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“No Surprises Act” has a disparate impact on hospital-based physician services

On July 1, the Department of Health and Human Services (along with Treasury and Labor departments) issued an interim final rule (the “Rule”) implementing certain provisions of the “No Surprises Act” (“NSA”) which focuses on providing consumers with protection against surprise medical bills.

The Rule prohibits surprise billing (or otherwise referred to as balance billing) for emergency services, out-of-network cost sharing for emergency and non-emergency services at amounts in excess of in-network cost sharing, out-of-network ancillary services rendered at participating facilities, and certain out-of-network services rendered at health care facilities without prior advance notice and consent. Two circumstances most likely present balance billing concerns addressed by the NSA: (a) when patients receive emergency care at out-of-network facilities or from out-of-network providers, and (b) when patients receive non-emergency care from out-of-network providers at in-network facilities. The Rule imposes sweeping limitations on the amounts providers may charge patients for out-of-network services.

Facilities impacted by the Rule currently include hospitals, hospital outpatient departments, critical access hospitals, ambulatory surgery centers, participating independent freestanding emergency departments, and services provided by air ambulance providers. While services provided at physician offices or urgent care centers, except those licensed to provide emergency care, are not currently covered, HHS has the discretion to expand the scope. The restriction applies to any provider treating patients or rendering services to patients at regulated facilities regardless of the provider’s office location or ownership.

Physicians practicing in certain specialties should be aware of the potential disproportionate impact on their out-of-network services. Effective January 1, 2022, “ancillary services”, defined in the Rule as (a) items and services rendered by (i) physicians and non-physician practitioners practicing emergency medicine, anesthesia, pathology, radiology and neonatology; and (ii) assistant surgeons, hospitalists and intensivists; and (b) diagnostic services, including radiology and lab services, cannot be billed at out-of-network rates if provided at an in-network hospital.

If a health plan covers emergency services, patients may only be held responsible for in-network costs not only for traditional emergency services but also for post-stabilization services. The Rule defines “emergency services” broadly to include “post-stabilization services,” which are services rendered once the patient is no longer in immediate danger. This is significant for certain ancillary care providers because their services are often needed during this “post-stabilization” period.

Billing for out-of-network services provided to patients at in-network facilities was identified as particularly confusing for patients. The Rule allows providers (who are not Ancillary Service providers) to balance bill only when a specific written notice and consent are provided. First, providers must notify their patients of a good faith estimate of the higher rates. A facility may provide this notice for non-participating providers, but if it does, it must identify all providers and all estimated rates. HHS specifies the time, form and content requirements for the notice. Second, providers must obtain consent from the patient to bill a patient for the more expensive care. The form and content of the consent are also specified by HHS. Of particular note are the limited English proficiency requirements. A patient is not deemed to have provided consent if the patient cannot understand the notice or consent due to a language barrier. Also, the notice and consent do not apply when an in-network provider is not available, or to out-of-network radiology, pathology, emergency, anesthesiology, diagnostic and neonatal services and services by an assistant surgeon, hospitalist, and intensivists.

The Rule prohibits providers from billing patients more than the permitted cost-sharing amount referred to as the “Recognized Amount." This amount is specified by (i) state law, (ii) an All-Payer model, or (iii) “the lesser of the amount billed by the provider or facility or the [qualifying payment amount], which under these interim final rules generally is the median of the contracted rates of the plan or issuer for the item or service in the geographic region.” In short, if there is no applicable statute or All-Payer model, the recognized amount will be either the out-of-network bill or a payor’s median contracted rate in the geographic area for the medical service in question -- whichever is less.  For uninsured patients, a good faith estimate measurement is applied. The Rule also requires payments by health plans to non-participating providers within a specified time and a dispute resolution process for a non-participating provider to challenge the payment.

Healthcare providers and facilities are required to publish on their websites, make publicly available and provide to patients a disclosure regarding the patient’s protections against balance billing and the complaint process. The content and form are specified in the Rule. To avoid duplication, HHS permits a facility to make the disclosure on behalf of providers rendering services at the facility; however, the provider is ultimately liable if the disclosure is not provided or is not accurate, and must make an effort to correct the error.

Enforcement regulations have not been proposed by HHS. In general, the NSA authorizes HHS to impose Civil Money Penalties of up to $10,000 per violation in states where HHS directly regulates balance billing (non-All Payer Model states and other states without balance billing laws). HHS retains the discretion to waive the penalty if the surprise bill is withdrawn in 30 days and the facility or provider did not knowingly violate the regulation. It remains unclear to what extent HHS will regulate enforcement for violations of this nature. Therefore, it will be important for providers to monitor the issue as HHS develops further guidance. Providers should also take note that violations may be considered to be over-payments and may subject a Provider to additional regulatory or contractual liability.

Anesthesiologists, radiologists, pathologists and labs and other ancillary care providers are likely to feel the effects of this Rule on two fronts. First, because the definition of “emergency services” is so expansive, the limits on surprise billing will encompass a phase of care that frequently demands the services of ancillary care. Second, because patients may not consent to surprise billing for non-emergent ancillary services, ancillary care providers have little flexibility in setting their rates. The Interim Final Rule is open for public comment for sixty (60) days after its publication. The Rule is set to take effect 60 days after July 1, however, most provisions do not kick in until January 1, 2022.

Josh Elmets, a Waller 2021 Summer Associate and University of North Carolina law student, contributed to this report.


Beth Pitman
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