Surprise billing update: Judge blocks out-of-network rate provisions

On February 23, a U.S. District Court judge in Texas vacated surprise billing regulatory provisions that established a presumption in favor of median in-network rates to determine payment amounts for out-of-network services under the No Surprises Act arbitration process.

What is the No Surprises Act?

The No Surprises Act protects patients from surprise medical bills for non-emergency services furnished by out-of-network providers at in-network healthcare facilities, emergency services, and out-of-network air ambulance services. In addition, the No Surprises Act establishes a framework for negotiation and independent dispute resolution (IDR) to determine payment amounts for out-of-network services. For information on the No Surprises Act and the related 2021 interim final rules click here or click here to listen to a recent podcast explaining the act.

If an out-of-network provider and the health plan or insurer disagree on the payment amount for out-of-network services and are unable to resolve the dispute through negotiation then the No Surprises Act allows either party to initiate the IDR process within four business days after the end of the 30 business day negotiation period. An arbitrator (referred to in the regulations as the “IDR entity”) will then be selected, the provider and the health plan or insurer will each submit a proposed payment amount and supporting information to the IDR entity, and the IDR entity will select one of the two offers as the out-of-network rate. The No Surprises Act identifies factors to be considered in determining the payment amount, as well as some factors that should not be considered, and directs the Secretaries of Health and Human Services, Labor and Treasury to establish the IDR process. 

The IDR regulations require the IDR entity to select the offer closest to the “qualifying payment amount” (the “QPA”) as the payment amount unless the IDR entity determines that credible information submitted by one of the parties clearly demonstrates that the QPA is materially different from the appropriate out-of-network rate. This presumption in favor of the QPA (which is generally the median in-network contracted rate for the health plan or insurer) drew opposition from heath care providers and associations and has been challenged in six lawsuits. One of these cases was filed by the Texas Medical Association (TMA) and a Texas physician in the U.S. District Court for the Eastern District of Texas.

Judge vacates surprise billing regulatory provisions

In the TMA case Judge Kernodle on February 23 vacated portions of the IDR regulations relating to the QPA presumption on two independent grounds. The court determined that the IDR regulation “places its thumb on the scale for the QPA” and conflicts with the No Surprises Act by requiring the IDR entity to presume that the QPA is the correct out-of-network rate and imposing a heightened burden for the other factors listed in the statute. The court also found that the regulations failed to satisfy notice and comment requirements under the Administrative Procedure Act.

If this decision remains in effect it figures to allow a more even-handed (at least from a provider perspective) and perhaps less predictable approach to determining out-of-network rates. IDR entities will have more discretion to determine out-of-network rates and to weigh the factors that the parties are permitted to raise under the No Surprises Act. Providers may find it more beneficial to monitor and challenge out-of-network payment amounts. Selection of the IDR entity is likely to become increasingly important in determining out-of-network rates.  

With the removal of the QPA presumption it will become even more crucial for providers to develop plans on when to challenge out-of-network payment amounts and to implement policies and procedures to manage the tight timeframes for contesting and negotiating payment amounts and for navigating the IDR process. Providers should also have processes in place to quickly assemble and present supporting information. 

It is important to keep in mind that the TMA decision vacated only regulatory provisions relating to the presumption in favor of the QPA as the out-of-network rate. This case does not change the negotiation and IDR deadlines. In addition, the decision does not eliminate or lessen balance billing restrictions, notice and disclosure requirements or other patient protections under the No Surprises Act.  

The Departments of Health and Human Services, Labor and the Treasury (the “Departments”) issued guidance on February 28, 2022, stating that the consumer protections remain in place and that the Departments are considering next steps to comply with the TMA court order. In particular, (i) guidance documents based on or referring to the invalidated portions of the regulations have been withdrawn and will be replaced, (ii) the Departments will provide training on the revised guidance, (iii) the Departments will open the IDR process for submissions through the IDR Portal, and (iv) if the open negotiation period has expired in connection with a dispute the Departments will allow 15 days following the opening of the IDR portal to initiate the IDR process.

Surprise billing standards will continue to change as updated and new regulations are issued and perhaps as litigation proceeds on appeal of the TMA case or in other litigation.

For more information on surprise billing or related matters, please contact the attorney below.