The Biden administration on Friday released a final rule outlining how payment disputes over surprise medical bills should be resolved in an independent arbitration process—saying arbiters must consider median contracted in-network rates, but can also rely on additional factors when determining final payment amounts.

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Background

Surprise billing occurs when a patient unwittingly receives care from an out-of-network provider and is responsible for all or a large portion of the cost. This can occur when patients are unable to choose an in-network facility or provider because they are receiving emergency care, or their scheduled care team includes an out-of-network ancillary provider.

In December 2020, Congress passed the No Surprises Act to mitigate patients' exposure to surprise medical bills and require insurers and providers to resolve payment disputes for out-of-network care independently or use a new arbitration process.

And in 2021, CMS released two interim final rules to implement the law. One restricted out-of-pocket costs for consumers as a result of surprise and balance billing, and the other established a process to settle disputes between out-of-network providers or facilities and health plans over these surprise bills, also requiring providers and facilities to provide uninsured patients a "good faith estimate" of charges expected after an item or service is scheduled or upon the patient's request.

In the latter of the interim rules, arbiters were instructed to assume that an insurer's median contracted in-network rate was appropriate for an out-of-network rate; however, providers argued that policy unfairly favored insurers.

In February, a federal court ruled that arbiters couldn't give previous payment arrangements between providers and insurers more weight than other factors.

Details on the final rule

In the final rule, HHS and the Labor and Treasury departments outlined the independent arbitration process, saying that arbiters should consider an insurer's median contracted in-network rate "and then must consider all additional permissible information submitted by each party to determine which offer best reflects the appropriate out-of-network rate."

Therefore, while median contracted rates must be the starting point for resolving payment disputes, arbiters don't have to choose the offer closest to a median contracted rate—but they should select the best offer after considering that amount and other information.

According to the rule, other factors that should be considered when determining the final payment amount include the:

• Provider's level of training, experience, quality, and outcomes
• Provider's market share
• Patient's acuity
• Teaching status, case mix, and scope of services of the facility where the service was provided
• Demonstration of good faith efforts made by the provider or facility or plan to enter into network agreements with each other and, if applicable, contracted rates between the provider and facility during the previous four plan years

The final rule also requires insurers to provide information about their median contracted rate for each payment or payment denial when that rate is used to calculate cost-sharing. And if an insurer changes the code or modifier of a given service to one with a lower rate, the insurer is required to explain the purpose of that downcoding and reveal what the rate would have otherwise been.

The rule also requires arbiters to explain their decisions on payment disputes, including how much weight was given to the median contracted rate. If an arbiter uses additional information to decide the final payment amount, they should explain why that information was not already reflected by the contracted rate.

Reaction

According to the ERISA Industry Committee (ERIC), the final rule "watered down" the No Surprises Act. "Instead of adhering to Congress's original intent, the administration back-tracked on limiting out-of-network payments to reasonable market-driven rates," said Annette Guarisco Fildes, CEO of ERIC.

However, Chip Kahn, CEO of the Federation of American Hospitals, praised the final rule, saying it "moves more in the direction of the original intent of the legislation. The proof will be how this works in practice."

Families USA, a consumer advocacy group, said the final rule will protect families from financial hardship for seeking medical care.

"It's not secret that some providers try to obtain higher, inflated rates and have used surprise medical bills as a business model to keep costs high," said Frederick Isasi, executive director of Families USA. "Now, they will no longer have the opportunity to wring more money from families." (Tepper/Goldman, Modern Healthcare, 8/19; Hansard, Bloomberg Law, 8/19; Reed/Bettelheim, Axios, 8/22; Bannow, STAT+ [subscription required], 8/19)