What the Latest Court Decisions Mean for the Federal IDR Process

Texas Medical Association v. HHS

Two court cases are at the heart of the federal IDR process’ latest suspension: Texas Medical Association v. United States Department of Health and Human Services, Case No. 6:23-cv-59-JDK (TMA IV) and Texas Medical Association, et al. v. United States Department of Health and Human Services, Case No. 6:22-cv-450-JDK (TMA III).

First, the US District Court for the Eastern District of Texas (district court) issued an opinion and order in TMA IV on August 3rd. The overall ruling vacated the batching provisions of 45 CFR § 149.510(c)(3)(i)(C), 26 CFR § 54.9816-8T(c)(3)(i)(C), and 29 CFR § 2590.716-8(c)(3)(i)(C), as well as the $350 per party administrative fee established by guidance issued on December 23rd of last year.

The Departments of Health and Human Services, Labor, and Treasury (the Departments) temporarily suspended the IDR process as a result of the order.

In TMA IV, the Texas Medical Association and other providers challenged increased administrative fees, which went from $50 to $350 at the start of 2023, and rules limiting the “batching” related claims in a single IDR dispute. The latter issue was brought on by a rule from the Departments that stated items and services must be billed under the exact same service or procedural code to be considered the same or similar items and services, which makes them eligible for batching.

The district court sided with healthcare providers in this case, concluding the two items were unlawful because the Departments failed to open a notice and comment period prior to implementing both provisions.

Later, the district court also favored providers in TMA III. In TMA III, the Texas Medical Association and other providers challenged portions of the July 2021 interim final rules proposed by the Departments. The rules primarily provided guidance on how plans and issuers calculate the QPA, which is used by certified IDR entities to determine payment amounts for bills in dispute.

QPA is typically the median contracted rate for a specific service in the same geographic region within the same insurance market as of January 31, 2019, adjusted for inflation. Texas Medical Association and other plaintiffs argued the rules allowed plan and issuers to artificially deflate the QPA by excluding bonuses and incentives from calculations and using “ghost” rates, or rates that were never negotiated nor used but are present in contracts.

TMA III also challenged additional regulations and guidance affecting air ambulance providers and disclosure requirements for plans and issuers.

The district court vacated portions of the interim final rules, as well as relevant portions of several guidance documents.

What do the court rulings mean for the federal IDR process?

The court rulings are a win for providers, albeit a temporary one, according to Lindsay Burrows, senior counsel at Wolfe Pincavage.

First, TMA IV prompted CMS to reduce the administrative fee back to $50, which makes the process “more affordable and accessible to participating parties.” But it also vacated the batching ruling that “created hurdles for initiating disputes because it forced providers to initiate separate disputes per service code, resulting in a greater administrative burden on providers and a higher volume of disputes,” Burrows explains.

Batching requirements have been an issue for healthcare providers since the start of the IDR process. Despite guidance from the Departments, providers have been confused about what qualifies for batching, and some certified IDR entities that once allowed batching no longer accepted batched claims later on. With administrative fees on the rise, separating out disputes for an out-of-network claim — which can contain several codes for clinical and billing purposes — can get expensive.

TMA IV could alleviate the bottleneck created by former batching requirements.

“The Departments stated that the court’s decision is being reviewed and they are working on updating the federal IDR process to comply with the NSA requirements,” Burrows states. “For now, providers must wait to submit IDR filings because the Departments have temporarily suspended all federal IDR process operations until further notice.”

But, “[w]ho’s to say when the suspension will be lifted or how the batching rules may change,” she continues. “One thing is for sure, providers will likely want the court to uphold the vacated batching rules so a single IDR filing can be submitted for multiple underpaid claims involving the treatment of a ‘similar condition.’”

Second, TMA III clarified for all parties involved in the federal IDR process what the QPA should be. Burrows says, in her words below, the court ruling has several important points to note, including:

• Confirming that the NSA strictly requires the QPA to be calculated based on rates for services and items actually performed by a provider. This means that the ‘ghost rates’ can no longer be included in the QPA calculations.
• Finding that the Departments’ guidance deviated from the plain requirements of the NSA as the Departments did not require plans to calculate the QPA based on provider specialty. Plans were using out-of-specialty rates to calculate the QPA, therefore artificially deflating the QPA. This ruling requires plans to follow ‘the plain requirements’ of the NSA.
• Including in the calculation of the QPA, the following: risk sharing, bonus, penalty, or other incentive-based or retrospective payments or payment adjustments.
• Confirming that self-insured group health plans cannot use rates from other plans administered by third-party administrators in calculating the QPA.

These clarifications mean that the QPA should be based on rates for specific services in the same geographic area using the same specialty services. Rates used to calculate the QPA for self-funded plans must also be based on rates previously paid by the specific self-funded plan, Burrows explains.

Additionally, TMA III clarified deadlines for notice or denial of payment. Since the court ruling vacated the Departments’ guidance citing a 30-day deadline from when the plan or issuer receives the information needed to determine a claim, providers must look to the text of the NSA.

“The regulation requires the plan to send its notice or denial of payment no later than 30 days after the bill for services is transmitted to the provider,” Burrows says.

What should providers do now?

The court rulings should have a significant impact on the federal IDR process if the Departments follow through on the district court’s suggestions.

“Considering the cost-benefit analysis of pursuing the federal IDR process, providers will be more encouraged to engage in the IDR process if the administrative fee remains $50 or a similar amount,” Burrows states. “Additionally, if the Departments follow the district court’s suggestion, providers will be able to submit single disputes for multiple service codes.”

Dispute volume under the federal IDR process has been substantially higher than the Departments expected. Earlier this year, they reported that the caseload was 14 times higher than they anticipated in the first couple of months post-implementation.

While further guidance may make the process more accessible, new requirements around batching may ease some of the bottlenecks behind the backlog of disputed claims. Eligibility issues are a driving factor behind the backlog of disputes, with batching problems being one of the main reasons for eligibility issues, CMS reported.

Burrows also says providers should expect higher QPA values if forthcoming guidance follows the district court’s suggestion and the Departments exercise enforcement discretion for a fixed time period while plans and issuers recalculate their QPAs to comply with the TMA III ruling.

But while batching and QPA challenges are being addressed, providers should be aware of lingering issues with the new federal IDR process, including payers consistently failing to engage in good-faith negotiations and process delays when payers do not participate. Burrows also cited delayed payment of the federal IDR determination when payers lose and “no reply” emails from payers for the open negotiation process.

These issues and the court rulings will have an impact on provider strategy with the federal IDR process in the future.

“Providers are essentially at a standstill as we all await the new proposed regulations,” Burrows states. “Considering that the Departments have temporarily suspended all federal IDR process operations until further notice, providers must continue monitoring for updates.”