Bulletin No. 2022–37

HIGHLIGHTS

OF THIS ISSUE





Bulletin No. 2022–37

September 12, 2022

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

EXCISE TAX

INCOME TAX

T.D. 9965, page 192.

This document sets forth regulations regarding certain

requirements regarding implementation of the protections against balance billing provided under the No

Surprises Act. The regulations are issued jointly with

the Department of Health and Human Services, and the

Department of Labor.

Notice 2022-37, page 234.

This Notice announces that Treasury and the IRS intend

to amend the section 871(m) regulations to delay the

effective/applicability date of certain rules in those final

regulations and extends the phase-in period provided

in Notice 2020-2, 2020-3 I.R.B. 327, for certain provisions of the section 871(m) regulations.

Finding Lists begin on page ii.

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and

enforce the law with integrity and fairness to all.

Introduction

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The Bulletin is divided into four parts as follows:

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This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

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The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

September 12, 2022 

Bulletin No. 2022–37

Part I

26 CFR 54.9816-6: Methodology for calculating

QPA; 26 CFR 54.9816-8: IDR process; 26 CFR

54.9817-2: IDR process for air ambulance services

T.D. 9965

DEPARTMENT OF THE

TREASURY

Internal Revenue Service

26 CFR Part 54

Requirements Related to

Surprise Billing

AGENCY: Internal Revenue Service,

Department of the Treasury; Employee

Benefits Security Administration, Department of Labor; Centers for Medicare &

Medicaid Services, Department of Health

and Human Services.

ACTION: Final rules.

SUMMARY: This document includes final

rules under the No Surprises Act, which was

enacted as part of the Consolidated Appropriations Act, 2021 (CAA). The document

finalizes certain disclosure requirements

relating to information that group health

plans, and health insurance issuers offering

group or individual health insurance coverage, must share about the qualifying payment amount (QPA) under the interim final

rules issued in July 2021, titled Requirements Related to Surprise Billing; Part I

(July 2021 interim final rules). Additionally,

this document finalizes select provisions

under the October 2021 interim final rules,

titled Requirements Related to Surprise

Billing; Part II (October 2021 interim

final rules), to address certain requirements

related to consideration of information

when a certified independent dispute resolution (IDR) entity makes a payment determination under the Federal IDR process.

DATES: Effective date: These final rules

are effective on October 25, 2022.

Applicability date: See Section III of

the SUPPLEMENTARY INFORMATION section for information on the

applicability dates.

FOR FURTHER INFORMATION

CONTACT: Shira McKinlay, Internal

Revenue Service, Department of the Treasury, at 202-317-5500; Elizabeth Schumacher or David Sydlik, Employee Benefits

Security Administration, Department of

Labor, at 202-693-8335; Deborah Bryant,

Centers for Medicare & Medicaid Services, Department of Health and Human

Services, at 301-492-4293; Lindsey

Murtagh, Centers for Medicare & Medicaid Services, Department of Health and

Human Services, at 301-492-4106.

Customer Service Information:

Individuals interested in obtaining

information from the Department of Labor

(DOL) concerning employment-based

health coverage laws may call the

Employee Benefits Security Administration (EBSA) Toll-Free Hotline at 1-866444-EBSA (3272) or visit the DOL’s website (www.dol.gov/agencies/ebsa).

In addition, information from the

Department of Health and Human Services (HHS) on private health insurance

coverage, coverage provided by non-Federal governmental group health plans, and

requirements that apply to health care providers, health care facilities, and providers

of air ambulance services can be found

on the Centers for Medicare & Medicaid

Services (CMS) website (www.cms.gov/

cciio), and information on surprise medical bills can be found at www.cms.gov/

nosurprises.

SUPPLEMENTARY INFORMATION:

I. Background

A. Preventing Surprise Medical Bills

under the CAA

On December 27, 2020, the CAA,

which includes the No Surprises Act, was

enacted.1 The No Surprises Act provides

Federal protections against surprise billing

by limiting out-of-network cost sharing

and prohibiting “balance billing,” in many

of the circumstances in which surprise

bills arise most frequently. Balance billing

refers to the practice of out-of-­network

providers billing patients for the difference between: (1) the provider’s billed

charges, and (2) the amount collected

from the plan or issuer plus the amount

collected from the patient in the form of

cost sharing (such as a copayment, coinsurance, or amounts paid toward a deductible). In particular, the No Surprises Act

added new provisions applicable to group

health plans and health insurance issuers

offering group or individual health insurance coverage to Subchapter B of chapter 100 of the Internal Revenue Code

(Code), Part 7 of the Employee Retirement Income Security Act (ERISA), and

Part D of title XXVII of the Public Health

Service Act (PHS Act). Section 102 of

the No Surprises Act added section 9816

of the Code, section 716 of ERISA, and

section 2799A-1 of the PHS Act,2 which

contain limitations on cost sharing and

requirements regarding the timing of initial payments and notices of denial of payment for emergency services furnished by

nonparticipating providers and emergency

facilities, and for non-emergency services

furnished by nonparticipating providers

with respect to patient visits to participating health care facilities, defined as hospitals, hospital outpatient departments,

critical access hospitals, and ambulatory

surgical centers. Section 103 of the No

Surprises Act amended section 9816 of

the Code, section 716 of ERISA, and section 2799A-1 of the PHS Act to establish

a Federal IDR process that allows plans

and issuers and nonparticipating providers

and facilities to resolve disputes regarding

out-of-network rates. Section 105 of the

No Surprises Act added section 9817 of

the Code, section 717 of ERISA, and section 2799A-2 of the PHS Act. These sections contain limitations on cost sharing

Pub. L. 116-260 (December 27, 2020).

Section 102(d)(1) of the No Surprises Act amended the Federal Employees Health Benefits Act, 5 U.S.C. 8901 et seq., by adding a new subsection (p) to 5 U.S.C. 8902. Under this new

provision, each Federal Employees Health Benefits (FEHB) Program contract must require a carrier to comply with requirements described in sections 9816 and 9817 of the Code, sections

716 and 717 of ERISA, and sections 2799A-1 and 2799A-2 of the PHS Act (as applicable) in the same manner as these provisions apply with respect to a group health plan or health insurance

issuer offering group or individual health insurance coverage.

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and requirements for the timing of initial

payments and notices of denial of payment for air ambulance services furnished

by nonparticipating providers of air ambulance services, and allow plans and issuers and nonparticipating providers of air

ambulance services to access the Federal

IDR process described in section 9816 of

the Code, section 716 of ERISA, and section 2799A-1 of the PHS Act.

The No Surprises Act provisions that

apply to health care providers, facilities,

and providers of air ambulance services,

such as prohibitions on balance billing

for certain items and services and requirements related to disclosures about balance

billing protections, were added to title

XXVII of the PHS Act in a new part E.

The Departments of the Treasury,

Labor, and Health and Human Services

(the Departments) previously issued

interim final rules implementing provisions of sections 9816 and 9817 of the

Code, sections 716 and 717 of ERISA,

and sections 2799A-1 and 2799A-2 of

the PHS Act to protect consumers from

surprise medical bills for emergency services, non-emergency services furnished

by nonparticipating providers with respect

to patient visits to participating facilities

in certain circumstances, and air ambulance services furnished by nonparticipating providers of air ambulance services.3

The interim final rules also implement

provisions requiring the Departments to

create a Federal IDR process to determine

payment amounts when there is a dispute

between payers and providers or facilities

over the out-of-network rate due for emergency services, non-emergency services

furnished by nonparticipating providers

with respect to patient visits to participating facilities in certain circumstances, and

air ambulance services furnished by nonparticipating providers of air ambulance

services.4 To implement these provisions,

the Departments published in the Federal Register the July 2021 interim final

rules on July 13, 2021 (86 FR 36872),

and the October 2021 interim final rules

on October 7, 2021 (86 FR 55980).5 The

July 2021 interim final rules and October

2021 interim final rules generally apply to

group health plans and health insurance

issuers offering group or individual health

insurance coverage (including grandfathered health plans) with respect to plan

years (in the individual market, policy

years) beginning on or after January 1,

2022; and to health care providers and

facilities, and providers of air ambulance

services with respect to items and services

provided during plan years (in the individual market, policy years) beginning on or

after January 1, 2022.6

B. July 2021 Interim Final Rules

The July 2021 interim final rules implement sections 9816(a)-(b) and 9817(a) of

the Code, sections 716(a)-(b) and 717(a)

of ERISA, and sections 2799A-1(a)-(b),

2799A-2(a), 2799A-7, 2799B-1, 2799B2, 2799B-3, and 2799B-5 of the PHS Act.

Among other requirements, the July

2021 interim final rules generally prohibit

balance billing for items and services subject to the requirements in those interim

final rules.7 The July 2021 interim final

rules also specify that consumer cost-sharing amounts for emergency services furnished by nonparticipating providers or

facilities, and for non-emergency services

furnished by nonparticipating providers

with respect to patient visits to certain

participating facilities, must be calculated based on the “recognized amount,”

which is defined as one of the following

amounts: (1) an amount determined by an

applicable All-Payer Model Agreement

under section 1115A of the Social Security Act; (2) if there is no such applicable

All-Payer Model Agreement, an amount

determined by a specified State law; or

(3) if there is no such applicable All-Payer

Model Agreement or specified State law,

the lesser of the billed charge or the QPA.

The July 2021 interim final rules establish

the methodology for calculating the QPA,

which in most circumstances will be the

plan’s or issuer’s median contracted rate

that was in effect for the particular item

or service on January 31, 2019, increased

for inflation. Cost-sharing amounts for air

ambulance services provided by nonparticipating providers of air ambulance services must be the same as the cost-sharing

amounts that would apply if the services

were provided by a participating provider of air ambulance services, and these

cost-sharing amounts must be calculated

using the lesser of the billed charge or the

QPA.

The No Surprises Act directs the

Departments to specify the information

that a plan or issuer must share with a

nonparticipating provider, nonparticipating emergency facility, or nonparticipating provider of air ambulance services, as applicable, after determining the

QPA. Therefore, 26 CFR 54.9816-6T(d),

29 CFR 2590.716-6(d), and 45 CFR

149.140(d) require that plans and issuers

make certain disclosures about the QPA

with each initial payment or notice of

denial of payment, and that plans and issuers provide certain additional information

upon request of the provider, facility, or

provider of air ambulance services. This

information must be provided in writing,

either on paper or electronically, to a nonparticipating provider, facility, or provider

of air ambulance services, as applicable,

when the QPA serves as the recognized

amount.

With an initial payment or notice of

denial of payment, a plan or issuer must

provide the QPA for each item or service

involved as well as a statement certifying that, based on the determination of

the plan or issuer: (1) the QPA applies for

purposes of the recognized amount (or,

in the case of air ambulance services, for

calculating the participant’s, beneficiary’s,

or enrollee’s cost sharing), and (2) each

QPA shared with the provider, facility, or

provider of air ambulance services was

determined in compliance with the methodology outlined in the July 2021 interim

final rules.

86 FR 36872 (July 13, 2021) and 86 FR 55980 (October 7, 2021).

The Federal IDR process does not apply if an All-Payer Model Agreement under section 1115A of the Social Security Act or a specified State law applies.

The interim final rules also include interim final regulations under 5 U.S.C. 8902(p) issued by the Office of Personnel Management that specify how certain provisions of the No Surprises

Act apply to health benefit plans offered by carriers under the Federal Employees Health Benefits Act.

6

86 FR 36872 (July 13, 2021) and 86 FR 55980 (October 7, 2021). These provisions apply to carriers in the Federal Employees Health Benefits Program with respect to contract years beginning on or after January 1, 2022. The disclosure requirements at 45 CFR 149.430 regarding patient protections against balance billing are applicable as of January 1, 2022.

7

45 CFR 149.410(a), 149.420(a), and 149.440(a).

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A plan or issuer is also required to provide a statement that, if the provider, facility, or provider of air ambulance services

wishes to initiate a 30-day open negotiation period for purposes of determining

the amount of total payment, the provider,

facility, or provider of air ambulance services may contact the appropriate person or office to initiate open negotiation,

and that if the 30-day open negotiation

period does not result in an agreement on

the payment amount, the provider, facility, or provider of air ambulance services

typically may initiate the Federal IDR

process within 4 days after the end of the

open negotiation period. The Departments

note that these time frames are measured

in business days, and plans and issuers

should reflect this in the statement. The

plan or issuer must provide contact information, including a telephone number and

email address, for the appropriate office

or person for the provider, facility, or provider of air ambulance services to contact

to initiate open negotiation for purposes of

determining an amount of payment (with

the amount including cost sharing) for the

item or service.

It has come to the Departments’ attention that some plans and issuers are

requiring nonparticipating providers, nonparticipating emergency facilities, and

nonparticipating providers of air ambulance services to utilize plan- or issuer-owned web systems to initiate an open

negotiation period. As discussed earlier,

the July 2021 interim final rules require

plans and issuers to provide a telephone

number and email address for providers,

facilities, and providers of air ambulance

services to initiate the open negotiation

period. When a party to a payment dispute

chooses to initiate the open negotiation

period, the October 2021 interim final

rules specify that the party must use the

standard notice of initiation of open negotiation issued by the Departments and may

satisfy the requirement to provide notice

to the opposing party by sending the

notice electronically if the party sending

the notice has a good faith belief that the

electronic method is readily accessible to

the other party and the notice is also provided free of charge in paper form upon

request.8 For example, it is reasonable

for a provider, facility, or provider of air

ambulance services to have a good faith

belief that an email address provided by

a plan or issuer with the initial payment

or notice of denial of payment is readily

accessible to the plan or issuer. Thus, if a

provider, facility, or provider of air ambulance services sends the standard notice of

initiation of open negotiation to the email

address identified by the plan or issuer in

the notice of denial of payment or initial

payment, that transmission would satisfy

the regulatory requirement to provide

notice to the opposing party (so long as the

provider, facility, or provider of air ambulance services also sends the notice free

of charge in paper form upon request).9

Although plans and issuers may encourage the use of an online portal for nonparticipating providers, facilities, and providers of air ambulance services to submit the

information necessary to initiate the open

negotiation period, or may seek additional

information to inform good faith open

negotiations, such as through use of a

supplemental open negotiation form, the

July 2021 interim final rules require plans

and issuers to provide a telephone number

and email address for providers, facilities,

and providers of air ambulance services

to initiate the open negotiation period,

and the October 2021 interim final rules

permit a party to initiate the open negotiation period by sending the standard notice

of initiation electronically to the email

address identified in the notice of denial of

payment or initial payment. Accordingly,

a plan or issuer cannot refuse to accept the

standard notice of initiation of open negotiation from a provider, facility, or provider of air ambulance services because

the provider or facility did not utilize the

plan’s or issuer’s online portal when the

standard notice of initiation of open negotiation is provided in a manner consistent

with the requirements of the July 2021 and

October 2021 interim final rules.

In addition, upon request by the provider, facility, or provider of air ambulance

services, a plan or issuer must provide,

in a timely manner, information about

whether the QPA includes contracted

rates that were not set on a fee-for-service

basis for the specific items and services

and whether the QPA for those items and

services was determined using underlying

fee schedule rates or a derived amount.10 If

an eligible database was used to determine

the QPA, the plan or issuer must provide

information to identify which database

was used. Similarly, if a related service

code was used to determine the QPA for

an item or service billed under a new service code, the plan or issuer must provide

information to identify which related service code was used.

