Fifth Circuit Affirms Vacatur of Federal No Surprises Act’s Arbitration Provision
On August 2, 2024, the Fifth Circuit Court in Texas Medical Association et al. v. U.S. Department of Health and Human Services et al. ruled in favor of out-of-network health providers, finding that federal guidelines for Independent Dispute Resolution (“IDR”) proceedings unfairly favored health insurers. More specifically, the Court held that the guidelines unfairly put a “thumb on the scale” in favor of one factor, the Qualifying Payment Amount (QPA), which is solely determined by health insurers, by putting an undue advantage on it. This would lead to reduced reimbursement rates. The court affirmed the trial court’s decision to vacate those guidelines. The ruling is seen as a crucial step in helping health providers secure fair reimbursement rates under the Federal No Surprises Act, which was passed by Congress in December 2020 to protect patients from being held responsible for medical bills from non-contracted medical providers.
Under the Federal No Surprises Act, a quick and fair IDR process was established to resolve payment disputes between providers and health plans. The Act specified that providers and health plans must submit relevant data for consideration by the IDR entity. It also sets specific time frames for the IDR entity to make its determination and for the health plan to make additional payments if necessary.
Additionally, the Federal No Surprises Act outlined factors that IDR entities must consider when resolving disputes regarding out-of-network services, such as the QPA, the doctor’s level of training, the doctor or insurer’s market share, the patient’s acuity, and the facility’s scope of services.
In August 2022, the Departments of Health and Human Services, Labor, and the Treasury issued final rules for the federal IDR process. These rules mandated that IDR entities first consider the QPA before considering other statutory factors and provide an explanation if information beyond the QPA is relied on.
The Texas Medical Association challenged these rules, arguing that the Departments lacked statutory authority to impose these procedural rules. The district court agreed with the association and vacated the rules nationwide. The appeals court affirmed this decision, stating that the rules unlawfully favored the QPA and supplemented the comprehensive statutory scheme.
In looking ahead, the ruling once again dismisses the government’s efforts to use regulatory means to prioritize the QPA as the main standard for setting reimbursement rates via the IDR process. The Fifth Circuit emphasized that this approach contradicts the clear language of the Federal No Surprises Act and what Congress intended.
At this point, IDR entities must persist in their duties as they were before the district court nullified the contested regulations: they should consider the QPA as merely one of many factors, not more important than the rest. This approach ensures that healthcare providers maintain a stronger position in succeeding during the IDR proceedings.
The decision acknowledges that the Federal No Surprises Act provides the Departments with limited authority to enact procedural rules and guidelines concerning the IDR process. Consequently, this interpretation paves the way for further legal challenges against the Department’s rules on IDR procedures.
