Qualifying Payment Amount (QPA): A Comprehensive Guide

A Qualifying Payment Amount can help apply in-network comparable rates to out-of-network provider services. These QPAs set a baseline for upcoming cost-sharing obligations for the patient. However, QPAs come with plenty of complex processes and calculations, which can be confusing if you aren't well-versed in the terminology. This article provides you with a comprehensive guide to QPAs.

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What is the Qualifying Payment Amount?

The Qualifying Payment Amount determines cost sharing for services and items included in the balance-billing protections in the federal No Surprises Act.

The QPA provides for several circumstances, such as:

• Emergencies: For emergency and nonemergency services and items provided by an out-of-network provider in an in-network facility, cost-sharing is based on the lesser of the QPA or billed charges where a specified state law or an All-Payer Model Agreement exists under the Social Security Act.
• Air ambulance: For air ambulance services, cost-sharing is based on the lesser of the QPA or the billed charges.

Additionally, entities recognized as certified independent dispute resolution (IDR) organizations must consider the QPA when choosing between offers proposed by a plan/issuer, a facility/provider, or an air ambulance services provider when determining the out-of-network payment rate for bills subject to the IDR process.

QPA definition and calculation in one sentence

QPA definition: A service or item's QPA is the median contracted rate as of Jan. 31, 2019, for a similar service or item, increased for inflation.

Example: If you are trying to find the QPA of "Service X," you should look at the contracted rates for that service on Jan. 31, 2019. Suppose the service's rates at that time were $300, $305, $310, $311, and $320. To find the median, you should first order the numbers in ascending or descending order. The median is the central number in the data set, or $310 in this case. If the data set is even, you should take the average of the two middle numbers.

Once you have the median contracted rate from Jan. 31, 2019, you must increase the price for inflation.

2022: For the remainder of 2022, you should increase the median rate by the same percentage increase shown in the consumer price index for all urban consumers (CPI-U) in your city. Increase the median price by inflation over 2019, 2020, and 2021.

Post-2022: The QPA for 2022 will be adjusted annually using the CPI-U's annual increase.

Median contracted rate for QPA: How it's determined

When you determine the median contracted rate for a QPA, there are certain things you must clarify at the outset to ensure accurate calculations. You should understand and define the following based on your situation:

• The contracted rate
• The contracted rate's rules
• The term "same insurance market"
• The term "same or similar item or service"
• The term "provider in the same or similar specialty"
• The term "facility of the same or similar facility type"
• The geographic region

Understanding how these terms relate to your scenario can help you calculate the median contracted rate for your QPA with relative ease.

What is a contracted rate?

The contracted rate is the total amount a health insurance issuer or a group health plan has agreed to pay a participating provider entity for covered services and items.

Contracted rate rules and exceptions

There are several rules and exclusions associated with the contracted rate, such as:

• Each contract's negotiated amount is treated as a separate amount. This excludes rates paid under letters of agreement, single-case agreements, or other similar arrangements.
• Each contract's negotiated rate constitutes a single contracted rate, despite the number of claims paid at that rate.
• If a plan/issuer has individual contracts with separate providers, each contract's rate represents a single contracted rate.
• If a plan/issuer has one contract with a facility or provider group, with the same agreed-upon rate applying to all providers within the entity, this negotiated rate is treated as a single contract.
• If a plan/issuer has one contract with several providers that each have a separately negotiated rate, each rate represents one contracted rate.  

What does "same insurance market" mean?

The term "insurance market" can mean the following:

• Large group market
• Small group market
• Individual market, excluding short-term, limited-duration insurance
• All self-insured group health plans, with limited exceptions
• All self-insured group health plans administered through the same entity, with limited exceptions.

What does "same or similar item or service" mean?

The term "same or similar service" means a service or item billed under the same service code or an equivalent code under a separate procedural system.

What does "provider in the same or similar specialty" mean?

"Provider in the same or similar specialty" refers to the practice specialty of the provider as listed by the plan/issuer consistent with the plan/issuer's typical business practice.

