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Surprise Medical Billing Update

Surprise Medical Billing Update 

by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.


The Final Surprise Billing Regulations are FINALLY Here

  1. Most of us thought the final surprise billing regulations would arrive right before the July 4th I suppose we were all happy when July 1st came and went (and NO regs), because that allowed us to enjoy our holiday with family and friends. Then, as each Friday in July and the first part of August passed, we were always on the edge of our seat, waiting and watching for the final reg release. By Friday, Aug. 19th, it was time…  And the regs came out at 4:04 pm Friday afternoon.


  1. Analysis: Most of us were not quite sure what would be included in the final regulations. We DID expect that the Federal Departments would address the controversy surrounding the “rebuttable presumption standard” in the wake of the Eastern District of Texas court rulings invalidating the standard earlier this year (more on that below). We also figured that the Departments would endeavor to clarify various aspects of the Federally-developed arbitration process like: Allowing BOTH payers and providers to see the other party’s arguments they submitted to a Federal arbiter justifying why the party’s respective “offer” represents the most appropriate final payment amount. This way, each party will understand what the other party is arguing, and this will then allow each party to develop responses to the other party’s arguments.  Currently, the process is set up in such a way where neither party CAN SEE what the other party is saying to the Federal arbiter.  UNFORTUNATLEY, there were NO clarifications on this point. In addition, I thought we would see clarifying guidance on how payers should calculate their Qualifying Payment Amount (QPA), which as you know, is the median in-network rate for a furnished medical item or service. In particular, I thought we would see more information on how payers could and should use 3rd-party databases to calculate their QPA. AND, I figured we would see more guidelines on what 3rd-party entities could and should do to qualify as an “eligible” 3rd-party database. I also thought we would see more guidance on how providers could and should “batch” the claims a provider is disputing with a particular payer. NADA on BOTH.


In the end, there were ONLY 3 main components to the recently released final regs (I say “ONLY” because – again – I thought we would see MORE). These 3 main components include:

  1. Reminding Federal arbiters that they must provide a detailed explanation of their final determination.
  2. Requiring additional information to be furnished to a provider when a payer “
  3. And lastly, the elimination of the “rebuttable presumption standard,” which is where we will start…


The “Rebuttable Presumption Standard” Gets Bounced

  1. As stated, the long-awaited final surprise medical billing regulations are finally here. And for payers (i.e., insurance carriers and sponsors of self-insured plans), the regs came with a BIG THUD. That is, the final regs CONFIRM that the “rebuttable presumption standard” is GONE.


  1. Analysis: This means that a Federal arbiter is NO LONGER required to assume that the median in-network rate (i.e., the Qualifying Payment Amount (QPA)) for a furnished medical item or service should represent the final payment amount UNLESS a provider can produce “credible additional information” that the QPA is NOT the appropriate payment amount. This NOW means that a Federal arbiter MUST consider BOTH (1) the median in-network rate (i.e., the QPA) and (2) the “credible additional information” EQUALLY. I do NOT interpret this to mean that a Federal arbiter is PROHIBITED from assuming that the median in-network rate (i.e., the QPA) represents the most appropriate final payment amount. BUT, I do believe that this means that a Federal arbiter CAN give EQUAL WEIGHT to (1) the QPA and (2) the “credible additional information” when making a final payment determination. I wouldn’t call this a BFD (like then-Vice President Biden called the Affordable Care Act and former President Obama recently called the Inflation Reduction Act). BUT – at least in my opinion – this is PRETTY PRETY big (for you Curb Your Enthusiasm enthusiasts :]). Why is this PRETY PRETTY big?  Because there is NO DOUBT in my mind that this will increase health care costs. Why? Because Federal arbiters will now – on a much more frequent basis – choose a provider’s “offer,” which is an amount that is ALAWYS going to exceed the median in-network rate (i.e., the QPA) for the furnished medical item or service. BTW, while I am no Congressional Budget Office (CBO) economist, I would LOVE to see how CBO would “score” the surprise billing protections now that the “rebuttable presumption standard” is GONE (because the savings to the government that CBO initially estimated will NO DOUBT be LOWER).


Will There Be More Litigation Surrounding the “Rebuttable Presumption Standard”?

  1. Now that we have final regulations confirming that the “rebuttable presumption standard” is GONE, what’s going to happen to some of the pending litigation? After all, the DC District Court has been considering the same type of lawsuit the Texas District Court considered, which led the Texas Court to invalidate the “rebuttable presumption standard.” In the DC District Court case, the judge actually stated that he DID NOT want to render a ruling until AFTER final regulations were released.  Soooooooo, now that the final regs are here, will we see a ruling from the DC District Court, like the judge said?


