Is It Time to Change the Independent Dispute Resolution Process of the No Surprises Act? Leave a comment

Before the No Surprises Act, patients often got stuck in the middle of billing disputes.

For instance, when they went to an in-network hospital but were treated by an out-of-network provider or when they needed emergency care but couldn’t choose who treated them. This often led to them receiving huge surprise bills. The No Surprises Act, which went into effect in 2022, changed this. But new issues arose, particularly relating to the Independent Dispute Resolution process. At the heart of this is a recent lawsuit Anthem filed against Prime Healthcare. 

The No Surprises Act protects patients from unexpected bills and removes them from insurer-provider payment friction. The act requires insurers and providers to enter into 30 days of open negotiation to determine how much providers are paid. If they can’t come to an agreement, either side can use the Independent Dispute Resolution (IDR) process, in which a provider submits a payment offer and an insurer submits a payment offer and then a neutral arbitrator picks one.

This Independent Dispute Resolution process was intended to be used as a last resort. But some in the industry now argue that the IDR process is being misused by providers leading to an explosion of cases using this mechanism. 

Anthem Blue Cross Life and Health Insurance Company, an Elevance affiliate, filed a lawsuit earlier in January against 11 Prime Healthcare facilities in California. Anthem is accusing these facilities of “knowingly flooding” the IDR process with more than 6,000 ineligible disputes and “extracting millions of dollars in wrongfully obtained awards.” 

Aside from this lawsuit, Elevance has cases against other companies in other states including in Georgia and Ohio.

“When this bill was passed, the federal government expected 17,000 of these cases to come through in any particular year,” said Dr. Catherine Gaffigan, president of Elevance’s health solutions business, in an interview. “Instead, what we have seen is millions of cases actually going through. And Elevance actually sees 17,000 of these a month. So clearly this has been exploited in ways that were never intended.”

Elevance isn’t the only insurer up in arms about alleged IDR misuse. UnitedHealthcare sued Radiology Partners in August and BCBS Texas went after Zotec Partners in December.

One industry expert equated the issue to the 340B Drug Pricing Program, which allows hospitals and clinics that treat a large population of low-income and uninsured patients to buy outpatient prescription drugs at a discount. It was intended to support safety-net providers, but has since grown exponentially. Between 2000 and 2020, the number of covered entity sites participating in the program grew from 8,100 to 50,000.

The IDR process “was invented for good reasons. … That’s similar to the good intentions behind 340B. But I think there’s a chance that in this situation, the IDR process, like the 340B process, is being repurposed to serve as a revenue stream for hospitals that find justification for doing so,” said Michael Abrams, managing partner of Numerof & Associates.

Elevance is calling for lawmakers to reform the IDR process to ensure that it is used in the way they intended.

Anthem v. Prime Healthcare

In the complaint, Anthem claimed that the defendants used the IDR process as an “an extractive tool to gouge the healthcare system,” versus a forum for resolving good faith payment disputes.

Anthem declared that Prime Healthcare began flooding the IDR process in January 2024. The facilities received roughly $15 million greater than what Anthem had originally paid for services, and the typical reward was more than six times greater than what a contracted provider would be paid for the same service. Anthem added that this fits Prime’s reputation.

“Defendants, and Prime generally, have developed a reputation for prioritizing profits over patients,” the complaint stated. “Many hospitals acquired by Prime have canceled longstanding network contracts to extract higher reimbursement for the same services. Historically, out-of-network Prime hospitals aggressively pursued collection from their patients and routinely filed litigation against health plans like Anthem to recover ever-greater payments. And Prime hospitals who do contract with health plans will publicly threaten to cancel those contracts if they do not receive higher reimbursement rates, putting patients in limbo.”

Although the No Surprises Act protects patients, Anthem is alleging Prime exploited the IDR process by routinely pushing emergency claims — eligible or not — into arbitration to maximize payments. The defendants even initiate IDR against Anthem for patients who aren’t Anthem members, the insurer alleges.

Anthem added that Prime knowingly files hundreds of IDR disputes each month.

