Surprise Billing: Volume Of Cases Using Independent Dispute Resolution Continues Higher Than Anticipated
For consumers, the goal of the No Surprises Act (NSA) is to ensure that they are not financially penalized when they are treated by an out-of-network facility or provider in many circumstances where they have no real opportunity to receive care from a facility or provider in their insurance network. For the most part, the law appears to be fulfilling that goal.
For other stakeholders—insurers, health plans, facilities, and providers—the story is more complicated. For claims covered by the NSA, the law provides that issuers make an initial payment (or send a notice of denial of payment) to the out-of-network facility or provider within 30 days of receiving a clean claim. It also provides facilities and providers the opportunity to challenge that payment amount through a system of private negotiations followed by independent dispute resolution (IDR) if negotiations fail and other conditions of the law are met. In IDR, each party offers an amount, the arbitrator selects one of the two offers, and that amount becomes binding on the parties. This post provides an update on how the IDR process is working over its first year of operation. It also includes a brief summary at the end on the release by the federal agencies of a report on the impact of the NSA and some continued implementation advice in response to three frequently asked questions.
The IDR Process
Standards by which IDR entities decide which amount to select are laid out in the law, and the federal agencies with responsibility for the NSA published an interim final rule with their further interpretation of these standards. After key provisions of that rule were invalidated by Texas federal district court judge Jeremy Kernodle, the agencies revised their interpretation of the IDR standards in a final rule. But that rule was again invalidated by Judge Kernodle in a second lawsuit filed by the Texas Medical Association. That decision has been appealed by the federal government, with briefs to be filed in July. In the interim, the IDR process continues to operate without guidance other than the original language in the law.
On April 27, 2023, the federal agencies filed a second quarterly report on the status of IDR cases through the end of 2022, along with a memorandum providing additional information for the first quarter of 2023. We previously provided analysis of the first quarterly report. For the most part, the latest report shows continuation of the same trends, but with a few new findings.
As in the first report, the agencies note that they remain unable to publish more than a partial report on the IDR process. Key missing elements are details on IDR outcomes, such as amounts of offers submitted by each party, which offer was selected, and the amount of the selected offer expressed as a percentage of the qualifying payment amount (QPA). The agencies report that “the functionality of the Federal IDR portal remains largely manual,” thus limiting their ability to provide more details.
Significantly, however, the April 27 “status update” reports that in 71 percent of the 42,158 disputes with payment determinations made by March 31, 2023, the initiating party (nearly always the facility or provider) prevailed and saw their offer accepted. No information is available on the amounts of the prevailing offers or the differential between the offers submitted. Nor do we have information that links the actual payment determination to the identities of the parties involved in these cases, the types of services involved, or where services were provided. Future reports should also provide information on decision-making patterns across the 13 certified IDR entities.
Continuation Of Trends Established In The First Report
Volume Of Cases
The volume of IDR cases, which was already well above expected levels in the previous report, has continued to grow. Cases filed rose from 69,342 in the third quarter of 2022 to 110,034 in the fourth quarter and to 155,452 in the first quarter of 2023. The federal agencies note that the level of cases in the first year of the portal’s operation was 14 times the estimated caseload. In the most recent quarter, cases have been filed at a weekly rate of nearly 12,000.
It is notable and somewhat unexpected that the volume of cases has continue to grown in 2023, despite the government’s increase in the administrative fee for participating in the IDR process from $50 to $350 for each party. Some observers expected the higher fee to deter providers from taking cases to IDR when the potential award is less than the fee amount.
Share Of Cases Deemed Ineligible
A substantial share of the cases filed for IDR consideration are ultimately deemed ineligible for the IDR process. Of cases closed by March 31, 2023, 37 percent were dismissed as ineligible. Because of delays in completing case reviews, it is difficult to see whether there has been a learning curve such that fewer ineligible cases are being filed. But the high rate of ineligible cases continues to be an unexpected challenge for the government, the IDR entities, and the insurers and health plans that are nearly always the responding parties in these cases.
Rate Of Case Resolution
There has been significant improvement in the rate of cases being resolved. When the federal agencies reported numbers as of December 5, 2022, only 7 percent of cases had been resolved. As of March 31, the share of closed cases since the portal opened is 32 percent. While this growth is partly the inevitable result of more time passing, it should be viewed as important and positive progress. Because the process has been paused periodically as a result of litigation, this progress seems even more remarkable.
Mix Of Services Generating IDR Cases
About three-fourths of cases filed for IDR consideration continue to come from emergency services. But the share of cases coming from non-emergency settings increased modestly from Q3 to Q4 of 2023 The share of air ambulance cases also rose from 4 percent to 6 percent of all cases.
Geographic Distribution Of IDR Cases
Cases filed for IDR consideration continue to be geographically concentrated. As in the previous quarter, about two-thirds of all cases were filed in six states. The same four states (Texas, Florida, Georgia, and Tennessee) were at the top. Tennessee continues to have the highest rate of file cases adjusted for population. Filed cases continue to be rare in states such as Hawaii, Maine, Michigan, and Vermont.
Organizations Filing Cases
The latest report shows most cases are being filed by just a few organizations. The top three firms again represent about half of all cases, and the top ten initiated 71 percent of disputes. SCP Health (physician staffing firm focusing on emergency medicine) and R1 Revenue Cycle Management (company managing financial matters for physician practices) remain the top two firms by volume. TEAMHealth, a private-equity-backed physician practice that has expanded from emergency medicine to other specialties, now holds the third spot in volume of IDR cases.