Finally, upon request by the provider,

facility, or provider of air ambulance services, the plan or issuer must provide a

statement, if applicable, that the plan’s or

issuer’s contracted rates include risk-sharing, bonus, penalty, or other incentive-based or retrospective payments or

payment adjustments that were excluded

for purposes of calculating the QPA for

the items and services involved.

C. October 2021 Interim Final Rules

The October 2021 interim final rules

build on the July 2021 interim final rules

and implement the Federal IDR process

under sections 9816(c) and 9817(b) of

the Code, sections 716(c) and 717(b) of

ERISA, and sections 2799A-1(c) and

2799A-2(b) of the PHS Act.

The October 2021 interim final rules

provide for a Federal IDR process that

group health plans and health insurance

issuers offering group or individual health

insurance coverage and nonparticipating

providers, facilities, and providers of air

ambulance services may use to determine the out-of-network rate for items

and services that are emergency services,

26 CFR 54.9816-8T(b)(2)(iii)(B), 29 CFR 2590.716-8(b)(2)(iii)(B), and 45 CFR 149.510(b)(2)(iii)(B).

86 FR 55980, 55990 (Oct. 7, 2021).

10

26 CFR 54.9816-6T(d)(2)(i), 29 CFR 2590.716-6(d)(2)(i), and 45 CFR 149.140(d)(2)(i). Under the July 2021 interim final rules, plans and issuers are required to calculate the QPA using

underlying fee schedule rates or derived amounts when the plan or issuer has sufficient information to calculate the median of its contracted rates, but the payments under the contractual

agreements are not on a fee-for-service basis (such as bundled or capitation payments). 26 CFR 54.9816-6T(b)(2)(iii), 29 CFR 2590.716-6(b)(2)(iii), 45 CFR 149.140(b)(2)(iii). Plans and

issuers are not otherwise permitted to use underlying fee schedule rates or derived amounts to calculate the QPA.

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non-emergency services furnished by

nonparticipating providers with respect

to patient visits to participating facilities,

and air ambulance services furnished by

nonparticipating providers of air ambulance services, where an All-Payer Model

Agreement or specified State law does

not apply. The October 2021 interim final

rules generally specify rules to implement

the Federal IDR process, including the

requirements governing the open negotiation period; the initiation of the Federal

IDR process; the Federal IDR process

following initiation, including the selection of a certified IDR entity, submission

of offers, payment determinations, and

written decisions; costs of the Federal

IDR process; certification of IDR entities,

including the denial or revocation of certification of an IDR entity; and the collection of information related to the Federal

IDR process from certified IDR entities to

satisfy reporting requirements under the

statute.

The October 2021 interim final rules

provide that, not later than 30 business

days after selection of a certified IDR

entity, the certified IDR entity must select

one of the offers submitted by the plan or

issuer and the provider, facility, or provider of air ambulance services to be the

out-of-network rate for the qualified IDR

item or service.11 For each qualified IDR

item or service, the amount by which this

out-of-network rate exceeds the cost-sharing amount for the qualified IDR item or

service is the total plan or coverage payment (with any initial payment made by

the plan or issuer counted towards the

total plan or coverage payment).

The October 2021 interim final rules

state that, in selecting the offer, the certified IDR entity must consider the QPA for

the applicable year for the same or similar

item or service, or, in the case of batched

or bundled items or services, the QPA or

QPAs for the applicable year. The preamble to the July 2021 interim final rules provides that if multiple items and services

are reimbursed under non-fee-for-service

contractual arrangements, such as a bundled or capitated arrangement, and are

billed for under a single billing code,

plans and issuers must calculate a QPA for

each item or service using the underlying

fee schedule rates for the relevant items

and services if the underlying fee schedule

rates are available.12 If there is no underlying fee schedule rate for an item or service, the plan or issuer must calculate the

QPA using a derived amount.13 In addition, the October 2021 interim final rules

state that the certified IDR entity must also

consider information requested by, or submitted by the parties to, the certified IDR

entity relating to the offer, to the extent a

party provides credible information that

is not otherwise prohibited under 26 CFR

54.9816-8T(c)(4)(v), 29 CFR 2590.7168(c)(4)(v), and 45 CFR 149.510(c)(4)(v).

The October 2021 interim final rules

also require the parties to provide certain

information to the certified IDR entity,

including practice size and practice specialty or type; geographic region used to

calculate the QPA; the QPA for the applicable year for the same or similar item or

service as the qualified IDR item or service; and, if applicable, information showing that the Federal IDR process is inapplicable to the dispute. In addition, prior to

vacatur in the United States District Court

for the Eastern District of Texas, in the

cases of Texas Medical Association, et al.

v. United States Department of Health and

Human Services, et al., Case No. 6:21-cv425 (E.D. Tex.) (Texas Medical Association) (February 23, 2022) and LifeNet, Inc.

v. United States Department of Health and

Human Services, et al., Case No. 6:22cv-162 (E.D. Tex.) (LifeNet) (July 26,

2022), these interim final rules specified

that the certified IDR entity may request

additional information relating to the parties’ offers and must consider credible

additional information submitted, as further described in the next paragraph, that

relates to the parties’ offers and the qualified IDR item or service that is the subject

of a payment determination to determine if

the information submitted clearly demonstrates that the QPA is materially different

from the appropriate out-of-network rate

(unless the information relates to a factor

that the certified IDR entity is prohibited

from considering). For this purpose, the

October 2021 interim final rules specify

that credible information is information

that upon critical analysis is worthy of

belief and is trustworthy.14 Prior to vacatur in Texas Medical Association, the term

“material difference” was defined to mean

a substantial likelihood that a reasonable

person with the training and qualifications

of a certified IDR entity making a payment determination would consider the

information important in determining the

out-of-network rate and view the information as showing that the QPA is not the

appropriate out-of-network rate.15

For items and services that are not air

ambulance services, in determining which

offer to select, the certified IDR entity

must consider the following additional

information under certain circumstances:

1. The level of training, experience,

and quality and outcomes measurements

of the provider or facility that furnished

the qualified IDR item or service (such

as those endorsed by the consensus-based

entity authorized in section 1890 of the

Social Security Act).

2. The market share held by the provider or facility or that of the plan or issuer

in the geographic region in which the qualified IDR item or service was provided.

3. The acuity of the participant, beneficiary, or enrollee who received the qualified IDR item or service, or the complexity of furnishing the qualified IDR item or

service to the participant, beneficiary, or

enrollee.

4. The teaching status, case mix, and

scope of services of the facility that furnished the qualified IDR item or service,

if applicable.

5. Demonstration of good faith efforts

(or lack thereof) made by the provider or

facility or the plan or issuer to enter into

network agreements with each other, and,

Qualified IDR item or service has the same meaning as set forth in 26 CFR 54.9816-8T(a)(2)(xii), 29 CFR 2590.716-8(a)(2)(xii), and 45 CFR 149.510(a)(2)(xii).

86 FR 36893 (July 13, 2021).

13

The Departments also specify an alternative method to calculate the QPA when there is insufficient information based on contracted rates. See 26 CFR 54.9816-6T(c)(2)-(4), 29 CFR

2590.716-6(c)(2)-(4), and 45 CFR 149.140(c)(2)-(4).

14

26 CFR 54.9816-8T(a)(2)(v), 29 CFR 2590.716-8(a)(2)(v), and 45 CFR 149.510(a)(2)(v).

15

26 CFR 54.9816-8T(a)(2)(viii), 29 CFR 2590.716-8(a)(2)(viii), and 45 CFR 149.510(a)(2)(viii).

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if applicable, contracted rates between the

provider or facility and the plan or issuer

during the previous 4 plan years.

Under the October 2021 interim final

rules, the certified IDR entity may only

consider this information submitted by

the parties if the information is credible

and relates to the offer submitted by either

party.16 The certified IDR entity may not

consider any information submitted on

the prohibited factors, including usual and

customary charges (including payment or

reimbursement rates expressed as a proportion of usual and customary charges);

the amount that would have been billed

if the provider, facility, or provider of air

ambulance services were not subject to a

prohibition on balance billing; and payment or reimbursement rates payable by a

public payor, in whole or in part, for items

and services furnished by the providers,

facilities, or providers of air ambulance

services.17

The October 2021 interim final rules

also provided, prior to vacatur in Texas

Medical Association and LifeNet, that after

considering the QPA, additional information requested by the certified IDR entity

from the parties, and all of the credible

information submitted by the parties that

is consistent with the requirements and is

not prohibited information, the certified

IDR entity must select the offer closest to

the QPA, unless the certified IDR entity

determined that the credible information

submitted by the parties clearly demonstrates that the QPA is materially different

from the appropriate out-of-network rate,

or if the offers are equally distant from the

QPA but in opposing directions. In those

cases, the October 2021 interim final rules

required the certified IDR entity to select

the offer that the certified IDR entity

determines best represents the value of

the item or service, which could be either

party’s offer.

Not later than 30 business days after

the selection of the certified IDR entity,

the certified IDR entity must notify parties

to the dispute of the selection of the offer

and provide a written decision,18 which

must be submitted to the parties and the

Departments through the Federal IDR

portal.19 The October 2021 interim final

rules also provided that if the certified

IDR entity did not choose the offer closest to the QPA, this written decision must

include an explanation of the credible

information that the certified IDR entity

determined demonstrated that the QPA

was materially different from the appropriate out-of-network rate.

The October 2021 interim final rules

also implemented the Federal IDR process for qualified IDR services that are

air ambulance services. The process for a

certified IDR entity to select an offer in a

dispute related to qualified IDR services

that are air ambulance services is essentially the same as that for other qualified

IDR items or services. As with disputes

related to qualified IDR items or services

that are not air ambulance services, in

determining which offer to select, the No

Surprises Act and October 2021 interim

final rules provide that the certified IDR

entity must consider the QPA for the

applicable year for the qualified IDR

services that are air ambulance services.

The No Surprises Act and the October

2021 interim final rules likewise specified additional circumstances, in addition

to the QPA, that the certified IDR entity

must consider in making the payment

determination for air ambulance services.

With respect to air ambulance services,

the certified IDR entity is required to

consider, to the extent the parties provide

credible information, a different set of

additional circumstances:

1. The quality and outcomes measurements of the provider that furnished the

services.

2. The acuity of the condition of the

participant, beneficiary, or enrollee receiving the service, or the complexity of furnishing the service to the participant, beneficiary, or enrollee.

3. The training, experience, and quality of the medical personnel that furnished

the air ambulance services.

4. Ambulance vehicle type, including

the clinical capability level of the vehicle.

5. Population density of the point of

pick-up (as defined in 42 CFR 414.605)

for the air ambulance (such as urban, suburban, rural, or frontier).

6. Demonstrations of good faith efforts

(or lack thereof) made by the nonparticipating provider of air ambulance services

or the plan or issuer to enter into network

agreements with each other and, if applicable, contracted rates between the provider of air ambulance services and the

plan or issuer during the previous 4 plan

years.

As with qualified IDR items or services

that are not air ambulance services, the

October 2021 interim final rules provide

that after considering the QPA, additional

information requested by the certified IDR

entity from the parties, and all of the credible information submitted by the parties

that is consistent with the requirements and

is not prohibited information, the certified

IDR entity must select the offer closest to

the QPA, unless the certified IDR entity

determined that the credible information

submitted by the parties clearly demonstrates that the QPA is materially different

from the appropriate out-of-network rate,

or if the offers are equally distant from the

QPA but in opposing directions. In those

cases, the October 2021 interim final rules

require the certified IDR entity to select

the offer that the certified IDR entity

determined best represents the value of

the item or service, which could be either

party’s offer.

D. Public Comments Received in

Response to the July 2021 and October

2021 Interim Final Rules

In response to the July 2021 and October 2021 interim final rules, the Departments received thousands of comments

This requirement was vacated by the District Court in Texas Medical Association.

26 CFR 54.9816-8T(c)(4)(v), 29 CFR 2590.716-8(c)(4)(v), and 45 CFR 149.510(c)(4)(v). For this purpose, payment or reimbursement rates payable by a public payor include payments

or reimbursement rates under the Medicare program under title XVIII of the Social Security Act, the Medicaid program under title XIX of the Social Security Act, the Children’s Health

Insurance Program under title XXI of the Social Security Act, the TRICARE program under chapter 55 of title 10, United States Code, chapter 17 of title 38, United States Code, and payment

rates for demonstration projects under section 1115 of the Social Security Act.

18

26 CFR 54.9816-8T(c)(4)(vi)(A), 29 CFR 2590.716-8(c)(4)(vi)(A), and 45 CFR 149.510(c)(4)(vi)(A).

19

The Federal IDR portal is available at https://www.nsa-idr.cms.gov and must be used throughout the Federal IDR process to maximize efficiency and reduce burden.

16

17

September 12, 2022

196

Bulletin No. 2022–37

on many different aspects of the rules.

In particular, the Departments received

many comments related to a clarification in the preamble to the October 2021

interim final rules20 stating that the July

2021 interim final rules do not require

the plan or issuer to calculate the participant’s, beneficiary’s, or enrollee’s cost

sharing using the QPA for the service code

submitted by the provider or facility, and

that instead the plan or issuer could calculate the participant’s, beneficiary’s, or

enrollee’s cost sharing using the QPA for

a downcoded service code that the plan

or issuer determined was more appropriate. Many of these comments addressed

the information required by the July 2021

interim final rules that must be shared

about the QPA, the importance of this disclosure, and how additional disclosures

related to the QPA would be useful in the

context of the Federal IDR process, particularly when the QPA is based on a service code or modifier that is different than

the one the provider or facility billed. The

Departments also received many comments related to the payment determination standards under the Federal IDR process, including the provisions that govern

the certified IDR entity’s consideration of

the enumerated factors. These final rules

address only the provisions related to

these comments, and they make changes

in light of the decisions in Texas Medical Association and LifeNet. The Departments intend to address comments related

to other provisions of the July 2021 and

October 2021 interim final rules, including comments received in response to the

July 2021 interim final rules related to

the disclosure requirements that are not

specifically related to downcoded service

codes, at a later date.

1. QPA Disclosure Requirements

With respect to the information that

must be shared about the QPA, the

Departments received comments on both

the July 2021 interim final rules and the

October 2021 interim final rules supporting the disclosure requirement and emphasizing the importance of ensuring that the

QPA and other information related to the

item or service are provided to providers,

facilities, and providers of air ambulance

services at the time of the initial payment

or notice of denial of payment. Many

commenters on the July 2021 interim final

rules stressed that the methodology to calculate the QPA should be transparent, and

that the Departments should expand the

range of information that is shared with

providers, facilities, and providers of air

ambulance services with the QPA. Some

commenters felt the degree of disclosure

was insufficient, and that it provided too

much power and discretion to plans and

issuers. Others, however, questioned

whether plans, in particular, would be able

to obtain the information required under

the July 2021 interim final rules, as much

of the information may be in the control

of vendors or other service providers. In

particular, the Departments received comments in response to the July 2021 interim

final rules and the October 2021 interim

final rules requesting that the disclosures

that must be provided with each initial

payment or notice of denial of payment

include additional information about how

the QPA was determined to ensure that

providers, facilities, and providers of air

ambulance services have sufficient information when the Federal IDR process is

used for a payment determination. For

example, commenters requested that plans

and issuers be required, without a request,

to provide information on the number of

contracts and the geographic region used

to calculate the QPA, whether the QPA

is based on downcoding21 of the billed

claim, information about the use of modifiers in calculating the QPA, the types of

specialties and subspecialties that have

contracted rates included in the data set

used to determine the QPA, and whether

bonuses and supplemental payments were

paid to in-network providers.

