On August 24, 2023, the United States District Court for the Eastern District of Texas again largely ruled in favor of the Texas Medical Association and other plaintiffs (including air ambulance providers) and vacated certain regulations[1] and related guidance concerning how the “Qualified Payment Amount” (“QPA”) – one of the factors in the arbitration of out-of-network disputes – is calculated under the No Surprises Act (the “Act”).[2] The Court also vacated certain rules specific to the QPA and Federal Independent Dispute Resolution (“IDR”) process for out-of-network air ambulance services.

This development follows on the heels of a related Texas District Court decision vacating guidance issued by the Departments of Labor, Treasury and Health and Human Services (the “Departments”) concerning the batching of claims for Independent Dispute Resolution(“IDR”) and the IDR administrative fee, which prompted the Centers for Medicare and Medicaid Services to temporarily suspend the Federal IDR process since August 3, 2023. The Federal IDR and Patient-Provider Dispute Resolution processes remain suspended, and effective August 25, 2023, IDR entities have been directed to pause all IDR-related activities.

The QPA, Generally

The Act sets forth the rates at which out-of-network emergency services and out-of-network non-emergency services furnished at in-network facilities must be reimbursed. In states with an All-Payer Model, or a specified state law that is applicable to the item/service, the out-of-network rate is whatever amount is required under the All-Payer Model or state law. If there is no All-Payer Model or specified state law, then the out-of-network rate is an amount agreed upon by the out-of-network provider and the insurer/plan, or an amount determined through the Federal IDR process. The QPA is one of the factors used in the Federal IDR, and it is typically the median contracted rate the insurer would have paid if the service had been furnished by an in-network provider or facility.

Vacatur of Rules/Guidance Related to the Calculation of the QPA

In the latest case, Plaintiffs challenged the July 2021 IFR and related guidance issued by the Departments concerning, among other things, how the QPA is calculated. Specifically, plaintiffs objected to: the inclusion of contracted rates for items/services not actually furnished by the provider or supplier (often referred to as “ghost rates”); inclusion of contracted rates from providers in different specialties (referred to as “out of specialty rates”); exclusion of risk sharing, bonus, or other incentive-based payments or payment adjustments from the QPA calculation; and inclusion of contracted rates from other plan sponsors administered by a third-party administrator.

The Court agreed that these requirements were inconsistent or conflicted with the Act and vacated those specific provisions of the July 2021 IFR and related guidance issued by the Departments.

Vacatur of Additional Rules/Guidance Related to Out-of-Network Air Ambulance Services

The Court also considered challenges to specific provisions of the July 2021 IFR and August 2022 guidance concerning the timeline for initiation of the IDR process for air ambulance services, requiring separate IDR processes for different air ambulance services codes, and the exclusion of case-specific agreements for the purpose of calculating the QPA for air ambulance services. These provisions of the July 2021 IFR and related guidance were similarly vacated.

Certain July 2021 IFR Provisions Upheld

The Court upheld certain provisions of the July 2021 IFR which plaintiffs challenged, including a finding that the Act granted the Departments broad discretion and latitude in determining what information about the QPA insurers/plans must disclose to providers, as well as in how to proceed with auditing insurer/plan compliance with those disclosure obligations.

With respect to air ambulance services, the Court upheld the rule that permits insurers to calculate QPAs based on rates agreed to in widely disparate geographic regions. The Court agreed with the Departments that this was reasonable, given the nature of air ambulance services, and the likely lack of sufficient information for purposes of calculating the QPA otherwise.

FOOTNOTES

[1] Specifically, certain provisions of the July 2021 Interim Final Rule (the “July 2021 IFR”), Part I, 86 Fed. Reg. 36,872 (July 13, 2021) (codified at 45 C.F.R. §149).

[2] Texas Medical Association, et al. v. United States Department of Health and Human Services, Case No. 6:23-cv-00450-JDK (August 24, 2023).