By, Jack Hoadley, Kennah Watts, and Zachary Baron
The No Surprises Act (NSA) protects consumers from surprise out-of-network (OON) billing by banning providers and facilities from sending consumers balance bills for certain services in amounts beyond normal in-network costs. Many facility-based OON medical services are subject to the law, including most emergency services, non-emergency services from OON providers at in-network facilities, and services from OON air ambulance providers. (The NSA does not apply to ground ambulance services nor services that would not be covered by an individual’s insurance when in network.)
Before the NSA took effect on January 1, 2022, patients were often asked to cover the cost difference between the provider’s billed charge and the amount paid by the insurer. Under the NSA, providers and payers must reach a payment agreement for the types of services listed above and are not permitted to engage in balance billing. This negotiation process can trigger an independent dispute resolution (IDR) if the parties do not privately reach an agreement. In this case, a third-party arbitrator (IDR entity) selects either the plan or provider offer, and binds both parties to this amount.
The IDR process began in 2022. Regulations to implement it have faced substantial litigation, and associated court decisions have contributed to operational challenges over the course of its implementation. On February 15, 2024, in compliance with requirements in the NSA, the federal agencies (the Departments of Health and Human Services, Treasury, and Labor, and the Office of Personnel Management) released public use files with data on all the resolved IDR cases for the first half of 2023. On June 15, 2024, the agencies released additional public use files covering the remainder of 2023.
These files include information on the provider and payer and the offer amounts from each party––expressed as a percentage of a qualifying payment amount (QPA), which is the inflation-adjusted median rate paid by a specific insurer in 2019 to its contracted in-network providers, based on insurance type and geographic location. The files also include information on the prevailing offer, as determined by the IDR entity. In addition to the public use files that include information on IDR cases resolved in 2023, the federal agencies also released supplemental tables reporting on cases filed during 2023 (but not yet resolved).
In this article, we share key findings from the 2023 data and their implications for future use of the IDR process. Our analysis, which builds on our earlier discussion of IDR use in the first two quarters, illustrates trends in the IDR process across provider and payer types, offer amounts, geographic locations, and more. As relevant, our analysis reports on cases both filed and resolved in 2023.
Providers Continued To File New Cases At Rapid Rates
The number of newly initiated cases grew more than fourfold from 69,000 in the third quarter of 2022 to 318,000 in the fourth quarter of 2023. The vast majority of claims were filed by provider groups, with health plans as the responding party. The rate of new cases dipped in the third quarter of 2023, likely in part because of the district court decision in one of the lawsuits brought by the Texas Medical Association and the subsequent closing of the government’s portal for filing new cases. That case vacated several regulatory provisions nationwide concerning the methodology used to determine the QPA.
Throughout 2023, more than one-third of filed cases were challenged by health plans as potentially ineligible. Cases might be ineligible for IDR if they do not fall under the NSA’s scope, are not filed on a timely basis, or are required under the law to be resolved by a state payment determination process.
Filings Were Heavily Dominated By A Few Provider Groups In A Few States
There were 657,040 newly initiated cases filed in 2023, about 70 percent of which came from just four organizations, all backed by private equity: Team Health, SCP Health, Radiology Partners, and Envision. Team Health (backed by the Blackstone Group) and SCP Health (backed by Onex) are revenue cycle management companies that work with affiliated physician groups to file cases and otherwise help physicians maximize their revenues. Radiology Partners (backed by Starr Investment Holdings and New Enterprise Associates) and Envision (backed by KKR) are large physician practice companies. Radiology Partners, as the name suggests, concentrates in radiology medicine, while Envision is a multispecialty practice organization with a large presence in emergency medicine.
The concentrated use of IDR by just a few physician organizations is one factor that drove a geographic concentration in filed cases. Other factors may include the fact that the NSA directs certain cases to state processes. About half of all newly filed cases in 2023 were from just four states: Texas, Florida, Tennessee, and Georgia—all states where the four noted organizations are active. By contrast, another four populous states (Connecticut, Maryland, Massachusetts, and Washington) each had fewer than 1,500 cases filed in all of 2023.
Providers Won More Often And At Higher Rates Than Plans
The rate of resolving cases grew steadily, reaching a high point of 104,000 cases resolved in the fourth quarter of 2023—and payment determinations were made in 73,000 of those cases. Across the year, about 22 percent of all resolved cases were deemed ineligible.
As seen in the first data release, providers won the vast majority of resolved IDR disputes, and their win rate crept upward throughout the year. From the first to last quarter of 2023, the provider win rate grew from 72 percent to 85 percent. When providers won, they continued to win payments at a median rate of more than three times the QPA—322 percent to 350 percent, depending on the quarter. By contrast, plan offers in the IDR process adhered closely to the QPA. As further context, an analysis by researchers at the Brookings Institution found that the prevailing payments coming out of IDR proceedings in the first two quarters of 2023 were between 3.7 and 5.1 times Medicare rates for three types of services commonly contested in IDR proceedings (emergency care, imaging, and neonatal/pediatric critical care) and even higher in the past two quarters.