  1. Analysis: I am NOT a litigator, but it is my understanding that we may NEVER see a ruling from the DC District Court on whether the “rebuttable presumption standard” is valid or not. This is because – with the release of the final regulations and the Federal Department’s affirmative decision to eliminate the “rebuttable presumption standard” in its entirety – the providers WON. Which means, the providers are NO LONGER suffering an injury for which they can seek to redress through the courts. Meaning, the providers NO LONGER have “standing,” and the DC District Court judge will likely rule that their challenge to the “rebuttable presumption standard” is now MOOT. Sooooooo, if you are a payer, and you were hoping that the DC District Court would issue a ruling UPHOLDING the “rebuttable presumption standard,” you are NOT likely to get such a ruling. Unless… The payers decide to file a lawsuit challenging the elimination of the “rebuttable presumption standard.”  In my opinion, the main argument from the payers is that Congress ALWAYS intended that the “rebuttable presumption standard” be a part of the law (evidenced by CBO including the application of this standard when initially “scoring” the amount of savings for the government). AND, because the Federal Departments eliminated the “rebuttable presumption standard,” the Departments EXCEEDED their authority and took action that is contrary to the statute and Congressional intent. That’s no-no under the Administrative Procedures Act. BUT, the BIG question is this: Will the payers turn into the plaintiffs here (effectively switching roles with the providers)? BTW, I don’t think that’s gonna happen. BUT, you can never-say-never.


What About the Other 2 Components of the Final Surprise Billing Regs?

  1. Before I talk about the other 2 components of the final regs, let me say this:


  1. Analysis: It is important to understand that there are a number of aspects of the Federal surprise billing rules that these final regs do NOT touch. This means that the “untouched” aspects of the surprise billing requirements will CONTINUE to be governed by the July 1st and Sept. 30th Interim Final Rules (IFRs). In time, the Federal Departments will issue final regulations implementing all or portions of these “untouched” aspects of the surprise billing rules. BUT, until then, know that the “untouched” requirements set forth under the July 1st and Sept. 30th IFRs CONTINUE to be the rules of the road here.


The Final Regs:  Increased Information When “Downcoding”

  1. Over the past 4 months, a pattern of “downcoding” has prompted providers to file complaints with the Federal Departments. It is my understanding that the providers went so far as to ask the Federal Departments to PROHIBIT payers from “downcoding.” BUT, in BOTH the July 1st and Sept. 30th IFRs, the Federal Departments ALLOW payers to “downcode,” although the Departments DID WARN the Federal arbiters that they MUST consider any “credible additional information” showing that “downcoding” produced an artificially low QPA.


  1. Analysis: Just to be clear, the final regs define “downcoding” as “the alteration by a payer of a service code to another service code, or the alteration, addition, or removal by the payer of a modifier, if the changed code or modifier is associated with a lower QPA than the service code or modifier billed by the provider.”


In response to provider complaints – while NOT going so far as to PROHIBIT “downcoding” – the final regs NOW REQUIRE those payers that engage in “downcoding” to furnish the provider with ADDITIONAL information relating to the payer’s changing of the codes or modifiers initially included in the provider’s bill.  Going forward, payer MUST:

  1. Provide a statement that the codes or modifiers were “downcoded;”
  2. Include an explanation of why the claim was “downcoded,” including a description of which codes or modifiers were altered, added, or removed; and
  3. Specify the amount that would have been the QPA had the codes or modifiers not been “downcoded.”


In my opinion, here’s what drove all of this: When payers send their (1) Initial Payment or (2) Notice of Denial to a provider in response to the provider’s bill, the July 1st IFR requires the payer to furnish the following information to the provider:

  1. The QPA (i.e., the median in-network rate) for the furnished medical item or service.
  2. A certification that the QPA applies for purposes of the determining how much the patient will pay, and that the QPA for each item or service involved was determined in accordance with the methodologies outlined in the July 1st
  3. Contact information for the appropriate plan representative (e.g., phone number and email address) so the provider can contact them to initiate the “Open Negotiation” Period.


Once the provider receives the (1) Initial Payment or (2) Notice of Denial – plus the information noted above – the provider has to decide whether the provider wants to initiate the “Open Negotiation” Period, which is REQUIRED if the provider decides that they ultimately want to take the payer to Federal arbitration (i.e., the “Open Negotiation” Period MUST be exhausted before arbitration can begin). To aid the provider in making these decisions, the Federal Departments feel that it is extremely important that the providers have enough information to, for example, fully understand the basis for the value of the QPA that was calculated by the payer (so the provider can make an informed decision on whether they want to go all the way through the Federal arbitration process in hopes of getting paid MORE). But note (as I explain more fully below in my discussion of the FAQs), it is NOT the responsibility of the provider or a Federal arbiter to decide if the payer calculated the QPA correctly.  INSTEAD, the Federal Departments are responsible for making such a determination. HOWEVER, providers are allowed to argue why they think the QPA is WRONG, and Federal arbiters are allowed to consider these arguments if there is “credible additional information” supporting the provider’s argument here.