Additionally:

• All air ambulance service providers are considered a single specialty.
• If a plan/issuer's contracted rates for a service code vary based on specialty, the median rate is calculated for each specialty.
• Modifiers can affect median rate calculations for contracted rates.

Modifiers: Similar items and services may have modifiers attached. Modifiers are codes you apply to the service code to offer a more detailed billing description. Modifiers may affect the processing, payment rate, or payment of the code billed. If a modifier causes contracted rates to vary, the plan/issuer should calculate an additional median rate for each relevant service code-modifier combination.

What does "facility of the same or similar facility type" mean?

The term "facility of the same or similar facility type" refers to emergency services. It means either the emergency department of a hospital or a freestanding independent emergency department. If the plan/issuer's contracted rates for emergency services vary based on facility type, the median rate you should calculate the median rate separately for each type.

It's important to note that plans/issuers cannot calculate median rates based on other facility characteristics that may cause contracted rates to vary. For example, calculating rates based on a hospital's status as a teaching hospital or academic medical center is not allowed.

How is geographic region determined?

Geographic region is determined differently for air ambulance services and non-air ambulance services.

Air ambulance services

Air ambulance services define a geographic region as a region consisting of all medical savings amounts (MSAs) in the state or one region encompassing all other parts of the state.

Alternatively, air ambulance services may define a geographic region as a region consisting of all MSAs in the specific census division or one region encompassing all other census division portions.

Non-air ambulance services and items

Non-air ambulance billings may define the geographic region as one region for each MSA in the state or one region encompassing all additional parts of the state.

Alternatively, it may define the geographic region as a region that consists of all MSAs in the state or encompasses all remaining parts of the state. Yet another definition would say the region consists of all census division MSAs or one region encompassing the remaining parts of the census division.

Calculating qualifying payment amount for non-fee-for-service arrangements

The QPA methodology does allow for an approach to calculate the median contracted rate when the payment is not entirely based on a fee-for-service system, such as a bundled or partially-capitated arrangement.

There is a general approach and an alternative approach to this calculation.

The general approach is for the plan/issuer to calculate the median rates for each service or item using any available underlying fee schedule rates. The underlying fee schedule rates are the rates the plan/issuer uses to determine patients' cost-sharing liability when that rate differs from the contracted rate.

If no underlying fee schedule rates exist, the plan/issuer should use a derived amount to make the calculations. A derived amount is a price the plan/issuer assigns a service or item for internal accounting, provider reconciliation, or data submission in conformity with 45 CFR 153.710(c).

Indexing when calculating the qualifying payment amount

Depending upon the specifics of your situation, indexing methods may differ.

If you determine the median contracted rate using the 2019 contract rates, your method depends on whether the items and services were furnished during 2022 or after.

For services and items furnished during 2022, you should increase the 2019 median contracted rate by the CPI-U over 2019, 2020, and 2021.

For services and items furnished during 2023 or later, the QPA is adjusted annually according to the CPI-U.

Special rules for unit-based items

Some special rules may apply when you calculate the QPA. For example, you calculate the QPA for unit-based services and items by first determining the service or item's median rate. Then you index that median rate per the other applicable indexing rules and apply the appropriate multipliers.

Indexing in QPA for anesthesia items

For 2022 anesthesia services, you calculate the QPA by taking the median rate for the anesthesia conversion factor. This factor is determined using the same methodology for calculating code modifiers' median contracted rates.

The median contracted rate for the anesthesia conversion factor must then be increased according to changes in the CPI-U. This number is called the indexed median contracted rate. It is multiplied by the sum of three factors to calculate the QPA:

• The anesthesia service code's base unit
• The physical status modifier unit
• The time unit

For 2023 and later anesthesia services, you can calculate the QPA by taking the anesthesia conversion factor's indexed median contract rate and adjusting that amount according to changes in the CPI-U over the previous year. Next, you will multiply the median contracted rate by the sum of the time unit, the base unit, and the physical status modifier unit.

