Bloomberg Law
Nov. 28, 2022, 10:25 AMUpdated: Nov. 29, 2022, 5:57 PM

Surprise Medical Billing Disputes Pile Up as Lawsuit Unfolds (1)

Allie Reed
Allie Reed

Litigation over the Biden administration’s process for resolving surprise medical billing disputes threatens to exacerbate a growing backlog in claims and leave doctors without paychecks, health-care lawyers said.

A federal district court in Texas is slated to decide the validity of the Department of Health and Human Services’ revised process for settling disagreements between health insurers and providers over payment rates. It will hear arguments Dec. 20 in a case brought by the Texas Medical Association over a final rule outlining the independent dispute resolution process.

If the court strikes down the rule, insurers and providers would likely continue to see “long delays in claim resolution and additional costs” associated with the IDR process, said Jeremy Hays, who represents employers in disputes as of counsel at Ogletree Deakins.

The IDR process is meant to drive down health-care costs, help both parties negotiate a payment rate, and reduce the harms of surprise bills.

The HHS’s final rule took effect Oct. 25. It revises portions of a previous interim final rule that the same federal court in Texas struck down for straying too far from what Congress envisioned.

The Texas Medical Association argues the final rule will shut down physicians’ offices because the process favors lower payment rates. The American Medical Association and the American Hospital Association have backed the TMA.

Employers, patient advocacy groups, and insurers say the new rule should satisfy the judge, as it establishes essential guardrails for the independent dispute resolution process. The new rule instructs arbitrators to only weigh credible information and avoid double counting any factors, they say.

Meanwhile, until the court decides whether the final rule should stand, uncertainty about the IDR process is creating a logjam.

“These cases are just not being decided and the backlog is tremendous,” said Claire Ernst, director of government affairs at the Medical Group Management Association. “Some claims have been pending for eight or nine months. That’s eight or nine months that you’re not getting paid,” Ernst said.

The Centers for Medicare & Medicaid Services confirmed that there have been “delays in the processing of disputes,” but didn’t immediately respond to a question on how long the average claim takes to process.

Explosion in Claims

Congress passed the No Surprises Act in 2020 to protect Americans who “unknowingly got medical care from a provider or facility outside their health plan’s network,” which often happens in emergencies, said Ellen Montz, deputy administrator and director of the Center for Consumer Information and Insurance Oversight at the CMS.

The CMS established an independent dispute resolution process for situations where the insurer and provider disagree about how much the provider should be reimbursed. These disputes are common, given that insurers have an incentive to minimize payments to providers, and providers have an incentive to maximize their payment.

The HHS received over 90,000 claims in the first five and a half months after it launched the IDR portal in April, “which is substantially more than the department initially estimated would be submitted for a full year,” a spokesperson for the CMS said.

Because the process is so new, there isn’t much certainty about whether the revised IDR process will end up leaning toward favoring insurers, providers, or land somewhere in the middle, attorneys say.

“Parties are less likely to settle their dispute amicably when they can’t predict the dispute’s outcome,” Hays said. That’s one factor that led to an explosion in use of the independent dispute resolution process, Hays said.

And each time the independent resolution process changes, arbitrators have to “reconsider their methodologies” to make sure they align with the federal guidance, Hays said.

“It’s likely that this slowed down the IDR processing time,” and it could happen all over again if the litigation requires further revisions to the rule, Hays said.

The slow processing times preceded the final rule and the TMA’s lawsuit, according to the American Hospital Association. “There is no evidence that the current lawsuit challenging CMS’s unlawful Final Rule has caused or contributed to any backlog,” said Sean Barry, spokesman for the AHA.

“Instead, that backlog is caused by persistent issues with insurers underpaying claims or at times not paying claims at all, insurers refusing to negotiate with health care providers, and inefficient rules about batching claims,” Barry said.

Processing Delays

Providers used to be able to batch similar Current Procedural Terminology codes, Ernst said. For example, you could file just one arbitration claim for the five different codes a surgery triggers. Now, each CPT code requires a different arbitration, making the backlog even worse, Ernst said.

“In this era of workforce shortage and rampant inflation, we are concerned about the length of time it is taking to decide these cases,” Ernst said.

The CMS spokesperson said “the primary cause of the delays in the processing of disputes is the complexity of determining whether disputes are eligible for the IDR process.”

Independent dispute resolution entities must assess a claim’s jurisdiction, whether it was batched correctly, whether it met applicable time periods, and whether the parties completed the 30 business day open negotiation period that precedes the arbitration process, the spokesperson said.

Arbitrators have found that at least 22,000 disputes are ineligible for the independent dispute resolution process, according to the CMS.

Litigation Pending

Industry groups representing employers and health-care providers have both stepped into the case to fight the same goal—to stop surprise billing.

“On a very basic level, everyone agrees. Nobody is in favor of surprise billing to patients, and everyone wants a streamlined procedure for handling this,” Hays said. “Different interests suddenly diverge radically when it comes to actually implementing procedures that are trying to reach those goals.”

The debate hinges on the weight an arbitrator should give to the qualifying payment amount—the median in-network rate for a service. The Biden administration’s interim final rule told arbitrators to choose the offer closest to that rate, which US District Judge Jeremy Kernodle said strayed too far from Congress’s intent.

The median in-network rate is calculated by insurers, and the Texas Medical Association said that figure may not be credible.

The American Benefits Council, the Business Group on Health, the National Alliance of Healthcare Purchaser Coalitions, and other industry groups representing employers say the final rule is substantially different from the prior interim final rule.

The final rule doesn’t “create any preference for the offer submitted that is closest to the Qualifying Payment Amount,” the groups said in an amicus brief. The new rule removes the QPA presumption, instead instructing arbitrators “to select the offer that the IDR entity determines best represents the value of the item or service,” the groups said.

Health insurers previously advocated for linking payments with the median contract rates, which would likely reduce costs for health insurance plans. The federal judge in Texas said the agency’s initial rule, which gave the median contract rate more weight, rewrote Congress’s terms to suit its own agenda.

The American Medical Association and the American Hospital Association said in an amicus brief that the final rule still puts a “thumb on the scale in favor of the QPA.”

The regulations require the arbitrator to consider the QPA first, and arbitrators must “scrutinize the credibility of every factor Congress required them to consider except for the QPA,” the groups said. Favoring the QPA could incentivize insurers to lower their payment rates, knowing they would get a favorable outcome from the arbitration process, medical groups have said.

‘Thread the Needle’

The HHS is forced “to thread the needle among varied constituencies impacted by these rules” to “articulate how its regulatory choices are derived from the text of the law and congressional intent,” said Helaine Fingold, a member of Epstein Becker & Green.

The judge hearing arguments for TMA’s motion for summary judgment has ruled in its favor twice already, said Katy Johnson, senior counsel for health policy at the American Benefits Counsel.

But “the final rules are so different from the interim final rule that there may be a different ruling this time around,” Johnson said.

(Updates Nov. 28 story with comment from the American Hospital Association in the 18th and 19th paragraphs.)

To contact the reporter on this story: Allie Reed in Washington at

To contact the editors responsible for this story: Alexis Kramer at; Karl Hardy at

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