IDR Qualified Payment Amounts and The Elephant in the Room

When the No Surprises Act went into effect on January 1, 2022, few could have predicted what was to come. Legislation that was supposed to protect patients from high out-of-network bills turned into a series of strategic maneuvers by insurance companies to help their bottom lines.

The first move in this high-stakes chess match was a series of letters sent to specific medical practices, asking them to accept a significant reduction to their current contractual fee schedule. It’s important to note that these were not out-of-network provider groups; they were in-network practices with active contracts.

In the specialty of Anesthesiology, competitive managed care contract rates are essential to help offset low paying Medicare and Medicaid plans. In this case, the cuts requested by payers were as high as 50%, and if practices didn’t comply, the contacts would simply be terminated without cause within a specified time period. Being that most practices couldn’t afford such a huge financial hit, their only recourse was to go through the complicated and time-consuming Independent Dispute Resolution (IDR) process, after they were forced out of network by the payer.

Under the No Surprises Act, insurance companies are mandated to pay out-of-network providers a Qualified Payment Amount (QPA) for services rendered at in-network facilities. This QPA is supposed to represent the median contract rate for like specialties in the same geographical market, and patients cannot be balance billed for any amount above this number.

Herein lies the problem for medical practices; how do they know that the carrier’s QPA amounts are accurate and don’t include Medicare Managed Care plans, which could be misinterpreted as a “commercial” product? NSA prohibits rate setting based on governmental plan rates, such as these. If this is happening, it’s certainly not within the spirit of the NSA legislation and may run afoul of the law. But how do clinicians and practice management advocacy groups vet the numbers? The answer as of today is hard to fathom – we can’t.

Although NSA lawsuits involving the Texas Medical Association have compelled CMS to ask carriers for transparency on this topic, the insurance industry has (thus far) stonewalled the requests, citing difficulty in compiling the information. To the average healthcare professional, this argument seems deeply flawed. Obviously, the carriers had to perform these exact calculations to determine the QPAs in the first place. Even if the rates are proprietary and cannot be shared, shouldn’t these insurance companies at least have to attest to the government that no Medicare Managed Care or Federal rates were included in their median contract rate formula? How about attesting that non-anesthesia providers were excluded from the computation, who have small contractual allowances for local anesthesia, nerve blocks, or conscious sedation performed by proceduralists? 

Through various studies that have been conducted, it’s clear that QPAs for Anesthesia services appear to be artificially low in certain geographical markets, thus creating an unnecessary financial burden for any practice having to go through the IDR process. At the same time, insurance companies have yet to draw back the curtain and provide visibility on exactly how they arrived at their QPA amounts. Let’s move away from this “block box honor system” and moves towards a “trust but verify” approach. The courts and subsequently CMS must, at the very least, force the insurance industry’s hand in either showing their math or attesting that their approach was sound and in the spirit of the NSA regs.

Citation and Definitions

  • QPA Defined: The QPA for a given item or service is generally the median contracted rate on January 31, 2019 for the same or similar item or service, increased for inflation.
  • Median Contracted Rate: The median contracted rate for an item or service is determined by:

    • Identifying the contracted rates of all plans of the plan sponsor (or of the administering entity, if applicable) or all coverage offered by the issuer in the same insurance market for the same or similar item or service that is provided by a provider in the same or similar specialty or facility of the same or similar facility type and provided in the geographic region in which the item or service is furnished.

    • Arranging the contracted rates from least to greatest and selecting the middle number (or the average of the middle two numbers, if there are an even number of contracted rates).
  • Contracted Rate: The contracted rate is the total amount (including cost sharing) that a group health plan or health insurance issuer has contractually agreed to pay a participating provider, facility, or provider of air ambulance services for covered items and services, whether directly or indirectly, including through a third-party administrator (TPA) or pharmacy benefit manager (PBM).
  • Same Insurance Market: Any plan or coverage that is not a “group health plan” or “group or individual health insurance coverage” offered by a “health insurance issuer,” as those terms are defined in the Code, ERISA, and the PHS Act, such as a Medicare Advantage or Medicaid managed care organization plan, must also not be included in any insurance market for purposes of determining the QPA.
  • Indexing Anesthesia Services
    • For anesthesia services furnished during 2022, the QPA is calculated by taking the median contracted rate for the anesthesia conversion factor (determined in accordance with the methodology for calculating median contracted rates for service code-modifier combinations) for the same or similar item or service as of 1/31/2019, and increasing that amount to account for changes in the CPI–U.

    • This amount is referred to as the indexed median contracted rate, and it is multiplied by the sum of the following three factors to calculate the QPA:
      (1) the base unit for the anesthesia service code
      (2) the time unit, and
      (3) the physical status modifier unit.

    • For anesthesia services furnished during 2023 or a subsequent year, the QPA is calculated by taking the indexed median contracted rate for the anesthesia conversion factor and adjusting that amount by the percentage increase in the CPI–U over the previous year. The indexed median contracted rate is then multiplied by the sum of the base unit, time unit, and physical status modifier units for the participant, beneficiary, or enrollee.
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MSN Healthcare Solutions is a privately held anesthesia billing company headquartered in Columbus, GA. With no private equity partners to answer to, we can focus on making the right long-term decisions for our valued clients, who are our highest priority. MSN was founded in 1996 and currently bills for 190 practices across the United States. To inquire whether MSN might be a good fit for your anesthesia practice, please contact Jimmy Patrick at (706) 799-9000 or at

Hal Nelson, Vice President Anesthesiology Services


VP of Anesthesiology Services

Hal has 30+ years of experience on both the payor and RCM side, with a focus in Anesthesia. He formerly worked as a senior claims approver at United Healthcare, as well as a compliance officer for multiple national anesthesia billing companies. His broad-based experience ensures that MSN clients have a resource for documentation and billing issues. His past speaking engagements include ASA, MGMA, Dartmouth, and Johns Hopkins.

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