Qualifying Payment Amount Calculation Methodology

Qualifying Payment Amount Calculation

Methodology

45 CFR 149.140

December 2021

Disclaimers and Notifications

• The information provided in this presentation is intended only to be

a general informal summary of technical legal standards. It is not

intended to take the place of the statutes, regulations, or formal

policy guidance upon which it is based. This presentation

summarizes current policy and operations as of the date it was

presented. We encourage readers to refer to the applicable

statutes, regulations, and other interpretive materials for complete

and current information.

• The contents of this document do not have the force and effect of

law and are not meant to bind the public in any way, unless

specifically incorporated into a contract. This document is intended

only to provide clarity to the public regarding existing requirements

under the law.

• This communication was printed, published, or produced and

disseminated at U.S. taxpayer expense.

Overview

• The qualifying payment amount (QPA) is the basis for determining individual

cost sharing for items and services covered by the balance-billing

protections in the No Surprises Act (NSA), under certain circumstances.

o Cost-sharing for emergency items and services and non-emergency

items and services furnished by an out-of-network provider in an in-

network facility must be based on the lesser of billed charges or the QPA,

where an All-Payer Model Agreement under section 1115A of the Soc.

Sec. Act or a specified state law does not apply.

o Cost-sharing for air ambulances services must be based on the lesser of

billed charges or the QPA

• Certified Independent Dispute Resolution (IDR) entities are required to

consider the QPA when selecting between the offer submitted by a plan or

issuer and the offer submitted by a facility or provider or provider of air

ambulance services when determining the total out-of-network payment rate

for items and services subject to the federal IDR process.

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” Defined

• 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).

Contracted Rate – Rules & Exclusions

• The amount negotiated under each contract is

treated as a separate amount.

o Excludes rates paid under single case agreements, letters

of agreement, or similar arrangements between a provider,

facility, or provider of air ambulance services and a plan or

issuer, used to supplement the network of the plan for a

specific enrollee, participant, or beneficiary in unique

circumstances.

• The rate negotiated under a contract constitutes a

single contracted rate regardless of the number of

claims paid at that contracted rate.

Contracted Rate – Other Rules

• If a plan or issuer has:

o separate contracts with individual providers → rate under

each contract constitutes a single contracted rate (even if the

same rate is paid to other providers under separate contracts).

o a single contract with a provider group or facility, with the

same negotiated rate applying to all providers in the

group/facility

→ rate negotiated with that provider group or

facility is treated as a single contracted rate.

o a single contract with multiple providers, with separate

negotiated rates with each particular provider → each unique

contracted rate constitutes a single contracted rate for purposes

of determining the median contracted rate.

“Same Insurance Market”

• “Insurance market” is defined as:

o Individual market (excludes short-term, limited-duration insurance).

o Small group market.

o Large group market.

• For self-insured group health plans, “insurance market” means:

o all self-insured group health plans (other than account-based plans and plans that consist

solely of excepted benefits) of the plan sponsor, or

o at the option of the plan sponsor, all self-insured group health plans administered by the

same entity (including a TPA contracted by the plan) that’s responsible for calculating the

QPA on behalf of the plan.

• 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.

• Relevant market is determined irrespective of the state.

• All markets exclude coverage that consists solely of excepted benefits

“Same or Similar Item or Service”

• Defined as a health care item or service billed under

the same service code, or a comparable code under a

different procedural code system.

• Service code: the code that describes an item or

service, including a Current Procedural Terminology

(CPT), Healthcare Common Procedure Coding

System (HCPCS), or Diagnosis-Related Group (DRG)

code.

“Same or Similar Item or Service” –

Modifiers

• Modifiers: codes that are applied to the service code to provide

a more specific description of the furnished item or service and

that may adjust the payment rate or affect the processing or

payment of the code billed.

• Median contracted rates must be calculated separately for CPT

code modifiers that distinguish the professional services

component (“26”) from the technical component (“TC”).

