In December 2020, Congress passed the “No Surprises Act” (NSA) as part of the Consolidated Appropriations Act of 2021. The NSA applies most commonly in situations where a patient receives out-of-network medical services from a provider to whom the patient had no meaningful opportunity to consent, as in the case of emergency room care or a service performed by an ancillary provider in connection with a scheduled surgery, such as an anesthesiologist. The intent of the NSA is to protect patients from later receiving large “surprise bills” from such out-of-network providers.

On October 7, 2021, the Biden Administration published a second interim final rule implementing the NSA (September Rule) issued by the Departments of Health and Human Services, Labor, and Treasury (Departments). The NSA and its implementing rules are scheduled to go into effect on January 1, 2022.

The NSA’s process requires the provider to submit the out-of-network bill directly to the insurer. If the insurer disputes the bill, the parties may engage in a 30-day “open negotiations” process. If no settlement is achieved, either party may initiate NSA’s prescribed independent dispute resolution (IDR) process – namely a “baseball-style” arbitration in which the provider and insurer submit their best and final offers to the arbitrator, and the arbitrator must select one or the other.

If the parties opt for arbitration, the statutory language provides that in determining which offer is the most “reasonable,” the arbitrator “shall” consider several factors, namely: (1) the “qualifying payment amount” (QPA), which in practice will typically be the insurer’s median in-network rate for similar services in that geographic location; (2) the provider’s level of experience and quality of outcomes; (3) the market shares of both parties; (4) patient acuity; (5) the teaching status, case mix, and scope of services of the out-of-network facility; and (6) demonstrations of good faith efforts (or lack thereof) by the provider to “go in-network” during the previous four years. The arbitrator may also request, or either party may offer, any other relevant information. However, the arbitrator may not consider: (1) the provider’s “usual and customary charge;” (2) the amount the provider would have billed for the service if the NSA did not apply; or (3) the amount a public payer (like Medicare) would have paid.

While the statutory language does not give presumptive weight to any single factor, the September Rule creates a presumption that the QPA is the appropriate rate. The rule further provides that it is not the arbitrator’s role to determine whether the QPA has been calculated correctly. Finally, the rule requires that the arbitrator “must select the offer closest to the [QPA]” unless the arbitrator finds “credible information” that the QPA is “materially different from the appropriate out-of-network rate,” or if the offers are “equally distant from the [QPA] but in opposing directions.”

On December 9, 2021, the American Medical Association and the American Hospital Association – joined by other medical providers and facilities – filed suit (No. 21-3231) against the Departments in the U.S. District Court for the District of Columbia. The suit challenges the portions of the September Rule that create a presumption that the QPA is the appropriate payment. Plaintiffs allege that this presumption conflicts with the NSA’s statutory text and contravenes the legislative intent of creating an IDR process that does not favor providers or insurers. Plaintiffs seek to vacate the disputed provisions of the September Rule, but they do not seek to enjoin the NSA or the undisputed portions of the rule from taking effect on January 1, 2022.

The Departments have not yet answered the Complaint. Jackson Lewis P.C. will post updates as the suit develops.