The Final Regs:  Federal Arbiters’ Written Decisions

  1. Another pattern that has come to the forefront over the past few months is this:  When a Federal arbiter issues their written decision of a final payment determination, the written decision only includes cryptic conclusions and the decision does NOT provide much detail on how and why the arbiter chose, for example, the provider’s “offer.”


  1. Analysis: Payers, in particular, are disadvantaged by this because they do NOT know why the Federal arbiter ruled in favor of the provider. It is important for payers to know “why,” because the next time the payer submits their “offer” to this particular arbiter, the payer can learn from the arbiter’s decision and choose to include – or not include – certain information and arguments supporting their “offer.” BUT, if the arbiter’s decision only includes cryptic conclusions, the payer CANNOT learn.  We all have to remember that once the Federal arbiter renders their decision, that decision is BINDING. Sooooooo, payers CANNOT go back to the arbiter asking “what was the basis for your final decision.” Importantly, the Federal Departments are ALSO disadvantaged by the lack of detail in a Federal arbiter’s decision. What I mean here is this: The statute requires the Federal Departments to publicly report data and other information relating to the Federal arbitration process on a quarterly basis. The Sept. 30th IFR goes so far as to say that to aid the Federal Departments in meeting this statutory requirement, the Departments will look at the Federal arbiters’ written decisions to better understand things like the arguments providers and payers are making, and also, trends (e.g., how many times are providers vs. payers winning in arbitration (or vice versa) and why, and also, whether the QPA or the “credible additional information” served as the basis for making the final payment determination). BUT, if the Federal arbiters’ written decisions are NOT detailed – and they do NOT fully explain how and why the arbiter chose a particular “offer” over the losing “offer” – the Federal Departments CANNOT meet their statutory responsibilities.


Sooooooooo, the recently released final regulations direct Federal arbiters to include in their written decisions:

  1. A description of the information the arbiter determined demonstrated that the “offer” selected best represented the value of the furnished medical item or service;
  2. This MUST include an explanation of the weight given to the QPA and any “credible additional information”; and
  3. In cases where the arbiter relies on “additional information” in selecting an “offer,” the arbiter must include an explanation of why the arbiter concluded that this information was “credible,” and also, why this information was not already reflected in the QPA.


Related to this latter point, the Federal Departments reminded the Federal arbiters that there are many cases where the “credible additional information” presented by providers are already included in the calculation of the underlying QPA. And, if the arbiter relies on the “credible additional information” in this case, the arbiter would WRONGLY “double-count” the information and potentially choose an “offer” that is artificially high. This was ALREADY a rule set forth in the Sept. 30th IFR, but this reminder was welcomed by the payer community.


23 FAQs Released Alongside the Final Surprise Billing Regulations

  1. The Federal Departments released what I think are helpful FAQs clarifying certain aspects of the surprise billing requirements. The Departments also included 2 very helpful FAQs relating to the Transparency in Coverage (TiC) Rule:  1 Q&A relating to the public disclosure of in-network rates and out-of-network allowed amounts on “machine-readable files” and 1 Q&A relating to the cost-sharing liability tool.


  1. Analysis: I am just going to give you some “quick hit” summaries (and commentary) of some of the more relevant FAQs.  Note, there are other Q&As I do not summarize, but that does NOT mean that the “un-summarized” Q&As are not helpful too:


Surprise Billing:  Determining the Accuracy of the QPA Calculation

On page 15 and 16 of the FAQs, the Federal Departments reminded providers and Federal arbiters that it is NOT the responsibility of the provider OR the Federal arbiter to verify if a payer accurately calculated the QPA. INSTEAD, the FAQs confirmed that the Departments are responsible for verifying a QPA’s accuracy. The FAQs indicated that if providers have concerns that a payer is NOT accurately calculating the QPA, the provider may file a complaint with the Departments.


