The Independent Dispute Resolution process, created under the No Surprises Act, gives out-of-network providers and payors a formal pathway to resolve reimbursement disputes for eligible claims when negotiations fail. The new IDR Operations Final Rule issued on May 28th is designed to make that process more workable after years of delays, eligibility confusion, and administrative burden. For providers, the new rule changes both the economics and mechanics of IDR — let’s dig into why.

It’s Big News, But How Big? 

More than two and a half years after the Federal government issued the corresponding proposed rule, the HHS, DOL and Treasury Departments issued the Federal Independent Dispute Resolutions (IDR) Operations final rule (Final Rule). After all the waiting, the provider industry is buzzing about the big news. But just how big is this news? And what do providers need to do about it?

A close read of the new regulations and the associated Department commentary reveals some “Good News,” some “Bad News,” and some important “To Do’s” for providers who want to benefit from the Federal IDR process. Above all, two things are clear:

1. First, the Federal IDR process is maturing and stabilizing and is here to stay. 
2. Second, there will be an extended period of monitoring and process adjustment to adapt to the changes to come from the Final Rule. 

Plenty of Good News

• Administrative Fee Reduction. The Departments reduced the Administrative Fee required for both parties to a dispute from $115 to $15. This is a significant reduction that will come as a welcome relief for providers under pressure given the costs of the IDR process. But providers should also consider how this may make more claims cost-effective for inclusion in the Federal IDR process. In some cases where the ROI was a close call, this could tip the scales in favor of proceeding with IDR for a claim. 

• Shorter Cooling Off Period. The NSA establishes a “cooling off period” after a provider has received an IDR determination for disputes with the same payor, the same items or services, and same encounter or CPT codes, during which the provider must wait to submit additional IDR disputes. In the hope of encouraging batching to address growing IDR volume, the Departments reduced this cooling off period for batched claims from 90 days down to 30 days. This is a significant improvement and should help providers who have struggled with “stacking” of successive cooling off periods. (More on that below in the “Bad News” section). 

• Batching Methodology Changes. Batching similar claims for a payor or plan sponsor into one larger group is an essential strategy to make the IDR process more efficient and cost-effective. While IDREs have allowed batching of more than 25 claims together, practices have been inconsistent and some IDR filers have arguably taken liberties with batches that included hundreds of claims. The Final Rule finalizes several changes that are a net positive for providers:
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  • While the Proposed Rule would have kept a 25 line item cap on a batch, the Final rule increased that limit to 50 line items. The 50 line item batch size enables providers to pursue claims efficiently, while also avoiding abusive practices that have damaged credibility of the IDR process.
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  • The Final Rule includes more flexible standard for meeting the statutory requirement that batched claims “relate to the treatment of a similar condition,” which includes services billed under comparable codes but from different coding terminologies, groups of CPT codes provided by specific specialties, and all services provided to a patient during a single encounter.

• Essential Data for Eligibility Decisions. Perhaps the most fundamental challenge with the IDR process has been making accurate decisions regarding whether a claim is eligible for the Federal IDR process given the limited and sometimes conflicting information provided by payors to providers. The Final Rule adds a series of new required communications by payors to providers and IDREs that will significantly improve providers’ ability to evaluate eligibility quickly and accurately.
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  • Payors are required to include to-be-specified CARC and RARC codes and the business name (i.e., legal entity of both the payor and the plan sponsor if possible) in both paper and electronic remittance advice communications to out-of-network providers. This will go a long way to enabling providers to make accurate eligibility assessments on day one.
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  • Within three days of receiving a providers notice of IDR initiation, the Final Rule now requires that providers send an IDR initiation response that confirms or updates eligibility information, with a goal of enabling the IDRE to make a determination about eligibility within 5 business days of initiation of the dispute. This will likely reduce IDRE delays in issuing determinations, and may (we hope) result in less payor refusals to accept as binding the decisions made by IDREs.
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  • The Departments also announced a to-be-created Federal IDR Registry into which payors will be required to submit various information about their legal entities, including entity names, registration identification numbers, etc. and contact information for the correct entity.  This will be another valuable source of information to which providers can look to evaluate claim eligibility (for example, where remittance advice messages do not include required information).

• Improved IDRE Selection Process. One way that providers struggled with the IDR process is when they argued payors waited until the last minute to submit their preferred IDRE so that the provider did not have an opportunity to object, thereby resulting in the payor’s (more favorable) IDRE being selected. This hasn’t been an issue for technology-driven filers like Pivotal who use AI-driven functionality to enable fast responses to payor responses, but it’s been a serious challenge for providers managing the process with mostly human effort. The Final Rule eliminates this risk by creating more opportunity for providers to respond in time and multiple-step processes for defaults that will likely benefit providers if they stay involved throughout the IDRE selection process. 

Now for the Bad (or Less Good) News

• Still A Long Wait for Most Improvements.  While some changes will happen in short order (e.g., Administrative Fee reduction 5 days after official publication), most of the other impactful changes will not happen for many months — and could take over two years to take effect.
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  • All of the new process requirements that involve features of the Federal IDR portal (e.g. open negotiation notice and response, expanded data requirements in IDR initiation notice, new IDRE selection processes) will only be effective 90 to 150 days after the Departments announce availability of the functionality. The Departments stated that they expect all required functionality to be available within 24 months of the final rules taking effect. Implementation will occur in phases, and the Departments will issue future guidance specifying when each capability is available and when compliance with each requirement becomes mandatory.  We think an optimistic timeline would be for new functionality to be available in 12 months (which would mean an effective date of 15 months) but it could take longer.
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  • One of the most impactful requirements of the Final Rule is for payors to include CARC and RARC codes in paper and electronic remittance advice communications that clearly indicate eligibility for the Federal IDR process.  However, rather than immediately require available codes that indicate NSA eligibility (e.g., N860, which unambiguously indicates NSA applicability) and prohibiting use of ambiguous codes (e.g., N830, which indicates the claim could be subject to federal or state IDR processes), the Departments opted to work through the HHS-approved X12 committees that develop CARC and RARC codes to develop new codes or modifications to existing codes. Additionally, the Departments acknowledged that once the X12 committees publish new codes and the Departments publish guidance about the requirements, payors will likely need additional time to implement the technology and systems changes to incorporate these codes and related requirements. This will likely lead to a long implementation process involving many months. 

