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Post Pay Negotiation and Baseball-Style Arbitration Replace Balance Billing for Surprise Bills

With balance billing of the health plan member no longer allowed for certain out-of-network claims, the No Surprises Act establishes a post payment negotiation process between healthcare payors and providers if either party  is not satisfied with the payor’s initial payment. This process is similar to the patient advocacy services common to reference-based pricing programs.  Either party has up to 30 days after the payor makes an initial payment to begin the process, and then the negotiation must be open for at least 30 days. If the two sides can’t negotiate a settlement, either party can initiate the independent dispute resolution (IDR) process. The Act specifies that “baseball-style” arbitration, also known as pendulum or final offer arbitration, will be used in the IDR process. Each party submits a final offer, and the arbitrator chooses one or the other. Because the arbitrator cannot choose a middle ground or suggest an alternate payment, the losing side could end up paying a lot more or getting paid a lot less than they think is fair. 

This baseball-style arbitration should in theory dissuade payors from submitting payment amounts that are far too low while similarly discouraging providers from submitting offers that are much too high. The expectation is that both sides will submit reasonable amounts to avoid the risks that come with the winner-takes-all approach of this type of arbitration.

The Act cites several factors that arbitrators may consider in their decision including but not limited to the provider’s experience, the quality and outcome measures of the provider, the complexity of the service and the Qualifying Payment Amount (QPA), which is the plan’s median contracted rate adjusted for the CPI of the urban market. There are differing schools of thought regarding the weight that should be attributed to each of the factors. Some lawmakers believe that all factors should be considered equally while others, joined by a number of industry groups, are petitioning for QPA to be the primary factor and attributed higher weight.  We anticipate clarification around this point and others with the next interim final rule, expected potentially as early as August. Regardless of the end decision, payors and providers should carefully consider their final offer in relation to the QPA. The arbitrator may not consider public payor reimbursement rates such as Medicare nor can they take into consideration the provider’s usual and customary charges.

Arbitrators can also consider any relevant factors brought to their attention by either side. With this in mind, both parties should come to the arbitration armed with any information that supports their offers and demonstrates a good faith effort was made to resolve the situation.

In a further attempt to discourage arbitration or at the very least encourage settlement of similar claims, the No Surprises Act prohibits the party that initiated the arbitration process from taking the same party to arbitration again for the same service for 90 days following a decision. Any claims that occur during this 90-day period, however, can go to arbitration after the period ends.