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Specifics of Surprise Billing Law Implementation Could Prove Important for Labs


NEW YORK – With the comment period on federal surprise billing legislation due to close at the beginning of September, laboratories are keeping an eye on how implementation of the law could affect their businesses.

In particular, details on exactly how billing disputes will be filed and adjudicated under the law could prove significant for clinical labs, suggested some industry players.

Congress passed the surprise billing law, called the No Surprises Act, as part of the omnibus spending bill that was signed into law at the end of 2020. The lab business has not garnered as much attention as areas like emergency medicine where surprise billing is concerned, but the law is, nonetheless, likely to have an impact on laboratory billing and negotiations with insurers.

Broadly speaking, 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. A 2019 analysis by the Health Care Cost Institute, a nonprofit funded in part by major insurers including Aetna, Humana, and Kaiser Permanente that studies drivers of healthcare costs, found that of specialty claims billed as out of network during an in-network hospital admission, 22 percent were for independent lab testing. In a 2018 survey, researchers at the National Opinion Research Center at the University of Chicago found that of patients who received surprise bills, 51 percent received surprise bills for lab testing.

As lab testing has taken a central role during the COVID-19 pandemic, there have been a number of high-profile cases of surprise billing for COVID-19 testing, with some patients reporting they were charged hundreds or thousands of dollars out of pocket for testing.

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.

The law is slated to go into effect on Jan. 1, 2022. On July 1, 2021, the US Department of Health and Human Services released the law's interim final rule, laying out how it plans to implement the legislation. The law is currently in the middle of a 60-day comment period scheduled to end at the beginning of September.

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 leverage to payors in negotiations over reimbursement. 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.

Speaking recently to 360Dx, Myles said that the interim final rule likewise includes a number of features favorable to labs.

He cited as one key element the method laid out in the rule for calculating qualifying payment amounts, or QPAs — figures that will be used in some cases to determine patient cost-sharing responsibilities and will be considered as a factor during the independent dispute resolution, or IDR, process to be used to settle payment disagreements between payors and providers.

The QPA is the median of the contracted rates recognized by insurers for similar services. However, there was a question as to what insurers would be included when calculating the figure. Under the interim final rule, Medicare, Medicare Advantage, and Medicaid rates will not be included when calculating QPAs, which Myles said CAP was pleased to see as inclusion of those programs, particularly the last two, could lead to lower QPA amounts.

Additionally, individual QPAs must be calculated for different CPT code modifiers, which Myles said was also a priority for labs. He cited the example of the surgical pathology CPT code 88305 and its modified form 88305-26, the former of which is billed at roughly twice the rate as the latter.

One area where the QPA formula does not match CAP's preferences is in the geographical areas used to calculate the figures. CAP advocated for calculating QPAs based on billing in three-digit zip codes, which represent relatively small geographies. In the interim final rule, HHS chose to use metropolitan statistical areas instead, noting that "using larger geographic regions, for which plans and issuers are likely to have more information, is expected to reduce the likelihood that the median of contracted rates would be skewed by contracts under which the parties have agreed to particularly high or low payment amounts."

The current QPA formula is also less favorable to labs in that it does not distinguish between the different kinds of facilities where a test is performed — a teaching hospital versus a small independent lab versus a national reference lab, for instance.

"We thought that there should be some consideration for the facility type and case mix to account for the unique components of healthcare delivery and cost in those [different] settings," Myles said.

In this respect, the QPA formula reflects a larger ongoing battle between labs and payors, as insurers have been moving to normalize their payments across different facility types. Perhaps most notably, since 2018 payor Anthem has been implementing what it calls a "rate-alignment" policy that has had a significant impact on clinical labs and pathology outfits, and particularly on hospital facilities, which have traditionally received higher reimbursement rates than large independent labs.

Myles said that CAP was preparing comments to submit to HHS to advocate for distinguishing between facility types in QPA calculations.

Another main front for the organization's advocacy with regard to the act is to push for as streamlined a dispute resolution process as possible.

"The regulation should make it easy for folks to go through the IDR process if they choose to do so," Myles said. "For example, we are advocating for using things like virtual meetings, which would be easier for folks to participate in."

CAP has also advocated for the ability to batch disputed claims, which is allowed under the interim final rule. Myles said the organization is now pushing to extend the time period across which claims can be batched.

While IDR was for many in the lab business the preferred method for resolving billing disputes under the No Surprises Act, there are still concerns that the process could leave labs at a disadvantage if it is too slow or burdensome. The worry is that while large insurers have the administrative infrastructure to handle a high volume of IDR processes, many labs, especially smaller labs, don't.

"If it is a process that you can't go through because the cost on you as a provider is too great or there is a constant backlog … either of those would be a non-starter in my opinion if I was a diagnostic provider," said Kyle Fetter, COO at Xifin.

For instance, he said, if the process "required somebody at a high level on the payor side to engage … that tends to imply a much longer, harder process. If it's a form you can fill out and send in to initiate it, that's a faster, easier process."

"I'd say this is an important piece of language that diagnostic companies should weigh in on and make sure that the IDR process is ultimately what they need," Fetter said.