The manner in which items and services are coded, including the concept of

downcoding claims was reflected in both

the July 2021 interim final rules and the

October 2021 interim final rules. The preamble to the July 2021 interim final rules

noted that it is important that the QPA

methodology account for modifiers that

affect payment rates.22 The preamble to

the October 2021 interim final rules noted

that the Departments are aware that some

plans and issuers review claims and alter

the service code or modifier submitted by

the provider or facility to another service

code or modifier that the plan or issuer

determines to be more appropriate (a

practice commonly referred to as “downcoding” when the adjustment results in a

lower reimbursement, as noted in the preamble to the October 2021 interim final

rules).23 Some commenters expressed

concern that plans and issuers may calculate the QPA for a lower level service code

(and/or modifier) instead of calculating

the QPA for the particular service code or

modifier specified in the claim submitted

for reimbursement. These commenters

stated that it is important for providers

and facilities to know whether the plan or

issuer has downcoded a particular claim

that is subject to the balance billing protections in the No Surprises Act to ensure that

providers receive information that may be

relevant to the open negotiation process

and that could inform a provider’s offer

in the Federal IDR process, and which the

provider has no other means of ascertaining. Several commenters requested that

these final rules require plans and issuers

to disclose whether the claim has been

downcoded for purposes of computing the

QPA and include an explanation of why

the claim was downcoded, as well as what

the QPA would have been had the claim

not been downcoded.

See 86 FR 55997-98 n.35.

Downcode is defined in these final rules at 26 CFR 54.9816-6, 29 CFR 2590.716-6, and 45 CFR 149.30, to mean the alteration by a plan or issuer of a service code to another service code,

or the alteration, addition, or removal by a plan or issuer of a modifier, if the changed code or modifier is associated with a lower QPA than the service code or modifier billed by the provider,

facility, or provider of air ambulance services.

22

The preamble to the July 2021 interim final rules also noted that modifiers affect the payment rate because, for example, modifiers can be used to indicate that the work required to provide

a service in a particular instance was significantly greater—or significantly less—than the service typically required. See 86 FR 36891.

23

See 86 FR 55997-98.

20

21

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197

September 12, 2022

2. Payment Determination Standards

under the Federal IDR Process

With respect to the payment determination standards under the Federal

IDR process, the Departments received

numerous comments from various stakeholders about the provisions that govern

the certified IDR entity’s consideration of

the statutory factors during the payment

determination process. Many commenters supported the approach set forth in

the October 2021 interim final rules that

directs the certified IDR entity to begin

with the QPA as a baseline when making a

payment determination, which those commenters highlighted as an important part

of the payment determination process that

would ensure that the surprise billing provisions lead to lower health care costs for

all consumers. Furthermore, some commenters stated that the approach taken

in the October 2021 interim final rules is

crucial to achieving the budget savings

the Congressional Budget Office calculated. Those commenters stated that the

approach taken would shield consumers

from surprise bills and ever higher insurance premium costs. Commenters stated

that the October 2021 interim final rules

reinforce the statutory directive that the

QPA is the primary consideration for the

certified IDR entity. Commenters also

stated this use of the QPA represents a

reasonable, market-based rate and would

encourage greater participation in health

plan networks.

Commenters noted that there may be

circumstances in which the appropriate

out-of-network rate would exceed the

QPA, and that the October 2021 interim

final rules properly provide a pathway

for the certified IDR entity to reach that

determination when it can be justified.

These commenters highlighted that nothing in the October 2021 interim final rules

required a certified IDR entity to default to

the selection of the QPA or the offer closest to it, but rather that the rule correctly

mandated that all credible information be

considered. Commenters also stated that it

was not unreasonable to require a party to

document why the QPA is not the appropriate payment amount. Other commenters raised concerns about giving the same

weight to all factors because many of the

additional circumstances outlined in the

September 12, 2022

rule, such as patient acuity and complexity of care, could already be incorporated

into the QPA calculation. Commenters

also noted that the October 2021 interim

final rules provide clear guidance to certified IDR entities, which would reduce

variability in payment determinations and

better position the parties to settle disputes

before reaching the Federal IDR process,

by giving the parties a better sense of how

payment determinations would be made.

Other commenters disagreed with the

approach under the October 2021 interim

final rules and expressed opposition to the

emphasis placed on the QPA during the

Federal IDR process. Many of these commenters criticized the rule as establishing a rebuttable presumption in favor of

the QPA as the out-of-network rate while

failing to equip the parties with the necessary information to rebut the presumption.

Some commenters stated that the Departments disregarded bipartisan Congressional intent and tipped the scales in the Federal IDR process in favor of health plans

and issuers. Commenters expressed concern that emphasizing the QPA ignores the

complexity of billing factors, such as modifiers and the practice of bundling multiple

health care services under a single billing

code, and creates an incentive for the plan

or issuer to downcode claims in bad faith.

Commenters also expressed concern that

the prominence of the QPA could drive

down reimbursement rates for providers

that are currently reimbursed above the

median contracted rate, which they argued

could jeopardize network adequacy and

viability of physician practices and, commenters claimed, further drive down the

QPA. A number of commenters stated

that the emphasis given to the QPA would

provide an incentive for plans and issuers

to prefer out-of-network care, potentially

resulting in reduced networks, because,

ultimately, plans and issuers would pay

the QPA rather than a market rate driven

by the particular circumstances of the care

delivered. Commenters also asserted that

showing that the QPA is materially different from the appropriate out-of-network

rate would burden providers and facilities

who lack the resources to gather and submit this information during the Federal

IDR process.

Commenters who disagreed with the

approach set forth in the October 2021

198

interim final rules stated that certain provisions created a rebuttable presumption that

the QPA is the appropriate out-of-network

rate, and these commenters requested that

the Departments remove these provisions,

and instead issue rulemaking and guidance that instructs certified IDR entities

to consider all permissible and relevant

information submitted by the parties.

Other commenters suggested alternative

approaches for the provisions that govern

the certified IDR entity’s consideration of

the enumerated factors. Some commenters requested that equal weight be given to

the QPA and the contracted rates between

the provider or facility and plan or issuer

during the previous 4 years. Other commenters requested that the Departments

replace the QPA as the baseline in the Federal IDR process with a different amount,

such as the actual amount paid to a particular out-of-network provider for the same

or similar item or service or the median

contracted rate based on the amount negotiated under each contract the provider has

with a plan or issuer.

3. Payment Determinations for Air

Ambulance Services

A majority of commenters raised similar points with regard to the Federal IDR

process for both non-air ambulance items

and services and air ambulance services.

Some supported the emphasis on the QPA,

while others disagreed with the use of the

QPA as the baseline in the Federal IDR

process. These commenters raised concerns about the transparency of the calculation of the QPA, and questioned whether

the QPA is the appropriate out-of-network

rate. Several commenters stressed that the

use of the QPA as a baseline also raises

concerns that are unique to air ambulance

services. Some commenters highlighted

the prevalence of single-case agreements

for air ambulance services, which the

commenters interpreted as including settlements of post-service claims. The commenters asserted that, because of the prevalence of these agreements, the QPA does

not adequately reflect market rates for air

ambulance services and the QPA would be

lower than appropriate. Other commenters argued that hospital-based providers

of air ambulance services are subsidized

by the related hospitals, so including the

Bulletin No. 2022–37

rates of these providers in the QPA calculation with the rates of other air ambulance providers would improperly lower

the QPA and therefore the use of the

QPA as a baseline would not be appropriate. Another commenter argued that

the negotiated rates of the few in-network

providers for air ambulance services tend

to be inflated by their disproportionately

large market power, leading to artificially

high air ambulance rates and an inflated

QPA value. These commenters proposed

that the rules should direct the certified

IDR entities to take into account market

concentration and prices charged by nonprofit affiliated air ambulance providers

because air ambulance services owned

by private equity and publicly-traded

companies receive higher payments and

subsequently generate larger and more

frequent surprise bills than their non-profit-affiliated counterparts. Other commenters disagreed and stated that the Federal

IDR process should not make such a distinction among providers of air ambulance

services. One commenter stated that Congress clearly recognized the variation in

air ambulance services in distinguishing

the six “additional circumstances”24 specific to air ambulance services that certified IDR entities should consider.

4. The Certified IDR Entity’s Written

Decision

With respect to the certified IDR entity’s written decision, several commenters

supported the requirement for the certified

IDR entity to provide a written decision,

including the explanation of the underlying rationale for the certified IDR entity’s

determination. Other commenters stressed,

however, that requiring the explanation

of the rationale only if the certified IDR

entity determined that the QPA was materially different from the appropriate outof-network rate could discourage certified

IDR entities from considering additional

factors. A few commenters requested an

explanation be required when the certified

IDR entity selected the amount closest to

the QPA, including how the information

about the other required considerations

was assessed while others stated that a

robust explanation should be required

of the certified IDR entity in all cases.

Commenters also stated that requiring

an explanation in all cases would ensure

that certified IDR entities considered all

information submitted by the parties and

allow the parties to fully understand the

rationale behind the certified IDR entity’s

determination. Commenters asserted that

this could improve the quality and efficiency of the IDR process over time, as

parties become better informed as to the

types of information certified IDR entities find credible and the circumstances in

which the parties should pursue the IDR

process. Other commenters requested the

Departments either eliminate the requirement for a written decision or require a

similar analysis in all written decisions.

E. Litigation Regarding Requirements

Related to Surprise Billing; Part II

On October 28, 2021, the Texas Medical Association, a trade association representing physicians, and a Texas physician

filed a lawsuit against the Departments

and the Office of Personnel Management

(OPM), asserting that certain provisions

of the October 2021 interim final rules

relating to the certified IDR entities’ consideration of the QPA, as well as additional factors related to items and services that are not air ambulance services,

should be vacated. Plaintiffs argued that

the interim final rules ignored Congress’s

intent that certified IDR entities weigh

the QPA and other factors without favoring any factor, and they asserted that, as

a result, the rules would skew IDR results

in favor of plans and issuers. On February

23, 2022, the United States District Court

for the Eastern District of Texas (District

Court) issued a memorandum opinion and

order that vacated portions of the October 2021 interim final rules governing

aspects of the Federal IDR process related

to non-air ambulance qualified IDR items

or services including: (1) the definition of

“material difference;” (2) the requirement

that a certified IDR entity must select the

offer closest to the QPA unless the certified IDR entity determines that credible

information submitted by either party

under 26 CFR 54.9816-8T(c)(4)(i), 29

CFR 2590.716-8(c)(4)(i), and 45 CFR

149.510(c)(4)(i) clearly demonstrates that

the QPA is materially different from the

appropriate out-of-network rate for nonair ambulance qualified IDR items or services, or if the offers are equally distant

from the QPA but in opposing directions;

(3) the requirement that the certified IDR

entity may only consider the additional

information submitted by either party to

the extent that the credible information

related to the circumstances under 26 CFR

54.9816-8T(c)(4)(i), 29 CFR 2590.7168(c)(4)(i), and 45 CFR 149.510(c)(4)

(i) clearly demonstrates that the QPA is

materially different from the appropriate

out-of-network rate for non-air ambulance qualified IDR items or services; (4)

the dispute resolution examples; and (5)

the requirement that, if the certified IDR

entity does not choose the offer closest to

the QPA, the certified IDR entity’s written

decision must include an explanation of

the credible information that the certified

IDR entity determined demonstrated that

the QPA was materially different from the

appropriate out-of-network rate, based on

the factors certified IDR entities are permitted to consider with respect to the qualified IDR item or service.25

On April 27, 2022, LifeNet, Inc., a provider of air ambulance services, filed a

lawsuit against the Departments and OPM

seeking the vacatur of additional provisions of the October 2021 interim final

rules applicable to air ambulance services.

In particular, LifeNet alleged that the

requirement codified in the last sentence

of 26 CFR 54.9817-2T(b)(2), 29 CFR

2590.717-2(b)(2), and 45 CFR 149.520(b)

(2) that the certified IDR entity may

Under section 9817(b)(5)(C) of the Code, section 717(b)(5)(C) of ERISA, and section 2799A-2(b)(5)(C) of the PHS Act, those six additional circumstances are: (1) the quality and outcomes

measurements of the provider that furnished such services; (2) the acuity of the individual receiving such services or the complexity of furnishing such services to such individual; (3) the

training, experience, and quality of the medical personnel that furnished such services; (4) the ambulance vehicle type, including the clinical capability level of such vehicle; (5) population

density of the point of pick-up (such as urban, suburban, rural, or frontier); and (6) demonstrations of good faith efforts (or lack of good faith efforts) made by the nonparticipating provider

or nonparticipating facility or the plan or issuer to enter into network agreements and, if applicable, contracted rates between the provider and the plan or issuer, as applicable, during the

previous 4 plan years.

25

Tex. Med. Ass’n, et al. v. U. S. Dept. of Health and Human Servs., et al., Case No. 6:21-cv-425 (E.D. Tex.).

24

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199

September 12, 2022

consider information submitted by a party

only if the information “clearly demonstrate[s] that the qualifying payment

amount is materially different from the

appropriate out-of-network rate” should

be vacated. On July 26, 2022, the District

Court issued a memorandum opinion and

order vacating this language.26

F. Scope and Purpose of This Rulemaking

As discussed in more detail later in this

preamble, upon review of the comments

the Departments received on the information that must be shared about the QPA

when a service is downcoded and with

respect to the Federal IDR process, and in

light of the District Court’s memorandum

opinions and orders in Texas Medical

Association and LifeNet, the Departments

have determined that it is appropriate to

issue these final rules to finalize parts of

the July 2021 and October 2021 interim

final rules related to the information

that must be disclosed about the QPA

under 26 CFR 54.9816-6T(d), 29 CFR

2590.716-6(d), and 45 CFR 149.140(d)

to address downcoding; related to the

certified IDR entity’s consideration of

the statutory factors when making a payment determination under the Federal

IDR process at 26 CFR 54.9816-8T(c)

(4)(iii)-(iv) and 54.9817T-2(b), 29 CFR

2590.716-8(c)(4)(iii)-(iv) and 2590.7172(b), and 45 CFR 149.510(c)(4)(iii)-(iv)

and 149.520(b); and related to the certified IDR entity’s written decision at 26

CFR 54.9816-8T(c)(4)(vi)(B), 29 CFR

2590.716-8(c)(4)(vi)(B), and 45 CFR

149.510(c)(4)(vi)(B). These final rules

also include changes to remove from the

regulations the language vacated by the

District Court.

This rulemaking is purposefully narrow in scope and is intended to address

only certain issues critical to the implementation and effective operation of the

Federal IDR process. The Departments

intend to finalize the remaining provisions

of the July 2021 and October 2021 interim

final rules after further consideration of

comments.

