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Volume XII, Number 148

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Hotly Contested Dispute Resolution Rules in Second Federal No Surprises Act Interim Final Regulations Are Being Challenged in Court

On September 30, 2021, the federal Departments of Treasury, Labor, and Health and Human Services issued “Requirements Related to Surprise Billing; Part II,” the second in a series of interim final regulations (the “Second NSA Rules”) implementing the No Surprises Act (“NSA”). This new federal law became effective for services on or after January 1, 2022.

Not surprisingly, the Second NSA Rules have sparked a series of federal lawsuits against these agencies (see herehere, and here) brought by providers, hospitals, and medical associations alleging that the Rules unlawfully create advantages to the payors that were not intended by the NSA. The Second NSA Rules focus on the independent dispute resolution (“IDR”) that may be initiated by either party if there is a disagreement as to the payment amount. The IDR process will determine how much the payor must reimburse the non-participating provider or facility for out-of-network emergency or certain facility based non-emergency services (subject also to applicable state law or a state all-payer system).

As we previously discussed, the first set of NSA regulations provided, among other things, a methodology for how the payor calculates a patient’s estimated cost-share amount and the qualifying payment amount (“QPA”), which was identified as one of several factors that IDR entities must consider if the provider and payor cannot agree on an out-of-network rate for that particular date of service. Now, pursuant to the IDR rules outlined in the Second NSA Rules, arbitrators are required to begin with the presumption that the market-based QPA represents fair compensation, thereby creating additional evidentiary burdens for providers to prove that a more generous payment is warranted.

Here is an overview of how the NSA claims submission process works and, if necessary, how the IDR process works:

No Surprises Act Claims Submission Process and Independent Dispute Resolution Process

The IDR process is a “baseball-style” arbitration, meaning that each party must submit a proposed offer of payment and the IDR entity resolves the dispute by selecting one of the parties’ proposed amounts. Significantly, the Second NSA Rules make clear that the IDR entity must select the offer that is closest to the QPA unless the opposing party has submitted “credible information” that “clearly demonstrates” that the QPA is “materially different from the appropriate” out-of-network rate for the covered item or service. Additional information that may be submitted to rebut this presumption includes: the provider’s training and experience, the complexity of the procedure or medical decision-making, the patient’s acuity, the market share of the insurer and provider, the teaching status of the facility, the scope of services, any demonstrations of good faith efforts to agree on a payment amount, and the contracted rates from within the prior four years. But the IDR entity may not consider such information in resolving the dispute unless the information “clearly demonstrates” that the QPA is an inappropriate rate for the item or service at issue. In addition, according to the statute and regulations, the IDR entity may not consider: (i) the usual and customary charges; (ii) the amount that would have been billed but for the NSA; and, (iii) payment rates under Medicare, Medicaid, TRICARE, or other federal programs.

Provider groups that had intended to rely on the “other” permissible factors listed in the federal law during IDR proceedings are now confronted with the additional burden of having to overcome this new presumption in favor of the QPA. In the various federal lawsuits challenging the presumption favoring the QPA, the plaintiffs argue that Congress intended for the arbiter to consider several factors, such as prior contracted rates for the medical service, the physician’s experience and training, and case complexity, among others. According to these lawsuits, the federal agencies’ failure to follow the NSA’s clear statutory mandates when promulgating these interim final rules by adding this new rebuttable presumption will drive down physician reimbursement rates and encourage payors to further narrow their networks, ultimately making it harder for patients to access necessary medical care. The lawsuits also argue that the Second NSA Rules may result in consumers paying higher premiums, which is contrary to Congress’s stated intent to protect certain consumers from ever-increasing health care costs.

Whether and how providers will be able to meet these new “credible” and “material difference” regulatory requirements, and the overall impact of these new regulatory requirements on network and rate negotiations, remain to be seen. These are important cases to watch as we are in the first month of the implementation of the NSA and they may further shape the regulatory implementation of the NSA.

©2022 Epstein Becker & Green, P.C. All rights reserved.National Law Review, Volume XII, Number 21
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About this Author

Anthony Argiropoulos, antitrust attorney, Epstein Becker
Member of the Firm

ANTHONY ARGIROPOULOS is a Member of the Firm in the Litigation and Health Care and Life Sciences practices and Co-Chair of the firm's National Litigation Steering Committee. He represents health care clients, publicly held companies, and other large businesses in high-stakes litigation and dispute avoidance and resolution. He has represented clients in federal and state court matters throughout the United States and his deep experience includes numerous jury trials, bench trials, injunction proceedings, arbitrations, and mediations.

609-455-1541
Thomas Kane Healthcare Lawyer Epstein Becker Green Law Firm Princeton
Member of the Firm

Thomas Kane is a Member of the Firm in the Litigation and Health Care and Life Sciences practices, in the Princeton office of Epstein Becker Green. In 2017, Mr. Kane was recommended by The Legal 500 United States in the area of Healthcare: Service Providers.  

Mr. Kane:

  • Has extensive experience representing clients in a wide variety of industries, including health care, finance, insurance, pharmaceuticals, and retail services matters, before federal and state courts at both the trial and appellate levels, administrative bodies, and various arbitral forums
  • ...
609-455-1542
William Gibson Litigation Attorney Epstein Becker & Green Princeton, NJ
Senior Counsel

WILLIAM GIBSON is a Senior Counsel in the Litigation practice, in the Princeton office of Epstein Becker Green.

Mr. Gibson:

  • Represents clients in civil litigation matters involving commercial disputes, breach of contract, products liability, consumer fraud, securities fraud and market manipulation, and shareholder disputes
  • Provides representation in employment litigation, including defending against EEOC claims and class actions
  • Represents clients in civil and criminal investigations relating to antitrust violations, corruption,...
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Law Clerk - Admission Pending

Cynthia Park* advises on employee benefits and assists in defending clients in labor and employment-related litigation, such as discrimination, harassment, and breach of contract disputes. She also audits employers’ policies, procedures, and handbooks to ensure compliance with applicable laws and best practices.

While earning her J.D. at Benjamin N. Cardozo School of Law, Cynthia served as a legal extern in the Securities Fraud and Narcotics Units of the U.S. Attorney’s Office for the Southern District of New York. She also was a legal extern in...

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