• If application of a modifier causes contracted rates to vary, the

plan or issuer must calculate a separate median contracted rate

for each such service code-modifier combination.

• Modifiers that don’t cause contracted rates to vary must not be

taken into account when calculating the median contracted

rate

“Provider in the Same or

Similar Specialty”

• Defined as the practice specialty of a provider, as

identified by the plan or issuer consistent with the

plan’s or issuer’s usual business practice.

• W ith respect to air ambulance services, all providers

of air ambulance services are considered to be a

single provider specialty.

• If a plan or issuer has contracted rates for a service

code that vary based on provider specialty, the median

contracted rate is calculated separately for each

provider specialty.

“Facility of the Same or Similar

Facility Type”

• Defined to mean, with respect to emergency services, either an

emergency department (ED) of a hospital or an independent

freestanding emergency department (IFED).

• If a plan’s or issuer’s contracted rates for emergency services

vary based on the type of facility (that is, whether a facility is a

hospital ED or an IFED, the median contracted rate is

calculated separately for each facility type.

• Note: Plans and issuers may not separately calculate a

median contracted rate based on other characteristics of

facilities that might cause contracted rates to vary, such as

whether a hospital is an academic medical center or teaching

hospital.

Geographic Region

Non-air ambulance items and services Air ambulance services

Primary

definition

One region for

each MSA in the

state

One region

consisting of all other

portions of the state

One region consisting

of all MSAs in the

state

One region consisting

of all other portions of

the state

First

alternative

One region

consisting of all

MSAs in the state

One region

consisting of all other

portions of the state

One region consisting

of all MSAs in the

Census division

One region consisting

of all other portions of

Census division

Second

alternative

One region

consisting of all

MSAs in the

Census division

One region

consisting of all other

portions of the

Census division

• If a plan or issuer does not have sufficient information to calculate a median contracted rate for the geographic

regions under the primary definition, geographic regions are defined according to the first alternative definition.

• If the plan or issuer still does not have sufficient information after applying these broader regions, geographic

regions are defined using the second alternative definition (N/A for air ambulance services).

Geographic Region (continued)

• Note: MSAs that cross state boundaries are divided between

the respective states, with all the counties in a particular MSA in

each state counted as a geographic region.

• Geographic region to be applied for air ambulance services is

determined by the point of pickup, meaning the location of the

individual at the time the individual is placed on board the air

ambulance.

Non-Fee-for-Service Contractual

Arrangements

• QPA methodology establishes an approach for calculating a median contracted rate where

payment for an item or service is not fully on a fee-for-service basis (e.g., under bundled and

fully- or partially-capitated arrangements).

• General approach: The plan or issuer must calculate a median contracted rate for each item or

service using the underlying fee schedule rates (if available) for the relevant items and

services.

o Underlying fee schedule rate: the rate for a covered item or service that a group health

plan or health insurance issuer uses to determine an individual’s cost-sharing liability for

the item or service, when that rate is different from the contracted rate.

• Alternative approach: If there is no underlying fee schedule rate, the plan or issuer must

calculate the median contracted rate using a derived amount, which is the price that a plan or

issuer assigns an item or service for the purpose of internal accounting, reconciliation with

providers, or for the purpose of submitting data in accordance with 45 CFR 153.710(c).

• When calculating median contracted rates, plans and issuers must exclude risk sharing,

bonus, or penalty, and other incentive-based and retrospective payments or payment

adjustments.

Indexing: Overview

• In cases where the median contracted rate is determined using 1/31/2019

contracted rates:

o To calculate QPA for items/services furnished during 2022: increase the

median contracted rate as of 1/31/2019 by the percentage increase in the

consumer price index for all urban consumers (U.S. city average) (CPI–U) over

2019, the percentage increase over 2020, and the percentage increase over

2021.

o To calculate QPA for items/services furnished during 2023 or a

subsequent year: the QPA for 2022 is then adjusted annually by the annual

increase in the CPI–U.

