Researchers from the Robert Wood Johnson Foundation examined independent dispute resolution (IDR) systems in four states that already use this method to settle billing disputes. The way the national IDR system is structured will have huge implications for providers and payers.
The federal agencies tasked with developing a national independent dispute resolution (IDR) system to settle surprise billing disputes between healthcare providers and payers should look to states with similar processes in place to see what works best.
That's the recommendation of a new research brief from the Robert Wood Johnson Foundation, which examined IDR structures and outcomes in four states that already use this method to settle billing disputes.
The No Surprises Act, which will protect patients from surprise out-of-network bills, will use final-offer arbitration to settle payment disputes between payers and providers when they can't resolve them on their own.
In this method of arbitration, also called "baseball-style" arbitration, each party offers a payment amount, and an independent arbitrator chooses one offer or the other, rather than an amount in between.
Some states use this method of arbitration already as part of their surprise protections. However, the metrics that arbitrators use to help decide which bids to choose can differ, and so can the rules around the proccesses.
Congress says the U.S. Departments of Health & Human Services, Labor, and Treasury must create a national IDR system before the law takes effect in January 2022. RWJF researchers say that these policymakers should look to data from these states to do so.
The way the national IDR system is structured will have huge implications for providers and payers.
"That's another detail that is, obviously, pertinent to how these disputes end up being adjudicated," Benjamin L. Chartock, associate fellow at the Leonard Davis Institute of Health Economics, told HealthLeaders earlier this year.
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The new RWJF research examined IDR systems in four states: Colorado, Washington, Texas, and New Jersey.
The researchers lay out some key differences between the state systems. Among them:
- Colorado, New Jersey, and Washington require a minimum initial payment that the payer must remit to the out-of-network provider. Texas does not.
- The loser in the arbitration process must pay the full costs in Colorado, while the two parties must share the costs in New Jersey, Texas, and Washington.
- Arbitrators in Texas (by law) and New Jersey (by practice) consider providers' billed charges (which are not competitively determined) as a factor in determining which party wins the dispute.
Because of these process differences, the outcomes in each of the four states are "markedly different."
For instance, in 2020, their first year of operation, New Jersey's arbitrators received 5715 disputes and Texas's received more than 48,700.
Compare that to Washington's arbitrators, which received just 66 requests for arbitration in their first year of operation, while insurer stakeholders in Colorado—where providers must pay their arbitration costs in full if they lose—have reported just a handful.
The high caseloads in New Jersey and Texas may be because their arbitration processes seem to tilt in favor of providers, the research said.
An analysis of arbitration decisions in New Jersey finds that providers have gotten close to their full billed charges through the IDR process, with the average award nine times the average in-network rate. Overall, providers won 64% of the cases in 2020.
In Texas, the average arbitration award is 4.7 times higher than the average original plan payment.
Alexandra Wilson Pecci is an editor for HealthLeaders.
