On July 1, 2017, a California law took effect that changed the way that non-contracted physicians bill and are paid for providing non-emergency care at in-network facilities including hospitals, ambulatory surgery centers and laboratories. This out-of-network billing and payment law (AB 72) was designed to reduce unexpected medical bills when patients go to an in-network facility but receive care from an out-of-network doctor.

The interim rate is the greater of the plan/insurer’s average contracted rate (ACR) or 125 percent of the Medicare fee-for-service rate for the same or similar services in the general geographic region in which the services were rendered, unless otherwise agreed to by the noncontracting provider and the payor. Both regulators have adopted a standardized methodology that all payors are required to use to compute the average contracted rate beginning January 1, 2019. For reference, the Department of Managed Health Care’s (DMHC) ACR methodology can be found here. And the California Department of Insurance’s (CDI) ACR methodology can be found here.

This law includes a mechanism for physicians to challenge the payment amount if they are dissatisfied—the independent dispute resolution process (IDRP). Payors are required to participate in the IDRP once a physician begins the process.

To be eligible for IDRP a physician must first appeal in writing to the payor for additional payment. If the physician is not successful in resolving the dispute through the payor’s internal appeal process, the physician may then file an IDRP through the appropriate regulator – either DMHC or CDI, depending on the product type. Claims are only eligible for the IDRP for 365-days from the date of the payor's written response to the appeal. If a physician attempted the appeal process but the payor was non-responsive, the 365-day limit to file IDRP will begin after 45 business days have passed from the date of receipt of the physician's appeal.

The IDRP process for both regulators is web and email-based and conducted through the regulators’ portals, with no parallel paper process. Physicians may bundle up to 50 claims in a single IDRP application. These claims must all be for services provided by the same physician, for the same payor (health plan, insurer, or delegated entity), and for the same or similar services.

The DMHC and CDI’s IDRP processes have many differences including arbitration types, but both have fees involved that are split equally between the payor and the physician. DMHC uses traditional arbitration, meaning the arbiter can select any reimbursement amount he/she determines is appropriate. CDI uses baseball style arbitration, meaning the arbiter will select one of two the parties’ final offers and no other amount. Physicians are encouraged to utilize IDRP, as DMHC is required to consider information from the IDRP when establishing methodology for determining average contracted rates, which in turn will likely impact payor contracting practices going forward.

The California Medical Association has developed a number of resources to help physicians navigate this new law. These are all available free to members at cmadocs.org/out-of-network-billing.

For more information on IDRP eligibility, identifying the regulator, the submission processes and what to include in the narrative summary justification and/or the supporting documentation, the California Medical Association (CMA) has created an IDRP guide, “A Physician’s Guide to the AB 72 Independent Dispute Resolution Process.”

Practices with additional questions or concerns can contact CMA’s Reimbursement Helpline at (800) 786-4262 or via email.