The latest reporting on the organizations that dominate the use of IDR further emphasizes the role of private-equity-backed organizations. At least five of the top six organizations in the fourth-quarter report, representing half of the IDR cases, have private-equity backing. Although their motives are uncertain, it is reasonable to speculate that use of IDR may be a key strategy to obtain higher rates—whether by staying out of network and winning cases or by gaining higher rates in negotiations with payers.
New Releases From The Federal Agencies
On July 7, 2023, the Department of Health and Human Services issued another report, the first in a series of annual reports to Congress on the impact of the No Surprises Act. This initial report establishes some baseline information and a framework for future reports. In providing a baseline, it serves a different role than Georgetown’s qualitative one-year snapshot of the status of consumer protections during the law’s first year. The goal of the series of federal reports is to consider the law’s impact on surprise billing as well as on broader system trends for health care costs and consolidation.
The HHS report provides valuable baseline information in these areas as well as laying out methodological considerations that will be used for future reports. For example, it draws on Health Care Cost Institute data to show that 70 percent of physicians in 2019 billed 2 percent or fewer out-of-network claims. By contrast, about 5 percent of physicians had a majority of out-of-network claims. Out-of-network billing in 2019 was most common in emergency department and ambulatory surgery center settings and in select specialties, such as psychiatry and neurology, emergency medicine, and pathology.
The three federal agencies, as part of a larger release announcing actions to protect consumers and lower health care costs, published three new FAQs relevant to the NSA. One addresses facility fees, noting that they should be included not only in price transparency requirements, but also in good-faith cost estimates available to uninsured individuals, as well as the good-faith estimates and advanced explanations of benefits provided to those with insurance.
The other two FAQs seek to align definitions of participating and nonparticipating providers as used under the NSA and definitions of networks under the provision of the Affordable Care Act that establishes a maximum out-of-pocket (MOOP) limit that applies to most health plans and health insurance coverage. For example, if a provider is considered out of network and thus excluded from counting toward the MOOP limit for in-network services, then the provider would be treated as non-participating under the NSA and thus consumer protections would apply. But in a situation where a plan has a direct or indirect contractual relationship with a provider that would otherwise be considered out of network, that provider would be considered as a participating provider for NSA purposes and as in network for applying the MOOP.
Implications
The high volume of cases in the IDR system, combined with the frequency with which cases are deemed ineligible, continues to stress the system. The federal agencies and the IDR entities face challenges in determining whether cases have complete information and whether they meet the system’s eligibility standards. Determining which cases belong in state systems for determining payments and assessing whether batching of cases is done correctly are both common points of stress. Case volume creates difficulty for the insurers and health plans that must respond to the filed cases. It also contributes to the slow pace for getting cases resolved, and thus contributes to the cash flow concerns often raised by providers (though providers filing a case for IDR have largely already received the required initial payment from the insurer or health plan).
Difficulty in determining which cases are ineligible was a key rationale provided by the federal agencies when raising the administrative fee for filing a case from $50 to $350 effective in 2023—an increase that has been challenged in court by the Texas Medical Association. It is noteworthy that the case volume continued to grow in the first quarter of 2023, despite the fee increase. Anecdotally, provider organizations have noted that the higher fee makes it unrealistic to file for IDR with (for example) a single claim for evaluation and management services in the emergency department—a service where the billed charge would often be less than the $350 fee.
Despite the higher-than-expected volume of IDR cases, the total number of filed cases remains a small share of all out-of-network claims. The two leading trade associations representing insurers and health plans have estimated that 9 million out-of-network claims were processed in the first three quarters of 2023—claims that could have resulted in surprise bills in the absence of the No Surprises Act. Even allowing for lags in filing claims for IDR and for IDR filings that turned out to be ineligible, well over 90 percent of all out-of-network claims did not result in a request for IDR.
Clearly, a considerably higher share of emergency medicine and anesthesiology claims are entering the IDR process, and some providers may opt to avoid the cost and hassle of IDR even if they are not happy with the amount paid by the insurer or health plan. Nevertheless, it is noteworthy that more than nine of ten claims have not entered the IDR process. And even when claims do enter the process, consumers’ out-of-pocket costs for those claims are not affected by IDR outcomes. However, there is a potential long-term impact on premiums if providers prevail regularly and win sizable amounts.
The use of IDR remains concentrated by geography and provider organizations. Even in large states such as Maryland, Massachusetts, Michigan, and Minnesota, fewer than 30 cases are filed per week. Those using the IDR system come mostly from a few states, such as Texas and Florida (1,900 and 1,200 per week, respectively), and from a small set of provider organizations. Although available data are limited, it seems clear that private-equity-backed provider organizations are some of the most aggressive users of IDR.
The first year under the IDR system has created challenges for facilities, providers, health plans and insurers. But these challenges may get resolved in the months to come. The multiple legal cases brought by providers will eventually be resolved. There is some evidence that federal officials have been working with stakeholders to identify ways to make the IDR portal and other components work more smoothly, and it is critical that all parties continue seeking ways to improve the process. The eventual publication of additional information on IDR outcomes may lead stakeholders to use the system more efficiently by encouraging more acceptance of initial payments and more successful negotiation of payment disputes. Time will tell whether the system will soon find a smoother path.
Jack Hoadley and Kevin Lucia, “Surprise Billing: Volume Of Cases Using Independent Dispute Resolution Continues Higher Than Anticipated,” Health Affairs Forefront, July 27, 2023, https://www.healthaffairs.org/content/forefront/surprise-billing-volume-cases-using-independent-dispute-resolution-continues-higher. Copyright © 2023 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.
