and facilities), 149.520(b)(3) (air ambulance). The Departments directed that “[t]he certified IDR entity should not give weight to information to the extent that is not credible, it does not relate to either party’s offer for the payment amount . . . , or it is already accounted for by the [QPA] . . . or other credible information,” 42 CFR §§ 149.510(c)(4)(iii)(E), 149.520(b)(3) (emphasis added).

The Departments stated in the preamble to the final rule that “in all cases, the QPA, which is generally based on the median contracted rate for a qualified IDR item or service, will be relevant to a payment determination, as it represents the typical payment amount.” Final rule at 34. The Departments “are of the view that it will often be the case that the QPA represents an appropriate out-of-network rate,” although “additional factors may be relevant in determining the appropriate out-of-network rate, because the QPA may not account for information specific to a particular item or service.” Id. at 37. “The certified IDR entity should consider whether the additional information is already accounted for in the QPA and should not give weight to information related to a factor if the certified IDR entity determines the information was already accounted for in the calculation of the QPA, to avoid reweighing the same information twice.” Id. at 40. “For example, because the plan or issuer is required to calculate the QPA using median contracted rates for services codes, as well as modifiers (if applicable), and because service codes and modifiers in many cases reflect patient acuity and the complexity of the services provided, these factors will often already be reflected in the QPA.” Id.

According to the Departments, “[t]he QPA is generally calculated to include characteristics that affect costs, including medical specialty, geographic region, and patient acuity and case severity . . . . Therefore, in the Departments’ view, giving additional weight to information that is already incorporated into the calculation of the QPA would be redundant, possibly resulting in the selection of an offer that does not represent the value of the qualified IDR item or service.” Id. at 41.

Certified IDR Entity’s Written Decision

IFR Part II required the certified IDR entity to explain its payment determination and underlying rationale in a written decision submitted to the parties and the Departments. The certified IDR entity was also required to explain what credible information demonstrated that the QPA was materially different from the appropriate out-of-network rate.

The final rule changes those requirements. It requires a certified IDR entity to include in its written determination an explanation of the following:

• What information the certified IDR entity determined demonstrated that the offer selected as the out-of-network rate is the offer that represents the value of the qualified IDR item or service

• The weight given to the QPA and any other credible information submitted in accordance with the final rule.

If the certified IDR entity relies on other information or circumstances in selecting an offer, its written decision must include an explanation of why the certified IDR entity concluded that this information was not already accounted for in the QPA.

Payer Determination of the Provider Specialties for Which QPAs Are Required

In addition to the final rule, the Department issued new summaries and guidance documents. The accompanying Frequently Asked Questions document conveys new policy (or new articulations of the Departments’ thinking on existing policy), some of which is notable. In the FAQ set, the Departments answer “yes” to question 14 regarding whether payers must “calculate a median contracted rate separately for each provider specialty, if the [payer’s] contracted rates for service codes vary based on provider specialty (as a result of the [payer’s] contracting process)[.]”

The Departments begin FAQ 14 by explaining that they have been informed that some payers establish contracted rates “by offering most providers the same fee schedule for all covered services,” and then leaving it “up to the providers to negotiate increases to the rates for the services that they are most likely to bill. After the negotiation process, the entire fee schedule may be included in the provider contract, with the contracted rate modifications made only to certain service codes based on the negotiations.” This results in the payer using rates that are not negotiated, and perhaps never even billed, to determine the QPA for a provider specialty.

Many providers refer to this phenomenon as “ghost rate contracting,” and it has significant operational and economic consequences for many physician specialties. The Departments take steps to address the ghost rate contracting problem by stating that “[f]or the purpose of identifying provider specialties for which QPAs must be separately calculated, a [payer’s] contracted rates for an item or service are considered to vary based on provider specialty if there is a material difference in the median contracted rates for a service code between providers of different specialties, after accounting for variables other than provider specialty.” For example, “if a [payer’s] contracted rates for a given anesthesia service are clustered at one rate for anesthesiologists and at another rate for all other provider specialties because those providers do not provide and bill for anesthesia services, the [payer] must calculate one median contracted rate for the anesthesia service code for anesthesiologists, and one separate median contracted rate for the same anesthesia service code for all other provider specialties.”

The Departments’ effort to address the ghost rate contracting problem now, through guidance, suggests they have elevated the issue above many other important ones presented by the NSA. The Departments commit in FAQ 14 to “monitor [payer’s] compliance with the July 2021 interim final rules, as interpreted in [FAQ 14],” and to continue to “monitor contracting practices that affect the calculation of the QPA, to determine whether additional guidance is needed.” This supplemental guidance may benefit providers in payment resolution, whether through the normal course or through the IDR process, or even in up-front contract negotiation, but it is unclear how providers can confirm payer adherence to the guidance.

Model Disclosure Notice and Notice and Consent Documentation Requirements

The NSA allows nonparticipating providers and facilities to seek consent from an individual to waive the balance billing and cost-sharing protections in certain situations. HHS previously issued standard notice and consent documents that must be used to satisfy this exception, although states may also develop state-specific documents for this purpose. The NSA also requires certain providers, facilities and payers to provide disclosures to patients advising of their protections against balance billing. Such disclosures must be made publicly available on the entity’s website (if applicable) and provided to participants in the form of a one-page notice. HHS previously issued a model disclosure notice that may (but is not required to) be used to satisfy the balance billing disclosure requirement.

As noted, along with the final rule, the Departments issued FAQs announcing that HHS has revised both the required standard notice and consent form and the model disclosure form. For the remainder of 2022, providers and facilities may use either the initial or revised versions of the forms. On and after January 1, 2023, providers and facilities may only use the revised forms. The revisions include minor changes to the instructions and form templates.

Conclusion

The final rule primarily addresses issues related to the IDR process that were pressing because of the court orders vacating regulatory text from IFR Part II. The final rule is not the end of the rulemaking process or the implementation of the NSA. The final rule and new sources of guidance note that the Departments will publish additional rules and guidance in the future, on topics that include the auditing of payers for compliance with requirements related to the QPA; what constitutes “ancillary services” for purposes of the balance billing notice and consent exception; and the good faith estimate requirement pertaining to co-providers and co-facilities, set forth in IFR Part II and set to become effective on January 1, 2023. The Departments did not indicate when they will publish additional rules and guidance, and stakeholders therefore should continue to closely monitor regulatory action by the Departments.