For the third time, United States District Court Judge Jeremy D. Kernodle of the Eastern District of Texas has struck down certain rules implementing the arbitration process under the No Surprises Act (“the Act”) after a challenge by the Texas Medical Association (“the TMA”). Specifically, the Court struck down CMS guidance increasing the fee for using the Independent Dispute Resolution (“IDR”) process established under the Act from $50 to $350 and its rule limiting the types of claims that could be batched into one IDR arbitration to claims billed under the same service code.

The Act limits the amount insured patients are required to pay for services provided by 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 adopted the IDR process, which is a “baseball style” arbitration, for resolving disputes between payers and providers over the amount insurers would pay for out-of-network services subject to the Act.

TMA had challenged the increase in the IDR fee and the limitation on the types of claims that could be batched in one arbitration on the basis that the government had violated the Administrative Procedures Act by failing to use the notice and comment process.  TMA argued that the fee increase made the arbitration process cost prohibitive for providers, which problem was exacerbated by the limitation on claims that could be batched into one IDR proceeding.

The Court found that the government violated the APA both in “dramatically” increasing the fee to $350 and in limiting the types of claims that could be batched. In addition, the Court found that the violations were not harmless, therefore requiring the rules to be vacated.  In addressing the batching rule, the Court stated:

By permitting batching only if items or services share the ‘same service code,’ the Rule severely limits what claims providers and insurers may batch…And submitting separate claims to separate arbitrators (or IDRs) requires paying separate administrative fees – a costly and sometimes cost-prohibitive consequence of the Rule…The Rule’s ‘same service code’ requirement thus effectively forces providers out of IDR for some claims, substantially impacting the ability to recover their proposed payment amount.

The Court refused, however, to require the government to refund fees previously paid or to extend the time for filing IDR arbitrations.

In a statement applauding the ruling, TMA President Rick W. Snyder, II, MD stated:

We are pleased a federal court has once again agreed with the Texas Medical Association…in finding the federal agencies acted unlawfully when implementing provisions of the No Surprises Act….

The federal agencies set the initial administrative fee at $50, saying last October that the fees would remain at that rate through this year.  However, just two months later, the agencies announced the fee would jump to $350 beginning in January. TMA believes this unfair steep jump in fees has dramatically curtailed many physicians’ ability to seek arbitration when a health plan offers insufficient payment for out-of-network care.

Likewise, TMA is pleased the court decided…to invalidate certain rules narrowing the law’s provisions on ‘batching’ claims for arbitration. Congress authorized batching in the law to encourage efficiency and minimize costs in the independent dispute resolution process. It is vital the law be applied as Congress intended.

As a result of the ruling, CMS immediately suspended the IDR process, including the ability to initiate new disputes, until it can provide additional guidance.

The Court’s opinion is linked here and TMA’s statement is linked here.  Whatley Kallas’s previous articles on the Court’s opinions striking down rules under the Act as a result of TMA’s lawsuits are linked here and here.

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