Surprise Billing:  Reference-Based Pricing (RBP) Plans With NO NETWORK

Ever since the surprise billing requirements were enacted into law at the end of 2020, I received a TON of questions (and I STILL receive questions) on how the new Federal surprise billing rules will apply and impact RBP plans with NO NETWORK. I have consistently said that I believe an RBP Plan with NO NETWORK will ALWAYS be subject to the surprise billing protections when ANY provider furnishes emergency care (because the 1st prong of the surprise billing requirements applies to out-of-network emergency care, and emergency care will ALWAYS be out-of-network if your plan has NO NETWORK). I also explained that new surprise billing rules will NEVER apply in cases where an out-of-network provider furnishes medical items or services at an in-network medical facility (because the 2nd prong of the surprise billing requirements contemplates an IN-NETWORK facility which you will NEVER have if your plan has NO NETWORK). Fortunately for me, the Federal Departments agreed, and Q&As 1 and 2 confirmed this. Q&A-3 also confirmed that an RBP Plan with NO NETWORK is required to use a 3rd-party database to determine a QPA. The Departments note that if a Plan has a contract to pay amounts that are “not on a fee-for-service basis” (such as bundled and capitated payments), the Plan may determine the QPA using an underlying fee schedule or a “derived amount.” BUT, if your Plan has NO NETWORK, I do NOT believe you can “derive” an amount, so you are STUCK using a 3rd-party database. And lastly, Q&A-4 explains that an RBP Plan with NO NETWORK may be required to make a final payment amount that is DIFFERENT than the Plan’s reference-based amount paid for the furnished medical item or service. This is because the reference-based payment amount will NOT represent the QPA on which the Plan could argue should represent an appropriate final payment amount (because utilizing a 3rd-party database to develop the QPA will almost always be higher than the reference-based amount).


Surprise Billing:  “Informed Consent

Over the past few months, some providers have been “customizing” their own “Notice and Consent” forms (to obtain “informed consent” from the patient), but these provider-customized forms have NOT included all of the required information that the Federal Departments set forth in the “model” standard “Notice and Consent” form the Departments released along with the July 1st IFR. Q&A-13 confirms that providers MUST include ALL of the information set forth in the “Notice and Form” developed by the Departments. To do otherwise, the provider would fail to comply with the surprise billing requirements, and any efforts to obtain a patient’s “informed consent” through these provider-customized forms would fall short, meaning the surprise billing protections would CONTINUE to apply.


Surprise Billing:  Air Ambulance

Out-of-network air ambulance bills are among the MOST costly for payers, so anything related to air ambulance services is important. In Q&As 7, 8, and 9, the Departments explained that even if a point of pick-up is outside of the U.S., the surprise billing protections WILL APPLY to out-of-network services associated with the out-of-U.S. pick-up. AND, the geographic region for the point of pick-up outside of the U.S. is the location of the individual at the time the individual is placed on board the ambulance. AND, the geographic region that must be used for purposes of calculating the QPA should be the closest Metropolitan Statistical Area (MSA) to the actual point of pick-up (e.g., the Miami-Ft. Lauderdale-West Palm Beach will serve as the geographic region for a pick-up in the Bahamas).


Surprise Billing:  Disclosure of the Surprise Medical Billing Protections

Plans are required to publicly disclose information on (1) the surprise billing protections, (2) applicable state surprise billing protections, and (3) how to contact Federal and State agencies if an individual believes the provider has violated the prohibition against balance billing. If an employer-sponsored plan does NOT have its own website, Q&A-12 clarifies that the plan may enter into a written agreement with the plan’s insurance carrier (in the case of a fully-insured plan) or TPA (in the case of a self-insured plan) to post – on behalf of the plan – the required information on the carrier’s/TPA’s website. The plan, however, remains liable if the if the carrier/TPA fails to comply with this disclosure requirement.


TiC Rule:  Posting Links to “Machine-Readable Files

While the Federal Departments are a little late to the game for providing clarifying guidance relating to compliance with publicly disclosing in-network rates and out-of-network allowed amounts on “machine-readable files” (which was effective July 1st), the Departments provided a helpful clarification in the recently released FAQs (which is related to Q&A-12, summarized above).  Specifically, Q&A-22 explained that if an employer-sponsored plan (e.g., a self-insured plan) does NOT have its own website, the plan may enter into a written agreement with the plan’s TPA (or other service provider) to post links to the plan’s “machine-readable files” on the TPA’s/service provider’s website. In this case – even if the employer-plan sponsor has its own website – the employer-plan sponsor is NOT required to post the links to the “machine-readable files” on their website. As noted above, if the TPA/service provider fails to comply with the disclosure requirement, the plan remains liable for any non-compliance.


TiC Rule:  Cost-Sharing Liability Tool

Effective Jan. 1, 2023, insurance carriers and self-insured plans must disclose through the cost-sharing liability tool information for 500 medical items and services that the Federal Departments deem are “shoppable.” The final TiC regulations set forth a prescribed list of the 500 “shoppable” medical items and services that must be disclosed through the cost-sharing liability tool. In the last Q&A of the recently released FAQs, the Federal Departments explained that – starting Jan. 1, 2023 – the Departments will update the “list” of 500 shoppable items on a quarterly basis, so plans have the most up-to-date list of service codes to remain in compliance with this cost-sharing liability tool requirement. While this particular Q&A may seem straight-forward, this confirms that the Departments are NOT anticipating any delays of the Jan. 1, 2023 effective date (at least for now)