No Surprises Act: Provider Implications

By David Benn, Steve Lutfy, Mark Fish and David Gruber, MD

The No Surprises Act, part of the Consolidated Appropriations Act of 2021 (H.R. 133; Division BB – Private Health Insurance and Public Health Provisions), was approved December 2020; implementation is slated for January 1, 2022.1 Regulations and guidance were issued during the interim.

The main provisions of the No Surprises Act include:

• “Protects patients from receiving surprise medical bills resulting from gaps in coverage for emergency services (including air ambulances) and certain services provided by out-of-network clinicians at in-network facilities.
• Holds patients liable only for their in-network cost-sharing amount, while giving providers and insurers an opportunity to negotiate reimbursement.
• Allows providers and insurers to access an independent dispute resolution process in the event disputes arise around reimbursement.
• Requires providers and health plans to assist patients in accessing health care cost information.”2

A “surprise bill” occurs, for example, when an insurance company pays only a portion of an out-of-network provider’s charges, and this results in an unexpected balance billed to the patient. Surprise billing can occur on an emergency or non-emergency basis and is often used to drive higher in-network reimbursement by providers.3 Surprise bills and out-of-network cost-sharing usually do not count toward a person’s deductible and maximum out-of-pocket limit.

“States that have enacted balance billing protections include Arizona, Colorado, Delaware, Indiana, Iowa, Maine, Massachusetts, Minnesota, Mississippi, Missouri, New Mexico, North Carolina, Pennsylvania, Rhode Island, Texas, Vermont and Washington.”?

The No Surprises Act does not apply to Medicare or Medicaid.?

Economics: $40 billion

Approximately 18% of emergency services visits resulted in at least one surprise bill, with significant geographic variability; nearly 30% of emergency department claims in Florida and California had a surprise bill.? ? Surprise billing rates were lower for certain non-emergency services, such as pathology (12.9%), anesthesiology (8.3%), radiology (4.2%), surgery (2.1%) and cardiovascular medicine (2.0%).? Out-of-network charges also occur in 10% of ambulatory surgery center cases.?

?A Yale University study based on 2015 data found mean out-of-network charges were $2,130 for anesthesiologists, $311 for pathologists and $194 for radiologists.1? Anesthesiologists' out-of-network charges averaged 802% of Medicare payments whereas pathologists and radiologists' out of network charges were 562% and 452% of Medicare payments, respectively.11

The elimination of out-of-network spending by hospital-based specialists would save employers $40 billion annually, as estimated by Yale University researchers.12

Provider implications

• Providers, facilities and health plans will be required to give consumers upfront information (“notice and consent”) and potential out-of-network costs (“good faith estimates”) ahead of an out-of-network service.13 An informed consumer would be significantly less likely to use out-of-network providers. “Uninsured consumers will be able to get a good faith estimate from their health care providers and facilities ahead of time.”1?
• Out-of-network health care providers (including facilities, physicians and non-physician practitioners) may not “balance bill” patients for covered emergency services or certain covered non-emergency services provided at in-network facilities.1?
• The total amount to be paid to the provider or facility, including any cost sharing, is based on: (1) an amount determined by an applicable All-Payer Model Agreement (i.e., Maryland) under section 1115A of the Social Security Act; (2) an amount determined by a specified state law if there is no such applicable All-Payer Model Agreement; (3) an amount agreed upon by the plan or issuer and the provider or facility if there is no such applicable All-Payer Model Agreement or specified state law; or (4) an amount determined by an independent dispute resolution (IDR) entity if none of the three conditions above apply.1?
• An Independent Dispute Resolution (IDR) entity [arbiter] initially considers the median in-network contract rate (“qualifying payment amount”) for a service provided within the same geographic area. The IDR entity may also consider the level of training, experience, quality and outcomes of the provider; the market share held by the provider and/or the plan; patient acuity; teaching status, case mix and scope of services of the provider; demonstrations of good faith efforts to enter into a network agreement with the other party; and, if applicable, past contracted rates between the parties during the previous four years.1? Resolution based on the median in-network rate favors insurers.
• Out-of-network providers will need to decide whether to become in-network and negotiate insurer contracts. Negotiating leverage vis-à-vis the insurance companies is weakened.
• Revenue will decline somewhat for selected institutions and providers. Hospitals/health systems employ 36.9% of physicians involved in patient care; corporate entities such as private equity and insurers account for another 14.9%.1? 1?A few specialties - emergency medicine, pathology and anesthesiology - have been dependent upon out-of-network patients for profitable growth.2?

