Texas federal court again strikes regulations implementing the No Surprises Act

On August 24, 2023, the US District Court for the Eastern District of Texas granted in part Texas Medical Association's (TMA) motion for summary judgment, again striking down portions of the regulations implementing the No Surprises Act (NSA).

The ruling came in TMA's third lawsuit filed on November 30, 2022 against the US Departments of Health and Human Services (HHS), Labor and Treasury and the Office of Personnel Management (the Departments). TMA III, 2023 WL 5489028 (ED Tex. 2023). To date, the Court has issued four (4) different rulings regarding implementation of the NSA.

In TMA III, the plaintiffs challenged the Departments' implementation of the NSA, including, among other things, the methodology for calculating the qualifying payment amount (QPA). In response to the opinion, the Centers for Medicare and Medicaid Services (CMS) announced that:

As a result of the TMA III decision, effective August 25, 2023, the Departments have temporarily suspended all Federal IDR process operations in order to make changes necessary to comply with the court's opinion and order. Disputing parties should continue to engage in open negotiation.

The Court previously held that the Departments improperly restricted arbitrators' discretion and unlawfully tilted the arbitration process in favor of the QPA and insurers. TMA I, 587 F. Supp. 3d 528 (ED Tex. 2022); TMA II, 2023 WL 1781801 (ED Tex. 2023). More recently, the Court held that the Departments unlawfully bypassed the Administrative Procedure Act's notice-and-comment requirement in issuing rules related to the administrative fee for the independent dispute resolution (IDR) process and the batching of claims in that process. TMA IV 2023 WL 4977746 (ED Tex. 2023). The Court's latest ruling in TMA III enlarges the existing shadow over NSA implementation and adds additional uncertainty regarding the future of the law. 

No Surprises Act

The Act

The NSA was enacted as part of the Consolidated Appropriations Act, 2021, and took effect on January 1, 2022. Congress passed the NSA to protect patients covered by group and individual health plans from surprise medical bills. These protections apply when patients seek (i) emergency services, (ii) services from out-of-network providers at in-network facilities and (iii) services from out-of-network air ambulance providers.

When an out-of-network provider provides services to a patient, the NSA requires the insurer to reimburse the provider at a statutorily calculated rate. In some states, these rates are set by an All-Payer Model Agreement or by other state law. In states without a Model Agreement or specific law, the rate is either agreed to by the provider and the insurer or determined through the NSA's IDR process.

Independent dispute resolution and the QPA

After a patient receives out-of-network medical services the insurer must issue an initial payment or notice of denial of payment to the provider within thirty (30) days of the provider submitting a bill for the medical services. Then, the provider may initiate a 30-day open negotiation period in order to determine the appropriate payment for the medical services. If the parties do not resolve their dispute within this 30-day period, either party may proceed to IDR arbitration.

In the IDR arbitration, the NSA requires both the provider and the insurer to submit proposed amounts to resolve their payment dispute as well as an explanation for their proposed amounts. The arbitrator must then choose either the provider's or the insurer's amount. In making this decision, the arbitrator must take into consideration the QPA—the insurer's median contracted rate for the same or similar item or service in the geographic region—and the information submitted by the parties in relation to other statutorily mandated factors. See 45 CFR § 149.140; 45 CFR § 149.510(c)(4)(iii).

TMA III

In TMA III, the plaintiffs claimed that the NSA implementing regulations QPA calculation requirements enabled insurers to artificially reduce the QPA, swaying arbitrations in favor of the insurers and causing underpayment to providers. The plaintiffs also claimed that the regulations QPA calculation disclosure requirements precluded adequate review by providers and the Departments. The plaintiffs further challenged the regulations indefinite extension of the 30-day statutory deadline for insurers to make a payment decision. And specific to air ambulance services, the plaintiffs challenged the Departments' technical guidance requiring two separate IDR processes for a single medical air transport and the regulations exclusion of single case agreements from the QPA calculation and permitted expansion of the regions used to calculate the QPA.

On August 24, 2023, Judge Kernodle issued an opinion and order granting in part the plaintiffs' motion for summary judgment. Judge Kernodle stated that "all but one regulation pertaining to the calculation of the QPA violate the plain text of the Act." Specifically, Judge Kernodle vacated provisions that allowed the calculation of QPAs based on the: (i) inclusion of contracted rates for services providers have not provided; (ii) inclusion of out-of-specialty rates; (iii) exclusion of risk sharing, bonus, penalty or other incentive-based or retrospective payment adjustments; and (iv) inclusion by self-insured group health plans of rates for plans administered by a third-party administrator.

The Court also vacated the rule starting the 30-day deadline for notice or denial of payment from the insurer's receipt of the information necessary to decide a claim, finding that the inclusion of the ambiguous term "necessary" created an indefinite time period and conflicted with the NSA's unambiguous 30-day deadline for insurers to make a payment decision.

For air ambulance services, the Court vacated the Departments' technical guidance requiring two (2) separate IDR processes for a single medical air transport holding that the requirement violated the text of the NSA which "defines each air ambulance transport as a single service and allows initiation of a single IDR process for each service." The Court also vacated the implementing regulations exclusion of case-specific or single-case agreements from the calculation of the QPA for air ambulance services.

The Court upheld the NSA implementing regulations QPA calculation disclosure requirements finding that the NSA provides the Departments with significant discretion in determining what information an insurer is required to share with a provider regarding the QPA. The Court also upheld the regulations permitting calculation of the QPA for air ambulance services based on census divisions in instances of insufficient information.

In conclusion

In the wake of recent court rulings related to the NSA arbitration process, CMS has temporarily suspended all federal IDR process operations. This will exacerbate the existing backlog of cases, further delay payments to providers and frustrate the intent of the NSA to provide a clearer and swifter resolution to disputes between providers and payors.

Norton Rose Fulbright's healthcare team has the capacity to assist providers in navigating the ever-changing NSA landscape. Please let us know if we can be of assistance.