Implementation of the No Surprises Act Is Full of Surprises: What We Do and Don’t Know
McDermottPlus is pleased to bring you Regs & Eggs, a weekly Regulatory Affairs blog by Jeffrey Davis.
Click here and check the box at the bottom of the page to subscribe to future blog posts.
August 17, 2023 – It’s likely no surprise to anyone who has been following the implementation of the No Surprises Act over the last couple of years that we again find ourselves on an uncertain path. While Regs & Eggs has focused on some of the implementation issues that have existed over the last year with the federal independent dispute resolution (IDR) process, the road ahead will likely be even more bumpy—at least in the short term. McDermottPlus in conjunction with McDermott Will & Emery have put together a slew of resources around the No Surprises Act. We issued a report last week that summarizes the Texas Medical Association (TMA) litigation and provides an update on the status of enforcement and regulations:
READ OUR NO SURPRISES ACT UPDATE
However, things are moving fast, so Regs & Eggs is here to provide the latest!
The most recent No Surprises Act implementation speed bump resulted from a court decision. On August 3, 2023, the US District Court for the Eastern District of Texas ruled in favor of providers in the TMA IV case. The court found that the US Departments of Health and Human Services (HHS), Labor and Treasury (the Departments) violated the Administrative Procedures Act (APA) when they raised the IDR administrative fee from $50 to $350 for 2023, and when they established certain batching rules that did not enable providers to batch claims together in the IDR process.
The APA requires the federal government to go through notice and comment rulemaking when making substantive policy changes. The court ruled that in both these instances, the changes were substantive and should have gone through notice and comment rulemaking (the IDR administrative fee was increased via guidance, and the batching rules were established through an interim final rule that did not take into account public comments).
The court decided to vacate both policies nation-wide. However, the court denied a request from the plaintiffs to retroactively refund all providers that already paid the $350 administrative fee. Further, the Court will not extend the IDR time periods for providers that decided not to pursue IDR because of the fee.
The Departments are now determining how to proceed in the aftermath of the decision. Here’s what we know and what we don’t know about what’s happening with the federal IDR process:
WHAT WE KNOW
The IDR Process Has Been Temporarily Suspended for New Claims Initiated After August 3, 2023.
The Departments closed down the IDR portal on August 4, 2023, the day after the court’s decision in TMA IV. They also temporarily closed down the portal used by uninsured or self-pay patients to dispute charges that are significantly above the good faith estimate they received for a service. The latter “patient portal” has nothing to do with the TMA IV court case or the federal IDR process, but the patient portal and the IDR portal are interlinked operationally, so the Departments had to temporarily close down both. They figured out how to reopen the patient portal without reopening the IDR portal within a matter of days.
On August 8, 2023, certified IDR entities (i.e., the arbiters) resumed processing batched disputes where the IDR entity determined that the batched dispute was eligible and administrative fees had been paid (or the deadline for collecting fees had expired) before August 3rd. On August 11th the Departments directed certified IDR entities to resume processing all single and bundled disputes initiated on or before August 3rd. The processing of other batched disputes and dispute initiation remain temporarily suspended. The Departments have stated that they “intend to reopen the portal to permit the initiation of new disputes soon and will notify interested parties at such time.”
Open Negotiation Is Open!
The Departments are encouraging disputing parties (providers and health plans) to continue Open Negotiations for all claims. The 30-day Open Negotiations period is the precursor to the IDR process, and the Departments want to keep things moving while the IDR process is suspended for new claims. There is already a large backlog of unresolved disputes, and it will likely increase as a result of the IDR suspension. A pause in the Open Negotiations process could make the backlog even worse.
While some providers may want to wait until they know the new batching rules (discussed below under “What We Don’t Know”) to initiate Open Negotiations, the Departments recommend that parties continue the process if they can. The Departments will likely provide some flexibility when they reopen the IDR process for new claims, but we don’t know what that flexibility will look like (again, see “What We Don’t Know”).
The 2023 IDR Administrative Fee Is Back Down to $50 (For Now).
