On August 19, 2022, three federal agencies tasked with adopting regulations for the No Surprises Act (“NSA”) issued a highly anticipated Final Rule implementing key aspects of the NSA’s independent dispute resolution (“IDR”) process. Under the Final Rule, the neutrals who decide reimbursement disputes, known as IDR entities, are required to determine what dollar amount best represents the “value” of the health care service after considering all permissible information submitted by the disputing parties. The Final Rule will become effective 60 days from the date of publication in the Federal Register. 

The Final Rule modifies portions of a controversial Interim Final Rule published in October of last year that was the subject of significant criticism and litigation. The Interim Final Rule required IDR entities to begin with a starting presumption that an insurer’s unilaterally calculated median contracted rate, known as the “qualifying payment amount” (“QPA”), was the appropriate level of reimbursement for out-of-network health care services. Under this presumption, IDR entities were instructed not to deviate from the QPA absent credible evidence showing that the QPA was “materially different” from the appropriate rate. Stakeholders challenged the Interim Final Rule in courts across the country because the NSA sets forth specific factors that IDR entities “shall” consider when determining appropriate out-of-network rates during the IDR process, and Congress chose not to impose any more or less weight to any of these factors. A federal court in Texas ultimately ruled that the Interim Final Rule rewrote clear statutory terms, and the offending portions were therefore unlawful and must be vacated on a nationwide basis, which we discussed in our previous client alerts linked here and here.  The Final Rule addresses these deficiencies by making clear that IDR entities should determine the out-of-network rate during the IDR process by selecting the offer “that best represents the value of the item or service under dispute after considering the QPA and all permissible information submitted by the parties.” 

The Final Rule also incorporates new requirements intended to promote transparency, consistency and predictability in the IDR process. The Final Rule provides additional disclosure requirements related to cases involving “downcoding,” a practice by which an insurer alters a service code or changes, removes or adds a modifier, resulting in a lower QPA than the service code or modifier originally billed. Under the Final Rule, if an insurer downcodes a billed claim and asserts the corresponding QPA is the correct total payment amount, the insurer must explain in its initial payment or notice of denial of payment what was downcoded and what the QPA would have been on the code(s) and/or modifiers originally billed. The Final Rule also requires IDR entities to issue written decisions for all cases, explaining the information they relied upon in determining which offer represented the best value of the service at issue. The written decisions must include a description of the weight the IDR entity gave to the QPA and any additional information submitted by the parties.

Unfortunately, many questions related to how the IDR process is supposed to function are left unanswered by the Final Rule, and stakeholders must continue to wait for further guidance through rulemaking on aspects of the IDR process that are currently causing confusion. For example, some questions remain as to the NSA’s requirements for claim batching in the IDR process, and how the 90-day “cooling off” period following an IDR decision will apply in practice. 

In the meantime, providers continue to initiate a significant volume of out-of-network reimbursement disputes using the federal IDR process. The tri-agencies have reported that the total number of disputes initiated during the first quarter of 2022 exceeds 46,000, nearly three times the amount the tri-agencies expected for an entire year. Consequently, several IDR entities have fallen behind and are not keeping up with the deadlines they are expected to follow, leaving health care providers not only with underpaid claims but also delayed payments of fair reimbursement for out-of-network health care services.