NEW YORK – When Congress at the end of 2020 passed the No Surprises Act, legislation prohibiting surprise billing by healthcare providers, observers warned the bill could negatively impact clinical labs' negotiating leverage with payors.
Now, some nine months into implementation of the law, some insurers have begun using it to pressure laboratories to accept lower reimbursement rates.
"I have several clients … [whose] fees were dramatically slashed starting around April or May of this year, directly because of the No Surprises Act," said Joe Seale, director of pathology billing at lab revenue cycle management firm MSN Healthcare Solutions. He added that in some cases, insurers have explicitly told his clients that the cuts are due to the surprise billing legislation.
Jonathan Myles, chair of the government and professional affairs committee at the College of American Pathologists, likewise, said that the organization's members have seen cuts in out-of-network reimbursement levels since the act went into effect at the beginning of the year, adding that in some cases payors are cutting reimbursement by more than 50 percent.
And while the law provides an arbitration process for labs to challenge payments that they consider too low, Seale said his clients have thus far been reluctant to go down this road due to uncertainty about the process and their prospects for winning.
He added that another reason some of his clients haven't rushed to arbitration is the fact that, even after the cuts, they are still receiving decent rates.
"I have one client where the cuts were significant, but they are still getting paid well above Medicare rates," he said. "In that case, they are like, 'Well, do we want to shake the tree and maybe get a worse outcome?'"
Yet, if MSN's clients have not yet gone to arbitration, providers more generally have embraced the process. In a status update issued last month by the US Department of Health and Human Services, the government said that between April 15 and Aug. 11, parties initiated "over 46,000 disputes … which is substantially more than the Departments initially estimated would be submitted for a full year." The government noted that there have been delays in processing these arbitration cases.
Surprise billing typically 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. (With balance billing, a provider sends any portion of the bill unpaid by the payor directly to the patient.) 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, which currently run at $500.
In the run-up to the bill's passage, labs and other providers expressed concerns that it would give too much power to payors in negotiations over reimbursement given that 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.
The exact structure of the arbitration process, therefore, became a major area of contention. In an interim final rule issued on Sept. 30, 2021, 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 bill 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, which, provider groups argued, would essentially force them to accept payors' in-network rates and undercut their negotiating power.
In two separate lawsuits, the Texas Medical Association and ambulance company LifeNet Emergency Medical Services successfully challenged the interim ruling. Last month, HHS issued a final rule that instructed arbitrators to consider, in addition to the QPA, factors including "the level of training, experience, and quality and outcomes measurements of the provider"; the local market share held by the provider and the payor; the acuity of the patient and complexity of the service provided; "the teaching status, case mix, and scope of services" of the provider; whether the provider and payor had made good faith efforts "to enter into network agreements with each other"; and contracted rates between the provider and payor during the prior four years.
The extent to which this change to the rule addresses labs' concerns "is yet to be determined," said CAP's Myles. CAP has been one of the lab organizations most active in lobbying for changes to the arbitration process.
"We will engage with [HHS] once we have more data and more information to go on," he said.
Beyond the specifics of the arbitration process, the backlog of cases is a potential problem for labs, Myles said, noting that of the more than 46,000 cases submitted, only 1,200 have been adjudicated so far.
"Cases are not being adjudicated in an expeditious manner, and that is a problem for pathologists, particularly those folks who are in smaller practices," he said. "They can't wait [that long] for the payment to be adjudicated."
Another issue for labs, Myles said, is that arbitration decisions aren't binding with regard to future payments. That means even if they lose an arbitration case, payors can continue to bill future tests at the lower rate that initially triggered the dispute.
"We have heard from our members that even when they get a case adjudicated in their favor, they have to go back to arbitration again because the insurer doesn't change their payment [for the CPT code in question] going forward," Myles said.
He said that this is further complicated by the law's requirement of a 90-day "cooling off" period following arbitration, meaning a provider must wait 90 days before bringing the same CPT up for arbitration again with a payor.
The act also requires that before going to arbitration, providers and payors have a 30-day "open negotiation period" during which they attempt to resolve their dispute. The provider must initiate this period by sending notice to the payor, and while the law requires insurers to "provide contact information, including a telephone number and email address" for the appropriate contact for this notice, Myles said that in practice the process has not always been straightforward.
"We have heard from some [CAP] members that insurers are engaging with third parties [to handle arbitration], and our members have indicated to us that they are getting conflicting information from those third parties as to who to actually contact to initiate the open negotiation process," he said.
Myles added that payors are in many cases challenging whether disputes are eligible for arbitration. In its August status update, HHS noted that eligibility hinges "on a number of factors, such as state/federal jurisdiction, correct batching and bundling, compliance with applicable time periods, and completion of open negotiations." The agency said that of the more than 46,000 arbitration cases filed, more than 21,000 had been challenged, with more than 7,000 thus far deemed ineligible for arbitration.
Mick Raich, president of revenue cycle management consulting at Charlotte, North Carolina-based Lighthouse Lab Services, said that payors are operating under the assumption that many labs won't bother with the trouble of arbitration.
"They have figured out that most people aren't going to take this to arbitration," he said, adding some lab billing companies have told him that arbitration is not worth their time.
Like Myles, Raich said that the fact that arbitration doesn't bind payors to offer the arbitrated rate going forward means labs who decide to dispute payments could be stuck in an endless cycle of arbitration.
Seale said that a major factor driving his lab clients' hesitance to go to arbitration was uncertainty around what might constitute a winning argument.
"What do you point to as a reasonable fee?" he asked.
The HHS final rule cites a number of factors providers might ask an arbiter to consider, and Seale said he and his clients have discussed arguments that would point to issues like inflation, staffing challenges, and previous reimbursement levels.
But, he said, "I don't know that anyone has a good feel for how well it's going work. And I guess we won't know until we try it."