Texas Docs’ 4th Courtroom Win Over HHS Interrupts Out-Of-Network Billing Arbitration Yet Again

The Texas Medical Association (TMA) is now 4-0 on its legal challenges to the Biden administration’s rocky implementation of the No Surprises Act, which bans surprise out-of-network medical bills and outlines processes to resolve payment disputes between providers and payers.

In a decision filed Thursday (PDF), U.S. District Judge Jeremy Kernodle largely agreed with the association’s late 2022 objection to certain provisions of the implementation—those related to the calculation of a “qualifying payment amount” (QPA) used during dispute arbitration—that TMA had argued “unfairly disadvantaged physicians in payment disputes with health insurers.”

The No Surprises Act gives payers and providers 30 days to settle any disputes on an out-of-network charge. If an agreement can’t be reached, both parties submit a preferred amount to a third-party arbitrator, which then chooses one—a process referred to as independent dispute resolution.

TMA argued that the Department of Health and Human Services’ (HHS’) regulations permitted payers to “artificially depress” the QPA, which is typically the median rate an insurer would have paid for the service if it were in-network. Third-party arbitrators are instructed to consider the QPA when ruling on a contested billing.

TMA’s filing included additional objections to HHS’ disclosure requirements, while other plaintiffs representing the air ambulance industry who joined the suit contested a regulation extending the deadline for insurers to make an initial payment determination and other QPA calculation rules specific to air ambulances.

Kernodle, who has sided at least in part with TMA on three other occasions, ruled that most of the HHS regulations challenged by the groups were unlawful and must be set aside due to conflicts with the text of the No Surprises Act.

“All but one regulation pertaining to the calculation of the QPA violate the plain text of the Act,” Kernodle wrote in the decision. “Likewise, the regulations extending the deadline for making an initial payment determination and requiring two proceedings for one air transport conflict with the Act and are unlawful.”

In a statement posted online, the Centers for Medicare & Medicaid Services said it has temporarily suspended all federal independent dispute resolution process operations “until the Departments can provide additional instructions.”

The case and Thursday’s ruling were filed in the U.S. District Court for the Eastern District of Texas.

The tossed regulations include those that calculated contracted rate QPAs for services that had not been provided and those that calculated out-of-specialty rate QPAs, among others.

HHS managed to defend two of the contested regulations, one of which pertained to disclosure requirements and the other related to the calculation of air ambulance services’ QPA based on census divisions in instances of insufficient information.

Still, TMA celebrated the decision as another victory against HHS’ “unfair” billing dispute process.

“Calculating QPAs the way the agencies required meant physicians had the scales tipped against them from the outset of negotiations,” Rick Snyder, M.D., president of the TMA, said in a Friday statement. “Permitting the inclusion of ‘ghost rates’ in QPA calculations and rates of physicians who do not practice in the specialty in question—as well as the other provisions in the rules—imbalanced arbitration discussions in health plans’ favor, against physicians.

“While the court disagreed with TMA regarding disclosure requirements in the rules, we remain pleased with the overall outcome,” Snyder said. “… The federal agencies have work to do to revise their regulations to come into compliance with the court’s decision.”

The court’s latest decision on the No Surprises Act comes just weeks after another ruling in favor of TMA, in which Kernodle found that HHS had run afoul of proper notice-and-comment procedure. Per the order, HHS halted independent dispute resolutions to amend provisions surrounding an administrative fee increase as well as joint consideration of multiple disputed items and services (a process referred to as “batching”).

Similar pauses also resulted from Kernodle’s earlier rulings on TMA’s lawsuits, which found that HHS’ guidance to arbitrators weighed too heavily on the QPA.

The administration’s difficulties implementing the No Surprises Act have not gone unnoticed by members of Congress, several of whom critiqued HHS Secretary Xavier Becerra on the bumpy rollout. What’s more, in a March congressional hearing, Becerra noted that the government and its arbitrators have been overwhelmed by “more than 10 times the number of claims than anyone ever expected.”


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