• Plans and issuers will calculate the increases using the factors determined by the

Treasury Department and the IRS, and published in guidance by the IRS. The

percentage increase for any year is calculated by using the CPI–U published by

the Bureau of Labor Statistics (DOL).

• For this purpose, the CPI–U for each calendar year is the average of the CPI–U as

of the close of the 12-month period ending on 8/31 of the calendar year, rounded

to 10 decimal places.

Indexing: Special Rules for Unit-Based

Services

• Special rules apply when calculating the QPA for items

or services for which a plan or issuer generally

determines the reimbursement level for the same or

similar items or services by multiplying the contracted

rate by another unit, such as time or mileage.

• Rule: The QPA for unit-based items and services is

calculated by determining the median contracted rate

for the item or service, indexing that median amount

in accordance with the otherwise applicable rules

regarding indexing, and then applying the pertinent

multipliers.

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 in order 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.

Indexing: Air Ambulance Services

• Payers often reimburse air ambulance services in part by using air mileage service codes

(A0435 and A0436) and reimbursement levels that reflect the number of miles an individual is

transported by the air ambulance, which are referred to as loaded miles. Payment amounts are

calculated as:

(negotiated rate for the service code, referred to as the air mileage rate)

X (number of loaded miles).

• The QPA for air ambulance services billed using the air mileage service codes (A0435 and

A0436) that are furnished during 2022 is calculated as follows:

o Step 1: Increase the median contracted rate to account for changes in the CPI–U. This

amount is referred to as the indexed median air mileage rate.

o Step 2: Multiply (indexed median air mileage rate) by (number of loaded miles).

• The QPA for air ambulance services billed using service codes A0435 and A0436 that are

furnished during 2023 or a subsequent year is calculated as follows:

o Step 1: Increase the indexed median air mileage rate determined for such services

furnished in the preceding year.

o Step 2: Multiply (indexed median air mileage rate) by (number of loaded miles).

Cases With Insufficient Information

• An alternative process is used to determine the QPA in cases

where a group health plan or health insurance issuer offering

group or individual health insurance coverage lacks sufficient

information to calculate the median of contracted rates in 2019,

as well as for newly covered items or services in the first

coverage year after 2019.

• In cases in which a plan or issuer does not have “sufficient

information” to calculate a median contracted rate, the plan or

issuer must determine the QPA using an eligible database

(discussed in later slides).

Sufficient Information

• Rule: A plan or issuer has sufficient information to calculate

the median of contracted rates for an item or service if the plan

or issuer has at least three contracted rates on 1/31/2019.

• Where a plan or issuer does not have sufficient information to

calculate the median contracted rate based on 1/31/2019

contracted rates (or for new plans and coverage or new service

codes) but later gains sufficient information, the plan or issuer

must calculate the QPA using the median contracted rate for

the first sufficient information year.

First Sufficient Information Year

First sufficient information year is defined as follows:

(1) in the case of an item and service for which a plan or

issuer does not have sufficient information to calculate

the median of contracted rates in 2019, the first year

after 2022 for which the plan or issuer has sufficient

information to calculate the median of contracted rates in

the year immediately preceding that first year after 2022;

and

(2) in the case of a newly covered item or service, the first

year after the first coverage year for such item or service

for which the plan or issuer has sufficient information to

calculate the median of the contracted rates in the year

immediately preceding that first year.

First Sufficient Information Year

(continued)

• In cases where contracted rates for a year after 2019 must be used

to calculate the median contract rate, a plan or issuer will be

considered to have sufficient information to calculate the median

contracted rate for a year if both of the following conditions are met:

o the plan or issuer has at least three contracted rates on

January 31 of the year immediately preceding that year; and

o the contracted rates account (or are reasonably expected to

account) for at least 25 percent of the total number of claims paid

for the item/service for that year with respect to all plans of the

sponsor (or administering entity, if applicable) or all coverage

offered by the issuer in the same insurance market.

