The American Hospital Association (AHA) and American Medical Association (AMA) on Thursday filed a lawsuit against part of CMS' surprise billing rule, arguing that the independent dispute resolution process unfairly favors insurers and will "prevent fair and adequate compensation" to medical providers.
CMS' surprise billing rule
CMS in September released an interim final rule on surprise billing, which is scheduled to take effect Jan. 1, 2022. The rule establishes 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.
As part of this dispute-resolution process, the disputing parties will submit their proposed payment rates along with supporting documentation to an independent dispute resolution entity—either one who is jointly selected or chosen by HHS. The entity will then issue a binding determination by selecting one of the two parties' rates as the payment amount.
However, the rule notes that 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. From there, the arbiter may also consider five other factors specified by Congress, such as experience of the provider, type of hospital, and complexity of the treatment.
Upon the rule's release, representatives of hospital industry groups harshly criticized it, 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.
For example, Stacey Hughes, EVP of AHA, called the rule "a windfall for insurers." Hughes added, "The rule unfairly favors insurers to the detriment of hospitals and physicians who actually care for patients. These consumer protections need to be implemented in the right way, and this misses the mark."
AHA, AMA sue over arbitration process
AHA and AMA on Thursday sued the federal government in the U.S. District Court for the District of Columbia over provisions in surprise billing rule pertaining to the dispute-resolution process, arguing that it unfairly favors insurers, Modern Healthcare reports. According to Kaiser Health News, the lawsuit was joined by Renown Health, UMass Memorial Health, and two North Carolina physicians. Previously, the Texas Medical Association and the Association of Air Medical Services separately filed similar lawsuits against the rule.
In the lawsuit, AHA and AMA argue that this arbitration process will harm their members, as well as patients, due to underpayment of out-of-network bills. Specifically, the organizations said the rule's provision mandating that arbitrators focus on median in-network rates "places a heavy thumb on the scale" against providers and "barely resembles" the process Congress envisioned. According to the organizations, Congress in passing the No Surprises Act did not prescribe any "particular weight or presumption for any one factor.” In fact, AHA and AMA argue, Congress ordered arbitrators to consider all factors—and that the rule's focus on median in-network rates will "prevent fair and adequate compensation."
AHA and AMA state that the currently proposed process will limit access to care by barring meaningful contract negotiations. According to the organizations, the system would cause insurers to lower in-network rates, which could force some providers out of insurance networks.
"Congress established important patient protections against unanticipated medical bills in the No Surprises Act, and physicians were a critical part of the legislative solution," said AMA President Gerald Harmon. "But if regulators don't follow the letter of the law, patient access to care could be jeopardized as ongoing health plan manipulation creates an unsustainable situation for physicians."
He added, "Our legal challenge urges regulators to ensure there is a fair and meaningful process to resolve disputes between health care providers and insurance companies."
In addition, AHA president and CEO Rick Pollack said, "No patient should fear receiving a surprise medical bill. That is why hospitals and health systems supported the No Surprises Act to protect patients and keep them out of the middle of disputes between providers and insurers. Congress carefully crafted the law with a balanced, patient-friendly approach and it should be implemented as intended."
According to Kaiser Health News, the Biden administration has defended its interpretation of the surprise billing rule, with HHS Secretary Xavier Becerra saying the system "provides the guideposts to keep us efficient, transparent and cost-effective," since leaving the arbitration process "wide open" would lead to costs increasing. (Goldman, Modern Healthcare, 12/9; Appleby, Kaiser Health News, 12/9; Minemyer, Fierce Healthcare, 12/9)