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Final Rule Changes No Surprises Act Requirements

On Friday, August 26, 2022, the Department of Health and Human Services’ Centers for Medicare and Medicaid Services (“CMS”), the Department of Labor’s Employee Benefits Security Administration and the Department of Treasury’s Internal Revenue Service (the “Departments”) published a final rule updating key regulations pertaining to the No Surprises Act (the “Final Rule”). The Final Rule changes requirements promulgated through prior interim final rulesi to conform with two rulings by the U.S. District Court for the Eastern District of Texas.ii The Final Rule addresses specific disclosure requirements for group health plans and health insurance issuers related to the Qualified Payment Amount (“QPA”) for out-of-network (“OON”) services and sets forth the factors and information which certified Federal Independent Dispute Resolution (“IDR”) entities must consider in arbitrating disputes for OON services or items.

The Final Rule is effective October 25, 2022, for services/items rendered during plan years beginning or after January, 1, 2022.

In addition to adopting the Final Rule, CMS recently published a chart to assist providers and payers in determining whether the Federal IDR process is available in their respective states as well as guidance for parties submitting disputes to the Federal IDR process. Below are highlights of the Final Rule and guidance:

I. The Final Rule

A. Disclosure of Information Related to the QPA

The July 2021 interim final rule requires group health plans and health insurance issuers to make certain disclosures with each initial payment or notice of denial of payment. When the QPA serves as the recognized amount, or as the amount upon which cost sharing is based with respect to an OON service or item (including air ambulance services), plans and issuers must disclose the QPA and certain information related to the QPA for the item or service involved, as well as certain additional information, upon request of the provider, facility, or provider of air ambulance services for each item or service involved.

The Final Rule requires the disclosure of additional information regarding the QPA. Specifically, when a plan or issuer downcodes the billed claim, the Final Rule requires that the plan or issuer automatically provide additional information about the QPA with an initial payment or notice of denial. The Final Rule defines “downcode” 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 modifier is associated with a lower QPA than the service code or modifier billed by the provider, facility, or provider of air ambulance services. 

The additional information must include a statement that the service code or modifier billed 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 stressed that they are committed to conducting audits to monitor the accuracy of plans’ and issuers’ QPA calculation methodologies. They also stressed that payment determinations in the Federal IDR process should center on a determination of a total payment amount for a particular item or services based on the facts and circumstances of the dispute at issue, rather than an examination of a plan or issuer’s QPA methodology.

B. Payment Determinations under the Federal IDR Process

In October 2021, the Departments promulgated rules regarding the Federal IDR process, specifically with respect to the factors that an IDR entity must consider and directing it to select the offer that was closest to the QPA. These interim final rules were challenged in court and subsequently vacated.iii

IDR Factors for OON Disputes

Pursuant to the Final Rule, a Federal IDR entity must weigh specific considerations and select the offer that “best represents the value of the qualified IDR service or item” as the OON rate. Specifically, the IDR entity must consider the QPA for the same or similar qualified IDR item/service, for the applicable year (regardless of whether the parties submit information related to the QPA) and then must also consider additional information submitted by a party related to:

  • The level of training, experience, and quality and outcomes measurements of the provider/facility;

  • The market share held by the provider/facility or the plan in the geographic region;

  • The acuity of the patient or the complexity of furnishing the item/service;

  • Good faith efforts (or lack thereof) by the parties to enter into network agreements; and/or

  • Previously contracted rates between the provider/facility and the plan, for the past 4 years (if and as applicable).

IDR Requirements for Air Ambulance Services 

The Final Rule includes similar requirements with respect to the Federal IDR process for OON air-ambulance services. In addition to the information above required for non-air ambulance items and services, the Final Rule requires IDR entities for air-ambulance services to consider population density at the point of pick up and the vehicle type. 

The Final Rule includes examples to assist IDR entities in evaluating whether additional information is credible or applicable to the service/item in dispute, or if the additional information is duplicative of circumstances already reflected or taken into account in the QPA.