On August 11, 2023, the Departments released frequently asked questions (FAQs) regarding the IDR administrative fee. As a result of the TMA IV decision, the Departments state that the administrative fee will revert to the amount established initially for calendar year 2023: $50. Therefore, until the Departments take action to set a new administrative fee amount, the administrative fee for disputes initiated on or after August 3, 2023, is $50 per party per dispute.
The Departments clarify that if a party already paid the higher administrative fee of $350 any time from January 1, 2023, through August 2, 2023, they will not be refunded. As noted, the TMA IV court decision weighed in on this specific issue and decided to not grant refunds of the higher administrative fee. If a party sent a $350 check to the IDR entity on or after August 3, 2023, or was invoiced for this higher amount, the check or invoice will be cancelled and the party will be billed instead for the lower amount of $50. The Departments also clarify that if one party in a dispute paid $350 before August 3rd but the other party had not yet paid, the party that did pay will not receive a refund and the party that did not pay will only be assessed a $50 fee. To this last point, the Department’s policy effectively means that a party that is late in its payment of the administrative fee will be “rewarded” by only having to pay the smaller fee. I guess sometimes it pays (or saves) to be late!
Finally, the Departments state that the other required IDR fee, the certified IDR entity fee, was not impacted by the TMA IV court decision.
The Departments Plan to Issue Notice in Comment Rulemaking Around Batching.
As instructed by the court, the Departments must go through notice and comment rulemaking to revise the administrative fee and update the batching methodology. The Departments have already begun work on a proposed reg regarding IDR operations that will likely include batching policies (more on that proposed reg later).
WHAT WE DON’T KNOW
While it seems like we know a lot, there are many unknowns at this point as well, including the following:
When the IDR Process Will Be Reopened for New Claims
The Departments intend to put out guidance soon that will enable the IDR process to reopen for claims initiated after August 3. However, we don’t know how “soon” soon is (in fact, by the time you read this, it may be reopened already!)
What Flexibilities Will Be Granted Once the IDR Process Reopens
As stated above, the Departments will provide flexibility once the IDR process reopens for new claims after August 3. They most likely will allow parties to initiate the IDR process even if they miss the four-business-day time period after the close of Open Negotiations. In other words, if a party starts Open Negotiations and that process completes, the party may have more than four business days to initiate the federal IDR process. What we don’t know is whether the Departments will allow parties that missed the 30-day window to start Open Negotiations to do so. While stakeholders may hope that the Departments provide this flexibility, it may be prudent for parties to take the Departments’ advice and begin Open Negotiations if they think there is a chance that they want the claims to eventually go through the IDR process.
When the IDR Operations Proposed Reg Will Be Released
The IDR operations proposed reg (mentioned above) was actually at the White House Office of Management and Budget (OMB) for review briefly before the TMA IV ruling was issued. Once the ruling came out, however, it was quickly rescinded from OMB clearance.
Clearance by OMB is the last internal governmental review stage before a reg is released publicly. Therefore, a reg in OMB clearance provides an indication to the public that the reg could be released soon (although there is no required timetable for its release). Further, once a reg is at OMB, the public can request meetings with OMB and the White House to discuss the reg.
While it seemed for a moment that the regulation might be close to being released, now that it has been rescinded from OMB clearance, timing is much less clear.
What the Batching Rules Will Be in the Near and Long Term
Here is a big paradox that comes along with the TMA IV ruling. While many stakeholders want clearer batching rules as soon as possible, it’s going to take a while to get there. Since the Departments were sued over the APA, they must go through a long process of notice and comment rulemaking before a final policy can be created. That process includes the issuance of a proposed regulation (the one I reference above), a 60-day public comment period and then the issuance of a final regulation—a process can take at least six months, and likely much longer.
What is also interesting is that the Departments could wind up choosing to effectively finalize the same batching policy that they currently have in place. As long as they go through the required rulemaking process and sufficiently respond to all comments, they can finalize any policy that they deem most appropriate and that is justifiable. I’m not suggesting that the Departments will finalize the same batching policy that is currently in place, but am pointing out that they could do so. I do believe that the Departments plan to make changes to the batching methodology based on feedback they have received from stakeholders, but we don’t know exactly what those changes could be until the proposed reg is released.