Indexing in QPA for air ambulance items

Payers frequently recompense air ambulance services via air mileage service codes and reimbursement levels that mirror the miles a patient is transported by the air ambulance. These are called loaded miles.

You can calculate payment amounts using the following equation:

(air mileage rate) x (amount of loaded miles)

You can calculate the QPA for these 2022 services using the air mileage rate codes after finding the median air mileage rate. To get the median air mileage rate, increase the median contracted rate to match changes in the CPI-U. Next, multiply the indexed median air mileage rate by the loaded miles.

You can calculate the QPA for these post-2022 services by first increasing the indexed median air mileage rate for the respective services provided in the previous year. Then, you must multiply your indexed median air mileage rate by the number of loaded miles.

Sufficient information and QPA

A plan/issuer is deemed to have sufficient information to calculate the median contracted rates if the plan/issuer has at least three rates as of Jan. 31, 2019.

First year for sufficient information

When a plan/issuer lacks sufficient information but later gains it, the plan/issuer must calculate the QPA using the median contracted rate of the first sufficient information year.

The first year for sufficient information is defined as:

• When a plan/issuer lacked sufficient information to calculate the median contracted rates in 2019, then the first year for sufficient information shall be the first year post-2022 which contains sufficient data to calculate the median contracted rates for the immediately preceding year.
• The first year following the first coverage year for which the plan/issuer has sufficient data to calculate the median contracted rates in the year immediately before that first year. This is regarding newly covered services or items.

When you must use the contracted rates after 2019 to calculate the median rate, a plan/issuer is considered to have sufficient information if both of the following are met:

• The plan/issuer has at least three contracted rates on Jan. 31 of the preceding year.
• The contracted rates are reasonably expected to account for at least a quarter of the total number of claims paid for the item or service for that year compared to all of the administering entity's plans or the total coverage offered by the issuer in the same market.

Calculating QPA with insufficient information

Sometimes a plan/issuer may offer insurance coverage that lacks sufficient information to determine the median contracted rates in 2019. In these cases, you can use an alternative process to determine the QPA.

When the plan/issuer lacks sufficient data, the plan/issuer must determine the QPA using an eligible database.

Eligible database requirements

An eligible database could be a third-party database if it fills the requisite conditions:

• It is free from conflicts of interest.
• It has sufficient data regarding in-network allowed amounts paid to facilities or providers for relevant services or items furnished in the relevant geographic region.
• It can distinguish amounts paid to facilities and providers by commercial actors from all other claims data.

One type of database that is categorically eligible is the state all-payer claims database.

Calculating qualifying payment amount with the eligibility database

To calculate the QPA for something furnished in 2022 or a service or item that is newly covered while using an eligible database, the plan/issuer must first identify the database's rate that is equivalent to the median of the allowable in-network amounts for a similar service or item in the region the year before the service or item is furnished. A newly covered item must be for the year before the first coverage year.

Next, the plan/issuer must increase the median in-network allowed amount by the same increase as the CPI-U compared to the previous year.

Calculating QPA when new health plans are involved

When a new plan or coverage is offered in a region after 2019, you must observe certain rules for calculations.

If the plan/issuer would otherwise have enough data to calculate the median contracted rate in 2019 in the region where the service or item is provided, the QPA can be determined using the standard methods.

However, the plan/issuer may need more data to calculate a median contracted rate in 2019 in the region for services and items in the first year of offering. In this case, the QPA is calculated according to the rules that apply when there is insufficient information to calculate the median contracted rate or for newly covered services and items, including using an eligible database.

You can calculate the QPA for services and items provided in a later year. Still, the plan/issuer must increase the QPA for services or items furnished in the prior year by the relevant increase in the CPI-U.

Calculating QPA when new service codes are involved

Sometimes new service codes may be involved in the QPA you are attempting to calculate. A new service code is one created or substantially reformed after 2019.

When a plan/issuer is billed for something that uses a new service code, the plan/issuer must determine the QPA by using the following three steps:

1. Identify a similarly related code in the prior year. This similar code should be in the same code family or a code for services of a similar relative value in units.

