The Issue of Surprise Billing Rules in Plain English

Douglas W. Lundy, M.D., M.B.A.
AAOS Advocacy Council Chair

At the 2020 AAOS Annual Meeting, I began my tenure as advocacy council chair. The ongoing overlay of the pandemic along with the hyper-partisan climate in Washington, D.C. has drastically changed the atmosphere in advocacy when it comes to protecting the practice of orthopaedic surgery and our ability to care for the patients we have been entrusted. I can assure you that the role is much different than I had anticipated!

Medicine was assaulted with two gloomy issues in 2021: the proposed severe cuts to Medicare payments to physicians and the implementation of the regulations for the No Surprises Act. Our aggressive lobbying efforts have mitigated the Medicare cuts for the time being, but even so, we will face a decrease in Medicare payments in 2022. We will certainly continue to fight this terrible trend which further threatens the viability of medical practices already damaged by the economic effects of the COVID-19 pandemic.

Since the Medicare issue is relatively at bay for the moment, I would like to focus this article on the flawed rulemaking process in the No Surprises Act and why these issues are of such vital concern to Orthopaedic Surgeons. On December 27, 2020, the No Surprises Act was signed into law as part of the Consolidated Appropriations Act of 2021 (H.R. 133; Division BB – Private Health Insurance and Public Health Provisions). This bipartisan law was intended to protect patients from surprise medical bills as well as other issues concerning patients.

Surprise bills occur through different methods, and we will examine one concern through this theoretical case. Suppose that a patient with private insurance who sustained a closed femoral shaft fracture goes to a hospital seeking medical care believing that they will only be responsible for their deductible and copays. If the attending Orthopaedic Surgeon is “out-of-network” (that is that he/she does not “take” that patient’s insurance), then the patient will eventually receive a separate bill from the Orthopaedic Surgeon that insurance did not cover. This phenomenon is known as “surprise billing.” There are many reasons why the surgeon may not be in the network of the insurance company that are outside the scope of this article.

One of the purposes of the No Surprises Act was to take the patient out of the dispute process and establish a fair procedure between the insurer and the physician so that the claim could be fairly settled. AAOS supported this legislation, and it was subsequently signed into law.

Continuing with our example, suppose that the surgeon was not in the insurance company’s network, and all attempts at reaching a mutually agreed amount to settle the bill failed. Starting in 2022, the No Surprises Act is supposed to adjudicate this conflict. A generalization of the law that left the president’s desk is as follows:

The insurer and the physician enter the “Independent Dispute Resolution” (IDR) process.
An IDR entity is selected to serve as the “judge” in this dispute.
The surgeon and the insurer each submit documentation to the IDR entity to support what each side believes is the fair monetary value of the claim.
The IDR entity determines the fair value of the claim based on many factors including:
- The Qualified Payment Amount (QPA) which is based on the insurance company’s median in-network rate for that procedure/service.
- The level of training, experience and quality of the surgeon.
- The market share of the surgeon’s practice and the insurer.
- Patient acuity and the complexity of the care that the surgeon delivers.
- Teaching status, case mix and scope of services of the hospital facility.
- Demonstrations (or the lack of) of good faith efforts to enter into in-network agreements.
- Prior contract history between the surgeon and the insurer during the previous four years.
The IDR entity then uses “baseball-style” arbitration. This means that the IDR entity selects the offer (whether from the surgeon or the insurer) that was closest to the amount that the IDR entity believed as the appropriate rate.
The case is then settled since the payment amount is determined. There are certainly more subtleties to this process that have been intentionally omitted for clarity.

After the law left the president’s desk, the rules regarding how the law was to be implemented were then written by three departments (Treasury, Labor and Health and Human Services). AAOS has strong objections to some of the methodology and final rules that these agencies determine, and we have voiced these to the departments as well as the congressional leaders who initially championed this law.

One of our main concerns is that the final rule determined by these three executive departments instructs the IDR entity to “select the offer closest to the QPA” rather than equally considering the other six factors listed above. Since the QPA is essentially determined by the rate that the insurance company pays surgeons who are in network, the process is now unfairly in favor of the insurance companies and away from the surgeon. AAOS strongly believes that the three departments writing the rules have ignored the letter and the intent of the No Surprises Act, and we are advocating strongly to correct this error.

Agencies’ biased interpretation of the No Surprises Act strongly shifts the dispute process in the favor of insurance companies and can have significant deleterious effects on physicians in the future. Since so much of the process is now weighted toward the median in-network rate that the insurance company pays, the insurer can progressively lower reimbursement to physicians to the point that we can no longer take care of our patients.

How can you get involved? Go to the Advocacy Action Center at the Surprise Billing - American Academy of Orthopaedic Surgeons. Also, check out our webinar at the Advocacy Action Center - American Academy of Orthopaedic Surgeons.

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