26

27

28

II. Overview of Final Rules

A. Information to be Shared About the

Qualifying Payment Amount

As described earlier in this preamble,

the July 2021 interim final rules require

plans and issuers to make certain disclosures with each initial payment or notice

of denial of payment. When the QPA

serves as the recognized amount, or as the

amount upon which cost sharing is based

with respect to air ambulance services,

plans and issuers must disclose the QPA

and certain information related to the QPA

for the item or service involved, as well

as certain additional information, upon

request of the provider, facility, or provider of air ambulance services for each

item or service involved.27

As stated in the preamble to the July

2021 interim final rules, the Departments

seek to ensure transparent and meaningful disclosure of information relating to

the calculation of the QPA for providers,

facilities, and providers of air ambulance

services, while at the same time minimizing administrative burdens on health plans

and issuers and on the Federal IDR process. The Departments sought to balance

those competing interests by, on the one

hand, requiring plans and issuers to make

certain disclosures with each initial payment or notice of denial of payment and

to provide certain additional information

upon request by the provider, facility, or

provider of air ambulance services and, on

the other hand, avoiding more wide-reaching disclosure requirements that could add

to the costs and burdens of adjudicating

claims subject to the surprise billing protections in the No Surprises Act.

After review of the comments submitted on the July 2021 interim final rules

regarding downcoding and on the clarification in the preamble to the October

2021 interim final rules stating that, under

the July 2021 interim final rules, a plan

or issuer may calculate the QPA using a

downcoded service code, including the

comments suggesting how the disclosure requirements could be modified in

light of this clarification, the Departments

have concluded that additional disclosure

of information about the QPA is appropriate.28 This additional disclosure will

ensure that providers, facilities, and providers of air ambulance services receive

information regarding the QPA that aids

in their meaningful participation in open

negotiation and the Federal IDR process

in all payment disputes that involve qualified items or services that have been subject to downcoding.

Specifically, the Departments are of the

view that additional information would be

helpful in cases in which the plan or issuer

has downcoded the billed claim to ensure

that providers, facilities, and providers of

air ambulance services receive the relevant information from a plan or issuer that

is needed to engage in a productive open

negotiation period. Without information

on what the QPA would have been had the

claim not been downcoded, the provider,

facility, or provider of air ambulance services may be at a disadvantage compared

to the plan or issuer. In cases in which the

plan or issuer has downcoded the billed

claim and asserts that the QPA that corresponds with the downcoded claim is the

correct total payment amount, it is of particular importance that the provider, facility, or provider of air ambulance services

knows that the item or service in question

has been downcoded and has information

regarding both the QPA for the downcoded claim and the amount that would

have been the QPA had the service code

or modifier not been downcoded. In the

Departments’ view, this information may

be critical to the provider, facility, or provider of air ambulance services in developing an offer or submitting information

if it believes that the QPA calculated by

the plan or issuer does not best represent

the value of the item or service provided.

Furthermore, the requirement to disclose this additional information will

increase transparency by ensuring that the

provider, facility, or provider of air ambulance services has sufficient information

about the QPA to submit an informed

offer, including how it relates to the billed

LifeNet, Inc. v. United States Department of Health and Human Services, et al., Case No. 6:22-cv-162 (E.D. Tex.).

26 CFR 54.9816-6T(d), 29 CFR 2590.716-6(d), and 45 CFR 149.140(d).

86 FR 55997-98 (October 7, 2021).

September 12, 2022

200

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claim. This increased transparency will

aid in the open negotiation process by

helping providers, facilities, and providers

of air ambulance services to understand

how the plan or issuer arrived at the relevant QPA in relation to the billed claim.

This increased transparency will inform

the provider’s, facility’s, or provider of air

ambulance services’ decision whether to

initiate open negotiation and the Federal

IDR process, as well as its determination

of the amount that it submits as its offer.29

Further, this requirement will help a provider, facility, or provider of air ambulance

services ascertain what information to

provide the certified IDR entity to demonstrate that the provider’s, facility’s, or provider of air ambulance services’ offer best

represents the value of the item or service.

If submitted for the certified IDR entity’s

consideration, this information will also

aid the certified IDR entity in selecting the

offer that best represents the value of the

item or service by ensuring that the certified IDR entity will have additional pertinent information about the item or service.

For example, in a dispute that concerns a

qualified IDR service for which the plan

or issuer downcoded the billed service

code, the provider, facility, or provider of

air ambulance services may present information showing that the billed service

code was more appropriate than the downcoded service code. In such an instance,

the certified IDR entity could determine

that the QPA based on the downcoded service code does not sufficiently encompass

the complexity of furnishing the qualified

IDR service because it was based on a

service code for a different service from

the one furnished. If the certified IDR

entity makes such a determination, then

the amount that would have been the QPA

had the service code or modifier not been

downcoded may be relevant to the certified IDR entity in determining which offer

best represents the value of the qualified

IDR item or service.

Therefore, the Departments are issuing

these final rules to add a definition for the

term “downcode” to 26 CFR 54.9816-6,

29 CFR 2590.716-6, and 45 CFR 149.140;

and final rules under 26 CFR 54.98166(d), 29 CFR 2590.716-6(d), and 45 CFR

149.140(d) to require additional information about the QPA that must be provided

with an initial payment or notice of denial

of payment, without a provider, facility, or

provider of air ambulance services having

to make a request for this information,

in cases in which the plan or issuer has

downcoded the billed claim. Although

“downcoding” is being defined for the

first time in these final rules, the concept

was reflected in both sets of interim final

rules. Though neither set of interim final

rules specifically defines a term for this

practice, the interim final rules described

the practice and explained that it was

permissible under certain circumstances.

See 86 FR 55997-98 n.35 (clarification in

October 2021 interim final rules regarding

requirements of July 2021 interim final

rules). Indeed, as described previously,

the Departments received several comments in response to the July 2021 interim

final rules and the October 2021 interim

final rules requesting that the disclosures

that must be provided with each initial

payment or notice of denial of payment

include additional information about how

the QPA was calculated to ensure that

providers, facilities, and providers of air

ambulance services have sufficient information when the Federal IDR process is

used for a payment determination. For

example, commenters requested that plans

and issuers be required, without a request,

to provide information on the number of

contracts and the geographic region used

to calculate the QPA, whether the QPA

was calculated based on a downcoded

billed claim, information about the use of

modifiers in calculating the QPA, the types

of specialties and subspecialties that have

contracted rates included in the data set

used to determine the QPA, and whether

bonuses and supplemental payments were

paid to in-network providers.

These final rules define the term

“downcode,” as described in the preamble

to the October 2021 interim final rules, to

mean the alteration by a plan or issuer of

a service code to another service code, or

the alteration, addition, or removal by a

plan or issuer of a modifier, if the changed

code or modifier is associated with a lower

QPA than the service code or modifier

billed by the provider, facility, or provider

of air ambulance services.

These final rules also specify that,

if a QPA is based on a downcoded service code or modifier, in addition to the

information already required to be provided with an initial payment or notice of

denial of payment, a plan or issuer must

provide a statement that the service code

or modifier billed by the provider, facility, or provider of air ambulance services

was downcoded; an explanation of why

the claim was downcoded, including a

description of which service codes were

altered, if any, and which modifiers were

altered, added, or removed, if any; and

the amount that would have been the QPA

had the service code or modifier not been

downcoded.

The Departments are continuing to

consider comments on the July 2021

interim final rules about whether additional disclosures related to the QPA calculation methodology should be required

to be provided with an initial payment

or notice of denial of payment, or upon

request. The Departments note that the

statute places the responsibility for monitoring the accuracy of plans’ and issuers’

QPA calculation methodologies with the

Departments (and applicable state authorities) by requiring audits of plans’ and

issuers’ QPA calculation methodologies,30

and the Departments have committed to

conducting audits. The Departments also

stress that payment determinations in the

Federal IDR process should center on a

determination of a total payment amount

for a particular item or service based on

the facts and circumstances of the dispute

at issue, rather than an examination of a

plan’s or issuer’s QPA methodology.

B. Payment Determinations Under the

Federal IDR Process

The October 2021 interim final rules

provide that, not later than 30 business

The Departments understand that many plans and issuers make initial payments that are equivalent to or are informed by the corresponding QPA for the item or service at issue. As noted

in in the preamble to the July 2021 interim final rules, the initial payment should be an amount that the plan or issuer reasonably intends to be payment in full based on the relevant facts and

circumstances, which may be higher or lower than the QPA, as required under the terms of the plan or coverage, prior to the beginning of any open negotiation or initiation of the Federal

IDR process. 86 FR 36872, 36900 (July 13, 2021)

30

86 FR 36872, 36899 (July 13, 2021).

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September 12, 2022

days after the selection of the certified

IDR entity, the certified IDR entity must

select one of the offers submitted by the

plan or issuer or the provider, facility, or

provider of air ambulance services as the

out-of-network rate for the qualified IDR

item or service. In determining which offer

to select, the October 2021 interim final

rules provided, prior to Texas Medical

Association and LifeNet, that the certified

IDR entity must first look to the QPA, as it

represents a reasonable market-based payment for relevant items and services, and

then to additional information requested

by the certified IDR entity from the parties and other additional information submitted by the parties. After considering

the QPA and additional information, the

October 2021 interim final rules required

the certified IDR entity to select the offer

closest to the QPA, unless the certified

IDR entity determined that the additional

information requested by the certified

IDR entity and the credible information

submitted by the parties demonstrated that

the QPA was materially different from the

appropriate out-of-network rate, or if the

offers were equally distant from the QPA

but in opposing directions. In instances in

which the certified IDR entity determined

that the credible information submitted

by the parties clearly demonstrated that

the QPA was materially different from the

appropriate out-of-network rate, or when

the offers were equally distant from the

QPA but in opposing directions, the October 2021 interim final rules state that the

certified IDR entity must select the offer

that the certified IDR entity determined

best represents the value of the item or service, which could be either party’s offer.

As stated earlier in this preamble, on

February 23, 2022 and July 26, 2022, the

District Court in Texas Medical Association and LifeNet issued memorandum

opinions and orders that vacated certain

provisions of the October 2021 interim

final rules that govern aspects of the Federal IDR process, including provisions that

provided guidance to certified IDR entities on selecting the appropriate out-ofnetwork rate in a payment determination.

In the October 2021 interim final rules,

the Departments required certified IDR

entities to view the QPA as an appropriate payment amount, subject to consideration of the information submitted by

the parties related to the additional circumstances outlined in the statute, as a

mechanism to ensure that certified IDR

entities approached making payment

determinations in the Federal IDR process

in a consistent manner. The regulatory text

required certified IDR entities to select the

offer closest to the QPA unless the certified IDR entity determined that credible

information submitted by a party clearly

demonstrated that the QPA was materially

different from the appropriate out-of-network rate. The preamble to the October

2021 interim final rules described the relevant instructions to certified IDR entities

as a “rebuttable presumption” in favor of

the QPA.

The District Court in Texas Medical

Association and LifeNet vacated the portions of the October 2021 interim final

rules that it construed as creating a rebuttable presumption in favor of the QPA. The

Departments note that these final rules are

not intended to impose a rebuttable presumption for payment determinations in

the Federal IDR process. The regulatory

text in these final rules does not include

the provisions that the District Court reasoned would have the effect of imposing

such a presumption.

The Departments note that, in all cases,

the QPA, which is generally based on the

median contracted rate for a qualified

IDR item or service, will be relevant to

a payment determination, as it represents

the typical payment amount that a plan or

issuer that is a party to a payment determination will pay in-network providers,

facilities, and providers of air ambulance

services for that particular qualified IDR

item or service. The Departments also

note that, to the extent the QPA is calculated in a manner that is consistent with the

detailed rules issued under the July 2021

interim final rules, and is communicated in

a way that satisfies the applicable disclosure requirements, the QPA will meet the

credibility requirement that applies to the

additional information and circumstances

set forth in these final rules.31 The credibility requirement is designed to ensure

that the additional information submitted

by the parties to a payment determination

meet the same credibility standard that the

QPA already meets through other mechanisms, by virtue of the requirements

related to the QPA set forth in the July

2021 interim final rules. The Departments

also note that the credibility requirement is designed to ensure that certified

IDR entities have clear guidance on how

to evaluate potentially voluminous and

complex information in a methodical and

consistent manner. Absent clear guidance

on a process for evaluating the different

factors, there would be no guarantee of

consistency in how certified IDR entities

reached determinations in different cases.

The Departments are of the view that

this guidance is also important because

the QPA must be a quantitative figure,

like the offers that will be submitted in a

payment determination. Generally, these

quantitative figures will be unlike the

information received related to the additional circumstances, which will often be

qualitative and open to subjective evaluation. Although the QPA is a quantitative

figure, the amount that best represents the

value of the qualified IDR items and services may be more or less than the QPA

due to additional circumstances that are

not easily quantifiable such as the care

setting or the teaching status of the facility. It therefore is reasonable to ensure that

certified IDR entities consider the QPA,

a quantitative figure, and then consider

the additional, likely-qualitative factors,

when determining the out-of-network rate

– another quantitative figure.

1. Requirement to Consider the QPA and

Additional Information Submitted

In light of the Texas Medical Association and LifeNet decisions, and in

response to comments received on these

provisions, the Departments are finalizing

rules that remove the provisions that the

To the extent there is a question whether a plan or issuer has complied with the July 2021 interim final rules’ requirements for calculating the QPA, it is the Departments’ (or applicable

State authorities’) responsibility, not the certified IDR entity’s, to monitor the accuracy of the plan’s or issuer’s QPA calculation methodology by conducting an audit of the plan’s or issuer’s

QPA calculation methodology. However, a provider or facility may always assert to the certified IDR entity that additional information points in favor of the selection of its offer as the outof-network payment amount, even where that offer is for a payment amount that is different from the QPA.

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District Court vacated and that adopt standards for making a payment determination

that are intended to achieve the statutory

aims articulated earlier in this preamble.

Congress granted the Departments

statutory authority to “establish by regulation one independent dispute resolution

process” under which certified IDR entities determine the amount of payment

for an out-of-network item or service.32

The Federal IDR process that the Departments establish under this authority is to

be “in accordance with the succeeding

provisions of” the cited statutory subsections,33 including the statutory provisions

describing the factors for the certified

IDR entity to consider in determining the

out-of-network payment amount. Under

sections 9816(c)(5) and 9817(b)(5) of the

Code, sections 716(c)(5) and 717(b)(5) of

ERISA, and sections 2799A-1(c)(5) and

2799A-2(b)(5) of the PHS Act, the statute provides that with respect to payment

determinations, the certified IDR entity

must always consider the QPA without the

parties specifically bringing it to the certified IDR entity’s attention. Next, the statute provides that the certified IDR entity

must also consider “additional information” or “additional circumstances” submitted to the certified IDR entity.

As explained later in this preamble,

the Departments are of the view that it

is appropriate to exercise their authority under this provision, and that it is in

accordance with these statutory provisions, to adopt a Federal IDR process that

encourages a consistent methodology for

evaluation of information when making a

payment determination. The Departments

are of the view that there is value in ensuring that all certified IDR entities approach

payment determinations in a similar manner, which will promote consistency and

predictability in the process, thereby lowering administrative costs and encouraging consistency in appropriate payments

for out-of-network services.34 The statute

requires certified IDR entities to always

consider the QPA when making a payment

determination, as it is the one statutory

consideration that will always be present

in each payment determination, whereas

the parties may or may not choose to submit information related to the additional

circumstances as part of their offer. Consideration of the QPA, which is the firstlisted statutory factor and a quantitative

figure, will aid certified IDR entities in

their consideration of each of the other

statutory factors, as these entities will then

be in a position to evaluate whether the

“additional” factors present information

that may not have already been captured

in the calculation of the QPA.