Legal action

On December 9, the American Hospital Association (AHA) and the American Medical Association (AMA) filed suit against Health & Human Services “to protect patients’ access to critical health care services.”21 Litigation is focused on a single provision involving disputes and the use of the median in-network rate for a service within a defined geographic area. The AHA and AMA believe other factors, as specified above, increasingly matter in price determination. Concern was highest for teaching hospitals and rural providers with a higher cost structure.22

Bottom line

The No Surprises Act negatively affects specific specialties: emergency medicine, anesthesiology, pathology and, to a lesser extent, radiology. The elimination of out-of-network spending by hospital-based specialists will save an estimated $40 billion annually. The magnitude of the savings will depend on negotiations between payers and providers, and if necessary, an independent dispute resolution entity. Balance billing is being eliminated. Consumers and, secondarily, insurers are the primary beneficiaries of the Act.

Appendix

Scenario #1: Patient visits the emergency room of an in-network hospital and is treated by an out-of-network Emergency Department physician employed by the hospital. A bill is sent to the insurer, and only a portion of the bill is paid. There is no applicable state law. The hospital negotiates with the insurer for 30 days after bill generation, to no avail. An arbitrator is selected.

The legislation requires health insurers to cover emergency services without prior authorization and regardless of health plan network status. Under the legislation, the health plan must cover emergency services as if they were in-network. Patient cost-sharing is based on a “recognized amount,” e.g., 20% co-insurance. In-network deductibles and out-of-pocket maximums apply. Balance billing is prohibited.

The legislation defers to the Maryland All-Payer Model and state law. Provider out-of-network payment determination, under federal legislation, is either the rate agreed upon by the plan and provider during a 30-day negotiating period (following provider receipt of a payment or payment denial notification) or, in the event of no agreement, the rate is determined through the independent dispute resolution (IDR) process.

The IDR may be triggered by either the health plan or the provider four days after the 30-day negotiating period. Parties can negotiate during the IDR process. The IDR entity (arbiter) is selected jointly, and if agreement cannot be reached, by Health & Human Services. Each party submits a reimbursement proposal, inclusive of supporting documentation, within ten days of IDR entity selection. The IDR selects one of the proposals without modification for reimbursement determination within 30 days of IDR entity selection.23

Arbiters will consider the “qualifying amount,” the median in-network contract rate recognized by the health plan within the same insurance market (e.g., large group) and geographic area. Arbiters may also consider the level of training, experience, quality and outcomes of the provider; the market share held by the provider and/or the plan; patient acuity; teaching status, case mix, and scope of services of the provider.

The AHA and AMA are litigating use of the median in-network rate for a service within a defined geographic area.

Scenario #2: Patient goes to an Ambulatory Surgical Center that is part of a joint venture with local physicians. The surgeon, anesthesiologist and pathologist are out-of-network. The patient is given “notice and consent” and a “good faith estimate” of procedural costs. The patient decides to go to a different facility with 100% in-network physicians.

An out-of-network provider may balance bill a patient for items or services if the provider satisfies the “notice and consent” process. The process cannot be used for emergency medicine, anesthesiology, pathology, radiology, neonatology or diagnostic services (including radiology and laboratory services).

“Adequate notice and consent is achieved via furnishing to the patient (a) a written notice and consent form at least 72 hours in advance of the appointment, or on the day the appointment is made if the appointment takes place within 72 hours from when it is made, or within three hours from when the patient is to receive care if the appointment is made the same day.”2?

Notice and consent includes the following: notification that the provider is out-of-network; a good faith estimate of the charges; a list of in-network providers at the facility (if the facility is in-network) to which the patient can be referred; information regarding any prior-authorization or other care management requirements; and a clear statement that consent is optional and the patient can instead opt for an in-network provider.2? A signature is required.

A template for good faith estimates is provided by the Centers for Medicare & Medicaid Services (CMS). It requires provider/facility demographic information, itemized services details (diagnosis and service codes, expected costs) and total charges.2?

Scenario #3: There is a terrible accident in a remote area, and an out-of-network air ambulance is used to take the patient to the nearest trauma center.

Similar protections for the consumer exist as with emergency medicine. Patients will be required to pay in-network cost-sharing amounts; balance billing would be eliminated.

Providers and health plans will have a 30-day negotiating period (following provider receipt of a payment or payment denial notification). In the event of no agreement, the rate is determined through the IDR process.

1Jim Probasco. The Consolidated Appropriations Act of 2021: What's in It, What's Not. Investopedia; Updated October 31, 2021. https://www.investopedia.com/congress-agrees-on-second-stimulus-here-s-what-s-in-it-and-what-s-not-5093226

2Surprise Billing at A Glance. American Hospital Association. https://www.aha.org/surprise-billing

3Requirements Related to Surprise Billing; Part I Interim Final Rule with Comment Period. CMS.gov; July 1, 2021. https://www.cms.gov/newsroom/fact-sheets/requirements-related-surprise-billing-part-i-interim-final-rule-comment-period

?Ibid.

