DFS Issues Guidance on Surprise Billing Disputes

Accident and health (A&H) insurers and health maintenance organizations (HMOs) doing business in New York should consider new guidance from the New York Department of Financial Services on the independent dispute resolution (IDR) process for determining reasonable fees in the context of emergency services or “surprise billing.”

Specifically, Circular Letter 2023-2, issued on May 9, 2023, addresses the criteria to be used to determine a reasonable fee in an IDR context and reminds issuers and providers that they must submit all relevant information to the IDR entity at the time of application or upon the IDR entity’s request.

By way of background, Article 6 of the Financial Services Law establishes an IDR process for out-of-network emergency services in hospital facilities, for surprise bills in participating hospitals and participating ambulatory surgical centers, and for out-of-network services when a patient is referred by a participating physician. The IDR process is to be administered by IDR entities certified for such purpose by the Superintendent of Financial Services. Article 6 also applies to hospital bills for out-of-network emergency services and to inpatient services following an emergency room visit. Furthermore, pursuant to amendments in 2022, the statute provides that emergency services and surprise bills relating to the services of non-participating health care providers are eligible for IDR.

Generally, a “surprise bill” means a bill for health care services, other than emergency services, with respect to (1) an insured for services rendered by a non-participating provider at a participating hospital, where a participating provider is unavailable or a non-participating provider renders services without the insured’s knowledge, or unforeseen medical services arise at the time the health care services are rendered; (2) an insured for services rendered by a non-participating provider, where the services were referred by a participating physician to a non-participating provider without explicit written consent of the insured acknowledging that the participating physician is referring the insured to a non-participating provider and that the referral may result in costs not covered by the health care plan; or (3) a patient who is not an insured, for services rendered by a physician at a hospital, where the patient has not timely received certain required disclosures (under Section 24 of the Public Health Law) concerning out-of-network coverage.

A “participating” provider is one with a contract with a health plan to provide the specified services to an insured.

Under the surprise billing legislation, the IDR entity must determine whether the provider’s charge or the insurer’s payment is “reasonable” using the criteria set forth in the state legislation. The new May 9 guidance (addressed to A&H writers, HMOs, Article 43 corporations (certain nonprofit indemnity and health and hospital service corporations), student health plans, municipal cooperative health benefit plans, prepaid health services plans and health care providers) reiterates these statutory factors, which comprise the following:

(1) whether there is a gross disparity between the fee charged by the provider for services rendered as compared to (x) fees paid to the provider for the same services rendered by the provider to other patients covered by issuers with which the provider is not participating, and (y) for a dispute involving an issuer, fees paid by the issuer to reimburse similarly qualified providers for the same services in the same region who do not participate with the issuer;

(2) the level of training, education and experience of the provider, and in the case of a hospital, the teaching staff, scope of services and case mix;

(3) the provider’s usual charge for comparable services for patients covered by issuers in which the provider does not participate;

(4) the circumstances and complexity of the particular case, including time and place of the service;

(5) individual patient characteristics;

(6) the median of the rate recognized by the issuer to reimburse similarly qualified providers for the same or similar services in the same region that are participating with the issuer; and

(7) with regard to physician services, the usual and customary cost of the service (defined in the legislation generally as the 80^th percentile of all charges for the particular service in the same specialty in the same geographical area; the May 9 guidance explains that, for purposes of construing a “geographical area,” an IDR entity “typically. . . considers the ZIP code or geozip where the provider rendered the service. However, the IDR entity must also consider other ZIP codes or geozips in the surrounding area where the provider rendered the service if submitted by an issuer or provider.”).

The May 9 circular letter indicates that the “criteria listed above carry the same weight, and no single factor is determinative.”

Finally the letter states that “it has come to DFS’s attention that issuers and providers may not be providing all information necessary for an IDR entity to make determination on a dispute.” The letter calls on “issuers and providers to submit all information with the IDR application or upon request from the IDR entity,” reminding recipients that “the IDR entity must make its determination based on the information it has at the time it makes the determination.”