As commenters noted, there may be

instances in which the QPA would not

adequately account for one or more of the

additional factors. The Departments note

that these final rules do not require certified IDR entities to default to the offer

closest to the QPA or to apply a presumption in favor of that offer. The Departments are of the view that it will often be

the case that the QPA represents an appropriate out-of-network rate, as the QPA is

largely informed by similar information

to what would be provided as information in support of the additional statutory

circumstances. Nonetheless, the Departments acknowledge that the additional

factors may be relevant in determining the

appropriate out-of-network rate, because

the QPA may not account for information

specific to a particular item or service.

Therefore, these final rules do not require

the certified IDR entity to select the offer

closest to the QPA. Rather, these final

rules specify that certified IDR entities

should select the offer that best represents

the value of the item or service under dispute after considering the QPA and all

permissible information submitted by the

parties.

Accordingly, in determining which

offer to select during the Federal IDR process under these final rules, the certified

IDR entity must consider the QPA for the

applicable year for the same or similar

item or service and then must consider

all additional information submitted by a

party to determine which offer best reflects

the appropriate out-of-network rate, provided that the information relates to the

party’s offer for the payment amount for

the qualified IDR item or service that is

the subject of the payment determination

(and does not include information that

the certified IDR entity is prohibited from

considering in making the payment determination under section 9816(c)(5)(D) of

the Code, section 716(c)(5)(D) of ERISA,

and section 2799A-1(c)(5)(D) of the PHS

Act).35 For this purpose, the Departments

understand that information requested by

a certified IDR entity, or submitted by a

party, would be information relating to a

party’s offer if it tends to show that the

offer best represents the value of the item

or service under dispute. Therefore, these

rules require the certified IDR entity to

evaluate whether the information relates

to the offer submitted by either party for

the payment amount for the qualified IDR

item or service that is the subject of the

payment determination. In considering

this additional information, the certified IDR entity should evaluate whether

information that is offered is credible and

should not give weight to information that

is not credible.36 The appropriate out-ofnetwork rate must be the offer that the

certified IDR entity determines best represents the value of the qualified IDR item

or service.

For non-air ambulance items and services, the additional information to be

considered includes information related to

the following factors:

1. the level of training, experience, and

quality and outcomes measurements

of the provider or facility that furnished the qualified IDR item or service (such as those endorsed by the

consensus-based entity authorized in

section 1890 of the Social Security

Act);

See section 9816(c)(2)(A) of the Code, section 716(c)(2)(A) of ERISA, and section 2799A-1(c)(2)(A) of the PHS Act; see also section 9817(b)(2)(A) of the Code, section 717(b)(2)(A) of

ERISA, and section 2799A-2(b)(2)(A) of the PHS Act.

33

Id.

34

See Cong. Budget Office, H.R. 5826, the Consumer Protections Against Surprise Medical Bills Act of 2020, as Introduced on February 10, 2020: Estimated Budgetary Effects at 1 (Feb. 11,

2020) (arbitrators “would be instructed to look to the health plan’s median payment rate for in-network rate care,” and as a result “average payment rates for both in- and out-of-network care

would move toward the median in-network rate,” thereby lowering health insurance premiums and budget deficits); see also H.R. Rep. No. 116-615, pt. I, at 57-58 (2020).

35

See also 26 CFR 54.9816-8T(c)(4)(v), 29 CFR 2590.716-8(c)(4)(v), and 45 CFR 149.510(c)(4)(v).

36

For this purpose, credible information is information that upon critical analysis is worthy of belief and is trustworthy. 26 CFR 54.9816-8T(a)(2)(v), 29 CFR 2590.716-8(a)(2)(v), and 45

CFR 149.510(a)(2)(v).

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September 12, 2022

2.

the market share held by the provider

or facility or that of the plan or issuer

in the geographic region in which the

qualified IDR item or service was

provided;

3. the acuity of the participant, beneficiary, or enrollee receiving the

qualified IDR item or service, or the

complexity of furnishing the qualified

IDR item or service to the participant,

beneficiary, or enrollee;

4. the teaching status, case mix, and

scope of services of the facility that

furnished the qualified IDR item or

service, if applicable; and

5. the demonstration of good faith efforts

(or lack thereof) made by the provider

or facility or the plan or issuer to enter

into network agreements with each

other, and, if applicable, contracted

rates between the provider or facility,

as applicable, and the plan or issuer,

as applicable, during the previous 4

plan years.

Under these final rules, the certified

IDR entity must also consider information

related to the offer provided in response

to a request from the certified IDR entity

under 26 CFR 54.9816-8T(c)(4)(i)(A)(2),

29 CFR 2590.716-8(c)(4)(i)(A)(2), and 45

CFR 149.510(c)(4)(i)(A)(2).

2. Avoidance of Double-counting

Information

When considering the additional information under 26 CFR 54.9816-8(c)(4)

(iii), 29 CFR 2590.716-8(c)(4)(iii), and 45

CFR 149.510(c)(4)(iii), the certified IDR

entity should evaluate the information and

should not give weight to that information if it is already accounted for by any

of the other information submitted by the

parties. The certified IDR entity should

consider whether the additional information is already accounted for in the QPA

and should not give weight to information related to a factor if the certified IDR

entity determines the information was

already accounted for in the calculation

of the QPA, to avoid weighting the same

information twice. In addition, if the parties submit information related to more

than one of the additional factors, the

certified IDR entity should also consider

whether the information submitted regarding those factors is already accounted for

by information submitted relating to other

credible information submitted to the certified IDR entity in relation to another factor and, if so, should not weigh this information more than once.

Numerous comments received on the

October 2021 interim final rules highlighted that, in many cases, certain factors,

such as patient acuity or the complexity

of furnishing the qualified IDR item or

service to the participant, beneficiary, or

enrollee, will already be accounted for

in the calculation of the QPA and should

therefore not receive additional weight.

For example, because the plan or issuer

is required to calculate the QPA using

median contracted rates for service codes,

as well as modifiers (if applicable), and

because service codes and modifiers in

many cases reflect patient acuity and the

complexity of the service provided, these

factors will often already be reflected in

the QPA.

Commenters also acknowledged that

there could be instances in which the QPA

would not adequately account for the

acuity of the patient or complexity of the

service: for example, if the complexity of

a case is an outlier such that the time or

intensity of care exceeds what is typical

for a service code. A certified IDR entity

may also conclude that the QPA does not

already account for patient acuity or the

complexity of furnishing the qualified

IDR item or service in instances where the

parties disagree on what service code or

modifier accurately describes the qualified

IDR item or service, such as when a plan

or issuer has downcoded a claim and the

QPA is based on the downcoded service

code or modifier, rather than the billed service code or modifier.

The Departments agree with the commenters that, in many cases, the additional

factors for the certified IDR entity to consider other than the QPA will already be

reflected in the QPA. The QPA is generally

calculated to include characteristics that

affect costs, including medical specialty,

geographic region, and patient acuity and

case severity, all captured in different billing codes or the QPA calculation methodology.37 Therefore, in the Departments’

view, giving additional weight to information that is already incorporated into the

calculation of the QPA would be redundant, possibly resulting in the selection of

an offer that does not best represent the

value of the qualified IDR item or service

and potentially over time contributing to

higher health care costs. As noted earlier

in this preamble, the Departments are also

aware that there are instances when certain factors related to the qualified IDR

item or service may not be adequately

reflected in the QPA. Under these final

rules, certified IDR entities are required to

consider the QPA and then must consider

all additional information submitted by

the parties relating to the offer for the payment amount for the qualified IDR item or

service that is the subject of the payment

determination, but each factor should be

weighted only once in the evaluation of

each party’s payment offer. To the extent a

factor is not already reflected in the QPA,

the certified IDR entity should accord

that factor appropriate weight based on

information related to it provided by the

parties. For example, some providers and

facilities that provide high-acuity care,

such as level 1 trauma or neonatal care,

may contend that additional factors such

as their case mix and the scope of services

offered were not accounted for in the QPA

and could justify the selection of a higher

amount as the out-of-network payment

amount.

3. Examples Provided

These final rules also include examples

to illustrate the consideration of factors

when making a payment determination,

including whether and how to give weight

to additional information submitted by a

party. Each example assumes that the Federal IDR process applies for purposes of

determining the out-of-network rate, that

both parties have submitted the information parties are required to submit as part

of the Federal IDR process, including

Plans and issuers are required to calculate separate QPAs for the same service code by provider specialty if the plan or issuer has contracted rates for the service code that vary based on

provider specialty. See 26 CFR 54.9816-6T(b)(3), 29 CFR 2590.716-6(b)(3), and 45 CFR 149.140(b)(3).

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the applicable QPA(s), and the submitted

information does not include information

on the prohibited factors.

In the first new example, a level 1

trauma center that is a nonparticipating

emergency facility submits an offer that is

higher than the QPA. Along with the offer,

the nonparticipating emergency facility

submits additional written information

showing that the scope of services available at the nonparticipating emergency

facility was critical to the delivery of care

for the qualified IDR item or service provided, given the particular patient’s acuity, and the information is determined to

be credible by the certified IDR entity.

The nonparticipating emergency facility

also submits information showing that

the contracted rates used to calculate the

QPA were based on a level of service that

is typical in cases in which the services are

delivered by a facility that is not a level

1 trauma center and that does not have

the capability to provide the scope of services provided by a level 1 trauma center.

This information is also determined to be

credible by the certified IDR entity. The

issuer submits an offer equal to the QPA.

No additional information is submitted

by either party. The certified IDR entity

determines that the information submitted

by the nonparticipating emergency facility

relates to the offer for the payment amount

for the qualified IDR item or service that

is the subject of the payment determination. If the certified IDR entity determines

that it is appropriate to give weight to the

additional credible information submitted

by the nonparticipating emergency facility and that this information demonstrates

that the facility’s offer best represents the

value of the qualified IDR item or service,

the certified IDR entity should select the

facility’s offer.

In the second new example, a nonparticipating provider submits an offer that is

higher than the QPA. Along with the offer,

the nonparticipating provider submits

additional written information regarding

the level of training and experience of

the provider, and the information is determined to be credible by the certified IDR

entity, but the certified IDR entity finds

that the provider does not demonstrate

that the level of training and experience

relates to the offer for the appropriate payment amount for the qualified IDR item or

Bulletin No. 2022–37

service that is the subject of the payment

determination (for example, the information does not show that the level of

training and experience was necessary to

provide the qualified IDR service or that

the training or experience made an impact

on the care that was provided). The nonparticipating provider does not submit any

additional information. The issuer submits

an amount equal to the QPA as its offer,

with no additional information. Even if

the certified IDR entity determines that

the additional information regarding the

level of training and experience is credible, if the certified IDR entity determines

that the information does not relate to

the offer for the payment amount for the

qualified IDR service that is the subject of

the payment determination, the certified

IDR entity should not give weight to the

additional information. In the absence of

any other credible information that relates

to a party’s offer, the certified IDR entity

should select the issuer’s offer as the offer

that best represents the value of the qualified IDR service.

In the third new example, in connection with an emergency department visit

for the evaluation and management of a

patient, a nonparticipating provider submits an offer that is higher than the QPA.

Along with the offer, the nonparticipating provider submits additional written

information showing that the acuity of

the patient’s condition and the complexity of the qualified IDR service required

the taking of a comprehensive history, a

comprehensive examination, and medical

decision making of high complexity, and

the information is determined to be credible by the certified IDR entity. The issuer

submits an offer equal to the QPA for Current Procedural Terminology (CPT) code

99285, which is the CPT code for an emergency department visit for the evaluation

and management of a patient requiring a

comprehensive history, a comprehensive

examination, and medical decision making of high complexity. The issuer also

submits additional written information

showing that this CPT code accounts for

the acuity of the patient’s condition, and

the information is determined to be credible by the certified IDR entity. The certified IDR entity determines that this information relates to the offer for the payment

amount for the qualified IDR item or

205

service that is the subject of the payment

determination. Neither party submits any

additional information. If the certified

IDR entity determines the information on

the acuity of the patient and complexity of

the service is already accounted for in the

calculation of the QPA, the certified IDR

entity should not give weight to the additional information provided by the nonparticipating provider. If, after evaluating

the information submitted by the parties,

the IDR entity determines that the issuer’s

offer best represents the value of the qualified IDR service, then the certified IDR

entity should select the issuer’s offer.

In the fourth new example, the issuer

submits an offer that is higher than the

QPA and that is equal to the nonparticipating emergency facility’s prior contracted

rate (adjusted for inflation) with the issuer

for the previous year for the qualified IDR

service. Although the facility is not participating in the issuer’s network this year,

it was a participating facility in the issuer’s network in the previous 4 plan years.

Along with the offer, the issuer submits

additional written information showing

that the contracted rates between the nonparticipating facility and the issuer during

the previous 4 plan years were higher than

the QPA, and that these prior contracted

rates took into account the case mix and

scope of services typically furnished at

the facility. The certified IDR entity determines that the information is credible and

that it relates to the offer submitted by the

facility for the payment amount for the

qualified IDR service that is the subject

of the payment determination. The nonparticipating emergency facility submits

an offer that is higher than both the QPA

and the prior contracted rate (adjusted for

inflation) and submits additional written

information intending to show that the

case mix and scope of services available

at the facility that furnished the qualified

IDR service were integral to the services

provided. The certified IDR entity determines this information is credible and

relates to the offer submitted by the facility for the payment amount for the qualified IDR service that is the subject of the

payment determination. If the certified

IDR entity determines that the information submitted by the facility regarding the

case mix and scope of services available

at the facility includes information that is

September 12, 2022

also accounted for in the information that

the issuer submitted regarding prior contracted rates, then that same information

that has been submitted twice should be

weighted only once by the certified IDR

entity. The certified IDR entity also should

not give weight to the same information

provided by the nonparticipating emergency facility in relation to any other factor. If the certified IDR entity determines

that the issuer’s offer best represents the

value of the qualified IDR service, the certified IDR entity should select the issuer’s

offer.

In the fifth new example, regarding a

qualified IDR service for which the issuer

downcoded the service code that the provider billed, the issuer submits an offer

equal to the QPA (which was calculated

using the downcoded service code). The

issuer also submits the additional written

information that it was required to disclose to the nonparticipating provider at

the time of the initial payment. The certified IDR entity determines the additional

information to be credible and that it

relates to the offer for the payment amount

for the qualified IDR service that is the

subject of the payment determination.

The nonparticipating provider submits an

offer equal to the amount that would have

been the QPA had the service code not

been downcoded. The nonparticipating

provider submits additional written information that includes the same documentation provided by the issuer, as well as

information that explains why the billed

service code was more appropriate than

the downcoded service code, as evidence

that the provider’s offer best represents

the value of the service furnished, given

its complexity. Neither party submits any

additional information. The certified IDR

entity determines that the information submitted by the provider is credible and that

it is related to the offer for the payment

amount for the qualified IDR service that

is the subject of the payment determination. If the certified IDR entity determines

that it is appropriate to give weight to the

additional credible information submitted

by the provider and that this information

demonstrates that the provider’s offer best

represents the value of the qualified IDR

service, the certified IDR entity should

select the provider’s offer.