?What You Need to Know about the Biden-Harris Administration’s Actions to Prevent Surprise Billing. CMS.gov; July 1, 2021 https://www.cms.gov/newsroom/fact-sheets/what-you-need-know-about-biden-harris-administrations-actions-prevent-surprise-billing

?Karen Pollitz, et al. US Statistics on Surprise Medical Billing. JAMA.?2020; 323(6):498. https://jamanetwork.com/journals/jama/fullarticle/2760721

?John Hargraves and Jean Fuglesten Biniek. How common is out-of-network billing? Health Care Cost Institute; November 21, 2019. https://healthcostinstitute.org/out-of-network-billing/how-common-is-out-of-network-billing

?Ibid.

?Erin L. Duffy, et al. Prevalence and Characteristics of Surprise Out-of-Network Bills from Professionals in Ambulatory Surgery Centers. Health Affairs; April 15, 2020. https://www.healthaffairs.org/doi/10.1377/hlthaff.2019.01138

1?Mike Cummings. Study exposes surprise billing by hospital physicians. Yale News; December 16, 2019. https://news.yale.edu/2019/12/16/study-exposes-surprise-billing-hospital-physicians

11Shelby Livingston. Out-of-network billing by hospital-based specialists boosts spending by $40 billion. Modern Healthcare; December 16, 2019. https://www.modernhealthcare.com/physicians/out-network-billing-hospital-based-specialists-boosts-spending-40-billion

12Ibid.

13Understanding costs in advance. CMS.gov. https://www.cms.gov/nosurprises/consumer-protections/Understanding-costs-in-advance

1?Ibid.

1?Detailed Summary of No Surprises Act. American Hospital Association Legislative Advisory; January 14, 2021. https://www.aha.org/system/files/media/file/2021/01/detailed-summary-of-no-surprises-act-advisory-1-14-21.pdf

1?Requirements Related to Surprise Billing; Part I Interim Final Rule with Comment Period. CMS.gov; July 1, 2021. https://www.cms.gov/newsroom/fact-sheets/requirements-related-surprise-billing-part-i-interim-final-rule-comment-period

1?Detailed Summary of No Surprises Act. American Hospital Association Legislative Advisory; January 14, 2021. https://www.aha.org/system/files/media/file/2021/01/detailed-summary-of-no-surprises-act-advisory-1-14-21.pdf

1?COVID-19’s Impact on Acquisitions of Physician Practices and Physician Employment 2019-2020. Prepared by Avalere Health; June 2021. https://www.physiciansadvocacyinstitute.org/Portals/0/assets/docs/Revised-6-8-21_PAI-Physician-Employment-Study-2021-FINAL.pdf?ver=K6dyoekRSC_c59U8QD1V-A%3d%3d

1?2020 Physician Specialty Data Report. Association of American Medical Colleges. https://www.aamc.org/data-reports/workforce/interactive-data/active-physicians-largest-specialties-2019

2?The hidden opportunity to significantly increase profits: Maximizing out-of-network reimbursements. Becker’s Hospital CFO Report; Dec 3, 2014 https://www.beckershospitalreview.com/finance/the-hidden-opportunity-to-significantly-increase-profits-maximizing-out-of-network-reimbursements.html

21Melinda Hatton and Molly Smith. Why hospitals and physicians are filing suit over No Surprises Act final rules that jeopardize patient access to care. American Hospital Association Blog; December 9, 2021. https://www.aha.org/news/blog/2021-12-09-blog-why-hospitals-and-physicians-are-filing-suit-over-no-surprises-act-final

22Ibid.

23Detailed Summary of No Surprises Act. American Hospital Association Legislative Advisory; January 14, 2021. https://www.aha.org/system/files/media/file/2021/01/detailed-summary-of-no-surprises-act-advisory-1-14-21.pdf

2?Federal “No Surprises Act”. IceMiller; October 1, 2021 https://www.icemiller.com/ice-on-fire-insights/publications/federal-no-surprises-act/

2?Detailed Summary of No Surprises Act. American Hospital Association Legislative Advisory; January 14, 2021. https://www.aha.org/system/files/media/file/2021/01/detailed-summary-of-no-surprises-act-advisory-1-14-21.pdf

2?Good Faith Estimate for Health Care Items and Services. CMS-10791 – 11. 2. Good Faith Estimate Template https://omb.report/icr/202109-0938-015/doc/115258001