Understanding Provider–Payer Disputes: Key Issues in Reimbursement, Denials, and the NSA IDR Process

By: Pearl Walia

Changes in politics, public policy, and economic conditions continue to influence contract negotiations between healthcare payers and providers. Shifts in reimbursement legislation, regulatory requirements, Medicaid eligibility rules, and compliance obligations all affect how parties evaluate contractual provisions. As a result, payer disputes remain a persistent and significant challenge across the healthcare industry.

Payers include health insurance companies and other entities that finance or administer healthcare benefits. Because providers and payers frequently disagree on issues such as medical necessity, coverage limitations, prior authorization requirements, and coding accuracy, reimbursement disputes have become a recurring revenue cycle management concern for hospitals, physician groups, and other healthcare professionals.

Network agreements between providers and insurers or third party administrators (TPAs) define the terms governing reimbursement, coding, billing, and covered services. Like many contractual disputes, payer conflicts often arise when a payer denies payment, delays payment, seeks recoupment of alleged overpayments, or reimburses a claim at an amount inconsistent with the contract or applicable law.

Common Reasons Healthcare Claims are Denied

Payers cite several common reasons to deny healthcare claim reimbursement, including:

• Request for Medical Documentation: Payers frequently request treatment records and other supporting documentation to verify that the requirements for billing a covered service under the applicable CPT/HCPCS code(s) have been satisfied. Denials may follow if the payer determines that the submitted documentation is incomplete, insufficient, or does not substantiate the billed service.
• Services Not Covered: Payers often deny claims on the basis that the billed service is not covered under the member’s benefit plan or under Medicare (for Medicare Advantage plans). Providers should consult legal counsel to review the governing contract, applicable statutes, regulations, and administrative guidance to determine whether the service is, in fact, excluded from coverage.
• No Prior Authorization: Payers frequently deny claims for lack of prior authorization. Providers may rebut these denials by demonstrating that prior authorization was not required under the circumstances, could not reasonably be obtained in a timely manner, or was unnecessary because the provider can substantiate the medical necessity of the service For example, a provider administers life-saving treatment and requests authorization retroactively.
• Missing Primary Care Provider (PCP) referral: Some payers require a PCP authorized referral before the member can receive specialized or out-of-network care. This denial reason largely parallels no prior authorization denials. A payer dispute can arise if there is no PCP on the insurance portal or the provider challenges the basis for the PCP referral requirement application to the circumstances.
• Billed Claims Were Not Medical Necessity: Payers may deny a provider’s claims on the grounds that the underlying services were not medically necessary and therefore not covered. These disputes typically turn on differing legal, regulatory, or contractual definitions of medical necessity. Many payers incorporate cost‑oriented considerations into their medical‑necessity standards, including coverage rules, policy guidelines, utilization controls, and benefit limitations. Providers, by contrast, generally define medical necessity through individualized, reasonable clinical judgment—focusing on what the patient requires to diagnose, treat, or manage a condition.
• Downcoding: Instead of denying the claim outright, payers may “downcode” a service—reducing the billed CPT/HCPCS code to a lower-level code that reimburses less. This typically occurs when the payer asserts that the documentation does not support the complexity, intensity, or time associated with the higher‑level code. Providers often challenge downcoding by demonstrating that the documentation meets all required elements for the original code, that the payer misapplied coding guidelines, or that the payer’s automated systems improperly downgraded the claim.

The No Surprises Act and the IDR Process

The No Surprises Act (“NSA”), effective January 1, 2022, is a federal law designed to protect patients from unexpected healthcare bills resulting from out-of-network care. Traditionally, a patient could be “balance billed” for the difference between a provider’s charges and the amount that their insurer chose to cover. The NSA sharply restricts this practice for certain categories of care.

Out-of-network providers include healthcare professionals, hospitals, and facilities that do not have a contractual relationship with a patient’s health plan. Under the NSA, these providers are generally prohibited from balance billing patients for emergency services, post-stabilization services, and certain non-emergency services provided at in-network facilities.