2. Calculate the appropriate relativity ratio.

• If Medicare appointed a payment rate for the service or item under the new service code, the plan/issuer should calculate the Medicare payment rate ratio for the item billed under the new code compared to the Medicare rate under the related code. Both rates should disregard adjustments for all value-based purchasing arrangements.
• If Medicare has not established a payment rate for the service or item under the new code, the plan/issuer should calculate the rate ratio that the plan/issuer pays for a service or item under the related code.

3. Multiply the ratio in the second step by the related code's QPA for the year the service or item was furnished.

Required disclosures for QPA

There is certain information that you must share regarding the QPA, known as the required disclosures. Plans/issuers must make disclosures at certain points and deliver additional information upon the provider's request. Disclosure becomes a requirement with each initial payment or a notice of payment denial.

The following list outlines how information and any required disclosures will be shared about the QPA to the facility, provider, or provider of air ambulance services. The listed disclosures should be delivered in the following sequence:

1. A plan/issuer must supply the QPA for each service or item.

2. A plan/issuer must deliver a statement certifying the following:

• The QPA applies for purposes of the recognized amount.
• Each shared QPA was calculated in compliance with the methods outlined in the interim final rules of July 2021.

3. A plan/issuer must supply a statement that informs the recipient that they may initiate 30-day open negotiations. Pending failing negotiations, they may initiate the federal IDR processes within four days of the negotiations' closing.

4. The plan/issuer must provide contact information for the relevant contact point to initiate open negotiations.

The QPA information plans must share with providers upon request

Upon request, the facility, provider, or provider of air ambulance services must provide the following promptly:

• Information related to whether the QPA includes contracted rates for the relevant items that are not founded on a fee-for-service basis and whether the QPA was calculated using a derived amount or underlying fee schedule rates
• Information to identify which database you used to calculate the QPA
• Information to identify which related service code you used to calculate the QPA, if applicable
• A statement that the plan/issuer's contracted rates include penalty, bonus, risk-sharing, or other retrospective or incentive-based payments or payment adjustments for the related services and any items excluded from determining the QPA

QPA audit authority

The QPA audit authority is a statutory authority to conduct audits, according to 42 U.S.C. § 300gg-111(a)(2).

Audit process: The Secretary, in consultation with the Secretary of the Treasury and the Secretary of Labor, establishes a process under which plans/issuers offering individual or group health insurance coverage plans are audited by the applicable state authority or Secretary to ensure that:

• Such coverage and plans comply with the QPA requirement.
• Such QPA satisfies the definition provided in paragraph (3)(E) regarding the year involved, including with regards to a plan/issuer described in clause (ii) of paragraph (3)(E).

Audit samples: Under the process established under clause (i), the Secretary shall:

• (Beginning in 2022) Conduct audits, as described in the clause, of a sample of not more than 25 plans/issuers offering insurance coverage.
• Audit any plan/issuer offering insurance coverage if the Secretary receives a complaint or other relevant information about the coverage, see subclasses (I) and (II).

It is important to note that state regulators enforcing QPA provisions may call QPA audits of plans/issuers within their jurisdiction. Plans/issuers should check with the relevant enforcing states regarding specific processes.

Qualifying payment amount regulation

Audits are implemented under 45 C.F.R. § 149.140(f). The procedures ensuring plan or coverage compliance with providing QPAs and ensuring the QPA satisfies this section's requirements are described in part 150.

The scope of auditing QPA

You can apply the QPA audit's scope to items and services covered by plans/issuers offering individual or group health insurance coverage. However, this does not include health reimbursement arrangements, short-term, limited-duration insurance, and other account-based or excepted benefit insurance plans.