Database Eligibility Requirements

• Where a plan or issuer does not have sufficient information to

calculate a median contracted rate, the plan or issuer must determine

the QPA using an eligible database.

• A third-party database may be an eligible database if it satisfies all of

the following conditions:

o No conflicts of interest.

o Has sufficient information regarding in-network allowed

amounts paid to a health care providers or facilities for relevant

items/services furnished in the applicable geographic region.

o Has the ability to distinguish amounts paid to participating

providers and facilities by commercial payers from all other

claims data.

• State all-payer claims databases have been deemed categorically

eligible.

Database Eligibility Requirements –

Conflicts of Interest

• As noted in the previous slide, an eligible database is required

to be free from any conflicts of interest. Specifically, the

database or the organization maintaining the database cannot

be affiliated with, or owned or controlled by, any health

insurance issuer, or a health care provider, facility, or provider

of air ambulance services, or any member of the same

controlled group as, or under common control with, any such

entity.

• For purposes of applying the controlled group rules to eligible

databases, a controlled group means a group of two or more

persons that is treated as a single employer under Code

sections 52(a), 52(b), 414(m), or 414(o).

Determining the QPA Using an

Eligible Database

• To calculate the QPA for an item or service furnished during 2022 (or for

newly covered items or services, in the first coverage year) using an eligible

database, a plan or issuer must:

o First, identify the rate in the database that is equal to the median of the

in-network allowed amounts for the same or similar item or service in

the geographic region in the year immediately preceding the year in

which the item or service is furnished (or for a newly covered item or

service, the year immediately preceding the first coverage year).

o Then, increase the median in-network allowed amount by the

percentage increase in the CPI–U over the preceding year.

• For each subsequent year before the first sufficient information year, the

plan or issuer must increase the QPA applicable in the immediately

preceding year by the percentage increase in the CPI–U over the preceding

year.

Determining QPA Using an

Eligible Database (continued)

• Consistency requirement: A plan or issuer that uses a

database to determine the QPA for an item or service must

use the same database to determine the QPA for that item or

service through the last day of the calendar year.

o If a different database is selected for some items or services,

the basis for that selection must be one or more factors not

directly related to the rate of those items or services (e.g.,

the sufficiency of data for those items or services).

• Plan or issuer is responsible for the costs associated with using

an eligible database to determine the QPA.

New Plans or Coverage

• In cases where a sponsor of group health plan or a health insurance issuer is n ew ly

offering a plan or coverage in a geographic region in a year after 2019:

o if the plan or issuer otherwise has sufficient information to calculate a

median contracted rate in 2019 in the geographic region where the item or

service is furnished (e.g., where the sponsor or issuer has sufficient existing

provider contracts under other current coverage in the geographic region), the

QPA is determined using the standard methodology.

o if the plan or issuer does not have sufficient information to calculate a

median contracted rate in 2019 in the geographic region (e.g., where the

sponsor or issuer did not offer any plan or coverage in 2019), for items and

services in the first year in which the plan or coverage is offered in the

geographic region, the QPA is determined according to the rules that generally

apply when there’s insufficient information to calculate a median contracted rate,

or for newly covered items and services, including the use of an eligible

database.

• To calculate the QPA for items and services furnished in a subsequent year, the plan

or issuer must increase the QPA for items or services furnished in the immediately

preceding year by the percentage increase in the CPI–U over the previous year.

New Service Code

• Defined as a service code that was created or substantially

revised in a year after 2019.

• In situations in which a plan or issuer is billed for a covered item

or service using a new service code, the plan or issuer must

determine the QPA as follows:

o Step 1: Identify a reasonably related service code that

existed in the immediately preceding year (e.g., another

service code within the same family of codes, or a code for

services that represent similar relative value units).

New Service Code (continued)

o Step 2: Calculate the applicable relativity ratio.

