No Surprises Act: Examining the Independent Dispute Resolution Process

The Final Rule implementing the No Surprises Act provides new guidance for the payor-provider independent dispute resolution (IDR) process. The Final Rule directs certified IDR entities to consider the qualifying payment amount as well as certain other specific factors when resolving out-of-network rate disputes and requires payors to be more transparent about changes to codes or modifiers that reduce the qualifying payment amount, referred to as ”downcoding.”

Qualifying Payment Amount

The initial guidance provided by CMS instructed IDR entities overseeing the process to place emphasis on Qualifying Payment Amount (QPA), which is defined as the median contracted rate as of January 31, 2019, based on the same service in the same market. IDR entities were instructed not to deviate from the QPA absent credible evidence showing that the QPA was “materially different” from the appropriate rate. The District Court vacated these requirements in rulings in February and July 2022.

The final rules released, remove the provisions that the District Court vacated and specify that IDR entities should select the offer that best represents the value of the item or service under dispute after considering the QPA and all permissible information submitted by the parties.

Downcoding of Service Code or Modifier

The final rules also define the term “downcode” as the alteration by a payor of the service to another service code or the addition or removal of a modifier if the change is associated with a lower QPA than the code and/or modifier billed by the provider. 

If a QPA is based on a downcoded service code or modifier, then the payor must provide:

• A statement that the service code or modifier billed by the provider was downcoded;
• An explanation of why the claim was downcoded, including a description of which service code or modifiers was altered; and
• The amount that would have been the QPA had the service code or modifier not been downcoded.

IDR Cases Substantially Exceed Estimates

According to the Federal IDR Status Update issued with the final rule, stakeholders have initiated substantially more cases through the federal IDR portal in four months than federal agencies anticipated for a full year.

Between April 15 and August 11, 2022:

• Over 46,000 disputes were initiated through the federal IDR process
• Payment was rendered in over 1,200 disputes initiated
• Non-initiating parties challenged over 21,000 disputes
• Over 7,000 disputes were found to be ineligible for the federal IDR process

On the CMS No Surprise Act website, CMS states that during the initial implementation of the Federal IDR program, some disputes are taking longer than expected to process. CMS also provides a list of common mistakes to avoid and expedite the process.

Common Mistakes Related to IDR Disputes

Of the 46,000 IDR disputes initiated, 21,000 or 46% were challenged by the non-initiating party as ineligible. Eligibility for the IDR process is dependent on several factors such as state/federal jurisdiction, correct batching or bundling, compliance with applicable time periods, and completion of open negotiation.

The primary cause of delays in the processing of disputes is the complexity of determining whether disputes are eligible for the federal IDR process. Guidance is continually being published to help disputing parties and certified IDR entities resolve disputes including the most recently published August 2022 Guidance for Certified IDR Entities.

Listed below are the most common mistakes CMS is encouraging parties to avoid to ensure the dispute is processed as quickly as possible:

• Incorrectly batching cases
• Incorrectly submitting disputes involving bundled qualified IDR items or services
• Failing to use the contact information provided with the initial payment or notice of denial of payment
• Failing to include the QPA provided with the initial payment or notice of denial of payment
• Failing to provide documentation of initiation of open negotiation, if the non-initiating party reports that open negotiation did not occur

Complying with IDR Timeline

Another common mistake is non-compliance with the IDR timeline. Before initiating the IDR process, the disputing parties must engage in a 30-day open negotiation period in an attempt to reach an agreement. 

The open negotiation period must be initiated within 30 business days of receiving payment or denial. If after the 30-day open negotiation period providers cannot reach an agreement, IDR can be initiated. IDR must be initiated within the 4-day period after the 30-business-day open negotiation period ends. 

For more information on the required information and timeline for initiating the process, review the CMS checklist of requirements.

Additional XiFin Resources:

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