CMS surprised the medical community with a substantial change in NSA

CMS surprised the medical community with a substantial change in NSA

With no warning and no apparent sense of irony, on Dec. 23, the Centers for Medicare and Medicaid Services (CMS) surprised the medical community with a substantial change in the No Surprises Act (NSA).

The act, which was supported by the medical community, was passed to protect patients from unexpected out-of-network medical bills that they could not reasonably anticipate or avoid. On the Friday before the long holiday weekend, CMS stated that if providers wish to appeal an underpayment from health insurance companies by requesting arbitration (termed “independent dispute resolution” or “IDR”), the administrative fee they are required to pay would be increasing by 600 percent. This change was effective Jan. 1, four business days after the announcement.


In 2022, the administrative fee was $50. Two months ago, CMS confirmed that the fee would remain $50 in 2023. A few days before the new year came the unexpected announcement that the fee was increasing to $350.

While this change is relevant for all hospital-based medical specialties, it is especially meaningful for those of us in radiology. This is because almost all radiology claims are less than $350. Thus, if an insurer under-reimburses a physician, and the physician wishes to access the federal NSA independent dispute resolution process to settle the disagreement, the physician must pay a $350 administrative fee. This fee is separate from and in addition to the fee charged by the arbiter (which is several hundred dollars). That arbiter’s fee is paid by each side in arbitration but the winner in arbitration has their amount returned. The administrative fee is not returned.

As a result of this fee increase, if an insurer under-reimburses for less than $350, it is not cost-effective for providers to request arbitration. If an insurer inappropriately pays $25 when they should have paid $100, the physician can request arbitration and pay $350. When the physician wins in arbitration, they will receive $75 from the insurer plus the return of the arbiter fee they paid, but they will not get back the $350. As a result, they suffered a net loss of $275 ($350-$75), plus the time value of the arbiter fee plus the resources they had to expend to file the case.

To make arbitration worthwhile, the amount recouped must be greater than the amount spent to win a determination. With the new administrative fee of $350, this is nearly impossible for many providers.

Why is CMS doing this? CMS stated that there was a greater number of arbitration submissions than anticipated. The system was overwhelmed, and they had to take action to cover their costs to manage the system. At a high level, CMS had two options:

Limit the need for providers to submit claims for arbitration.
Limit the ability of providers to submit claims for arbitration.
Instead of taking action to promote reasonable reimbursement by insurers, which would limit providers’ need to request arbitration, CMS chose the latter option. The $350 fee will accomplish their goal of limiting providers’ ability to access arbitration. It is worth noting that the No Surprises Act was painstakingly crafted to protect patients by promoting good-faith negotiations between providers and insurance companies, limiting the need for arbitration. If one side acted unreasonably, arbitration was available to correct the misbehavior. Of course, this system only works if both sides have access to unbiased arbitration. If there is no threat of review by a neutral third-party arbiter, insurance companies are free to reduce reimbursement rates at will. As medical practices absorb these additional cuts, services will be reduced or lost, impacting patients.

There are at least three actions that CMS could take to alleviate this problem. First, CMS could widen the batching of claims for arbitration. Using the example above, if 10 claims that were under-reimbursed for an average of $75 each were bundled together for arbitration, that would be cost-effective. Although the law provides for flexibility with batching, in prior guidance CMS specified that there were strict limits on how claims could be batched together. As a result, instead of one submission containing 10 claims, practices often need to submit numerous individual claims for arbitration. The administration could address this unnecessary limitation on batching through rulemaking, making the arbitration process far more efficient.

Second, CMS could stipulate that the full administrative fee is paid by the losing party in the arbitration. This would allow the government to keep the fee that they claim is necessary to manage the program and penalize the loser in arbitration. This is also consistent with the way the law was established. The No Surprises Act was written such that the loser in arbitration pays the arbiter’s fee. If arbitration is truly balanced, this penalty serves as a mechanism to support reasonable behavior and promote network contracting.

Finally, if the administrative fee was paid directly to the government by both parties at the time of submission, there might be no need to increase the fee. Based on the government’s recent report, they spent about $8.3 million but only received about $90,000 in administrative fees despite over 3,500 determinations. Using the $50 fee, which is $100 to the government because it is paid by both parties, and their report of over 90,000 submissions, the government could have over $9 million, more than covering their costs without a fee increase. Even accounting for ineligible submissions, if payments were made directly to the government, millions of dollars would be readily collected.

These options would help address the immediate threat to medical practices and their patients. Longer term, CMS should consider ways to promote balanced, good-faith negotiations between medical practices and insurers, limiting the need for providers to submit claims for arbitration.

With the support of the medical community, the No Surprises Act was passed to protect patients from surprise bills. CMS should show physicians the same respect.



Staff writer for the Chicago Morning Star

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