The Departments note that the statute

and the October 2021 interim final rules

continue to provide that when making a

payment determination, a certified IDR

entity must not consider information on

the prohibited factors, such as the usual

and customary charges (including payment or reimbursement rates expressed

as a proportion of usual and customary

charges); the amount that would have

been billed by the provider, facility, or

provider of air ambulance services with

respect to the qualified IDR item or service had the balance billing provisions of

45 CFR 149.410, 149.420, and 149.440

(as applicable) not applied; or the payment or reimbursement rate for items and

services furnished by the provider, facility,

or provider of air ambulance services payable by a public payor.38,39 In considering

all the permissible information submitted

by the parties, the Departments expect

that the certified IDR entity will conduct

a thorough review of the information submitted to evaluate whether the information includes any of the prohibited factors,

so as to ensure that prohibited factors are

not considered in any payment determinations. In conducting this review, the certified IDR entity may request additional

information from the disputing parties,

including confirmation that information

submitted does not include information on

the prohibited factors.

The Departments are committed to

establishing a fair, cost-effective, and

reasonable IDR payment determination

process that does not have an inflationary

impact on health care costs. To that end,

the Departments will monitor the effects

of these payment determination requirements and make appropriate adjustments

as necessary to achieve the intended goals

articulated in this preamble.

C. Payment Determinations Under the

Federal IDR Process for Air Ambulance

Services

As discussed in section I.C of this

preamble, the process for a certified

IDR entity to select an offer in a dispute

related to qualified IDR services that are

air ambulance services is generally the

same as the process applicable to disputes

related to qualified IDR items or services

that are not air ambulance services. However, section 9817(b)(5)(C) of the Code,

section 717(b)(5)(C) of ERISA, section

2799A-2(b)(5)(C) of the PHS Act, and

the October 2021 interim final rules specify different additional circumstances,

in addition to the QPA, that the certified

IDR entity must consider in making the

payment determination for air ambulance

services. Upon review of the comments

the Departments received on the Federal

IDR process, and in light of the District

Court’s memorandum opinions and orders

in Texas Medical Association and LifeNet,

the Departments have determined that it is

appropriate to issue the final rules under

the Federal IDR process for air ambulance

services.

As for non-air ambulance items and

services, these final rules provide that

in determining which offer to select in a

dispute related to air ambulance services,

the certified IDR entity must consider

Contracted rates are frequently based on a percentage of rates payable by a public payor, such as Medicare. In these cases, because contracting parties have chosen to set their rates in this

way, the contracted rates represent an independent decision by contracting parties. Thus, if a party submits information on such rates to a certified IDR entity, consideration of these contracted

rates does not violate the prohibition on considering the factors described in 26 CFR 54.9816-8T(c)(4)(v), 29 CFR 2590.716-8(c)(4)(v), and 45 CFR 149.510(c)(4)(v). In contrast, if a party

submits evidence showing that its offer was a percentage of the rates paid by Medicare, a certified IDR entity is prohibited from considering such information.

39

Under 5 U.S.C. 8904(b), in the case of a retired individual who is over age 65 and enrolled in the Federal Employees Health Benefits (FEHB) Program but not covered by Medicare part A

or B, fee-for-service FEHB carriers may not pay a charge imposed by a hospital provider for inpatient services or a physician to the extent that charge exceeds applicable Medicare limits. The

Departments, after consulting with OPM, clarify that a certified IDR entity is not considered to violate the prohibition on considering the payment or reimbursement rate for items and services

furnished by the provider, facility, or provider of air ambulance services payable by a public payor to the extent the certified IDR entity’s selection of an offer is made to allow compliance

with 5 U.S.C. 8904(b) and 5 CFR part 890, subpart I. That is, if 5 U.S.C. 8904(b) applies, and either offer exceeds the applicable Medicare limit referenced in 5 U.S.C. 8904(b), the certified

IDR entity must ensure that the payment determination does not exceed the applicable Medicare limit. A certified IDR entity would not be considered to violate the prohibition on considering

Medicare reimbursement rates when it selects an offer on this basis.

38

September 12, 2022

206

Bulletin No. 2022–37

certain additional information submitted

by a party. Also, for non-air ambulance

items and services, these final rules for air

ambulance services provide that the certified IDR entity must consider the QPA for

the applicable year for the same or similar

service and then consider all additional

permissible information to determine

the appropriate out-of-network rate. For

air ambulance services, this information

includes information related to the following factors:

1. quality and outcomes measurements

of the provider that furnished the services;

2. the acuity of the condition of the participant, beneficiary, or enrollee receiving

the service, or the complexity of furnishing the service to the participant, beneficiary, or enrollee;

3. training, experience, and quality of

the medical personnel that furnished the

air ambulance service;

4. ambulance vehicle type, including

the clinical capability level of the vehicle;

5. population density of the point of

pick-up; and

6. demonstrations of good faith efforts

(or lack thereof) by the disputing parties to

enter into network agreements with each

other, as well as, if applicable, contracted

rates between the parties during the previous 4 plan years.

Additionally, as with non-air ambulance disputes, the certified IDR entity

must also consider information related

to the offer provided in a response to

the certified IDR entity’s request under

26 CFR 54.9816-8T(c)(4)(i)(A)(2), 29

CFR 2590.716-8(c)(4)(i)(A)(2), and 45

CFR 149.510(c)(4)(i)(A)(2). The certified IDR entity must also consider other

information provided by the parties under

26 CFR 54.9816-8(c)(4)(iii)(D), 29 CFR

2590.716-8(c)(4)(iii)(D), and 45 CFR

149.510(c)(4)(iii)(D).

As with non-air ambulance disputes,

the certified IDR entity should evaluate

whether each piece of submitted information is credible, relates to the offer

for the payment amount for the qualified

IDR service submitted by either party,

and does not include information on factors described in 26 CFR 54.9816-8T(c)

(4)(v), 29 CFR 2590.716-8(c)(4)(v), or 45

CFR 149.510(c)(4)(v) (regarding prohibited considerations). When considering

the additional information listed above,

Bulletin No. 2022–37

the certified IDR entity should not give

weight to the information to the extent it is

not credible, does not relate to either party’s offer for the payment amount for the

qualified IDR service, or is included in the

QPA calculation or other credible information. The Departments note that these

final rules do not require certified IDR

entities to default to the offer closest to the

QPA or to apply a presumption in favor of

that offer. Rather, these final rules specify

that certified IDR entities should select the

offer that best represents the value of the

air ambulance service under dispute after

considering the QPA and all permissible

information submitted by the parties.

D. The Certified IDR Entity’s Written

Decision

Under section 9816(c)(7) of the Code,

section 716(c)(7) of ERISA, and section

2799A-1(c)(7) of the PHS Act, the Departments are required to publish a variety of

information relating to the Federal IDR

process, including the number of times

a payment amount determined or agreed

to under this process exceeds the QPA;

the amount of each offer submitted in the

Federal IDR process expressed as a percentage of the QPA; and any other information specified by the Departments. The

statute also instructs certified IDR entities

to submit to the Departments such information as the Departments determine necessary to carry out the provisions of section 9816(c) of the Code, section 716(c)

of ERISA, and section 2799A-1(c) of the

PHS Act, which include these reporting

requirements as well as the Departments’

obligations to establish and oversee the

Federal IDR process. The Departments

have determined it is necessary under this

provision to require certified IDR entities

to submit certain information, including a

written statement of the certified IDR entity’s reasons for a particular determination

of an out-of-network rate.

Under the October 2021 interim final

rules, the certified IDR entity must explain

its payment determination and the underlying rationale in a written decision submitted to the parties and the Departments,

in a form and manner specified by the

Departments. The October 2021 interim

final rules also required the certified IDR

entity to include in its written decision an

207

explanation of the credible information

that the certified IDR entity determined

demonstrated that the QPA was materially

different from the appropriate out-of-network rate if the certified IDR entity did

not choose the offer closest to the QPA.

As stated earlier in this preamble, on

February 23, 2022, the District Court in

Texas Medical Association issued a memorandum opinion and order that invalidated the requirement to provide an explanation of the credible information that the

certified IDR entity determined demonstrated that the QPA was materially different from the appropriate out-of-network

rate (but not the general requirement that

a certified IDR entity issue a written decision). The Departments are of the view

that, in all cases, a written decision with

a comprehensive discussion of the rationale for the decision is important to ensure

that the parties understand the outcome of

a payment determination under the Federal IDR process. The Departments note

that commenters generally supported the

requirement that certified IDR entities

provide a written rationale for determinations. The Departments agree with commenters’ assertions that the certified IDR

entity should be required to provide an

explanation for its decision in all cases,

and not only when the offer furthest from

the QPA is determined to best represent

the value of the qualified IDR item or service. This requirement will ensure that all

parties understand the certified IDR entity’s payment determination and how the

various information was considered.

The Departments are finalizing standards for the written decision that are

intended to achieve transparency and

consistency in the Federal IDR process.

Accordingly, similar to the October 2021

interim final rules these final rules require

that the certified IDR entity explain in all

cases its determination in a written decision provided to the parties and the Departments, in a form and manner specified by

the Departments in separate guidance.

Additionally, these final rules continue to

require that the rationale be included in

the written decision. In response to comments requesting additional transparency

and explanation, these final rules also

provide that the certified IDR entity’s

written decision must include an explanation of its determination, including what

September 12, 2022

information the certified IDR entity determined demonstrated that the offer selected

as the out-of-network rate is the offer that

best represents the value of the qualified

IDR item or service, including the weight

given to the QPA and any additional credible information submitted in accordance

with these final rules. This requirement

will help ensure that certified IDR entities

carefully evaluate all credible information

and promote transparency with respect

to payment determinations. These final

rules also provide that, if the certified IDR

entity relies on additional information or

additional circumstances in selecting an

offer, its written decision must include

an explanation of why the certified IDR

entity concluded that this information

was not already reflected in the QPA. The

Departments are of the view that, in these

cases, the certified IDR entity should provide this additional explanation so that the

Departments may fulfill their statutory

functions to monitor and to report on how

often, and why, an offer that is selected

exceeds the QPA for a given qualified IDR

item or service. Additionally, this requirement will provide the Departments with

valuable information to inform future policy making, in particular, policy making

related to the QPA methodology. As stated

elsewhere in this preamble, the Departments are committed to establishing a reasonable and fair Federal IDR process.

Finally, the Departments are also

including two technical corrections to

address a regulatory cross-references in

the provisions that set forth the requirements for the certified IDR entity to

include a rationale for its written decision

for both air ambulance and non-air ambulance qualified IDR items and services

in monthly reporting to the Departments,

and to clarify that the certified IDR entity

should report to the Departments the

extent to which the decision relied on 26

CFR 54.9816-8(c)(4)(iii)(B)-(D), 29 CFR

2590.716-8(c)(4)(iii)(B)-(D), and 45 CFR

149.510(c)(4)(iii)(B)-(D). This requirement aligns the reporting requirement

with the requirement for the written decision, and with the intent of the October

2021 interim final rules to gather such

information.

III. Applicability of the Final Rules

These rules finalize certain provisions

of the July 2021 and October 2021 interim

final rules and address the decisions in

Texas Medical Association and LifeNet.

The July 2021 and October 2021 interim

final rules apply for plan years (in the individual market, policy years) beginning on

or after January 1, 2022, except to the

extent provided below.

The final rules that implement the

requirements related to the additional

information that must be provided with

each initial payment or notice of denial of

payment if the QPA is based on a downcoded service code or modifier are applicable with respect to items or services

furnished on or after October 25, 2022,

for plan years (in the individual market,

policy years) beginning on or after January 1, 2022.

With respect to the additional information that must be provided with each

initial payment or notice of denial of payment if a QPA is based on a downcoded

service code or modifier, the Departments

recognize that plans and issuers often

provide these notices through an automated or other streamlined system for

efficiency and that plans and issuers may

need additional time to update their operating systems to amend the notices that are

currently generated to satisfy the QPA disclosure requirements under the July 2021

interim final rules. Plans and issuers may

use reasonable methods to provide this

additional disclosure with the initial payment or notice of denial of payment while

plan or issuer systems and procedures are

updated to provide the additional notice in

a more streamlined and automated manner. Even when using other reasonable

methods, plans and issuers must provide

the required information starting on the

date these final rules are applicable to the

relevant plan or policy and in accordance

with the timeframes specified in the July

2021 interim final rules. The Departments

expect that plans and issuers will work to

make sure that systems are updated in a

timely fashion, and the Departments may

provide additional guidance, as warranted.

For requirements that finalize certain

provisions of the October 2021 interim

final rules, the final rules addressing the

payment determination standards for certified IDR entities, written decisions, and

reporting are applicable with respect to

items or services provided or furnished on

or after October 25, 2022, for plan years

(in the individual market, policy years)

beginning on or after January 1, 2022. This

approach will ensure uniformity and predictability in standards for qualified IDR

items and services (including between

non-air ambulance items and services

and air ambulance services, to the extent

applicable), and will allow time for the

Departments to provide updated guidance

to certified IDR entities and stakeholders.

If any provision in this rulemaking

is held to be invalid or unenforceable

facially, or as applied to any person,

plaintiff, or circumstance, the provision

shall be severable from the remainder of

this rulemaking, and shall not affect the

remainder thereof, and the invalidation

of any specific application of a provision

shall not affect the application of the provision to other persons or circumstances.

IV. Regulatory Impact Analysis

A. Summary

The Departments have examined the

effects of these final rules as required by

Executive Order 12866,40 Executive Order

13563,41 the Paperwork Reduction Act of

1995,42 the Regulatory Flexibility Act,43

section 202 of the Unfunded Mandates

Reform Act of 1995,44 Executive Order

13132,45 and the Congressional Review

Act.46

Regulatory Planning and Review, 58 FR 51735 (Oct. 4, 1993).

Improving Regulation and Regulatory Review, 76 FR 3821 (Jan. 18, 2011).

42

44 U.S.C. 3506(c)(2)(A) (1995).

43

5 U.S.C. 601 et seq. (1980).

44

2 U.S.C. 1501 et seq. (1995).

45

Federalism, 64 FR 153 (Aug. 4, 1999).

46

5 U.S.C. 804(2) (1996).

40

41

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Bulletin No. 2022–37

B. Executive Orders 12866 and 13563

Executive Orders 12866 and 13563

direct agencies to assess all costs and benefits of available regulatory alternatives

and, if regulation is necessary, to select

regulatory approaches that maximize net

benefits (including potential economic,

environmental, public health, and safety

effects; distributive impacts; and equity).

Executive Order 13563 emphasizes the

importance of quantifying costs and benefits, reducing costs, harmonizing rules,

and promoting flexibility.

Under Executive Order 12866, “significant” regulatory actions are subject to

review by the Office of Management and

Budget (OMB). Section 3(f) of the Executive order defines a “significant regulatory action” as an action that is likely

to result in a rule: (1) having an annual

effect on the economy of $100 million or

more, or adversely and materially affecting a sector of the economy, productivity, competition, jobs, the environment,

public health or safety, or State, local,

or tribal governments or communities

(also referred to as “economically significant”); (2) creating a serious inconsistency or otherwise interfering with

an action taken or planned by another

agency; (3) materially altering the budgetary impacts of entitlement grants,

user fees, or loan programs or the rights

and obligations of recipients thereof; or

(4) raising novel legal or policy issues

arising out of legal mandates, the President’s priorities, or the principles set

forth in the Executive order. Based on the

Departments’ estimates, OMB’s Office of

Information and Regulatory Affairs has

determined this rulemaking is “economically significant” under section 3(f)(1) of

Executive Order 12866 as measured by

the $100 million threshold.47 Therefore,

the Departments have prepared a Regulatory Impact Analysis that presents the

costs, benefits, and transfers associated

with this rulemaking. Pursuant to the

Congressional Review Act, OMB has

designated these final rules as a “major

rule,” as defined by 5 U.S.C. 804(2).

