A recent decision from the Eastern District of Texas invalidated part of a rule under the No Surprises Act (“NSA”) – a federal law designed to limit “surprise billing” for out-of-network providers – and has created uncertainty regarding the administration of parts of the law.
Background
Part of the Consolidated Appropriations Act of 2021, the NSA generally limits the amount patients can be required to pay for certain out-of-network services, including emergency services and certain non-emergency services, such as anesthesiology and radiology, when performed at in-network facilities. Under the law, plans must calculate participant cost-sharing on covered services based on specified rates for similar services in the geographic area, and providers are not permitted to balance bill participants for the portion not paid by the plan. For insurers and insured plans subject to state law, state pricing laws apply, assuming that a state has adopted reimbursement rates by law; for self-insured plans in all states, as well as those insurers and insured plans in states that have not set reimbursement rates by law, cost-sharing is based on a “qualifying payment amount,” or QPA, which is the median rate paid by the plan for the same or similar items or services by providers in the same or similar specialty in the same geographic region. If a provider disagrees with the pricing of a claim and is unable to reach an agreement with the plan, the NSA provides for an independent dispute resolution (“IDR”) process to choose a reimbursement rate.
The IDR process is conducted through “baseball-style” arbitration, where the plan and provider each propose an amount that they contend to be the appropriate reimbursement rate, and after considering certain factors, the IDR entity – essentially, an arbitrator – must select one of the two options. The IDR entity is not permitted to choose something in the middle. One factor that the IDR entity must consider is the QPA. The NSA required the Departments of Health and Human Services, Labor, and Treasury (collectively, the “Departments”) to adopt rules implementing the IDR process. On September 30, 2021, the Departments issued an interim final rule (the “Rule”), under which the IDR entity was required to select the proposal closest to the QPA unless it determined that credible information submitted by either party clearly demonstrated that the QPA was materially different from the appropriate reimbursement rate. In such a case, the Rule instead required the IDR entity to select the proposal that best represented the value of the items or services provided.
Texas Medical Association v. U.S. Department of Health and Human Services
The Texas Medical Association and a Texas physician filed a lawsuit against the Departments in the United States District Court for the Eastern District of Texas, arguing that the Rule conflicts with the NSA and must be set aside. On February 23, 2022, the Court entered an order agreeing with the plaintiffs, granting summary judgment to them, and invalidating portions of the Rule.
After concluding that the plaintiffs had standing to pursue their lawsuit, the Court turned to the question of whether the Rule satisfied administrative law principles and found that it did not because the Rule conflicted with the NSA. The Court found that the NSA was unambiguous in requiring IDR entities to consider several factors, but that nothing in the NSA instructed them to weigh one factor more than any other, which the Court found that the Rule did by making the proximity of the proposal to the QPA to be determinative in most cases. The Court also found that the NSA did not authorize a “rebuttable presumption” that the proposal closest to the QPA should be the one selected. Because the Court found that Congress had been unambiguous in describing the factors that IDR entities were to consider, without weighing one factor more than the others, it concluded that the Departments’ interpretation of the NSA was not entitled to deference and that the Rule must be set aside because it was contrary to what Congress had authorized. Additionally, the Court also held that the Rule should be set aside because the Departments had failed to provide adequate opportunity for notice and comment before implementing the Rule.
As a result, the Court vacated the following provisions of the Rule: (1) the presumption that an IDR entity should select the proposal closest to the QPA; (2) the requirement that a party must produce information clearly demonstrating that the appropriate reimbursement rate is materially different from the QPA in order for an IDR entity to select the proposal that was not closest to the QPA; (3) the Rule’s definition of “material difference;” (4) the examples in the Rule demonstrating how IDR entities should select between competing proposals; and (5) the requirement that an IDR entity explain why it chose an proposal that was not closest to the QPA.
After this decision was issued, on February 28, 2022, the Centers for Medicare & Medicaid Services (“CMS”) issued a memorandum (the “Memorandum”), acknowledging the decision and stating that the Departments are reviewing the decision and considering next steps.
In the Memorandum, CMS notes that the order does not affect any of the Departments’ other rulemaking under the NSA and that the remainder of the Rule, except for the five provisions described above, remains in place. With respect to those portions of the Rule that were invalidated, the Memorandum states that the Departments are immediately withdrawing all guidance documents that are based on, or that refer to, the portions of the Rule invalidated by the Court. CMS also states that the Departments will provide additional guidance once available.
Please contact Slevin & Hart for more information about this case and how it could affect your plan.
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