CMS Proposes 200% Fee Hike to No Surprises Act IDR Fees – On September 20, 2023, the Departments of Health and Human Services, Labor, and the Treasury (the Departments) announced the Federal Independent Dispute Resolution (IDR) Process Administrative Fee and Certified IDR Entity Fee Ranges Proposed Rule (the Proposed Rule). Under the Proposed Rule, the administrative fee for arbitrations initiated pursuant to the No Surprise Act independent dispute resolution process would increase from $50 to $150 per party per dispute. The range of permissible fees chargeable by certified IDR entities would increase by 20% for single determinations and 25% for batches determinations, with certified IDR entities able to charge a fixed tier fee up to $250 for every additional 25-line items within a batched dispute beginning with the 26th line item.
The No Surprises Act, enacted in December 2020, prohibits balance billing patients for out-of-network emergency services and non-emergency services rendered by out-of-network providers at in-network facilities. When the No Surprises Act applies, the out-of-network rate payable by the plan is determined by an All-Payer Model or specified state law, if applicable. In the absence of an All-Payor Model or specified state law, reimbursement is determined by the IDR process when the payor and provider cannot agree on a negotiated out-of-network rate. In the IDR process, after that process is initiated, both parties must submit final offers for payment along with supportive written material to an IDR entity who is required to select between the two offers (“baseball-style” arbitration).
On September 30, 2021, the Departments issued the second set of implementing regulations (the “IDR Rule”) which, in part, provided significant additional detailed rules regarding the IDR process. The IDR Rule was promulgated as an interim final rule, skipping the regular notice-and-comment rulemaking required by the APA. Relevant here, under the IDR Rule, in order to batch items and services into a single IDR process, the items or services must each be “billed under the same service code or a comparable code under a different procedural code system.”
Contemporaneously with the IDR Rule, the Departments also issued “Fee Guidance” setting the fee at $50 for calendar year 2022. In October 2022, the Departments issued guidance for calendar year 2023, which again set the fee at $50. Then, in December 2022, the Departments issued new Fee Guidance for calendar year 2023 and dramatically raised the fee for 2023 to $350, a 600% increase, citing the volume of disputes and the costs associated with making disputed eligibility determinations (Fee Guidance).
Following the issuance of the Fee Guidance, on January 31, 2023 the Texas Medical Association (TMA) filed a fourth suit in federal district court (TMA IV) challenging the Fee Guidance and the batching regulations in the IDR rule alleging that they were unlawfully issued without notice and comment and therefore must be set aside under the Administrative Procedures Act. On August 3, 2023, the Eastern District of Texas granted summary judgment in favor of the TMA and vacated the Fee Guidance’s $350 administrative fee along with certain challenged portions of the IDR Rule regarding batching, as recounted further here.
Subsequently, the Departments directed certified IDR entities to pause work in the Federal IDR process to permit the Departments to release guidance reflecting the TMA IV decision, including the applicability of the fees reflected in the October 2022 guidance. This Proposed Rule now follows in response to the TMA IV decision.
The Proposed Rule
Under the Proposed Rule, the Departments propose the following:
- The administrative fee charged by the Departments to participate in the federal IDR process, and the ranges for certified IDR entity fees for single and batch determinations will be set by the Departments through notice and comment rule making henceforth.
- The administrative fee for 2024 will increase from $50 to $150.
- For 2024, the upper range for certified IDR entity fees for single determinations will increase to $840 and to $1,173 for batched determinations, which is an increase of 20% and 25% respectively.
- Additionally, certified IDR entities will be able to able to charge a fixed tier fee between $75 to $250 for every additional 25 line items within a batched dispute beginning with the 26th line item.
The Proposed Rule also notes that since the TMA IV opinion and order vacated 26 CFR 54.9816-8T(c)(3)(i)(C), 29 CFR 2590.716-8(c)(3)(i)(C), and 45 CFR 149.510(c)(3)(i)(C), which established standards for determining when multiple items or services relate to “the treatment of a similar condition” for the purpose of batched disputes, certified IDR entities must now only rely upon the statutory language when determining whether multiple items or services are appropriate to batch, which may require greater administrative burden.
The Proposed Rule expressly solicited comments regarding the following:
- The methodology used to calculate the fee amounts, and the economic impact thereon to interested parties as a result of the fee increases.
- The proposal for the Department to have the ability to set the administrative fee amount more or less frequently than annually, or whether the Departments should retain the current annual policy.
- Any other implications of TMA IV (and the case that preceded it, TMA III) that could impact the fee increase proposals not otherwise addressed by the Proposed Rule
- Whether, and how, the Departments should apply an inflationary adjustment in future years.
The Proposed Rule is available here.
King & Spalding Client Alert: Healthcare PE Anti-Trust Enforcement Action – On September 21, 2023, the FTC sued Texas-based U.S. Anesthesia Partners (USAP) and its private equity backer, Welsh, Carson, Anderson & Stowe (Welsh Carson), in Texas federal court, accusing Welsh Carson in a “first of its kind” lawsuit of anti-competitive trade practices resulting from USAP’s horizontal acquisition strategy. While the FTC has historically targeted market participants that are directly involved in alleged anti-competitive behaviors, here the FTC has taken the position that Welsh Carson, a minority, indirect owner in USAP, engaged in a “multi-year anticompetitive scheme to consolidate anesthesiology practices in Texas, drive up the price of anesthesia services provided to Texas patients, and boost their own profits.” Please click here to read the full King & Spalding Client Alert.