In a subset of cases, providers won much higher amounts. In about one-fourth of resolved cases, the prevailing rate decided by the IDR entities was at least five times the QPA. In the fourth quarter of 2023, 9 percent of resolved cases had a prevailing rate of more than 10 times the QPA. While providers were requesting these higher amounts, the plan offers were nearly always at or below the QPA. In the fourth quarter, only about 10 percent of plan offers were higher than the QPA—more than in any previous quarter.
Some Provider Groups And Specialties Were Especially Successful In The IDR Process
Two of the organizations contesting the most IDR cases were among the most successful. Both Team Health and Singleton Associates won more than 90 percent of their cases in the past three quarters of 2023, although the amounts won differed significantly between these provider groups. Team Health typically won an amount double the QPA across all quarters. Singleton Associates, a subsidiary of Radiology Partners, won almost fivefold of QPA in the first quarter, and in the past three quarters received median payments up to eight times QPA.
Overall, radiology providers using the IDR system were especially successful. In their contested cases, the median prevailing offer was more than 500 percent of the QPA in the past two quarters of 2023. Surgeons and neurologists did even better, with prevailing offers of 800 percent or more of the QPA. By contrast, institutional providers (hospitals) won less frequently than physician providers, and their winning offers were at a lower level (no more than 250 percent of the QPA throughout 2023).
What Does It All Mean?
The data release for two additional quarters of 2023 provides a broader look at how the IDR process under the NSA is working and confirms that the story emerging from the early months was not a fluke. The volume of cases entering the IDR process remained high, and providers continued to maintain a high rate of success. Data from the most recent available quarter (the fourth quarter of 2023) suggest that case volume was growing from already high levels and providers were winning more often and with higher amounts.
It remains early, however, to draw firm conclusions about future trends in the IDR process. Litigation over the process and the calculation of the QPA remains active, and the resolution of various cases on appeal could have significant ramifications for the IDR process, patient cost-sharing exposure, and health costs more broadly. A Fifth Circuit panel recently issued a decision upholding the lower court’s ruling that blocked the fairly modest guardrails the administration sought to put in place that would guide how IDR entities consider the relevant statutory standards in weighing offer amounts from each party (maintaining the status quo). A separate Fifth Circuit appeal remains pending (briefing is complete and oral argument will occur on September 3, 2024) concerning the regulations outlining the methodology used to calculate the QPA. Enforcement discretion mitigating the fallout from a district court decision vacating multiple regulatory provisions related to the QPA methodology has been extended, for now, until November 2024.
Additional lawsuits in which providers sought to sue IDR entities directly to overturn arbitration awards are also winding their way through the appeals processes in the Fifth and Eleventh Circuits. The administration previously warned that if IDR entities could be exposed to such litigation frequently, “the viability of the Act’s IDR process would be placed at risk.”
Depending on how these cases are resolved, the ground rules for the IDR process and calculation of the QPA could still change. Stakeholders are gaining experience in what works for them and what does not, but data releases made in 2024 can only affect behavior going forward. It could be well into 2025 before the process stabilizes and stakeholders reconsider their strategic approaches to the IDR system.
The evidence to date suggests that strategies of using IDR are not uniform across the provider community. System use is dominated by a handful of organizations, especially those backed by private equity. There is little evidence that rank-and-file emergency physicians, radiologists, and anesthesiologists are using the system. A key policy question is whether the projection by the Congressional Budget Office (CBO) that the NSA would have a modest dampening effect on health costs and premiums paid by consumers will prove accurate. The evidence to date points in the other direction, but it will take more time and experience to offer a definitive answer. In particular, the CBO estimate relied on the idea that future rounds of in-network fee negotiations between plans and providers would be influenced by IDR outcomes. It remains too early to know whether and how the early trends in IDR decisions—occurring in a small minority of all health care claims—may affect these negotiations.
Looking Forward
In the interim, policy makers and researchers will look forward to future data releases to see if the trends are changing at all in 2024. At this point, the biggest open question is to understand why the decision trends show high provider win rates. The NSA makes no requirement that IDR entities offer reasons for their payment determinations, nor have they opted to offer explanations. An attempt in regulation to include such a requirement is one of the provisions nullified in the courts.
Some observers have speculated that contracted rates for OON providers when they were previously in network—a factor explicitly identified in statute—may play a key role in the high provider win rates, in some cases. Others have suggested that rates previously paid for OON services may be influential, even though it is not one of the NSA’s specified factors. Still others have wondered whether physicians are more aggressive than insurers in making their cases to the IDR entities. Ideally, more information is needed on the types of evidence being submitted to the IDR entities by providers and plans and on the reasons given by IDR entities for their decisions.
Jack Hoadley, Kennah Watts, Zachary Baron, “2023 Data From The Independent Dispute Resolution Process: Select Providers Win Big,” Health Affairs Forefront, August 19th, 2024, https://www.healthaffairs.org/content/forefront/2023-data-independent-dispute-resolution-process-select-providers-win-big. Copyright © 2024 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.
