In a win for providers, the federal court that had previously struck down the sections of the No Surprises Act rules governing how arbitrators determine the amount paid to out-of-network providers, has now struck down the final rules governing these determinations. The rules had been challenged by the Texas Medical Association, one of its physician members, a Texas hospital, and an air ambulance company.
Congress passed the No Surprises Act (“the Act”) in order to prevent patients from being surprised by bills from out-of-network providers after treatment for an emergency service or for treatment for a non-emergency service by an out-of-network provider at an in-network facility. The Act also provided a framework for resolving disputes between payers and providers regarding the amount insurers would pay for out-of-network subject to the Act. This framework included a “baseball-style” arbitration under which the provider and the insurer each submit an offer and the arbitrator selects one of the offers.
The Act did not establish a benchmark for determining such payment amounts, but rather set various factors to be considered. One of the factors was the qualified payment amount (“QPA”), which is the median in-network contract amount. Other factors specifically listed in the Act included 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 rules previously struck down by the Court created a rebuttable presumption that the QPA – the in-network payment amount – was the appropriate out-of-network payment.
The plaintiffs argued that although the final rules removed the rebuttal presumption, they still limited the discretion of the arbitrators by requiring them to consider the QPA first and only thereafter consider the other factors and by prohibiting them from giving weight to these additional factors unless certain prerequisites were met. In addition, they argued that the final rules impermissibly imposed a requirement on arbitrators relying on non-QPA factors in reaching their determination of the out-of-network rate to explain in writing why the additional factors were not already reflected in the QPA. The government argued that it was filling in gaps in the Act and that it was entitled to deference under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc.
The Court agreed with the plaintiffs and struck down the challenged rules. As it had in its earlier decision, the Court found that the Act was “unambiguous” in “plainly require[ing] arbitrators to consider all the specified information in determining which offer to select” and that there was no gap. Therefore, the agency’s interpretation of the Act was owed no deference under Chevron:
Rather than instructing arbitrators to consider all the factors pursuant to the Act, the Final Rule requires arbitrators to consider the QPA first and then restricts how they may consider information relating to the on-QPA factors.
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.
The Court vacated the challenged rules and remanded them for further consideration by the agencies. The government has not yet indicated whether it will appeal the Court’s ruling.
Providers welcomed the decision. In a statement, Melinda Hatton, General Counsel of the American Hospital Association said:
With the Court now having struck down two regulations as inconsistent with the No Surprises Act, we hope the apartments will work with hospitals and health systems to implement the air process Congress intended.
The Court’s opinion is linked here.
The attorneys at Whatley Kallas will continue to follow developments both with respect to the government’s further issuance of rules governing the determination of out-of-network payments and with respect to any further litigation. Whatley Kallas, LLP’s earlier article about the Court’s previous ruling is linked here.