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Third and Final No Surprises Rule Brings Lots of Surprises, Actually

Updated: Oct 12, 2021

On October 7, 2021, the Departments of Labor, Treasury, and Health and Human Services (HHS) published an Interim Final Rule (IFR) completing the implementation of the No Surprises Act.

This is the third and (presumably) final rule implementing the Act, and the Departments have saved the biggest surprises for last. The new rule substantially alters the landscape for compliance. It also has the potential to move the Act closer towards what Congress never intended it to be: a de facto regulation of providers’ rates.

The Qualifying Payment Amount: A Brief Review

Where the Act applies (e.g., emergency room visits and non-emergency care by physicians at an in-network hospital), patients do not have to pay more than an “in-network” cost sharing amount. This “in-network” amount is calculated based on the Recognized Amount, which in most circumstances will be the Qualifying Payment Amount (QPA). For 2022, the QPA will be the payor’s median in-network rate for January 31, 2019, adjusted for inflation each year thereafter based on the CPI-U index. External data sources may be used to calculate the QPA only there is insufficient information to calculate a median.

The Act also establishes an Independent Dispute Resolution Process (IDR), through which independent and certified arbiters will resolve disputes over payment between health plans and providers. The QPA is one of eight or so factors to be considered by an arbiter in IDR.

Surprise! The QPA Takes an Outsize Role in IDR

The new IFR now says the QPA will be presumed to be the appropriate level of payment:

“ . . . [T]he certified IDR entity must begin with the presumption that the QPA is the appropriate out-of-network rate for the qualified IDR item or service under consideration. These interim final rules further provide that the certified IDR entity must select the offer closest to the QPA unless the certified IDR entity determines that credible information submitted by either party clearly demonstrates that the QPA is materially different from the appropriate out-of-network rate . . . .”

In order to rebut this presumption, the provider must provide “credible” evidence of “additional circumstances” based on the statutory factors, which include the provider’s level of training, experience, quality, and outcomes; the acuity or complexity of the case; the teaching status, case mix, and scope of services; the market share of the plan and provider in the geographic region; historic contracted rates between the parties, and the demonstration of “good faith efforts or lack thereof” by the parties to enter into a contract. 42 U.S.C. § 300gg-111(c)(5)(C). Providers’ charges and Medicare / Medicaid rates cannot be considered, however. Id.(c)(5)(D).

Practically speaking, while “either party” may submit this evidence, the burden to do so falls almost entirely on providers. After all, it is payors who calculate the QPA – based on contracted rates to which providers are not privy. Payors have no incentive to materially deviate from their own contracted rates for the same items and services.

What Does This Mean for IDR?

Nothing in the text of the Act – or in previously issued regulations – requires out-of-network payment to be tied so closely to the QPA in the IDR process. The Departments say they made this decision to “encourag[e] predictable outcomes,” which “will reduce the use of the Federal IDR process over time.” By now placing such a heavy thumb on the scale in favor of the QPA, they have drastically altered the dynamics of the IDR process.

How much weight will arbiters place on the additional information offered by providers? Will arbiters feel comfortable deviating from the QPA when it is clearly warranted? If the answers are “not much” and “no”, then IDR will be heavily stacked against the provider from the start. If that happens, then the Act may become precisely what Congress did not intend: a de facto regulation of how out-of-network providers are paid, even if achieved indirectly.

In short, depending how things play out this October surprise could upend the entire compromise upon which the Act was built: making a fair IDR process available to both payors and providers.

Who Will Guard the Henhouse?

Only payors will know how the QPA is calculated. So unless the states and HHS significantly increase oversight and enforcement – and there is presently no indication that they will – payors retain sole and unfettered discretion in how to calculate the QPA.

Providers are not permitted under current regulations to audit the plan’s calculation of the QPA. Rather, they are entitled to a limited amount of information upon request about whether the QPA was used and how it was calculated. See 85 Fed. Reg. 36872, 36899 (July 13, 2021 Interim Final Rule). Plans must reveal, for instance, whether “derived amount[s]” or “underlying fee schedule rates” are used in calculating the QPA – terms that typically mean that a plan has “backed into” one or more unspoken contract rates for a given item or service that are associated with a capitated or risk-sharing arrangement. Id. They must also inform the provider if they utilize an external source, such as an UCR database, to calculate the QPA. Id. But this does not provide a complete picture.

HHS also announced in a separate Proposed Rule last month that it does not intend to conduct very many plan audits “to verify compliance with” the QPA requirements – no more than 25 per year. 86 Fed. Reg. 51730, 51747 (September 16, 2021 Proposed Rule). (To be fair, this limit comes from the Act itself. See 42 U.S.C. § 300gg-111(a)(2)(A)(i).) HHS “expects” that the states, who have “primary enforcement authority,” to conduct most audits. As of today, neither DMHC nor CDI have posted any information on their website explaining how they will audit or enforce QPA requirements.

This de-emphasis on audits and providers’ own limited insight into the QPA may be a disastrous combination. Without adequate oversight, providers will have no meaningful ability to challenge the calculation of the QPA despite the heavy weight afforded to it.

On a Separate Note: Final Guidance on Uninsured Good Faith Estimate Requirements

In good news, HHS will exercise “its enforcement discretion” during calendar year 2022 with respect to the Good Faith Estimate (GFE) requirement for scheduled procedures. As my last post explained, HHS will only require providers in 2022 to issue GFEs to uninsured patients for care scheduled at least 3 business days in advance. The new IFR now clarifies that in 2022, a hospital providing a GFE for an outpatient surgery will only be responsible for estimating its own charges, and charges or costs associated with the surgeon’s or anesthesiologist’s professional services, for instance.

The IFR lays the groundwork for enforcement of the full GFE requirements in the future. The primary obligation to generate a GFE is placed on the “convening” provider or facility, the one who schedules the patient’s services. “Co-providers” and “co-facilities” have separate obligations to timely provide their own estimates to the convening provider / facility.

Last, the IFR also sets forth extensive guidance implementing the separate patient-provider dispute resolution process. An uninsured patient may initiate IDR if the actual charges billed for scheduled care are “substantially in excess” of the GFE. The GFE, in effect, has a “binding” effect on the provider or facility who issues it and later performs the procedure. Indeed, if a “replacement” provider or facility steps in at the last minute and does not issue a new GFE, whether due to time constraints or otherwise, the old GFE remains binding on them.

The Departments have defined “substantially in excess” in the most generous manner possible. The standard is met whenever the final charges incurred by the patient exceed the GFE by at least $400, regardless of the total size of the bill. Providers should thus err on the side of thorough and complete estimates of costs and charges to uninsured patients.


The modified requirements of the No Surprises Act go into effect in just a few months. For questions on these new requirements and how to comply, please contact Eric Chan at (310) 913-4013 or

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