On August 24, the U.S. District Court for the Eastern District of Texas once again struck down parts of the regulations governing the arbitration process created by the No Surprises Act (NSA) to settle payment disputes between out-of-network healthcare providers and payers. This decision in Texas Medical Association, et al. v. United States Department of Health and Human Services, Case No. 6:22-cv-450-JDK (TMA III) is the latest in a series of successful challenges brought by providers against the Independent Dispute Resolution (IDR) process developed by the Departments of Health and Human Services, Labor, and Treasury (the Departments). The Departments have extended a temporary suspension of the IDR process as a result of the decision.

In TMA III, the Texas Medical Association and other providers challenged the regulations governing how payers should calculate the qualifying payment amount (QPA) for an item or service. The QPA serves two primary functions under the NSA: it serves as the basis for determining patient cost-sharing amounts (i.e., how much providers are allowed to charge patients), and it is a key factor arbitrators consider in the IDR process. In TMA III, plaintiff providers disputed the following:

• The inclusion of “ghost rates” (rates for items or services that providers had no intention to provide).
• The inclusion of the rates of providers in different specialties.
• The exclusion of risk sharing, bonuses, penalties, or other incentive-based or retrospective payments or payment adjustments.
• Plan sponsors’ ability to use either rates from their own plans or rates from all plans administered by their third-party administrator.

The Court granted summary judgment for the plaintiff providers on all four points, vacating the offending provisions of the NSA regulations and remanding the matter to the Departments for further consideration.

In response, the Departments posted a notice on the IDR website indicating a continuance of the suspension of the IDR process that resulted from the issuance of TMA IV (discussed in a prior alert). Effective September 5, 2023, the Departments have instructed IDR entities to “proceed with eligibility determinations for single and bundled disputes submitted on or before August 3, 2023,” and “all other aspects” of the IDR process continue to be suspended, although payers and providers may continue negotiations over payment disputes. Meanwhile, the Departments said in an email that they continue to review the TMA III decision and are “evaluating current IDR processes, templates, and system updates that will be necessary to comply with the court’s order.”

The TMA III decision is another positive development for providers that believe the QPA calculation methodology implemented by the Departments favored insurers in the arbitration process to settle payment disputes. However, vacating the QPA calculation also creates uncertainty with respect to patient cost-sharing and how much providers can charge patients. The NSA requires providers to charge patients based on the QPA information provided by payers. Without guidance on how payers should calculate the QPA, it is not clear how the Departments expect payers to calculate the QPA. Stakeholders should monitor the Departments’ guidance on CMS’s Surprise Billing website for instructions related to the QPA calculation.

In the meantime, the Departments are planning to issue two proposed rules related to the IDR process, one to address IDR operations and the other IDR fees. The IDR operations proposed rule will amend the NSA interim final rules issued in July and October 2021, and the final rule issued in August 2022. Both proposed rules are under review at the White House Office of Management and Budget (OMB), which is the final stage before an agency publishes proposed rules in the Federal Register, but there is no clear timeline for when they will be issued. The Departments have also appealed to the United States Court of Appeals for the Fifth Circuit TMA II, a February 2023 decision finding unlawful the Departments’ instructions for how arbitrators should make payment determinations.

We will continue to monitor developments related to the NSA and the Departments’ implementation.