October 1, 2021

CMS just released its new 'surprise' billing rule—and hospital groups are furious

Daily Briefing

    CMS on Thursday released an interim final rule establishing a process to settle disputes between out-of-network providers or facilities and health plans over so-called "surprise" medical bills, which occur when an out-of-network provider participates in a patient's care at an in-network facility.

    Radio Advisory: The biggest transparency and surprise billing policies coming your way


    The new rule builds upon a prior rule that CMS released in July known as "Requirements Related to Surprise Billing; Part I." That rule restricted out-of-pocket costs for consumers as a result of surprise and balance billing.

    Specifically, the "Part I" rule banned balance billing for emergency services, required that patient cost-sharing for emergency services and some non-emergency services not be higher than they would be for an in-network provider, and banned out-of-network providers from charging for items or services provided at an in-network facility unless consent and notice is given.

    The "Part I" rule, however, left open the question of how health plans and providers would settle disagreements over appropriate payment amounts.

    Details on the new, 'Part II' rule

    On Thursday, CMS released the "Requirements Related to Surprise Billing; Part II" rule, which includes a process for settling payment disputes between out-of-network providers or facilities and health plans.

    According to a CMS fact sheet, before the independent dispute resolution process is initiated, both parties must enter a 30-day "open negotiation" period to determine a rate of payment. If the negotiations fail, either party can then initiate the dispute resolution process.

    Once initiated, parties are required to jointly select an independent dispute resolution entity. If one cannot be jointly selected, HHS will choose one, according to the rule.

    The disputing parties will then submit their proposed payment rates along with supporting documentation to the resolution entity. The entity will then issue a binding determination by selecting one of the two parties' rates as the payment amount.

    Notably, the dispute process "must begin with the presumption" that the appropriate payment amount is the median rate negotiated by insurers for the service in the patient's geographical area, the New York Times reports. From there, the arbiter may also consider five other factors specified by Congress, such as whether the provider had attempted to participate in an insurer's network.

    In addition to establishing the dispute resolution process, the new rule also states that providers and facilities must give uninsured patients a "good faith estimate" of charges expected after an item or service is scheduled or upon the patient's request.

    This estimate must include charges expected for the item or service scheduled, as well as any other items or services that "would reasonably be expected" to be part of the scheduled item or service, according to a CMS fact sheet.

    The rule is scheduled to take effect on Jan. 1, 2022. CMS is accepting comments on the rule for 60 days following its Sept. 30 publishing date.


    Representatives of hospital industry groups harshly criticized the rule, arguing that the Biden administration violated the intent of the No Surprises Act by prioritizing the median negotiated rate over other factors in determining an appropriate payment amount.

    Stacey Hughes, EVP of the American Hospital Association, called the rule "a windfall for insurers."

    "The rule unfairly favors insurers to the detriment of hospitals and physicians who actually care for patients," Hughes said. "These consumer protections need to be implemented in the right way, and this misses the mark."

    Similarly, Federation of American Hospitals president and CEO Chip Kahn said the rule is a "total miscue" and goes against Congressional intent.

    "It inserts a government standard pricing scheme arbitrarily favoring insurers," Kahn said. "For two years, hospitals and other stakeholders stood shoulder to shoulder with lawmakers to develop legislation that would protect patients from surprise medical bills and last December, Congress passed a bill with a fair and balanced payment dispute resolution process. This regulation discards all of that hard work, misreads Congressional intent, and essentially puts a thumb on the scale benefiting insurers against providers and will over time reduce patient access."

    However, Matt Eyles, president and CEO of America's Health Insurance Plans, praised the rule, saying it "signals a strong commitment to consumer affordability and lower health care spending through an independent dispute resolution process that should encourage more providers to join health plan networks."

    "We are particularly encouraged to see the rules conform to the intent of the No Surprises Act and direct that arbitration awards must begin with a presumption that the appropriate out-of-network reimbursement is the qualified payment amount," Eyles added. (Kliff, New York Times, 9/30; CMS fact sheet, 9/30 [1]; CMS fact sheet, 9/30 [2]; Commins, HealthLeaders Media, 10/1)

    Transparency and surprise billing

    The biggest policies coming your way

    Radio Advisory, a podcast for busy health care leaders.

    As Covid-19 begins to slow down in the United States, the health care world is starting to refocus on some of the issues that permeated the space before the pandemic. In this episode, Rae sits down with Advisory Board's Rob Lazerow and Heather Bell to talk about how three new policies—hospital price transparency, payer price transparency, and surprise billing—will affect the health care industry.

    Listen now

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