Written Statements Required

In addition, the Final Rule requires that IDR entities issue written statements in connection with all (not just some) Federal IDR disputes. A written decision must include, in part, an explanation; what the IDR entity determined demonstrates that the offer it selected as the OON rate is the offer that best represents the value of the service/item; the weight of the QPA; additional credible information that was submitted; and any explanation of why the IDR entity determined that such additional information was not already reflected in the QPA.

Other Aspects of the IDR Process Remain in Place

Of note, the Final Rule does not change other aspects of the Federal IDR process as established in the October 2021 interim final rule – the service/item in question must still be a “qualified” IDR service/item, and IDR entities are still prohibited from considering certain factors, such as the usual and customary rate or public payer rates (e.g., Medicare or Medicaid) rates. Additionally, an IDR entity does not have the authority to review disputes related to how the QPA was calculated.

On September 20, 2022, the American Hospital Association and American Medical Association announced they are still concerned the newly promulgated Final Rule departs from the legislative intent of the No Surprises Act, and indicated they may challenge the Final Rule in court.

II. Guidance

A. CMS Guidance Regarding State IDR Versus Federal IDR

The Federal IDR process for OON disputes is not available for all OON services. In some states, payers and providers may be required to use state IDR processes for these disputes. This has been a source of confusion for many providers and facilities, particularly those in “bifurcated states” where state law applies for disputes for certain services or with certain plans or payers, but not others. To help resolve some of this confusion, CMS published a chart summarizing the extent to which disputes are appropriate for the Federal IDR process, as opposed to any applicable state IDR process. Providers are encouraged to familiarize themselves with the avenues through which they can dispute OON payments in their state, based on the respective payer and service or item at issue.

B. CMS Guidance for Parties Submitting Disputes to the Federal IDR

CMS also created a webpage offering tips for parties initiating a Federal IDR dispute. The webpage contains best practices, common mistakes, tips for communications, and resources for getting help.


FOOTNOTES

i The July 2021 interim final rule and the October 2021 interim final rule. See 86 FR 36872 (July 13, 2021) and 86 FR 55980 (October 7, 2021).

ii See Texas Medical Association, et al. v. United States Department of Health and Human Services, et al., Case No. 6:21–cv–425 (E.D. Tex.) (February 23, 2022) and LifeNet, Inc. v. United States Department of Health and Human Services, et al., Case No. 6:22– cv–162 (E.D. Tex.) (July 26, 2022).

iii See id.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 265
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Lynsey Mitchel Corporate Attorney Sheppard Mullin Century City, CA
Partner

Lynsey Mitchel is a partner in the Corporate Practice Group in the firm's Century City office, a leader of the Health Plan Practice and a member of the firm's Healthcare team.

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Lynsey represents health maintenance organizations, managed care organizations, medical groups, hospitals, home health providers, medical device retailers and other healthcare entities and providers.

Lynsey has deep expertise in managed care, including HMO regulatory matters and has assisted numerous clients to obtain HMO licensure as healthcare service plans under California’...

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Carmen Jule Government Contracts Lawyer Sheppard Mullin
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Carmen Jule is special counsel in the Government Contracts, Investigations and International Trade Practice Group in the firm's New York office.

Carmen’s practice includes routinely advising a broad range of healthcare providers in criminal, civil and regulatory government actions. She has represented clients in connection with licensure, professional conduct, governmental audit and administrative proceedings.  She regularly counsels clients on applicable federal and state regulatory issues, including Medicare and Medicaid reimbursement rules...

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Jarrod Brodsky Corporate Lawyer Sheppard Mullin Law Firm
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Jarrod Brodsky is an associate in the Corporate Practice Group in Sheppard Mullin's Washington, D.C. office.

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J.D., Georgetown University Law Center, 2020

B.A., New York University, 2014, magna cum laude

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