Disputes over surprise billing continue to soar, new CMS data shows

By Rebecca Pifer for Healthcare Dive

Dive Brief:

• The federal government received 13 times more surprise billing disputes in the first half of 2023 than it expected to receive in a full year, according to new CMS data.
• And the amount is growing each quarter, contributing to a growing backlog and straining the capacity of the system regulators set up to arbitrate disputes over medical bills between providers and health insurers.
• Of the 288,810 disputes filed in the first six months of 2023, fewer than half were closed, and arbiters rendered payment decisions in under a third of cases. Of those, providers won 77% of payment determinations, while health plans prevailed in 23% — noteworthy statistics given providers have argued the arbitration process is unfairly weighted toward insurers.

Dive Insight:

The No Surprises Act, passed in 2021, is viewed as the most comprehensive consumer health legislation since the Affordable Care Act. But implementation of the law, which is meant to hold patients blameless for unexpected out-of-network medical bills, has been less than perfect.

Provisions protecting patients kicked into gear at the start of 2022, but the process set up by the federal government to resolve payment disputes, called independent dispute resolution or IDR, was immediately embroiled in lawsuits from physician groups. Regulators were forced to stop and restart the IDR multiple times since opening the federal portal to disputes in April 2022.

IDR has also been bogged down by more disputes than the government expected.

“The first six months of 2023 were characterized by a large volume of disputes submitted through the Federal IDR portal and substantial complexity in determining whether the disputes were eligible for the Federal IDR process,” the CMS said regarding the data published this week.

A small number of providers are responsible for filing the majority of disputes, a fact that insurers have leaned on when arguing that providers are abusing the process to increase their profits.

The top three initiating parties in the first six months of 2023 — SCP Health, Team Health and Radiology Partners — were responsible for 58% of all disputes. All three are major physician staffing firms with business models that critics say are predicated on remaining out-of-network with hospital employers and surprise billing patients.

Two such staffing firms, Envision Healthcare and American Physician Partners, have filed for bankruptcy in the past year, citing the implementation of No Surprises.

Meanwhile, provider groups argue IDR is time-intensive and expensive to access, and allege many insurers aren’t complying with payment decisions.

Despite squabbling between payers and providers, the law has improved the situation for patients. More than 10 million surprise bills were prevented in the first nine months of 2023 because of No Surprises, according to an analysis by health insurance groups.

Yet, there’s a worry that No Surprises could potentially increase costs for patients in another area: their insurance premiums.

In IDR, providers and insurers resolve payment disputes by entering into baseball-style arbitration. A third-party arbiter picks one payment offer, submitted by either side.

Arbiters are instructed to consider the qualifying payment amount, or QPA, in their decisions. The QPA, which is determined by the health insurer, is the median contracted rate for a service in a given area.

According to the new data, the offer that won out was higher than the QPA in 82% of cases. Providers — which prevailed in the majority of determinations — generally benchmarked their offers to past in-network rates with the disputing plan, or past out-of-network payment amounts (which can be significantly higher than in-network rates).

Meanwhile, health plans often benchmarked their offers to the QPA, which they say represents a fair market reimbursement.

The final allowed amount being higher than prior median in-network prices suggests that No Surprises might actually end up increasing premiums, Loren Adler, associate director of the Brookings Schaeffer Initiative for Health Policy, wrote on X, formerly known as Twitter.

However, it’s “plausible” that QPAs are lower than what insurers were paying in out-of-network claims before No Surprises passed, “such that arbitration determinations aren’t creating a more lucrative out-of-network option than before,” Adler wrote on Thursday.