As of January 1, 2022, portions of the holy trinity of price transparency legislation went into effect. Throughout 2021, this legislation evolved leaving many people a little perplexed as to what exactly would happen January 1, 2022, and what’s been delayed until further notice. While there is still the potential for another hail mary pass that could further delay or alter this legislation, we thought we’d offer a breakdown of what price transparency legislation has gone into effect and what that means. You’re welcome.
What happened on January 1, 2022
Besides the Rose Bowl and the beginning of the end of your New Year’s Resolutions, on January 1, 2022, different parts of the triumvirate of price transparency laws went into effect. The triumvirate (Hospital Price Transparency Rule, Transparency in Coverage Rule, and the No Surprises Act) are easily confusable and at times, a little redundant. Before you go any further into reading this handy (dare we say, beautiful?) breakdown, make sure that you remember that these are three different laws all with distinctly different things taking effect throughout 2022. It’s important to not conflate all three laws as one. Got it? Cool.
More Money And More Problems
The first and likely the most activating change is the January 1, 2022 fee increase that went into effect under the Hospital Price Transparency Rule. According to CMS, for hospitals with thirty or fewer beds, there is now a $300 per day penalty. This $300 per day fine is both the minimum and the maximum daily penalty for hospitals with thirty or fewer beds. This results in a max penalty of $109,500 per hospital for an entire year of non-compliance for these hospitals. For hospitals with more than thirty total beds, there is a penalty of $10 per day per bed with a maximum daily penalty of $5,500. This results in a maximum total penalty of $2,007,500 per hospital for an entire year of non-compliance. We know that looks like chump change right now, but say for example you’re doing the math to figure out the total annual penalty for Providence Health System if they were in non-compliance for an entire calendar year. Providence Health has over fifty hospitals in the US. Only a handful of these hospitals have less than thirty total beds. Using our dashboard for calculating ballpark penalty estimates, the Providence penalty could exceed $40M in 2022. That’s about 5% of the $740M in net income reported for 2020. Are these increased fines large enough for systems to take notice?
QPA & IDR DTR
Under the Requirements Related to Surprise Billing; Part II, an interim final rule related to the No Surprises Act, effective January 1, 2022, payers and providers will begin to negotiate rates for emergency services rendered using a “qualifying payment amount” (QPA). These rates will be calculated before the patient has been given care, preventing, as the name would suggest, surprise medical bills. We’ll get into the #drama over this in a second.
In addition to using QPAs, implementation of the Independent Dispute Resolution (IDR) process begins for plan years starting January 1, 2022. Sometimes called “baseball-style” arbitration, IDR is a process in which payers and providers can dispute the proposed cost for out-of-network care. Let’s take a quick break for legal jargon. When it comes to our triumvirate of laws, there are two ways the effective date has been noted. Either, (1) “effective January 1, 2022” or, (2) “plan years beginning on or after January 1, 2022.” Our first option is self-explanatory but option two is a little tricky. Basically, when a rule says it is effective on “plan years” it means that the law goes into effect wherever January 1, 2022 lands on each health plan’s “plan year.” In this instance, the “plan year” means the calendar, policy, or fiscal year on which the records of the plan are kept. Essentially, it means the exact same thing as Option 1 but still leaves wiggle room for health plans where the plan year does not follow the typical Jan-Dec calendar year. Back to QPA and IDR. Now that we have all our definitions, what does this actually mean?
Say a patient comes in for emergency services and the provider and payer cannot come to an agreement on costs. If the parties choose to utilize the IDR process, both parties would each submit an offer to an independent arbiter. When choosing between the two offers the arbiter is required to consider five different factors to determine whether or not the proposed costs by both parties are appropriate. The arbiter must “select the offer closest to the QPA” unless, for some reason, the QPA is questionably high/low. If that were to occur, then they would consider those five factors mentioned above. Enter #drama.
In December 2021 (also known as the “the last second”), the AHA and AMA sued the US Department of Health and Human Services (HHS) over HHS’s interpretation of the law they were tasked to enact. The AHA and AMA claimed that “The September Rule undermines the independence of the IDR process and the fairness of the No Surprises Act by severely tilting the scales towards the QPA.” This argument does hold water since payers determine the QPA by taking the median contracted rate for the same or similar service—that’s a lot of power in the payer’s hands. So, while the AHA and AMA have a point, they should be placed in time-out for waiting until the last second to make this point just because it came right before the holidays (writer’s opinion).