The process for auditing QPA

The Centers for Medicare & Medicaid Services also outline the process for auditing a QPA. The process is as follows:

1. The issuer or plan sponsor will receive a letter notifying it that a QPA audit is commencing and requesting the initial audit information and documents.
2. QPA auditors will conduct a pre-examination meeting to inspect the documents and information requested, set expectations, arrange any necessary security access or potential training, and answer questions from the plan/issuer.
3. QPA auditors will select samples and request additional documents from the plan/issuer. These items include information about the QPA sent with initial payments or denials of payment, claims-related items, and other items related to regulatory compliance.
4. QPA auditors will send their questions to the plan/issuer through a request for information as needed throughout the process.
5. QPA auditors will provide preliminary findings of potential violations to the plan/issuer through a Criticism before the draft final report is completed. This allows the plan/issuer to provide additional data if they disagree with the preliminary findings.

Data and document requests for the audit

Processes for the audit's data and document requests are as follows:

1. A comprehensive list of all insurance markets in which the plan/issuer offers coverage and each plan offered in each market. For each listed plan, the plan/issuer must provide documents related to the plan's benefits and coverage, including:

• Certificate
• Policy
• Schedule of benefits
• Contract of insurance

2. A narrative describing the Plan/Issuer's QPA calculation method, which demonstrates compliance. The narrative should be formatted as a step-by-step document and include any supporting documentation to provide a transparent and comprehensive explanation. This includes any QPAs for which the plan/issuer had insufficient information to calculate the median contracted rates for anything supplied in 2022.

3. Remote access, read-only access, or other reasonable substitutes to the claims administration system throughout the audit that provides access to claims that require a QPA. If unable to provide this access, you must provide the following:

• A claims data file in the prescribed format, a spreadsheet that will be given a call letter. The spreadsheet should include all pending, denied, and paid claims that require a QPA. Include any appeals of adverse benefit determinations for relevant plans.
• A complete data file with all calculated QPAs, regardless of whether they are associated with a claim, during the audit period. The format for the data file will be prescribed in the spreadsheet provided with the call letter.

4. Internal bulletins, claims handling manuals, and guidelines the plan/issuer utilized at any point during the audit that addresses how the plan/issuer identified claims to receive a QPA and how the plan/issuer applied the QPA to these claims.

5. Complete complaint log, or equivalent documentation, identifying any entries related to QPAs and the corresponding complaint file.

Conclusion of the audit process

After the audit process, the auditors will provide a draft final report to the plan/issuer once the plan/issuer has responded to all Criticisms upon completion of the review.

The plan/issuer has 30 calendar days from receiving the draft final report to concur with CMS's position outlined in the report or to dispute CMS's position. If the plan/issuer opts to dispute, it should clearly outline the basis for the dispute and submit appropriate illustrative examples.

Civil Money Penalty Authority

The Civil Money Penalty Authority is a statutory authority that can impose civil money penalties under 42 U.S.C. § 300gg-22(b)(2).

Generally, any non-Federal government health insurance issuer and any group health plan that fails to meet a necessary provision are subject to civil money penalties.

Regulation for civil money penalties

Regulations that implement civil money penalties for violations under PHS Act title XXVII Part D (45CFR) include:

• § 150.315: Civil money penalties for each violation of 42 U.S.C. 300gg et seq. may not exceed $100 per day for each responsible entity, for each affected individual. These penalties are in addition to any other penalties prescribed by law.
• §§ 150.317 - 323: These sections provide the factors used to determine the penalty, such as aggravating circumstances, mitigating circumstances, and other matters of justice.
• § 150.341: This section provides for circumstances under which a penalty is not imposed and the burden of establishing knowledge. The burden falls upon the responsible party or parties to establish that no responsible entity knew of the failure or should have known of the failure.
• §§ 150.343 - 347: These sections require CMS to send the responsible party a notice of penalty with specific information. They also provide a right to the responsible party to initiate an appeal of the penalty and outline how CMS may proceed if no appeal is submitted within 30 days.

Process for civil money penalties

CMS has a process for determining civil money penalties. They follow the process to determine whether a penalty is assigned when a violation is uncovered during a QPA audit. The penalty is determined based on certain factors, such as aggravating and mitigating circumstances and other matters.

The auditors send a notice of civil money penalty to the responsible party, giving that party the right to appeal. If the appeal is not timely, within 30 days of the notice, CMS will send a final penalty determination and how the party can satisfy the judgment.

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