Another question is what the batching process will be in the interim while the rulemaking process is ongoing. If the IDR process is to reopen for new claims, there must be some sort of interim batching guidance in place. The Departments are busy working on that interim guidance now, and my bet is that they will give deference to the certified IDR entities to consider batched claims in line with how batching is defined in the No Surprises Act. The batching section of the statute is short and sweet:
TREATMENT OF BATCHING OF ITEMS AND SERVICES.— (A) IN GENERAL.—Under the IDR process, the Secretary shall specify criteria under which multiple qualified IDR dispute items and services are permitted to be considered jointly as part of a single determination by an entity for purposes of encouraging the efficiency (including minimizing costs) of the IDR process. Such items and services may be so considered only if— ‘‘(i) such items and services to be included in such determination are furnished by the same provider or facility; ‘‘(ii) payment for such items and services is required to be made by the same group health plan or health insurance issuer; ‘‘(iii) such items and services are related to the treatment of a similar condition; and ‘‘(iv) such items and services were furnished during the 30 day period following the date on which the first item or service included with respect to such determination was furnished or an alternative period as determined by the Secretary, for use in limited situations, such as by the consent of the parties or in the case of low-volume items and services, to encourage procedural efficiency and minimize health plan and provider administrative costs.
Based on the statute, Congress intended that the HHS Secretary develop criteria, likely because there are several ways to define certain of the requirements, such as “related to the treatment of a similar condition.” Thus, there may be some uncertainty and inconsistency in how batching is viewed until the Departments can finalize new batching requirements in rulemaking.
What the New Administrative Fee Will Eventually Be
In the administrative fee FAQs that the Departments released on August 11, they state that the 2023 fee will be $50 “until the Departments take action to set a new administrative fee amount.” Since the Departments have to go through notice and comment rulemaking to set a new administrative fee (and, as discussed above, that process could take six months), the $50 fee will likely remain in place for the rest of the year. Once the fee is established in rulemaking, however, it could be significantly higher once again.
What the Future Holds for TMA III
I have left the biggest unknown for last. The same district court in Texas has yet to opine on the last of the TMA cases: TMA III. (I know it’s confusing since the Court opined on TMA IV before TMA III). TMA III deals with the methodology the Departments established for calculating the qualifying payment amount (QPA). The QPA, or the median contracted rate, is a central component to the No Surprises Act. It is used for two purposes: to establish the cost-sharing amount for patients who receive certain out-of-network services, and as a factor in the federal IDR process. (As a reminder, TMA I and TMA II both focused on how the certified IDR entity must consider the QPA relative to all the other factors listed in the No Surprises Act.)
The QPA methodology was established through an interim final reg and did not take into account public comments. Many provider groups have repeatedly argued that the methodology produces artificially low QPAs that do not reflect market rates. If the court invalidates the QPA methodology because of a violation of the APA, then it is unclear what happens next. How would health plans calculate the QPA in the interim as the rulemaking process played out? For new out-of-network claims, what would patient cost-sharing be based on in the interim? Could the IDR process continue if the QPA couldn’t be considered as a factor? These are just a few of the many questions that I would have if the court in fact does invalidate the QPA.
It is also unclear if the Departments are doing any advance planning for such a ruling. They have their hands full already trying to get the IDR process back up and running for new claims in the aftermath of the TMA IV decision. HHS also just received more than 40 detailed questions from Senator Bill Cassidy (R-LA) about various issues related to implementation and enforcement of the law. Senator Cassidy expects responses to all his questions by September 15, 2023. The same staff working on reopening the IDR process will likely be involved with responding to the questions. Given these other priorities and workstreams, the Departments may not have the bandwidth to also think about a scenario in which the QPA methodology is invalidated.
Well, that’s an overview of what we know and don’t know at this point. It’s understandable that you may have a lot of questions with all these moving pieces, so feel free to reach out!
Until next week, this is Jeffrey saying, enjoy reading regs with your eggs.
For more information, please contact Jeffrey Davis. To access the full archive of Regs & Eggs, visit the American College of Emergency Physicians.
To subscribe to Regs & Eggs, please CLICK HERE.