Oh, it’s OON
Where QPA and IDR take center stage is in legislation that went into effect on January 1, 2022. The No Surprises Act: Emergency Services legislation stipulates that insurers (aka plans) must cover out-of-network (OON) emergency care at the same cost (in this instance, “cost-sharing”) as they would in-network emergency care. Prior to this law going into effect, it was common for patients to receive surprise bills after emergency care. For example, a patient might have gone to a hospital that was in-network but received a radiology interpretation by an OON provider without their knowledge. In the past, the OON provider might have billed the patient for the difference in cost between the charge and the amount paid by their insurer. This practice, known as “balance billing,” has been banned effective January 1, 2022 under No Surprises. Now, the patient would be billed as if the care is in network, while the provider and payer work out a deal behind the scenes based on a state All-Payer Model Agreement or specified state law. Or they can simply come to an agreement separate from these models. If they cannot come to an agreement, they can enter an IDR where the QPA dictates reimbursement. You can reheat that #tea by referring to the above paragraph. All in all, it seems like quite the unprecedented, sticky situation. But actually, it’s not unprecedented. Our friends in New York have been doing it for years.
New York, New York
Ah, New York. First to sell a hot dog from a hot dog stand in the 1860s, then called “dachshund sausages” sold out of a cart by a German immigrant, and first to enact Surprise Billing legislation. What do these two things have in common? Nothing! Sorry, we’re hungry. Anyhoo, in 2015, New York passed a surprise billing law that uses "baseball-style" arbitration to settle payments between payers and providers. Remember, in this instance, “baseball-style” arbitration is the same thing as IDR. Initially, New York claimed that this legislation had saved patients $400 million, but according to this report by the New York State Department of Financial Services, that might not be the case. In New York, arbiters were directed to “consider the 80th percentile of billed charges,” which is inherently different from the above-defined QPA. By pegging arbitration to already highly inflated list prices, the New York law may have an unintended effect on pricing. While we’ll compare the case of New York to the 2022 No Surprises rollout in a later article, it’s important to note that the success of No Surprises at a macroeconomic level may well hinge on the definition of QPA.
But wait, there’s more!
Remaining effective January 1, 2022 legislation is the ID Card Requirement, External Review, Notice of Continuity of Care, and the Provider Directory Requirements. All four of these requirements affect group health plans and health insurers with the exception of the External Review which seems to pertain only to non-grandfathered group health plans and insurers. Since these are non-price transparency requirements, we won’t be going into details. However, you can read the August 2021 Department of Labor FAQ here.
What’s To Come
While you’re busy celebrating Christmas in July, more price transparency legislation will go into effect. On July 1, 2022, all healthcare providers will dress up like Michael Scott from The Office, look to insurers, and say, “well, well, well how the turn tables…” because it’s Transparency in Coverage Final Rule time.
If We're Transparent, You're Transparent
Also known as Group Health Plan Price Transparency for public disclosure, this legislation requires insurers to provide even more pricing information than hospitals via two different machine-readable files: in-network rates and out-of-network allowed amounts. This legislation was initially set to take effect on January 1, 2022, but everyone’s favorite animal, the Legal Eagle, got crafty deferring enforcement of in-network rates and out-of-network allowed amounts until July 1, 2022, leaving prescription drug negotiated rates out in the cold for future rulemaking. This legislation only applies to non-grandfathered health plans and insurers. Grandfathered health plans, account-based plans, excepted benefits, short-term duration, and retiree-only plans, you live to see another non-transparent day.
What’s Maybe?!
Who knew price transparency legislation could be so exciting! (Us, obviously.) Like we mentioned above, there are a few items that remain to be seen. On the No Surprises front: With the AHA and AMA’s request for injunctive relief, there is the potential for either an indefinite delay in the use of QPA’s for IDR or for them to not happen at all. In addition, Good Faith Estimates and Advanced EOBs sit collecting dust until further rulemaking. While both of these stand to heavily benefit the patient, they are technically difficult to enact without further guidance.
Like we’ve seen and will continue to see, final hour hail marys and other last-ditch efforts to delay price transparency legislation will keep happening. Our hope is that as the existing laws remain in effect, more and more members of the healthcare industry and the public will begin to see the importance of this legislation and prevent it from being delayed indefinitely. As always, it is ultimately the patient who suffers most when this legislation is delayed.
Was that confusing as all get out? Why is the phrase “as all get out” a phrase that makes sense? We have no idea but we can totally help make price transparency less confusing! Send us an email if you need a little extra help understanding what’s what. Or you can join in on all the data fun by signing up for our newsletter.