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HHS Rule on Dispute Resolution Provisions of Surprise Billing Law Has Labs Concerned


NEW YORK – While federal surprise billing legislation has, broadly speaking, developed in a direction relatively favorable to clinical laboratories, recent rulemaking actions by the US Department of Health and Human Services have concerned some in the industry.

Specifically, HHS issued on Sept. 30, an interim final rule for the law's independent dispute resolution process that uses payors' median in-network rates as benchmarks for determining the appropriate payment for services, a move that labs fear could undermine their negotiating leverage with insurers.

In general terms, surprise billing refers to situations when a patient receives out-of-network treatment without their knowledge and is then required to pay the oftentimes large portions of the bill not covered by their insurance. Passed as part of the omnibus spending bill that was signed into law at the end of 2020, the No Surprises Act prevents out-of-network providers from balance-billing patients for emergency and non-emergency services provided at an in-network provider unless the patient voluntarily chooses to use an out-of-network provider. Instead, the patient's insurer and the out-of-network provider must negotiate between themselves a fee for the service. If they are unable to come to an agreement, they can take the dispute to arbitration, with the loser paying the costs of arbitration.

Upon the act's passage at the end of 2020, Jonathan Myles, chair of the government and professional affairs committee at the College of American Pathologists, noted that the law included a number of provisions that had been high priorities for CAP and other lab groups, citing in particular the use of arbitration for dispute resolution as opposed to other proposed mechanisms based on, for instance, the median in-network payment in a provider's geography.

Labs and other providers feared that a median rate approach would give too much power to payors in negotiations over reimbursement. One of the major sources of leverage a provider has with insurers is the ability to remain out-of-network and balance bill the insurer's members at higher, out-of-network prices. Were the No Surprises Act to resolve out-of-network billing disputes by requiring such bills be paid at the insurer's median in-network rates, it would likely undermine this leverage.

Analyses by researchers like Loren Adler, associate director at the USC-Brookings Schaeffer Initiative for Health Policy, have shown that in states like New York that have adopted an arbitration process to resolve surprise bills, it has resulted in payments substantially above median in-network rates, suggesting another reason they are the preferred option for providers and organizations like CAP.

Given this, labs saw the bill's use of arbitration as a win. However, in the recently issued interim final rule, HHS instructed that if a dispute does go to arbitration, the arbitrator must "begin with the presumption that the QPA [qualified payment amount] is the appropriate OON [out-of-network] amount" and that the arbitrator must choose whichever offer is closer to the QPA unless one party submits information that "clearly demonstrate[s] that the value of the item or service is materially different from the QPA."

The No Surprises Act defines the QPA as the payor's median in-network rate for a given geography, updated annually to reflect changes in the consumer price index. This means that if a payment dispute goes to arbitration, the arbitrator must (barring information showing the value of the service is different from the QPA) choose as winner the party offering the rate closest to the insurer's in-network median, a situation that would seem to favor payors and undercut labs' negotiating power in much the way the industry originally feared the law might.

"When that is the default amount, you decrease the incentive for insurers to expand their network," CAP's Myles told 360Dx last month. "If a pathologist isn't in the network, you are likely going to get the QPA amount, and you are going to have less of a chance to advocate successfully to get an appropriate amount for your particular practice situation."

Myles said CAP was "working with our congressional advocates on the Hill to indicate to the administration that this gives an unfair advantage to insurers."

The bill including the rule around dispute resolution is scheduled to take effect on Jan. 1, 2022. HHS is accepting comments on the rule until Dec. 6, and CAP plans to submit comments on the rule, Myles said.