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Key Issues for Providers in Part 2 of Surprise Billing Regulations: Dispute Resolution Process to Determine Out-of-Network Payment Rates and Good Faith Estimates of Charges for Uninsured/Self-Pay Individuals

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On September 30, 2021, the Departments of Health and Human Services (HHS), Labor, and Treasury (the Departments), along with the Office of Personnel Management (OPM), released an interim final rule with comment period (IFC) to continue implementation of the federal ban on surprise medical bills enacted by Congress in December 2020. The No Surprises Act (the Act), part of the Consolidated Appropriations Act of 2021, included a ban on "balance billing," when a payer does not cover the entire cost of a patient's treatment by a nonparticipating – i.e., out-of-network (OON) – provider and the patient receives a "surprise" bill to make up the difference. The Departments issued Part 1 of the surprise billing regulations in July (see Baker Donelson summary here) and issued a proposed rule in September to implement additional provisions of the Act. The Departments refer to the latest round of regulations as Part 2 of the requirements related to surprise billing (Part 2).

Part 2 outlines the independent dispute resolution (IDR) process available January 1, 2022 to payers and OON providers to settle disputes over payment rates. Part 2 also addresses requirements for providers to offer a good faith estimate of expected charges for uninsured and self-pay patients and creates a patient-provider dispute resolution process to determine a payment amount when an uninsured or self-pay patient is billed in an amount higher than the good faith estimate. These provisions will also apply starting January 1, 2022. Part 2 also amends regulations addressing external review of payer determinations to allow for external review of whether payers are complying with the surprise billing rules.

Although the Departments issued Part 2 as an interim final rule that will take effect upon publication in the Federal Register, which is expected on October 7, 2021, stakeholders will have an opportunity to submit comments on the IFC, due 60 days after publication.

Below is a summary of key provisions in Part 2 and implications for health care providers.

Provider Payment Rates Under the Independent Dispute Resolution Process

Part 1 of the surprise billing regulations codified the Act's ban on balanced billing for emergency services, non-emergency services furnished by a nonparticipating provider at a participating health care facility, and OON air ambulance services. Part 1 also codified a prohibition on patient cost-sharing that exceeds in-network levels. In conjunction with the ban on balance billing, Part 1 outlined a framework for the determination of OON rates to providers. Starting January 1, 2022, the total amount to be paid to an OON provider, including any cost sharing, will be based on:

  1. An amount determined by an all-payer model agreement in place in a given state, if applicable;
     
  2. If no all-payer model agreement in place, an amount determined under state law; or
     
  3. If no applicable state law, an amount agreed upon by the plan or issuer and the provider or facility; or
     
  4. If no agreed upon rate, an amount determined by an IDR entity.

Under the Act, if an OON provider receives payment that the provider considers inadequate, or if the payer denies payment, either the provider or the payer may initiate negotiations for a 30-day period, referred to as an "open negotiation period," to determinate the payment amount for the item or service, including any cost-sharing. If the negotiations fail, the Act called for a binding IDR process that the parties may use to determine the payment amount.

Part 2 outlines the IDR process, which either a payer or provider may initiate if negotiations fail upon the conclusion of the 30-day open negotiation period. The parties will either jointly select a certified IDR entity or, if there is disagreement over the IDR entity to be selected, the Departments will choose the entity. Each party will submit to an IDR entity an offer for a payment amount, along with supporting documentation. The IDR entity will select one of the offers submitted by the parties to be the amount of payment.

Each party will pay an administrative fee, set at $50 for 2022. The party whose offer is not selected by the IDR entity must pay a dispute resolution entity fee that covers the use of the IDR process, which can range depending on certain factors. For 2022, certified IDR entities must charge a fixed IDR entity fee for single determinations within the range of $200-$500. For batched determinations, the fee must be within the range of $268-$670. HHS has issued guidance on the selection of certified IDR entities and the allowed fee structure.

Below is a timeline of the negotiation and dispute resolution process provided by the Departments:

Independent Dispute Resolution Action

Timeline

Initiate 30-business-day open negotiation period 30 business days, starting on the day of initial payment or notice of denial of payment
Initiate independent dispute resolution process following failed open negotiation 4 business days, starting the business day after the open negotiation period ends
Mutual agreement on certified independent dispute resolution entity selection 3 business days after the independent dispute resolution initiation date
Departments select certified independent dispute resolution entity in the case of no conflict-free selection by parties 6 business days after the independent dispute resolution initiation date
Submit payment offers and additional information to certified independent dispute resolution entity 10 business days after the date of certified independent dispute resolution entity selection
Payment determination made 30 business days after the date of certified independent dispute resolution entity selection
Payment submitted to the applicable party 30 business days after the payment determination