C. Need for Regulatory Action

On December 27, 2020, the CAA,

which includes the No Surprises Act, was

enacted.48 The No Surprises Act provides

Federal protections against surprise billing

by limiting out-of-network cost sharing

and prohibiting balance billing in many of

the circumstances in which surprise bills

arise most frequently.

On July 13, 2021, the Departments

published the July 2021 interim final

rules.49 The July 2021 interim final rules

implemented provisions of the No Surprises Act to protect participants, beneficiaries, and enrollees in group health plans

and group and individual health insurance

coverage from surprise medical bills

when they receive emergency services,

non-emergency services furnished by

nonparticipating providers with respect to

patient visits to certain participating facilities, and air ambulance services provided

by nonparticipating providers of air ambulance services.

On October 7, 2021, the Departments

published the October 2021 interim final

rules.50 The October 2021 interim final

rules build on the July 2021 interim final

rules and implement the Federal IDR process.51 The October 2021 interim final

rules generally apply to group health

plans and health insurance issuers offering group or individual health insurance

coverage (including grandfathered health

plans) with respect to plan years (in the

individual market, policy years) beginning on or after January 1, 2022; and to

health care providers and facilities, providers of air ambulance services, and certified IDR entities beginning on January

1, 2022 with respect to items and services

furnished during a plan year (in the individual market, policy year) beginning on

or after January 1, 2022.

On February 23, 2022, the District

Court in Texas Medical Association issued

a memorandum opinion and order that

vacated portions of the October 2021

interim final rules governing aspects of

the Federal IDR process, as discussed earlier in this preamble. On July 26, 2022, the

District Court in LifeNet issued a memorandum opinion and order that vacated

additional portions of the October 2021

interim final rules, as discussed earlier in

this preamble.

In response to the decisions in Texas

Medical Association and LifeNet and

comments received on the October 2021

interim final rules and July 2021 interim

final rules, these final rules address certain issues critical to the implementation

and effective operation of the Federal IDR

process, including the disclosure requirements relating to information that group

health plans and health insurance issuers

offering group or individual health insurance coverage must share about the QPA,

and certain requirements related to consideration of information when a certified

IDR entity makes a payment determination under the Federal IDR process.

i. Final Rules on Information to be

Shared About the Qualifying Payment

Amount

As described earlier in this preamble,

the July 2021 interim final rules require

plans and issuers to make certain disclosures with each initial payment or notice

of denial of payment in cases in which

the recognized amount with respect to

an item or service furnished by a nonparticipating provider or nonparticipating emergency facility, or the amount

upon which cost sharing is based for air

ambulance services furnished by a nonparticipating provider of air ambulance

services, is the QPA. After review of the

comments on the July 2021 interim final

rules and October 2021 interim final rules,

the Departments are finalizing parts of the

This rulemaking builds on the July 2021 and October 2021 interim final rules described in this preamble. The interim final rules were deemed to be economically significant. The economic

analyses for each of these interim final rules can be found in the Federal Register at 86 FR 36872 and 86 FR 55980.

48

Pub. L. 116-260 (Dec. 27, 2020).

49

86 FR 36872 (July 13, 2021).

50

86 FR 55980 (October 7, 2021).

51

The July 2021 and October 2021 interim final rules also include interim final regulations under 5 U.S.C. 8902(p) issued by OPM that specify how certain provisions of the No Surprises Act

apply to health benefit plans offered by carriers under the Federal Employees Health Benefits Act. The rules apply to carriers in the FEHB Program with respect to contract years beginning

on or after January 1, 2022.

47

Bulletin No. 2022–37

209

September 12, 2022

July 2021 interim final rules to add a new

definition and make changes to require

additional information about the QPA

that is provided by a plan or issuer with

an initial payment or notice of denial of

payment in certain cases. These disclosures are required in cases in which the

recognized amount with respect to an

item or service furnished by a nonparticipating provider or nonparticipating emergency facility, or the amount upon which

cost sharing is based for air ambulance

services furnished by a nonparticipating

provider of air ambulance services, is the

QPA. Specifically, these final rules provide a definition of the term “downcode”

to mean the alteration by a plan or issuer

of a service code to another service code,

or the alteration, addition, or removal

by a plan or issuer of a modifier, if the

changed code or modifier is associated

with a lower QPA than the service code

or modifier billed by the provider, facility, or provider of air ambulance services.

These final rules also specify that when

a QPA is calculated based on a downcoded service code or modifier, in addition to the information already required

to be provided with an initial payment or

notice of denial of payment under the July

2021 interim final rules, a plan or issuer

must provide a statement that the claim

was downcoded; an explanation of why

the claim was downcoded, including a

description of which service codes were

altered, if applicable, and a description of

which modifiers were altered, added, or

removed, if applicable; and the amount

that would have been the QPA had the

service code or modifier not been downcoded. The Departments are of the view

that this additional disclosure of information about the QPA will be helpful to

ensure that providers, facilities, and providers of air ambulance services receive

the information regarding the QPA that

may assist in their meaningful participation in open negotiation and in the Federal

IDR process in all payment disputes that

involve qualified items or services that

have been subject to downcoding. In particular, in cases in which the plan or issuer

has downcoded the billed claim, it is of

particular importance that the provider,

facility, or provider of air ambulance services has information regarding both the

QPA (based on the downcoded service

September 12, 2022

code or modifier) and the amount that

would have been the QPA had the service

code or modifier not been downcoded in

order to ascertain what information will

demonstrate that the provider’s, facility’s,

or provider of air ambulance services’

offer best represents the value of the item

or service and aid the certified IDR entity

in selecting an offer that best represents

the value of the item or service provided.

ii. Final Rules on Payment

Determinations Under the Federal IDR

Process

As discussed earlier in this preamble,

the October 2021 interim final rules provided that, not later than 30 business days

after the selection of the certified IDR

entity, the certified IDR entity must select

one of the offers submitted by the plan or

issuer or the provider, facility, or provider

of air ambulance services to be the out-ofnetwork rate for the qualified IDR item

or service. In determining which offer to

select, the October 2021 interim final rules

provided that the certified IDR entity must

select the offer closest to the QPA unless

the certified IDR entity were to determine

that additional permissible information

demonstrated that the QPA is materially

different from the appropriate out-of-network rate, or if the offers are equally distant from the QPA but in opposing directions. A key goal in facilitating consistency

in the Federal IDR process through the

October 2021 interim final rules was to

ensure a level of predictability in outcomes in the Federal IDR process. In the

Departments’ view, greater predictability

in the Federal IDR process would encourage parties to settle disputes through open

negotiation or earlier through the offer and

acceptance of an adequate initial payment,

which would increase efficiencies in how

disputes are handled and ultimately lead

to lower administrative costs associated

with health care. As articulated earlier in

this preamble, in light of the Texas Medical Association and LifeNet decisions,

and in response to comments received

on these provisions, the Departments are

finalizing standards for making payment

determinations that are intended to lead to

greater predictability and regularity in the

Federal IDR process. Accordingly, these

final rules require that, in determining

210

which offer to select during the Federal

IDR process, the certified IDR entity must

consider the QPA for the applicable year

for the same or similar item or service.

The certified IDR entity must then consider all additional information submitted

by a party to determine which offer best

reflects the appropriate out-of-network

rate, provided that the information relates

to the offer for the payment amount for

the qualified IDR item or service that is

the subject of the payment determination

and does not include information that the

certified IDR entity is prohibited from

weighing in making the payment determination. In considering this additional

information, the certified IDR entity

should evaluate whether information that

is offered is credible and should not give

weight to information that is not credible.

The appropriate out-of-network rate must

be the offer that the certified IDR entity

determines best represents the value of the

qualified IDR item or service.

For non-air ambulance items and services, this information includes information related to the following factors:

(1) the level of training, experience, and

quality and outcomes measurements of

the provider or facility that furnished the

qualified IDR item or service (such as

those endorsed by the consensus-based

entity authorized in section 1890 of the

Social Security Act); (2) the market share

held by the provider or facility or that of

the plan or issuer in the geographic region

in which the qualified IDR item or service

was provided; (3) the acuity of the participant, beneficiary, or enrollee receiving

the qualified IDR item or service, or the

complexity of furnishing the qualified

IDR item or service to the participant,

beneficiary, or enrollee; (4) the teaching

status, case mix, and scope of services

of the facility that furnished the qualified

IDR item or service, if applicable; and

(5) demonstration of good faith efforts

(or lack thereof) made by the provider or

facility or the plan or issuer to enter into

network agreements with each other, and,

if applicable, contracted rates between the

provider or facility, as applicable, and the

plan or issuer, as applicable, during the

previous 4 plan years.

Under these final rules, the certified

IDR entity must also consider information

related to the offer provided in a response

Bulletin No. 2022–37

to a request from the certified IDR entity.

The certified IDR entity must also consider additional information submitted by

a party, provided the information relates

to the offer for the payment amount for

the qualified IDR item or service that is

the subject of the payment determination

and does not include information that the

certified IDR entity is prohibited from

weighing in making the payment determination under section 9816(c)(5)(D) of the

Code, section 716(c)(5)(D) of ERISA, and

section 2799A-1(c)(5)(D) of the PHS Act.

In considering either form of information,

the certified IDR entity should evaluate

whether the information is credible and

should not give weight to information that

is not credible.

When considering the additional credible information under 26 CFR 54.98168(c)(4)(iii), 29 CFR 2590.716-8(c)(4)(iii),

and 45 CFR 149.510(c)(4)(iii), the certified IDR entity should evaluate whether

the information is already accounted for

by any of the other credible information

submitted by the parties. Because the certified IDR entity must consider the QPA,

the certified IDR entity should always

consider whether the additional credible

information is already accounted for by

the QPA and should avoid giving weight

to information related to a factor if the

certified IDR entity determines the information was already accounted for in the

calculation of the QPA, to avoid weighting the same information twice. In addition, if the parties submit credible information related to more than one of the

additional factors, the certified IDR entity

should also consider whether the information submitted regarding those factors

is already accounted for by information

submitted relating to other credible information already before the certified IDR

entity in relation to another factor and, if

so, should not weigh the information more

than once.

Regarding air ambulance services,

these final rules state that the certified

IDR entity must consider the QPA for the

applicable year for the same or similar

service and then consider all additional

permissible information to determine

the appropriate out-of-network rate. In

considering this additional information,

the certified IDR entity should evaluate whether information that is offered

is credible and should not give weight

to information that is not credible. For

air ambulance services, this information

includes information related to the following factors: (1) quality and outcomes measurements of the provider that furnished

the air ambulance services; (2) the acuity

of the condition of the participant or beneficiary receiving the air ambulance service, or the complexity of furnishing the

service to the participant or beneficiary;

(3) training, experience, and quality of the

medical personnel that furnished the air

ambulance services; (4) ambulance vehicle type, including the clinical capability

level of the vehicle; (5) population density

of the point of pick-up; and (6) demonstrations of good faith efforts (or lack

thereof) by the disputing parties to enter

into network agreements with each other,

as well as, if applicable, contracted rates

between the parties during the previous 4

plan years.

After the certified IDR entity has

reviewed and selected the offer it determines best represents the value of the

qualified IDR item or service as the

out-of-network rate, the certified IDR

entity must explain its determination in

a written decision submitted to the parties and the Departments, in a form and

manner specified by the Departments.

These final rules require that the certified IDR entity’s written decision must

include an explanation of what information the certified IDR entity determined

demonstrated that the offer selected as

the out-of-network rate is the offer that

best represents the value of the qualified

IDR item or service, including the weight

given to the QPA and any additional credible information submitted in accordance

with these final rules. If the certified IDR

entity relies on any additional information in selecting an offer, the written

decision must include an explanation of

why the certified IDR entity concluded

that this information was not already

reflected in the QPA.

iii. Summary of Impacts

Plans, issuers, third-party administrators (TPAs), Federal Employees Health

Benefits (FEHB) Program carriers, health

care providers, facilities, providers of air

ambulance services, and certified IDR

entities will incur costs to comply with

the requirements in these final rules. However, these final rules will help ensure that

the payment determination in the Federal

IDR process is a more consistent process

for providers, facilities, providers of air

ambulance services, plans, and issuers.

These final rules will improve transparency in the Federal IDR process. This

increased transparency will aid in the open

negotiation process, the decision whether

to initiate the Federal IDR process, and the

determination of the amount a provider,

facility, or provider of air ambulance services submits as an offer. Therefore, the

Departments have determined the benefits

of these final rules justify the costs.

This regulatory action finalizes certain

provisions in the July 2021 interim final

rules and the October 2021 interim final

rules, including changes to remove the

language vacated by the District Court in

Texas Medical Association and LifeNet.

This cost-benefit analysis focuses on

the incremental costs of complying with

the requirements that are included in

these final rules. One baseline assumption for this analysis is the existence of

the requirements of the July 2021 and

October 2021 interim final rules, with

a second baseline assumption being the

use of a comparison with a hypothetical

state of the world absent those interim

final rules. As discussed in the analysis

of the July 2021 interim final rules, the

total annualized cost associated with the

July 2021 interim final rules is $2,252

million, using the 7 percent discount

rate.52 As discussed in the analysis of

the October 2021 interim final rules, the

total annualized cost associated with the

October 2021 interim final rules is $517

As discussed in the analysis of the July 2021 interim final rules, the total annualized cost associated with the July 2021 interim final rules is $2,177 million, using the 3 percent discount rate.

The Departments note that these cost estimates have not been updated.

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September 12, 2022

million, using the 7 percent discount

rate.53 The Departments consider these

cost estimates to be reflected in the analytic baseline of these final rules and to

form a subset of total costs of these final

rules for the purposes of this cost-benefit analysis relative to the hypothetical

state of the world absent the July 2021

and October 2021 interim final rules.54 As

noted in Table 1 (Accounting Statement)

the Departments estimate the additional

total annualized cost associated with the

parts these final rules to be $5.9 million,

using the 7 percent discount rate.

To avoid repeating the analysis of

the July 2021 and October 2021 interim

final rules, only a short summary of

the benefits and costs is provided, and

readers are directed to the analysis in

the July 2021 and October 2021 interim

final rules for more detail. Numbers in

this analysis may not match numbers in

the analysis for the July 2021 and October 2021 interim final rules because the

estimates have been updated with the

most current data. However, the methodology remains the same, except for

the calculation of the burden to prepare the certified IDR entity’s written

decision for payment determinations,

as explained later in this section. The

Departments also discuss the impacts of

changes made by these final rules is this

section.

In accordance with OMB Circular

A–4, Table 1 depicts an accounting statement summarizing the Departments’

assessment of the benefits, costs, and

transfers associated with this regulatory

action. The Departments are unable to

quantify all benefits, costs, and transfers

associated with this regulatory action, but

have sought, where possible, to describe

these non-quantified impacts. The effects

in Table 1 reflect non-quantified impacts

and estimated direct monetary costs

resulting from the provisions of these

final rules.

Table 1: Accounting Statement

Benefits:

• These final rules will increase transparency in the Federal IDR process.

• These final rules will help a provider, facility, or provider of air ambulance services ascertain what information will

demonstrate that the provider’s, facility’s, or provider of air ambulance services’ offer best represents the value of the item or

service and aid the certified IDR entity in selecting an offer that best represents the value of the item or service.

