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First Rule on ‘Surprise’ Billing Lays Out How Hospitals Get Paid (1)

July 1, 2021, 8:54 PMUpdated: July 1, 2021, 10:10 PM

The first regulation to implement a law that prohibits hospitals and doctors from billing sending patients high bills in emergencies and other situations was released Thursday by the Biden administration.

The interim final rule (RIN 0938-AU63) specifies how rates will be calculated to determine what providers should be paid.

The No Surprises Act, passed as part of appropriations legislation (H.R. 133) in December 2020, bars health providers from billing patients more than would be paid for in-network services in emergencies or other circumstances when out-of-network clinicians are used.

“This is the first of what will be some additional rules as well to implement what I consider bipartisan legislation that—probably only second to the Affordable Care Act—will make a major difference in the lives, the health-care of millions of Americans,” Health and Human Services Secretary Xavier Becerra said in a press call. Later rules will deal with how arbitration will be handled in disputes between health plans and providers, he said

How much hospitals and doctors are paid for out-of-network care will be important in controlling premium rates that employers pay for their workers’ health care. These “surprise bills” can hit patients—and insurers or employer health plan sponsors—for tens of thousands of dollars.

In addition to the interim final rule, the HHS released a fact sheet on what patients need to know about their rights regarding surprise bills, as well as a fact sheet on requirements for meeting the rule.

Qualifying Payment Amount

The rule lays out how the so-called qualifying payment amount will be determined, which is the basis on which patient’s share of the bill is calculated. That figure is based on a health plan’s historic median contract rate for similar services in a particular geographic area adjusted by the consumer price index.

Under the law, patients can’t be billed for any amount other than what they would pay for in-network care in emergencies and when they receive services from out-of-network providers at facilities that are in their networks. Anesthesiologist services are a major example of the latter.

The qualifying payment amount also must be considered by arbitrators if the health plan and the health-care providers can’t agree on how much the doctor or hospital should be paid, according to the law.

Arbitrators must also take into account the level of training and experience of the doctors and clinicians, the patient’s outcome, the market share of the insurer and the health provider, and the complexity of the patient’s case under the law.

Arbitrators can’t consider so-called usual and customary charges or public program rates such as Medicare or Medicaid payments. Usual and customary charges, also called billed charges, are typically higher than what is paid by health plans under network contracts, while Medicare and Medicaid typically pay less than commercial insurance rates.

The interim final rule covers how to determine if services are similar, as well as what are considered insurers’ normal practices in contracting with providers. Both will be used to determine the qualifying payment amount, according to a senior HHS official who spoke on the press call. The rule also takes into account whether alternative payment models, such as bundled payments or capitated payment arrangements, are employed, the official said.

Access to Services Considered

The HHS consulted with the National Association of Insurance Commissioners in writing the rule to consider access to services in rural and underserved areas, including areas with shortages of health-care professionals, and to reflect different costs in rural or urban areas, the official said.

James Gelfand, senior vice president of health policy for the ERISA Industry Committee, issued a statement applauding the administration “for taking a firm stand to protect Americans from surprise medical bills while lowering health care costs to patients, families and employees.” ERIC represents large employers that provide health benefits.

Rulemaking on the independent dispute resolution process must be completed by Dec. 27.

The interim final rule also sets requirements for notices and consent that must be obtained from patients who agree to allowing services on an out-of-network basis from a provider or a health-care facility.

(Updates with additional details throughout.)

To contact the reporter on this story: Sara Hansard in Washington at shansard@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Brent Bierman at bbierman@bloomberglaw.com

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