Source: https://www.cms.gov/newsroom/fact-sheets/requirements-related-surprise-billing-part-ii-interim-final-rule-comment-period

Presumption Favoring Median Contracted Rates

Leading up to the release of Part 2, stakeholders were eagerly awaiting more details on the factors that IDR entities would use to determine payment amounts. The Act indicates that the IDR entity must consider the qualifying payment amount (QPA) when determining which offer to accept, which is also used to determine cost-sharing amounts for patients when treated OON. The Act defined the QPA as the median of the contracted rates recognized by the plan, across all plans of the sponsor that are offered in the same insurance market, as of January 31, 2019, for the same or a similar item or service that is provided by a provider in the same or similar specialty and provided in the same geographic region in which the item or service is furnished.

However, in addition to considering the QPA, the Act also specified that the IDR entity will consider other factors that could warrant higher payment rates to certain providers, such as a provider's level of training or experience; a provider's market share; the acuity of an individual receiving services; a facility's teaching status, case mix, and scope of services; and good faith efforts by OON providers to enter into network agreements and contracted rates during the prior four years, if applicable. Stakeholders were looking for indications from the Departments as to whether an IDR entity will give equal weight to these factors as to the QPA.

In publishing Part 2, the Departments made clear that IDR entities will not give equal weight to both the QPA and the additional factors. The preamble to the IFC indicates that the IDR entity "must begin with the presumption that the QPA is the appropriate out-of-network rate for the qualified IDR item or service under consideration." Part 2 instructs IDR entities to "select the offer closest to the QPA unless the certified IDR entity determines that credible information submitted by either party clearly demonstrates that the QPA is materially different from the appropriate out-of-network rate." Consistent with the Act, Part 2 also indicates that the IDR entity may not consider usual and customary charges, billed charges, or the reimbursement rate under public payers, including Medicare, Medicaid, Children's Health Insurance Program (CHIP), TRICARE, or Veterans' benefits.

In defending their interpretation of the Act that presumes the QPA is the appropriate payment amount, the Departments highlight the fact that the Act lists the QPA as the first factor that an IDR entity must consider and then outlines "additional circumstances" to be considered, if relevant. The Departments also focus on the fact that the Act details how to calculate the QPA, whereas the Act provides little guidance on the consideration of additional circumstances. Lastly, the Departments point to the focus on the QPA in the determination of cost-sharing obligations for patients, highlighting the importance of the QPA under the Act.

Good Faith Estimate of Charges for Uninsured/Self-Pay Patients

The Act includes several requirements for providers and facilities related to making available good faith estimates of expected charges, both to payers and patients. Part 2 does not implement the Act's requirement that providers share good faith estimates of charges with payers, in recognition of feedback shared by stakeholders highlighting technical challenges related to reporting this information to payers by January 1, 2022. As such, HHS, the Department implementing these provisions, indicates that the agency will defer enforcement of this requirement until the agency issues regulations to implement the provisions related to sharing good faith estimates with payers.

HHS is, however, moving forward with implementing a requirement under the Act that providers offer uninsured and self-pay patients a good faith estimate of charges upon the patient's request and at the time of scheduling an item or service. Uninsured and self-pay patients include individuals who do not have benefits for an item or service under a group health plan, group or individual health insurance coverage offered by a health insurance issuer, a federal health care program, or a health benefits plan. The definition also includes individuals who have benefits covering the item or service but who do not seek to have a claim submitted to the plan or coverage.

The Act requires that providers offer uninsured and self-pay patients a good faith estimate of the expected charges both for an item or service as well as for any items or services that are reasonably expected to be provided in conjunction with the scheduled or requested items or services as well as any items or services reasonably expected to be provided by another provider or facility. HHS recognizes that implementation of this requirement will involve both "convening" providers and facilities, meaning those that receive the initial request for a good faith estimate from an uninsured/self-pay patient and are/would be responsible for scheduling the primary item or service, as well as "co-providers" and "co-facilities," which include any provider or facility other than the convening provider/facility that provides items or services that are customarily provided in conjunction with a primary item or service.

At the same time, HHS also acknowledges that requiring the provision of good faith estimates from both convening providers/facilities and co-providers/co-facilities would place burdens on patients and make it difficult to understand all expected charges. As such, HHS outlines separate requirements for convening providers/facilities and co-providers/co-facilities that involve the sharing of information by co-providers/co-facilities to convening providers/facilities so that the convening provider/facility can share one estimate of charges with the patient.