• Weak Signals on Appetite for Enforcement. One critical question is when will the Departments begin to take meaningful enforcement action to compel all parties — providers, payors and IDREs — to conform to process and timeline requirements. Unfortunately, the Departments missed multiple opportunities to make statements, or even give hints, of future enforcement efforts, leaving an overall uncertain impression of their commitment to enforcement. Notably, when discussing the new requirements for use of CARC and RARC codes in remittance advice communications the Departments noted that providers had asked for enforcement to ensure payors would actually follow the new requirements, but then simply stated that they would “use existing process to enforce requirements.” (p. 36). Moreover, on the all-important question of whether or when the Departments will take enforcement action against payors who do not make required payments to providers within 30 days of an IDR determination, the Departments acknowledged the providers’ concern but only answered with a repeat of its statement that “the Departments will use existing processes to enforce requirements.” (p. 56). 

• Uncertainty on Content of Eventual Agency Guidance. Several key sections of the new regulations depend upon issuance of guidance from the Departments (e.g. use of CARC and RARC codes, batching methodologies, cooling off period management, IDR registry, etc.). While the initial direction in the regulation text, bolstered by the stated intent in the Departments’ commentary, suggest that the agencies’ guidance will include further helpful detail, it’s uncertain how the Departments will handle crucial details. Much of the promise of the improvements from the Final Rule could be significantly watered down if the Departments fail to follow through on meaningful change or clarify important details.  

The Provider “To Do List” Following These Changes

• To Do Now. The Final Rule has several near-term changes that will require providers or vendors managing the IDR process to take prompt action. They should:
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  • High-five their CFO and reduce payment of the Administrative Fee to $15, the first change effective under the Final Rule. This change is effective as of 5 business days after official publication of the rule in the Federal Register.
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  • Overhaul the basic logic that drives batching decisions (e.g. how many claims to include in a batch, including only claims for which services were billed under comparable codes, permitted groupings for specialties, or services for a single patient encounter) and updated cooling off periods (i.e. now only 30 days for a batched IDR submission). This change is effective 150 calendar days following the date of official publication of the Final Rule.
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  • Implement a process to identify and respond to all IDRE requests for information. The Final Rule adds a process by which the IDRE may formally request additional information from the parties. If neither party responds and the IDRE concludes it does not have enough information to make a decision about eligibility, the IDRE will consider the dispute withdrawn. This change is effective 150 calendar days following the date of official publication of the Final Rule.

• To Do Later. Several important new processes will only be required once relevant functionality exists in the IDR portal. In each of these cases, the Departments will issue guidance when the portal functionality is available, after which the new processes will be required effective ninety days later. Providers (or their IDR vendors) will need to closely monitor announcements from the Departments regarding IDR portal functionality progress or issuance of new guidance and related effective dates. They will need to:
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  • Update claim eligibility evaluation criteria to take advantage of new data provided in remittance advice messages, open notice initiation response communications, and the new Federal IDR registry, with particular attention to new CARC and RARC codes and payor legal entity names to identify which claims are eligible for Federal IDR, or alternatively for similar state IDR processes.
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  • Modify processes to create the notice of IDR initiation to include required elements for claim eligibility, and if necessary respond to inaccuracies in the IDR initiation response sent by payors. Providers should now have verified data sources it can cite in communications with the IDRE that will support assertions regarding claim eligibility, and they should be prepared to cite these sources.
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  • Update systems for monitoring IDRE selection communications to proactively manage the newly extended back-and-forth process. While payors will no longer be able to take advantage of delays and last-minute selection decisions, providers will need to carefully manage the process to avoid default IDRE selections.

• To Do Now AND Later. Because a significant portion of the new Final Rule requirements only become effective after Department guidance, there is risk that the Departments delay or struggle to include enough detail in these key guidance documents. It’s important to note that providers are not competing on a level playing field — payors and their lobbyists will likely be actively working to delay and dilute the substance of these guidance documents. Therefore, providers should continue to press the Departments on the following points:
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  • There is real danger of “analysis paralysis” at the X12 committees that will develop new and revised CARC and RARC code specifications, which could substantially delay the key requirements of the Final Rule that will help address claim eligibility decisions. Providers should press the Departments (primarily HHS) to keep the scope of additions and changes limited and focus on fast deliberations and decision-making.
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  • Providers need to continue impressing upon the Departments the urgent need for action on enforcement. Early statements of intent regarding enforcement would be a good starting point, but only when the Departments begin taking and publicizing enforcement actions — against all parties, providers, payors and IDREs alike — will compliance by all parties improve. 

Conclusion & Next Steps 

The new Federal IDR Operations Final Rule lowers costs and should eventually make the dispute process easier for providers. While most of these changes are positive, some go into effect immediately, while others won't take effect for years, so providers should start preparing now.

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