“When these disputes proceed to an IDR payment determination—and they often do—Defendants perfunctorily demand 80% of their original billed charges, ignoring any individual circumstances of the episode of care or market realities regarding its value,” the complaint stated.

Anthem also alleges that Prime repeatedly falsified information throughout the IDR process to bypass eligibility rules and push ineligible disputes to payment determinations. Making issues worse, Prime only sends IDR-related communications to Anthem through an “unnecessarily restrictive and cumbersome online portal,” which makes it “impossible” for Anthem to respond.

Prime Healthcare called Anthem’s lawsuit “meritless.” The organization stated that its facilities acted in compliance with the No Surprises Act and the IDR process and did not balance bill any patients. 

“Anthem’s lawsuit ignores the reality that certain large health plans, including Anthem, amass record profits by underpaying providers, delaying or denying care, and burdening patients with administrative barriers, practices that have eroded the public trust,” a spokesperson told MedCity News.

Beyond its initial intent

According to one healthcare expert, what was supposed to be a “narrow, last-resort pressure valve” has instead become a “fire hose.” And providers are winning the majority of the payment determinations (about 85% in 2024), with median determinations in late 2024 reported to be around 459% of the qualifying payment amount.

“Very few people anticipated just how far the No Surprises Act would drift from its original intent. While the law has protected patients from ‘being in the middle’ of negotiations between providers and payers, Congress did not envision the volume of arbitrations and a system where provider groups would prevail in arbitration more than 80% of the time. What was designed as a narrow patient-protection backstop has instead become a parallel payment system — one with enormous financial consequences,” said Dr. Adam Brown, an emergency physician and founder of healthcare advisory firm ABIG Health. 

He added that what was intended to protect patients has just morphed into a “high-stakes battlefield between providers and payers.”

Why are providers winning more often? According to Brown, the simple answer is that they are making a better case in front of the arbitrator. However, when you look at who is winning the cases, they’re often private equity-backed who have “spent time and capital to increase the volume of IDR and built administrative and automated processes around the IDR submissions,” he said. 

Abrams of Numerof & Associates echoed these comments.

“I think one of the consequences of these cases may be to accelerate reexamination of the IDR process, raise questions about whether it’s really functioning the way it was meant to,” he said.

Gaffigan said Elevance is in conversation with lawmakers and the Centers for Medicare and Medicaid Services about changing the IDR process, including requiring arbiters to justify unusually high rewards and providing clarity on what elective services are eligible for IDR.

In the meantime, Anthem has taken its own steps to fix the issue. For example, in the Fall, it announced plans to deduct 10% of payments to hospitals every time a doctor not in their network treats a patient enrolled in one of their plans.

Many provider organizations have pushed back against this new policy, including the American Hospital Association, arguing that it would limit patients’ choice of provider.

“The core objectives of the NSA were to protect patients and to incentivize network participation,” the AHA said in a statement in December. “Anthem undermines this landmark legislation by introducing new patient harms and targeting the very hospitals that have worked in good faith to participate in the plan’s network. The AHA calls on Elevance Health to do right by its Anthem enrollees and ensure it is a credible partner to its network hospitals and health systems and rescind this deeply flawed policy.”

When asked about the pushback this policy has received, Gaffigan noted that it is only for elective surgeries and when there are appropriate in-network providers available. In addition, critical access, rural and safety net hospitals are exempt.

“It really is like in these situations where there are lots of options, and yet somehow this patient is ending up with an out-of-network provider in an in-network hospital, and that out-of-network provider is then taking advantage of the IDR,” Gaffigan said. “We would prefer to never actually apply this penalty. We really just want our hospitals, which are in-network and important partners for us, to be part of the solution here.”

She added that while the No Surprises Act protects patients from surprise billing, they’re ultimately harmed on the back-end.

“The way that the independent dispute resolution process is being abused is driving up cost, and that ends up in patients’ premiums,” she argued. “It ends up in employers’ costs, and it drives up the cost of health insurance, and unfortunately, it’s doing that and not driving any improvements in quality, differences in care, etc. It’s purely inflationary.”

Photo: sdecoret, Getty Images