On July 26, 2022, Judge Jeremy D. Kernodle of the U.S. District Court for the Eastern District of Texas set aside a portion of the interim final rule implementing the No Surprises Act’s (NSA) independent dispute resolution (IDR) process for air ambulance service providers in Lifenet, Inc. v. United States Department of Health and Human Services, et al.

This ruling sets aside certain provisions that Lifenet had argued favored health plans’ standard rates over the NSA statutory considerations, similar to an earlier ruling with respect to other providers. As the courts continue to review the NSA and its implementing regulations, payors and providers must continue to implement policies and procedures that respond to the new NSA law, while facing numerous complicating ambiguities in the law, its regulations and such court decisions.

Kernodle previously struck down a parallel provision of the interim final rule applicable to other provider types on similar grounds in Texas Medical Association v. United States Department of Health and Human Services, et al., 2022 WL 542879 (E.D. Tex. Feb. 23, 2022).

In these cases, Lifenet and the Texas Medical Association alleged that while the underlying statute sets forth several factors IDR entities must consider when determining the appropriate out-of-network rate under the NSA, the interim final rule inappropriately creates a presumption for just one of those statutory factors — the qualifying payment amount (generally the health plan’s median contract rate), as set forth in more detail in a prior McGuireWoods client alert.

In both rulings, Kernodle found that the interim final rule’s IDR process conflicted with the statutory requirements and that the issuing agencies — the Departments of Health and Human Services, Labor, and the Treasury — failed to comply with the Administrative Procedure Act’s notice and comment requirements. The court indicated that “[b]ecause the [rule] rewrites clear statutory terms, it must be held unlawful and set aside for this reason alone” (internal quotations omitted).

Following the Lifenet decision, the Centers for Medicare & Medicaid Services directed IDR entities to comply with the ruling and indicated that it is in the process of updating IDR program guidance to ensure consistency with the Lifenet decision. For providers and payors seeking to resolve reimbursement rates under the patient protections for out-of-network billing, such additional guidance, and potentially additional litigation, will be welcomed to help resolve some of the ambiguities presented by the NSA.

McGuireWoods will continue to follow this litigation and regulatory process to provide additional background on the NSA provisions.