No Surprises Act Part 2: the new HHS Interim Final Rule on
Dispute Resolution for insured patients:
the Independent Dispute Resolution (IDR) process
On September 30, 2021, the Departments of Health and Human Services (HHS), Labor, and the Treasury, alongside the Office of Personnel Management (OPM), issued a new Interim Final Rule (IFR) to implement components of the NSA. One aspect this rule addresses is the independent dispute resolution (IDR) process to resolve payment disputes between payers and out-of-network providers.
Federal IDR system
The IFR establishes a new federal IDR system to resolve payment disputes between payers and out-of-network providers. This includes certifying qualified IDR entities, developing a portal to collect dispute information, and tracking data on IDR outcomes. The multi-use portal will be used by IDR parties and IDR entities and to satisfy reporting requirements. Overall, the IDR process will incentivize payers and providers to resolve payment disputes in a consistent and efficient manner.
The goal is to minimize the time, cost, and complexity of the process by encouraging the parties to submit reasonable offers, negotiate, and resolve disputes. This goal is more likely to be met since IDR entities must select the offer that is closest to the qualifying payment amount (QPA, the median in-network rate that payers pay to providers) and only deviate if there is credible information to support doing so. This will help ensure predictable IDR outcomes and discourage stakeholders from using the IDR process to obtain higher out-of-network payments when doing so is not warranted based on the circumstances.
Open Negotiation Period
To help limit the use of the IDR process, the NSA established a 30-day open negotiation period for the parties to engage in private, voluntary negotiations to try to resolve the payment dispute. If a provider wants to initiate the open negotiation period, they must inform the plan or insurer and send written notice within 30 business days of an initial payment or denial of payment. The parties must then exhaust this 30-day open negotiation period before initiating the federal IDR process. The agencies urge good faith negotiation during this period by encouraging the parties to reach an agreement before proceeding to the federal IDR process and incurring administrative costs.
The parties can still agree on a payment amount even after the federal IDR process is initiated. If agreement is reached, the parties must notify federal officials within 3 business days. The plan or insurer must then pay the balance to the out-of-network provider or facility within 30 business days of the agreement. In these circumstances, each party must pay half of the IDR entity's fee, unless the parties agree to a different amount. No party can seek additional payment from a patient, even if the out-of-network rate exceeds the QPA.
The federal IDR system will certify qualified IDR entities that are organizations free of conflicts of interest, and with expertise in arbitration, health care claims, managed care, billing and coding, and health care law. These entities administer the IDR process and make determinations about the amounts insurers must pay.
The IDR process
If negotiations fail and there is still no resolution, within 4 days insurers, patients, or providers may submit IDR requests through a federal IDR portal. HHS will select an IDR entity. Each party must submit its offer amount and other information within 10 business days of HHS selecting an IDR entity. The offer must be listed as both a dollar amount and a percentage of the QPA. Providers and facilities must disclose the size or their practice or facility and the practice specialty or type. Plans and insurers must disclose their coverage area, relevant geographic area, and whether their coverage is fully insured or self-insured.
Factors for IDR entities to consider
- the QPA
- the level of training or experience of the provider or facility
- quality and outcomes measurements of the provider or facility
- market share held by the out-of-network health care provider or facility, or by the plan or issuer in the geographic region in which the item or service was provided
- patient acuity and complexity of services provided
- teaching status, case mix, and scope of services of the facility
- any good faith effort-or lack thereof-to join the insurer's network
- any prior contracted rates over the previous four years
- the provider or facility's usual and customary charge or the billed charge (The inclusion of billed charges as a factor in state IDR processes has been shown to be inflationary.)
- the reimbursement rates paid by public payers (such as Medicare, Medicaid, CHIP, or TRICARE)
The agencies clarify the ban on consideration of usual and customary charges, billed charge, and reimbursement rates paid by public payers (such as Medicare, Medicaid, CHIP, or TRICARE). The parties cannot express their offer or otherwise submit information with a proportion of these amounts (e.g., 150 percent of Medicare) or construe billed charges as the amount that would have been billed in the absence of the NSA. The IDR entity can still consider the QPA, even if contracted rates themselves are based on a percentage of Medicare or other public programs.
The IDR decision
The NSA adopts "baseball-style" arbitration: each party offers a payment amount, and the certified IDR entity selects one amount or the other with no ability to split the difference. The IFR directs the IDR entity to select the offer that is closest to the QPA. The IDR entity is supposed to presume that the QPA is the appropriate out-of-network rate. If the two offers are equally distant from the QPA, the IDR entity must select the offer that, in its view, best represents the value of the items or services. This means that the IDR entity should only deviate from selecting the offer closest to the QPA in limited circumstances.
While the NSA permits arbitrators to consider other factors when determining which offer to select (e.g., the level of training or experience), the IFR makes clear that these other factors should be considered secondary to the QPA. These additional factors should be considered only to the extent that they are not already accounted for in the QPA. An IDR entity could, however, conclude that the QPA does not fully account for patient acuity or complexity if the parties disagree on the appropriate service code or modifier. IDR entities may then resolve disputes over downcoding by selecting the offer that best represents the value of the qualified IDR item or service.
This policy makes it less likely that the federal IDR process can be used by providers and facilities to obtain unjustified higher out-of-network payments and will thus likely encourage network negotiations between payers and providers or facilities. Anchoring IDR outcomes to the QPA will increase predictability, encourage private negotiations, help reduce prices that may have been inflated by pre-NSA practices, and prevent premium hikes if the IDR process became inflationary.
Batching and bundling are allowed. Multiple cases can be batched together in a single proceeding to encourage efficiency, but batched cases must involve the same provider or facility, the same insurer, the same or similar medical condition, and must occur within a single 30-day period. For batched items and services, the IDR entity can select different offers if the QPAs within the batch are different.
The interim final rule also allows bundled claims-i.e., the federal IDR process could be used to resolve disputes over multiple services that an individual received during an episode of care. If out-of-network care is billed as part of a bundled arrangement, or the plan or insurer makes an initial payment as a bundled payment, the parties could use the federal IDR process for a single bundled payment.
The IDR entity must select one of the party's offers within 30 business days, provide notice to the parties, and deliver a written decision. The written decision must include the entity's underlying rationale including a detailed explanation of additional considerations relied upon if the IDR entity did not choose the offer closest to the QPA.
After the IDR determination
The losing party is responsible for paying the fees associated with the IDR process. If a case is settled after IDR has begun, the costs are split equally unless the parties agree otherwise. Further, the party that initiates the IDR process is "locked out" from taking the same party to arbitration for the same item or service for 90 days following a decision. This provision was designed to encourage settlement of similar claims. Any claims that occur during the lock-out period can go to IDR after the period ends. Unless there is fraud or evidence of intentional misrepresentation of material facts, the decision from the IDR entity is binding on all parties, although the parties can continue to negotiate or settle.
Other IDR Requirements
There are two fees related to the federal IDR process: an administrative fee charged by the federal government to use the federal IDR process (currently $50) and a fee charged by the IDR entity for its services (currently $200-$670).
Federal officials intend to publish information on IDR payment determinations on a quarterly basis. These reports will promote transparency and help the public and regulated entities assess IDR outcomes.
Click here for part 3 of this series.