No Surprises Act Final Rules: Favors Healthcare Providers

Final Rules Snapshot

On August 26, 2022, the final rules were published by the Internal Revenue Service and the Departments of Health and Human Services, Treasury and Labor (the Departments) addressing the independent dispute resolution (IDR) process and payor “downcoding” (meaning when a payor assigns a service or item a lower level than originally billed).

The No Surprises Act (NSA) final rules contain some significant changes from the interim final rules (IFR) and are more equitable to providers. Now the IDR process allows for other factors to be weighed as equally as the qualifying payment amount (QPA) to determine the appropriate out-of-network (OON) charge. Payors must also document downcoding on the remit sent to providers, including the code(s) or modifier(s) changed, rationale and the original amount if no downcoding occurred.   

No Surprises Act Background

The NSA, which went into effect on January 1, 2022, protects patients from surprise OON medical bills. The recently published final rules go into effect on October 25, 2022, applying to plan years effective on or after January 1, 2022. The final rules reduce the QPA’s role and impact on OON payments as part of the IDR process plus increase payor compliance requirements for the downcoding process.

How the IDR Process Works

The IDR process is used by providers to request payment for emergency care provided to patients with OON coverage. For example, when a patient receives emergency care at an OON facility or from an OON provider at an otherwise in-network facility, the payor must remit the QPA. The QPA is generally calculated using the payor’s median contracted rate for the item or service in question.

The July 2021 IFR required that an IDR entity (essentially an arbitrator) presume the QPA is correct and only determine a different amount if the provider produced significant evidence showing the QPA was inappropriately insufficient. However, in February of this year, the U.S. District Court for the Eastern District of Texas (see Texas Medical Association vs. U.S. Department of Health and Human Services) ruled that giving QPA too much weight went against the intent of the NSA. This decision, along with comments submitted to the Departments from facilities, providers and other stakeholders, led to the Departments adjusting the IDR entity’s decision-making process.

IDR Changes[1]

When the final rules take effect, the IDR entity must consider the QPA plus the following applicable factors when presented to them to determine a rate that best represents the value of the item or service in question:

  1. The level of training, experience and quality and outcomes measurement of the provider or facility
  2. The market share held by the provider or facility or that of the plan or issuer in the geographic region in which the item or service was furnished
  3. The acuity of the patient or the complexity of furnishing the item or service
  4. The teaching status, case mix and scope of services of the facility, if applicable
  5. Demonstration of good faith efforts (or lack thereof) made by the provider or facility or the plan or issuer to enter into network agreements with each other, and, if applicable, contracted rates between the provider or facility and the plan or issuer during the previous four plan years

This change represents a critical win for providers and facilities as payors now have far less opportunity to dictate the QPA.

New Downcoding Requirements for Payors

When a QPA is remitted by a payor to a facility or provider, the payor must include certain information on the remit. Previously, payors were not required to indicate when they downcoded an item or service in calculating their QPA. The final rules now include an obligation for payors to document downcoding, so facilities and providers are on a more level playing field when negotiating rates and filing disputes.

What Providers Should Know

When the final rules take effect, facilities and providers should review the remit for downcoding and payor compliance, which must include the following information:

  1. A statement that the billed code or modifier was downcoded
  2. The rationale for the downcoding, including a description of which codes were altered (if applicable) and which modifiers were altered, added or removed (if applicable)
  3. The amount the QPA would have been if downcoding had not occurred

While this obligation is placed on the payor, it is vital information for facilities and providers to be aware of since failure to include the required downcoding information on the remit could serve as evidence of bad faith on the payor’s part and aid in disputes.

NSA Final Rules Conclusion

Largely, the final rules are favorable to facilities and providers and should aid in payor compliance. This forward movement shows the effectiveness of organizing responses to, and participating in, the administrative rulemaking process.

The Departments noted that other NSA requirements are being finalized and subsequent final rules will be released at future dates. We will continue to keep you updated on any new developments.


[1] Criteria slightly differs for Air Ambulance providers: https://www.govinfo.gov/content/pkg/FR-2022-08-26/pdf/2022-18202.pdf