• These final rules will promote more consistent payment determinations in the Federal IDR process for providers, facilities,

providers of air ambulance services, plans, and issuers.

• These final rules will promote transparency with respect to the certified IDR entity’s payment determination and will help to

ensure that the determination of a total payment amount for a particular item or service is based on the facts and circumstances

of the dispute at issue in each case.

Costs

Estimate

Year dollar

Discount Rate

Period Covered

Annualized Monetized

$5.9

2021

7 percent

2022-2031

($million/Year)

$5.9

2021

3 percent

2022-2031

Quantified Costs:

The Departments estimate the total annual cost associated with these final rules to be $5.9 million, with $4.3 million annually

attributable to the additional information plans and issuers will be required to provide related to the QPAs, $1.2 million annually

attributable to the preparation of IDR payment determination notices by certified IDR entities for nonparticipating providers or

emergency facility claims, and $0.3 million annually attributable to the preparation of IDR payment determination notices by

certified IDR entities for nonparticipating air ambulance providers’ claims.

Transfers:

These final rules make no changes that impact the transfers as described in the July 2021 and October 2021 interim final rules.

D. Affected Entities

These final rules will affect health care

providers, health care facilities, providers

of air ambulance services, group health

plans, issuers, TPAs, FEHB carriers, and

certified IDR entities.

Based on data from 2020, CMS estimated that there were 1,477 issuers in the

U.S. health insurance market, of which

1,212 served the individual market, 6

served the student health insurance market, 623 served the small group market,

and 784 served the large group market.55

Further, of the plans that filed a Form

53

As discussed in the analysis of the October 2021 interim final rules, the total annualized cost associated with the October 2021 interim final rules is $491 million, using the 3 percent discount

rate. The Departments note that these cost estimates have not been updated.

54

The Departments are accounting for the additional costs associated with these final rules due to parts of the July 2021 interim final rules and October 2021 interim final rules being finalized.

For those parts being finalized, the Texas Medical Association and LifeNet decisions do not impact the quantified costs.

55

Centers for Medicare and Medicaid Services. “Medical Loss Ratio Data and System Resources” (2020). https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.

September 12, 2022

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5500 in 2019, 30,181 plans were self-insured.56 Additionally, in the October 2021

interim final rules, the Departments previously estimated that there are 205 TPAs.57

The Departments also estimate that there

are 44 FEHB carriers. While there is a significant amount of research that demonstrates the prevalence of surprise billing,

the Departments do not have data on the

percentage of surprise bills covered by

health insurance issuers and self-insured

plans. However, given the size of health

insurance issuers and the scope of their

activities, the Departments assume that

all health insurance issuers, TPAs, and

FEHB carriers will be affected by these

final rules.

In 2019, 183 million individuals had

employer-sponsored coverage and 33.2

million had other private insurance,

including individual market insurance.58

The Departments do not expect that these

final rules will directly affect individuals

with private health coverage who visit an

emergency room, visit a health care facility,59 or are transported by an air ambulance, as these final rules contain only provisions that affect the relationships among

plans and issuers; providers, facilities,

and providers of air ambulance services;

and certified IDR entities. However, the

Departments estimate that these final rules

will indirectly affect covered individuals,

as the outcomes of payment disputes will

have implications for premiums.

In the October 2021 interim final rules,

the Departments estimated that there are

16,992 emergency and other health care

facilities, including 6,090 hospitals,60

29,227 diagnostic and medical laboratories,61 270 independent freestanding emergency departments,62 9,280 ambulatory

surgical centers,63 and 1,352 critical

access hospitals.64 These entities will also

be affected by these final rules.

In the October 2021 interim final rules,

the Departments also estimated that in

2018, the current year for which data are

available, there were 1,114 air ambulance

bases in the United States.65 The Departments do not have data on the number of

providers of air ambulance services that

submit out-of-network claims; however,

given the prevalence of out-of-network

billing among providers of air ambulance

services, the Departments assume that all

businesses in the industry will be affected

by these final rules.

Furthermore, in the October 2021

interim final rules, the Departments estimated that 140,270 physicians, on average, bill on an out-of-network basis and

will be affected by these final rules.66

These final rules are also expected to

affect non-physician providers who bill on

an out-of-network basis. The Departments

lack data on the number of non-physician

providers who would be impacted.

Finally, there are currently 11 certified

IDR entities that will be affected by these

final rules.67 The number of certified IDR

entities may increase or decrease due to

new IDR entities applying for certification

or the Departments revoking certification

because of noncompliance with the certification requirements or a certified IDR

entity’s inability to handle its caseload.

E. Benefits

These final rules will require plans and

issuers to provide additional information

about the QPA with an initial payment

or notice of denial of payment in cases

involving downcoding, without the provider, facility, or provider of air ambulance services having to ask for this information. These final rules will be helpful

to the provider, facility, or provider of air

ambulance services in developing an offer

or submitting information if it believes

that the QPA calculated by the plan or

issuer does not best represent the value

of the item or service. Furthermore, the

requirement to disclose this additional

information will increase transparency in

the Federal IDR process. This increased

transparency will aid in the open negotiation process, the decision whether to

initiate the Federal IDR process, and the

determination of the amount a provider,

facility, or provider of air ambulance services submits as an offer. Further, these

final rules will help a provider, facility, or

provider of air ambulance services ascertain what information will demonstrate

that the provider’s, facility’s, or provider

of air ambulance services’ offer best represents the value of the item or service and

aid the certified IDR entity in selecting an

offer that best represents the value of the

item or service.

In addition, these final rules require

that certified IDR entities must consider

the QPA and then must consider all additional permissible information submitted

by a party to determine which offer best

reflects the appropriate out-of-network

rate, provided the information relates

to the offer for the payment amount for

the qualified IDR item or service that is

the subject of the payment determination and does not include information

that the certified IDR entity is prohibited

from weighing in making the payment

determination under section 9816(c)(5)

Employee Benefits Security Administration. “Group Health Plans Report.” (July 2021). https://www.dol.gov/sites/dolgov/files/EBSA/researchers/statistics/retirement-bulletins/annual-report-on-self-insured-group-health-plans-2022-appendix-a.pdf.

57

Non-issuer TPAs based on data derived from the 2016 Benefit Year reinsurance program contributions.

58

Employee Benefits Security Administration. “Health Insurance Coverage Bulletin.” (March 2020). https://www.dol.gov/sites/dolgov/files/EBSA/researchers/data/health-and-welfare/

health-insurance-coverage-bulletin-2020.pdf.

59

Health care facility is defined in the July 2021 interim final rules. See 26 CFR 54.9816-3T; 29 CFR 2590.716-3; and 45 CFR 149.30.

60

American Hospital Association. “Fast Facts on U.S. Hospitals, 2021.” (January 2021). https://www.aha.org/statistics/fast-facts-us-hospitals.

61

IBIS World. Definitive Healthcare. “Diagnostic & Medical Laboratories Industry in the US—Market Research Report?” (May 2021). https://www.ibisworld.com/industry-statistics/

number-of-businesses/diagnostic-medical-laboratories-united-states/.

62

Emergency Medicine Network. “2018 National Emergency Department Inventory.” (2021). https://www.emnet-usa.org/research/studies/nedi/nedi2018/.

63

Definitive Healthcare. “How Many Ambulatory Surgery Centers are in the US?” (April 2019). https://www.definitivehc.com/blog/how-many-ascs-are-in-the-us.

64

Flex Monitoring Team. “Historical CAH Data.” https://www.flexmonitoring.org/​historical-cah-data65

Assistant Secretary for Planning and Evaluation (ASPE) Office of Health Policy. “Air Ambulance Use and Surprise Billing” (September 2021). https://aspe.hhs.gov/sites/default/files/202109/aspe-air-ambulance-ib-09-10-2021.pdf.

66

Please see the October 2021 interim final rules for more information on how these estimates were obtained.

67

As of July 31, 2022, there are 11 certified IDR entities. Center for Medicare and Medicaid Services. “List of Certified Independent Dispute Resolution Entities.” https://www.cms.gov/

nosurprises/Help-resolve-payment-disputes/certified-IDRE-list.

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September 12, 2022

(D) of the Code, section 716(c)(5)(D) of

ERISA, and section 2799A-1(c)(5)(D)

of the PHS Act. In considering this additional information, the certified IDR entity

should evaluate whether information that

is offered is credible and should not give

weight to information that is not credible.

The appropriate out-of-network rate must

be the offer that the certified IDR entity

determines best represents the value of the

qualified IDR item or service.

Because the certified IDR entity must

consider the QPA, the certified IDR entity

should always consider whether the additional credible information is already

accounted for by the QPA and should not

give weight to information related to a factor if the certified IDR entity determines

the information was already accounted

for in the calculation of the QPA, to avoid

weighting the same information twice.

In addition, if the parties submit credible

information related to more than one of

the additional factors, the certified IDR

entity should also consider whether the

information submitted regarding each of

those factors is already accounted for by

information submitted relating to other

credible information already before the

certified IDR entity in relation to another

factor and, if so, should not weigh such

information more than once. These final

rules will help ensure that the payment

determination in the Federal IDR process

is a consistent process for providers, facilities, providers of air ambulance services,

plans, and issuers.

The certified IDR entity’s written decision must include an explanation of what

information the certified IDR entity determined demonstrated that the offer selected

as the out-of-network rate is the offer that

best represents the value of the qualified

IDR item or service, including the weight

given to the QPA and any additional credible information submitted in accordance

with these final rules. If the certified IDR

entity relies on any additional information

in selecting an offer, the written decision

must include an explanation of why the

certified IDR entity concluded that this

information was not already reflected in

the qualifying payment amount. These

final rules will help ensure that certified

IDR entities carefully evaluate all credible

non-duplicative information. These final

rules will also promote transparency with

respect to the certified IDR entity’s payment determination.

F. Costs

This regulatory action seeks to minimize costs to providers, facilities, providers of air ambulance services, plans, issuers, TPAs, and certified IDR entities.

i. Federal IDR Process for

Nonparticipating Providers or

Nonparticipating Emergency Facilities

As explained in the analysis provided

in the October 2021 interim final rules, the

Departments estimate that there will be

approximately 17,435 claims submitted to

the Federal IDR process each year.68

After the selected certified IDR entity

has reviewed the offers, the certified IDR

entity must notify the provider or facility

and the plan, issuer, or FEHB carrier and

the Departments of the payment determination and the reason for such determination, in a form and manner specified by the

Departments.69 The Departments estimate

that the annual cost to prepare the notice

of the certified IDR entity’s determination

is $1.2 million. For more information on

this calculation, please refer to the Paperwork Reduction Act analysis, found in

section V of this preamble.

In addition to the information already

required to be provided with an initial payment or notice of denial of payment under

the July 2021 interim final rules, including

the QPA, these final rules require that a

plan or issuer must provide, if applicable,

an acknowledgement if all or any portion

of the claim was downcoded; an explanation of why the claim was downcoded,

including a description of which service

codes were altered, if any, and a description of any modifiers that were altered,

added, or removed, if any; and the amount

that would have been the QPA had the

service code or modifier not been downcoded. In the July 2021 interim final rules,

the Departments estimated that plans and

issuers will be required to provide documents related to the QPA along with the

initial payment or notice of denial of payment for approximately 5,068,512 claims

annually from nonparticipating providers

or facilities.70 The Departments assume

that approximately 10 percent of those

claims will involve downcoding and estimate that the annual cost to prepare the

required documentation and attach it to

each initial payment or notice of denial

of payment sent to the nonparticipating

provider or facility is $4.3 million. For

more information on this calculation,

please refer to the Paperwork Reduction

Act analysis, found in section V of this

preamble.

In total, the Departments estimate that

certified IDR entities, TPAs, and issuers

will incur costs of approximately $5.5

million annually to provide, as applicable,

payment determination notifications and

the additional QPA information required

under these rules.

ii. Federal IDR Process for

Nonparticipating Providers of Air

Ambulance Services

As explained in the October 2021

interim final rules, the Departments

assume that 10 percent of out-of-network

claims for air ambulance services will be

submitted to the Federal IDR process,71

which would result in nearly 5,000 annual

air ambulance payment determinations via

the Federal IDR process.72

For more details, please refer to the Paperwork Reduction Act analysis, found in section V of this preamble.

IDR Payment Determination Notification (section 716(c)(5)(A) of ERISA).

See 86 FR 36872 for more information on this estimate.

71

The Departments utilize 10 percent as an assumption to estimate the overall number of providers of air ambulance services billing out-of-network at least once in a year.

72

The Departments estimate that of the 216.2 million individuals with employer-sponsored and other private health coverage (183 million individuals with employer-sponsored health coverage and 33.2 million individuals with other private coverage), there are 33.3 air transports per 100,000 individuals, of which 69 percent result in out-of-network bills. The Departments assume

that 10 percent of the out-of-network bills will end up in the Federal IDR process. This is calculated as: 216,200,000 individuals x 0.000333 air transports per individual x 69% x 10%= 4,968.

68

69

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After the certified IDR entity has

reviewed and selected the offer, the certified IDR entity must notify the provider

of air ambulance services and the plan,

issuer, or FEHB carrier and the Departments of the payment determination and

include the written decision explaining

such determination.73 The Departments

estimate that the annual cost to prepare

this notice of the certified IDR entity’s

determination for air ambulance claims is

$0.3 million. For more details, please refer

to the Paperwork Reduction Act analysis,

found in section V of this document.

Similar to these final rules’ provisions

related to the disclosure of downcoded

claims for nonparticipating providers

and nonparticipating emergency facilities, these final rules require that a plan

or issuer must provide, if applicable, an

acknowledgement if all or any portion

of the claim pertaining to air ambulance

services was downcoded; an explanation

of why the claim was downcoded, including a description of which service codes

were altered, if any, and a description of

any modifiers that were altered, added,

or removed, if any; and the amount that

would have been the QPA had the service

code or modifier not been downcoded.

The Departments estimate that plans and

issuers will be required to provide these

documents for approximately 49,676

claims annually from providers of air

ambulance services.74 The Departments

assume that approximately 10 percent of

those claims will involve downcoding and

estimate that the annual cost to prepare the

required documentation and attach it to

each initial payment or notice of denial of

payment sent to the providers of air ambulance service is approximately $42,000.

For more details, please refer to the Paperwork Reduction Act analysis, found in

section V of this preamble.

In total, the Departments estimate that

certified IDR entities, TPAs, and issuers

will incur costs of approximately $0.4

million annually to provide payment

determination notifications and the additional QPA information required under

these final rules.

iii. Summary

The Departments estimate the total

annual cost associated with these final

rules to be $5.9 million with $4.3 million

annually attributable to the additional

information related to the QPAs, $1.2 million annually attributable to the certified

IDR entity’s payment determination for

nonparticipating provider and emergency

facility claims, and $0.3 million annually

attributable to the certified IDR entity’s

payment determination notification for

nonparticipating provider of air ambulance service claims.

G. Transfers

These final rules make no changes that

impact the transfers as described in the

July 2021 and October 2021 interim final

rules.

H. Uncertainty

These final rules make no changes that

impact the uncertainties as described in

the July 2021 and October 2021 interim

final rules.

I. Regulatory Alternatives

Section 6(a)(3)(C)(iii) of Executive

Order 12866 requires an economically

signifi

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