By Beth Anne Jackson, Shareholder, Brown and Fortunato
On September 22, 2022, the Texas Medical Association (TMA), along with a physician and Tyler Regional Hospital, sued the United States Department of Health and Humans Services, Department of Labor, Department of the Treasury, and their respective current leaders in their official capacity (Departments) seeking declaratory and injunctive relief from the No Surprises Act (NSA) final rule published August 26, 2022 (Final Rule). Specifically, the lawsuit (Complaint) alleges that the Final Rule exceeds the Department’s authority by imposing “extrastatutory criteria” on arbitrators’ decision-making authority.
The NSA limits patient cost-sharing when emergency services are provided in a non-network facility or when non-emergency services are provided by an out-of-network physician in an in-network facility. Out-of-network providers may not bill patients for amounts more than what they would pay for in-network services. Such providers must then negotiate with the patient’s plan for reimbursement. If those negotiations fail, either party may initiate arbitration with a certified independent dispute resolution (IDR) entity. In arbitration, each party submits an offer, and the arbitrator must decide which one is the appropriate payment amount. Importantly, the statute contains a detailed list of factors that arbitrators must consider. The NSA states that IDR entities (the arbitrators) “shall consider”: the qualifying payment amount (QPA); any information that the arbitrator requests from the parties; any additional information submitted by either party relating to its offer; and information on five additional circumstances (Additional Circumstances). Information on Additional Circumstances includes the level of training, experience, and quality of the healthcare provider; the market share of the provider; the acuity of the patient or the complexity of furnishing the services; the teaching status, case mix, and scope of services of the facility that furnished the item or service; demonstrations of good faith efforts (or lack thereof) made by the provider to enter into network agreements and, if applicable, contracted rates between the provider and the insurer during the previous four plan years.
TMA successfully challenged the Department’s interim final rule, published on October 7, 2021 (Interim Final Rule) in the United States District Court for the Eastern District of Texas, Tyler division (Court) (TMA I). The Court’s decision, in that case, vacated the Interim Final Rule, which had created a rebuttable presumption that, in arbitration between providers and insurers, the QPA was the amount that should be awarded unless credible evidence “clearly demonstrate[s]” that the QPA is “materially different from the appropriate network rate.” The Court stated that the Interim Final Rule impermissibly “put a substantial thumb on the scale in favor of the QPA” when the NSA required that all statutory factors be considered, with no one factor being given more weight than the others. Using the QPA as the presumptive rate is problematic to providers because the QPA is the median in-network rate, which is calculated by insurers in accordance with Department rules. However, insurers are only required to disclose a limited amount of information on how they calculated the QPA, and neither providers nor the Departments necessarily have enough information to determine whether the calculation was done in compliance with the NSA.
On August 19, 2022, less than six months after the TMA I decision, the Departments issued a final rule (Final Rule) that removed the regulatory language vacated by the Court. However, the Departments once again added factors that, according to the Complaint, are not included in the NSA. The Complaint asserts that the added factors are not only beyond the authority delegated to the Departments under the NSA, but also arbitrary and capricious under the Administrative Procedure Act. As in TMA I, the Complaint seeks to have those provisions vacated from the Final Rule and the Departments enjoined from enforcing the Final Rule as currently written. In addition, the Complaint requests that the Court remand the Final Rule to the Departments with instructions that any regulations or guidance regarding arbitration may not “privilege the QPA.”
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According to the Complaint, the problematic provisions of the Final Rule include: the first factor to be considered procedurally must be the QPA; the information submitted regarding Additional Circumstances must be deemed “credible” while not requiring this of the QPA, which is calculated solely by the insurance carrier; information about Additional Circumstances must be “related to” the provider’s offer, and arbitrators may not give weight to information regarding Additional Circumstances that are already accounted for in the QPA when information may be relevant to more than one statutory factor. Individually, these provisions “unlawfully limit . . . arbitrators’ discretion to weigh the statutory factors.”
Because the Complaint was only recently filed, it has not been scheduled for arguments before the Court. Providers should note that the NSA and its regulations only apply to plans not covered by Texas’ surprise billing laws (such as self-insured ERISA plans). State-regulated PPO, EPO, and HMO plans are among those to which Texas law, rather than the NSA, applies.
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