The No Surprises Act Part II – Independent Dispute Resolution Entities and a Lawsuit

On October 7, 2021, the Department of the Treasury, Department of Labor, and Department of Health and Human Services drafted and published Part II of the Requirements Related to Surprise Billing, which establish the Independent Dispute Resolution process.

The most interesting development arising out of Part II relates to the discretion (or lack thereof) provided to the Independent Dispute Resolution Entity (the “Entity”). Pursuant to Requirements, the Entity “must select the offer closest to the QPA [Qualifying Payment Amount] unless the [Entity] determines that credible information submitted by either party clearly demonstrates that the QPA is materially different from the appropriate out-of-network rate,” based on the additional factors set froth in the Code of Federal Regulations. Those other factors include the level of training, experience, and quality and outcomes measurements of the provider or facility, the market share held by the provider or plan in the geographic region where the service was provided, the acuity of the plan participant, the teaching status, case mix, and scope of services of the provider, and any good faith efforts made by the parties to enter into network agreements.

If the Entity deviates from the offer closest to the QPA, it must issue a written decision setting forth the reasons for the deviation.

As a refresher, the QPA is generally the historical median in-network rate for the same or similar services in the same geographic region.

As expected, the Entity is expressly barred from considering:

  • Usual and customary charges
  • Billed charges
  • Public payor payment or reimbursement rates (i.e. Medicare and Medicaid)

The decision to focus on the QPA was driven by the Departments’ desire to deter the use of the IDR Process:

The Departments are of the view that implementing the Federal IDR process in this manner encourages predictable outcomes, which will reduce the use of the Federal IDR process over time and the associated administrative fees born by the parties, while providing equitable and clear standards for when payment amounts may deviate from the QPA, as appropriate.

As one might imagine, providers are dissatisfied with this turn of events.[1] In fact, on October 28, 2021, the Texas Medical Association filed a lawsuit against the federal government seeking a declaration that the Departments acted unlawfully in promulgating Part II, an order vacating the provisions of Part II relating to the requirement that the Entity select the offer closest to the QPA, and an injunction preventing the Departments from enforcing the requirement. The lawsuit alleges:

The Departments’ new “rebuttable presumption” in favor of the offer closest to the QPA during the IDR process will have similar results. Providers will often receive lower reimbursement that does not reflect the fair market value of their services, and some patients will lose access to their in-network physicians.

This seems like an alarmist position that is generally self-serving. It is too early to know what the Court is likely to do. That said the Departments have a lot of discretion in implementing the No Surprises Act and Part II is unlikely to be modified. aequum will continue to follow the developments in this case and with the No Surprises Act generally.

A continued word of caution: Reference-based pricing plans that have some provider or facility contracts may be bound by all of the provisions of Part I in certain geographic regions if there is sufficient data to calculate a median contracted rate. Reference-based pricing plans should be aware of this risk as they enter into direct contracts with providers and facilities. (