– If the Medicare program has established a payment rate for an item or

service billed under the new service code, the plan or issuer must:

calculate the ratio of the Medicare payment rate for the item or service

billed under the new service code compared to the Medicare payment

rate for the item or service under the related service code (with both

rates disregarding any adjustments for value-based purchasing

arrangements).

– If the Medicare program has not established a payment rate for an item

or service billed under the new service code, the plan or issuer must

calculate the ratio of the rate that the plan or issuer pays for an item or

service billed under the new service code compared to the rate that the

plan or issuer pays for an item or service under the related service code.

o Step 3: Multiply the ratio in step 2 by the QPA for the related service code for

the year in which the item or service is furnished.

Information To Be Shared About

the QPA: Required Disclosures

• The July 2021 interim final rules require that plans and issuers make certain

disclosures with each initial payment or notice of denial of payment, and that plans

and issuers must provide additional information upon request of the provider, facility,

or provider of air ambulance services.

• First, a plan or issuer must provide the QPA for each item or service involved.

• Second, a plan or issuer must provide a statement certifying that:

(1) The QPA applies for purposes of the recognized amount (or, in the case of

air ambulance services, for calculating the participant’s, beneficiary’s, or

enrollee’s cost sharing), and

(2) each QPA shared with the provider, facility, or provider of air ambulance

services was determined in compliance with the methodology outlined in the

July 2021 interim final rules.

• Third, a plan or issuer must provide a statement informing the provider, facility, or

provider of air ambulance services that they may initiate the 30-day open

negotiations period, and if that fails to produce a determination, they may initiate the

federal IDR process within 4 days of the end of open negotiations.

• Fourth, the plan or issuer must also provide contact information for the appropriate

office or person to initiate open negotiations.

Information to Be Shared About

the QPA Upon Request

• In a timely manner upon request of the provider, facility, or provider of air

ambulance services, a plan or issuer must provide the following:

o Information about whether the QPA includes contracted rates that were

not set on a fee-for-service basis for the specific items and services at

issue and whether the QPA was determined using underlying fee

schedule rates or a derived amount.

o If an eligible database was used to determine the QPA, information to

identify which database was used to determine the QPA.

o If a related service code was used to determine the QPA for a new

service code, information to identify which related service code was

used.

o If applicable, a statement that the plan’s or issuer’s contracted rates

include risk-sharing, bonus, penalty, or other incentive-based or

retrospective payments or payment adjustments for the items and

services involved that were excluded to calculate the QPA.

Glossary

• cost sharing – the amount a participant, beneficiary, or enrollee is responsible for paying for a covered item

or service under the terms of the group health plan or health insurance coverage.

• derived amount – the price that a plan or issuer assigns an item or service for the purpose of internal

accounting, reconciliation with providers, or for the purpose of submitting data in accordance with the

requirements of 45 CFR 153.710(c).

• modifier – code applied to a service code that provides a more specific description of the furnished item or

service and that may adjust the payment rate or affect the processing or payment of the code billed.

• new service code –a service code that was created or substantially revised in a year after 2019.

• qualifying payment amount – In general, for a given item or service, the QPA is the median of the

contracted rates on January 31, 2019, for the same or similar item or service, increased for inflation.

• recognized amount – basis for determining individual cost sharing for certain services covered by the

balance billing provisions of the No Surprises Act. Defined as (1) an amount determined by an applicable All-

Payer Model Agreement under section 1115A of the Social Security Act; (2) if there is no applicable All-Payer

Model Agreement, an amount determined by a specified state law; or (3) if there is no applicable All-Payer

Model Agreement or specified state law, the lesser of the amount billed by the provider or facility or the QPA.

• underlying fee schedule rate – the rate for a covered item or service from a particular participating provider,

providers, or facility that a group health plan or health insurance issuer uses to determine a participant’s,

beneficiary’s, or enrollee’s cost-sharing liability for the item or service, when that rate is different from the

contracted rate.