When a payer and provider disagree about the appropriate payment amount for a protected out‑of‑network claim, the NSA sets forth a structured dispute resolution process:

1. 30-Day Open Negotiation Period: The parties must first attempt to resolve the dispute informally. If negotiations fail, either party may initiate the Independent Dispute Resolution (“IDR”) process.
2. IDR Process: After initiation, the parties enter a brief administrative phase in which they submit their payment offers and supporting documentation to a certified IDR entity. The arbitrator must then select one of the two offers—known as “baseball-style arbitration”—within the statutory timeframe, typically 30 days. In making this determination, the arbitrator considers several required factors, including:
   1. the Qualifying Payment Amount (“QPA”),
   2. the provider’s training and experience,
   3. the complexity of the service,
   4. patient acuity,
   5. facility characteristics, and
   6. any credible evidence of the payer’s or provider’s prior contracted rates.

The NSA’s core purpose is to ensure that patients are not financially penalized simply because their care—particularly in emergencies or facility‑based settings—involved an out‑of‑network provider they did not choose and could not avoid.

Because the NSA’s Independent Dispute Resolution process is highly technical, procedurally rigid, and continually evolving through federal rulemaking and litigation, many providers benefit from consulting a healthcare attorney before entering IDR.

Factors That Shape Claim Denial Appeal Strategy

Appealing a payer’s denial or underpayment is rarely a one‑size‑fits‑all process. The strategy our firm develops for each client depends on several key factors, including:

• Type of Claim: The nature of the dispute—whether an underpayment, denial of coverage, medical‑necessity determination, or timely‑filing issue—directly shapes the appeal pathway and the legal arguments available.
• Type of Insurance Plan: Different plan types are governed by different laws, regulations, and appeal procedures. These may include Medicaid managed care plans, ERISA self-funded employer plans, commercial fully insured plans, state employee health plans, and Federal Employee Health Benefits (“FEHB”) plans. Each framework imposes unique deadlines, documentation requirements, and remedies.
• Place of Service: Reimbursement methodologies often vary depending on where the service was rendered—such as a hospital, ambulatory surgical center, physician’s office, or via telemedicine. These distinctions can influence both the applicable payment rules and the strength of the provider’s appeal.
• Type of Service: The clinical nature of the service affects both the complexity of the dispute and the financial stakes involved. Emergency and out‑of‑network services may implicate the NSA, while similar services billed under a commercial plan may be governed by contractual appeal procedures. Surgical, specialty, and high‑acuity services often require more detailed clinical and regulatory arguments.
• Type of Provider: Hospitals, physician groups, specialty practices, and out‑of‑network providers each face different payment structures, leverage points, and regulatory obligations. For example, in‑network providers are bound by managed‑care contract terms, while out‑of‑network providers may rely on the No Surprises Act or state law to challenge improper payment reductions.
• Contractual versus Out-of-Network Claims: Whether the provider has a contract with the payer determines the governing rules and available remedies. Contracted claims are governed by negotiated rates and contractual dispute‑resolution procedures. Non‑contracted claims may instead rely on “usual, customary, and reasonable” (“UCR”) or usual and customary (“UC”) provider charges, statutory and regulatory coverage rules, or federal balance‑billing prohibitions.
• Payer’s Action on the Claim: The appeal strategy also depends on the specific action taken by the payer—whether an initial denial, a partial payment, a downcoded claim, or a delayed payment. In some cases, providers may have additional rights under state prompt pay laws when an insurer fails to issue payment within required timeframes.

Because every provider–payer relationship is shaped by a unique combination of contractual terms, regulatory frameworks, and factual circumstances, there is rarely a single approach that resolves all disputes. The appeals process can be time‑consuming, administratively burdensome, and financially consequential.

Our firm works closely with providers to identify the most effective strategy for pursuing payment—whether through internal appeals, regulatory escalation, or litigation. By understanding the specific facts of each claim and the laws that govern the dispute, providers can better protect their reimbursement rights and remain focused on delivering patient care.

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It should be noted that I am not your lawyer (unless you have presently retained my services through a retainer agreement). This post is not intended as legal advice; it is purely educational and informational, and no attorney-client relationship shall result after reading it. Please consult your own attorney for legal advice. If you do not have one and would like to retain my legal services, please get in touch with me using the contact information listed above.

All information and references to laws, rules, regulations, and advisory opinions were accurate as of this time, but laws are constantly evolving. Please get in touch with me to ensure that the law governing your business is up to date. Thank you.