Notification Requirements

Convening providers/facilities must verify whether an individual meets the definition of uninsured or self-pay and must provide oral and written communication to such individuals notifying them of the requirement that providers must make available good faith estimates of charges to uninsured and self-pay patients. Notification must be in a clear and understandable manner prominently displayed on the provider's website, in the office, and on-site. The online notification must be easily searchable from a public search engine. When uninsured and self-pay patients ask questions about the cost of items or services, providers must inform the patient of the availability of the good faith estimate.

HHS specifies that it anticipates providing a model notice for how providers/facilities can notify uninsured and self-pay patients regarding the availability of good faith estimates, although HHS is not requiring use of the model notice. As such, providers may develop their own notices. HHS is seeking comment on the potential for using a standardized notice and other options for meeting these requirements.

The required timelines for furnishing notice are as follows:

  • For scheduled items and services, providers must furnish notice to uninsured and self-pay patients at least three business days before the date the item or service is to be provided and no later than one business day after the date of the scheduling.
     
  • For items or services scheduled at least 10 business days before the date the item or service will be rendered, providers must furnish notice no later than three business days after the date of scheduling or request.
     
  • When an uninsured or self-pay patient requests a good faith estimate of charges, providers must offer the estimate at least 10 business days before the date the item or service is to be furnished and, in the case of an item or service that has not been scheduled, within three business days of the request.

Good Faith Estimate of Charges: Convening Providers/Facilities

The good faith estimate of charges furnished by a convening provider/facility must include:

  • Patient name and date of birth;
     
  • Description of the primary item or service in clear and understandable language (and if applicable, the date the primary item or service is scheduled);
     
  • Itemized list of items or services, grouped by each provider or facility, reasonably expected to be provided for the primary item or service, and items or services reasonably expected to be furnished in conjunction with the primary item or service, for that period of care including: (1) those items or services reasonably expected to be furnished by the convening provider or convening facility, and (2) those items or services expected to be furnished by co-providers or co-facilities;
     
  • Applicable diagnosis codes, expected service codes, and expected charges associated with each listed item or service;
     
  • Name, National Provider Identifier (NPI), and Taxpayer Identification Number (TIN) of each provider or facility represented in the good faith estimate, and the state(s) and office or facility location(s) where the items or services are expected to be furnished by such provider or facility;
     
  • List of items or services that the convening provider or convening facility anticipates will require separate scheduling and that are expected to occur before or following the expected period of care for the primary item or service;
     
  • A disclaimer that informs the uninsured (or self-pay) individual that there may be additional items or services the convening provider or convening facility recommends as part of the course of care that must be scheduled or requested separately and are not reflected in the good faith estimate;
     
  • A disclaimer that informs the uninsured (or self-pay) individual that the information provided in the good faith estimate is only an estimate of items or services reasonably expected to be furnished at the time the good faith estimate is issued to the uninsured (or self-pay) individual and that actual items, services, or charges may differ from the good faith estimate;
     
  • A disclaimer that informs the uninsured (or self-pay) individual of their right to initiate the patient-provider dispute resolution process if the actual billed charges are substantially in excess of the expected charges included in the good faith estimate; and
     
  • A disclaimer that the good faith estimate is not a contract and does not require the uninsured (or self-pay) individual to obtain the items or services from any of the providers or facilities identified in the good faith estimate.

Good Faith Estimate of Charges: Co-Providers/Co-Facilities

Convening providers/facilities must contact all co-providers/co-facilities to request submission of expected charges no later than one business day after a request for a good faith estimate is received or after a primary item or service is scheduled. Upon request by the convening provider or facility, a co-provider or co-facility must submit good faith estimate information for items or services that are reasonably expected to be rendered by the co-provider/co-facility in conjunction with the primary item or service. Such information must be received by the convening provider/facility no later than one business day after the co-provider/co-facility receives the request. Co-providers/co-facilities must also update the convening provider/facility if there are changes to good faith estimates.

Information submitted by co-providers/facilities to convening providers/facilities must include:

  • Patient name and date of birth;
     
  • An itemized list of items or services expected to be provided by the co-provider or co-facility that are reasonably expected to be furnished in conjunction with the primary item or service as part of the period of care;
     
  • Applicable diagnosis codes, expected service codes, and expected charges associated with each listed item or service;
     
  • Name, NPI, and TIN of the co-provider or co-facility, and the state(s) and office or facility location(s) where the items or services are expected to be furnished by the co-provider or co-facility; and
     
  • A disclaimer that the good faith estimate is not a contract and does not require the uninsured (or self-pay) individual to obtain the items or services from any of the providers or facilities identified in the good faith estimate.

The requirements outlined in Part 2 regarding good faith estimates of charges for uninsured and self-pay patients are applicable for estimates requested on or after January 1, 2022 and for items or services scheduled on or after January 1, 2022. However, HHS recognizes more time may be needed to transmit information between convening providers/facilities and co-providers/co-facilities. As such, HHS will exercise its enforcement discretion through December 21, 2022, where a good faith estimate provided to an insured or self-pay patient does not include expected charges from co-providers or co-facilities.

