The Centers for Medicare & Medicaid Services has ordered an immediate halt to payment decisions by Independent Dispute Resolution (“IDR”) entities under the No Surprises Act as a result of a February 6, 2023 federal court decision vacating the rules governing how out-of-network payment decisions are to be made. In addition, CMS directed IDR entities to recall any payment decisions made after February 6, 2023. In issuing these directives, CMS announced that it is “in the process of evaluating and updating Federal IDR process guidance, systems, and related documents to make them consistent” with the court decision.

The rules vacated by the Court addressed the weight that IDR entities should give to the qualified payment amount (“QPA”) – the median in-network payment amount – in making their payment determinations. It was the second time that Judge Jeremy D. Kernodle of the federal District Court for the Eastern District of Texas had struck down rules governing out-of-network payment decisions in the IDR process.

The first iteration of the rules created a rebuttable presumption that the QPA was the appropriate out-of-network payment. These initial rules imposed strict conditions before IDR entities could consider other factors listed in the No Surprises Act, which include the level of training and experience of the provider, the market share of the non-participating provider and insurer, the acuity of the patient, the teaching status or case mix of the provider, and the good faith efforts (or lack thereof) of the parties to enter into a network agreement.  The Court struck the initial rules down in 2022 as inconsistent with the unambiguous language of the No Surprises Act that “arbitrators are to consider several factors when selecting the proper payment amount and does not instruct arbitrators to weigh any one factor or circumstance more heavily than the others.”   Tex. Med. Ass’n v. U.S. Dep’t of Health & Hum. Servs., 587 F. Supp. 3d 528 (E.D. Tex. 2022).

In response to the 2022 decision, the government issued final rules that removed the rebuttable presumption, but still limited the discretion of arbitrators by requiring them to consider the QPA first and only thereafter consider the other factors. In addition, the new rules prohibited IDR entities from giving weight to these additional factors unless certain prerequisites were met and imposed a requirement that IDR entities relying on non-QPA factors in making out-of-network payment determinations explain in writing why the additional factors were not already reflected in the QPA.

As it had with the initial rules in December, the Court found that the new rules violated the “unambiguous” requirement of the No Surprises Act that arbitrators are to consider all of the factors listed in the Act in making their payment determinations:

While avoiding an explicit presumption in favor of the QPA, the Final Rule nevertheless continues to place a thumb on the scale for the QPA by requiring arbitrators to begin with the QPA and then imposing restrictions on the non-QPA factors that appear nowhere in the statue.

These decisions were wins for providers because prioritizing the QPA over other factors in the Act tends to reduce out-of-network payments to providers. The lawsuits in both of these cases were brought by the Texas Medical Association as well as individual providers.

The attorneys at Whatley Kallas, LLP will continue to follow developments as CMS issues new guidance to IDR entities.

CMS’s announcement is linked here. Whatley Kallas’s earlier article on the February 6, 2023 decision is linked here and the Court’s opinion is linked here.

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