On August 19, 2022, the Departments of Health and Human Services, Labor, and the Treasury (“the Departments”) issued their long-awaited Final Rules (“Final Rules”) under the No Surprises Act (“the Act”).  The Final Rules significantly changed the previously issued Interim Final Rules in ways that should improve the transparency and fairness of the process for setting out-of-network payment rates under the No Surprises Act for providers.  Specifically, the Final Rules (1) removed the requirement that the Independent Dispute Review (“IDR”) entity presume that the out-of-network payment rate be set at the Qualified Payment Rate (“QPA”), which is the median contract rate; and (2) and required health plans to disclose information regarding their calculation of payments for claims that have been downcoded. The Final Rules also finalized the requirement that IDR entities issue written decisions explaining their decisions setting out-of-network payment rates.

Congress passed the Act in order to prevent patients from being surprised by balance bills and cost-sharing amounts for services provided by out-of-network providers after treatment for an emergency service or after treatment for a non-emergency service by an out-of-network provider at an in-network facility.  The Act provided a “baseball style” arbitration framework for resolving disputes between payers and providers regarding the amount insurers would pay for out-of-network services subject to the Act. Under this process, both the provider and the insurer make an offer regarding the amount to be paid for the out-of-network service and the IDR entity picks one of the offers.

The Interim Final Rules setting the QPA as the presumed out-of-network payment rate had been roundly criticized by providers as violating the text of the No Surprises Act, which by its terms allowed providers to submit additional information regarding the appropriate rate. In a lawsuit brought by the Texas Medical Association challenging those portions of the Interim Final Rules, the Federal District Court for the Eastern District of Texas agreed and struck down those provisions.’

The Final Rules address the criticisms and the Court order by specifying that IDR entities must select 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.  Under the Act and the Final Rules, the additional information includes the level of training, experience and quality of the provider or facility furnishing the service; the market share of the provider, facility or health plan in the geographic region in which the service was provided; the acuity of the patient and the complexity of providing the service;  the teaching status, case mix and scope of services of the facility that furnished the service; and the demonstration of good faith efforts (or lack thereof) by the provider, facility, or the health plan to enter into a network agreement.

The Final Rules require the IDR entity to first consider the QPA and then consider all of the additional permissible information submitted by each party, evaluating the additional information to determine if it is credible. In addition, to avoid double counting, the IDR entity is required to evaluate the additional information to ensure that it was not already accounted for in the QPA. After weighing these factors, the IDR entity is required to select the offer that best represents the value of the disputed item or service.

The other improvement in the Final Rules from providers’ perspective is the addition of a definition of “downcode” and the requirement that health plans provide information regarding downcoding to providers.  The Final Rules define “downcode” as the alteration by a plan of the service code to another service code or the alteration, addition, or removal by a plan of a modifier, if the changed code or modifier is associated with a lower QPA than the code or modifier billed by the provider or facility. The Final Rules require health plans to include the following information in their initial payment or notice of denial of payment:  a statement that the code or modifier had been downcoded; an explanation of why the claim was downcoded; and the QPA amount for the service as originally billed by the provider.  In explaining these changes, the preamble to the Final Rules states:

Without information on what the QPA would have been had the claim not been downcoded, the provider, facility or provider of air ambulance services may be at a disadvantage compared to the plan or issuer….In the Departments’ view, this information may be critical to the provider, facility, or provider of air ambulance services in developing an offer or submitting information if it believes that the QPA calculated by the plan or issuer does not best represent the value of the item or service provided. ….This increased transparency will aid in the open negotiation process by helping providers, facilities and providers of air ambulance services to understand how the plan or issuer arrived at the relevant QPA in relation to the billed claim.

The Texas Court had invalidated the Interim Final Rules’ requirement that the IDR entity explain in writing how it determined that credible information showed that the appropriate out-of-network rate was materially different from the QPA.  Although this particular language was removed from the Final Rules, the Final Rules continue to require IDR entities to issue written opinions with their decisions.  As stated in the preamble, the “Departments are of the view that, in all cases, a written decision with a comprehensive discussion of the rationale for the decision is important to ensure that the parties understand the outcome of a payment determination under the Federal IDR Process.” The preamble noted that the Departments were finalizing standards for the written IDR decisions.

The Final Rules will take effect 60 days after they are published in the Federal Register.

The Final Rules are linked here, and the Department of Labor’s Fact Sheet about the Final Rules is linked here.  Whatley Kallas, LLP’s earlier article on the Texas Court decision is linked here.

The attorneys at Whatley Kallas will continue to analyze the implementation of the Final Rules and will report on any developments important to providers.

Scroll to Top