Method for Providing Good Faith Estimates of Charges

Providers must offer good faith estimates of charges in written form, either on paper or electronically, based on the patient's requested method. Electronic transmissions must allow patients to both save and print the information and must use clear and understandable language to be understood by the average uninsured or self-pay individual. Providers may share the estimate with a patient's authorized representative.

Patient-Provider Dispute Resolution Process

The Act directed HHS to establish a patient-provider dispute resolution process, under which an uninsured or self-pay patient may seek a determination from a select dispute resolution (SDR) entity for the amount to be paid by the patient to the provider. Under Part 2, a patient could request such a determination if the patient is billed for an amount that is "substantially in excess" of the good faith estimate of expected charges furnished by the provider. HHS defines "substantially in excess" as the billed charges being at least $400 more than the good faith estimate of charges. Patients must initiate the process within 120 calendar days of receiving a bill and will be charged an administrative fee to use the process, which will be $25 in 2022.

HHS will provide further guidance on how patients can initiate the SDR process. Upon a request for initiation, HHS will select the SDR entity. Within 10 business days after receipt of the notice from the SDR entity initiating the SDR process, providers must submit to the SDR entity the following:

  • A copy of the good faith estimate provided to the uninsured or self-pay patient for the items or services under dispute;
     
  • A copy of the billed charges provided to the uninsured or self-pay patient for the items or services under dispute; and
     
  • Documentation demonstrating that the difference between the billed charges and expected charges in the good faith estimate reflects the costs of a medically necessary item or service and is based on unforeseen circumstances that could not have reasonably been anticipated by the provider or facility when the good faith estimate was provided.

The SDR entity must make a determination on the payment amount within 30 business days of the receipt of information from the provider. Part 2 directs the SDR entity to presume that the expected charges are the appropriate amount. However, the SDR entity could determine a different payment amount if the provider shares credible information demonstrating that the difference between the estimated charges and the billed charges reflects the cost of a medically necessary item or service and is based on unforeseen circumstances that the provider could not have reasonably anticipated when providing the estimate of charges to the patient. HHS notes that this is the same standard the Departments adopted for purposes of the IDR process.

External Review

Existing regulations promulgated by the Departments in 2015 address external review of adverse benefit determinations by payers. Part 2 expands the existing regulations to allow external review for determinations involving whether a payer is complying with the surprise billing and cost-sharing protections under the Act and the implementing regulations. The amendments to existing regulations also indicate that grandfathered health plans that are not subject to external review will, going forward, be subject to external review with respect to coverage decisions involving compliance with the surprise billing rules.

Implications for Providers and Next Steps

Since passage of the No Surprises Act in December 2020, stakeholders have been waiting for clues as to whether the IDR process would result in payment rates more in line with median in-network rates or if the IDR process would account for provider-specific factors. Some stakeholders urged the Departments to require that IDR entities focus on the QPA when deciding between offers submitted by the parties. Providers, on the other hand, have highlighted statements made by members of Congress involved in authoring the legislation suggesting that Congress intended for IDR entities to give equal weight to the QPA and additional information submitted by providers.

Under Part 2 of the surprise billing regulations, the Departments unambiguously took the position that the QPA should be the starting point for deliberation by an IDR entity. In response, provider groups have issued strongly worded statements opposing the position taken by the Departments. Although the Departments issued Part 2 as an interim final rule that will be effective upon publication in the Federal Register, stakeholders will have 60 days after publication to submit comments. Provider groups are expected to continue expressing concerns with the approach taken by the Departments. Meanwhile, the Departments will move forward with taking steps to set up the IDR process by January 1, 2022.

In addition, providers should review the new compliance requirements included in Part 2 related to good faith estimates of charges for uninsured and self-pay patients, which will apply as of January 1, 2022. Providers should also review the compliance obligations outlined in Part 1 of the regulations, which will also apply on January 1, 2022.

Baker Donelson will continue to monitor implementation of the No Surprises Act. If you have questions regarding the content of this alert, please contact Jeff Davis or any member of Baker Donelson's Reimbursement Team.

Glossary of Key Terms

  • The Act: The No Surprises Act
  • The Departments: The Departments of Health and Human Services (HHS), Labor, and Treasury
  • IDR: Independent Dispute Resolution
  • IFC: Interim Final Rule with Comment Period
  • OON: Out-of-network
  • Part 2: Part 2 of the surprise medical billing regulations issued by the Departments
  • QPA: Qualifying payment amount
  • SDR: Select dispute resolution
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