Marking a fourth victory for the Texas Medical Association in as many lawsuits, a court on Aug. 24 struck down a large portion of the regulations setting forth a methodology insurers use to calculate the qualifying payment amount, or QPA, used in surprise-billing disputes – part of a series of federal rules TMA has long argued skew the arbitration process in insurers’ favor.
The ruling followed yet another victory against federal regulators on Aug. 3 when the same court – the U.S. District Court for the Eastern District of Texas – struck down a 600% hike in the administrative fee to access the arbitration process, as well as certain rules that limited batching to the same service code (e.g., CPT code).
Immediately following and citing the rulings, the Centers for Medicare & Medicaid Services (CMS) suspended the law’s independent dispute resolution (IDR) process. CMS said it is “reviewing the court’s decision and evaluating current IDR processes, templates, and system updates that will be necessary to comply with the [court orders].”
The decisions are among several victories TMA has won against federal regulators tasked with implementing the 2020 federal No Surprises Act. The association says regulators have failed to follow clear direction from Congress on how to implement the law’s IDR process, among other components.
TMA v. unfair QPA calculations
In the case underlying the Aug. 24 ruling, TMA took issue with the methods insurers used to calculate the QPA that arbitrators consider, along with certain other statutory factors, when deciding between the physician’s and the health insurer’s offer as the appropriate out-of-network payment.
Whereas the QPA is typically the median contracted rate insurers would pay for the service, TMA argued the federal rules permit insurers to include “ghost rates” in their QPA calculations – contract rates with physicians and others who don’t actually provide the particular health service. TMA also noted the rules unlawfully deflate QPAs because they:
- Allow insurers to include rates of physicians who are not in the same or similar specialty as the physicians in the payment dispute;
- Require insurers to use an amount other than the total payment in calculating a QPA when a contracted rate includes contingent payments such as risk sharing or incentive-based bonuses; and
- Permit self-insured plans to essentially opt in to a lower QPA for payment disputes with physicians by using the rates of other self-insured plans.
In his 45-page ruling, District Judge Jeremy Kernodle invalidated all four provisions. The court said they conflict with the plain language of the federal No Surprises Act.
He pointed out that, in TMA’s prior cases regarding the QPA, he ruled federal regulators had “improperly restricted arbitrators’ discretion and unlawfully tilted the arbitration process in favor of the [QPA],” and “the net effect of prioritizing the QPA was to favor insurers at the expense of plaintiff providers.”
In this lawsuit, Judge Kernodle again agreed “the challenged portions of the regulations conflict with the unambiguous terms of the [No Surprises] Act in several key respects” and “the seriousness of the deficiencies weighs heavily in favor of” nullifying them.
For one, the No Surprises Act “specifies that the QPA should include only certain contracted rates – specifically, rates for items or services ‘provided by a provider’ in the same specialty in the relevant geographic region,” he wrote. Federal regulators “cannot justify including rates for items or services that are not provided and never will be provided.”
TMA and the other plaintiffs “have also shown the likelihood of financial harm by submitting uncontroverted evidence that insurers’ fee-schedule negotiation process will lead to out-of-specialty rates being included in QPAs. … And plaintiffs contend that this will harm them because the out-of-specialty rates are often very low – sometimes nearing zero – and their inclusion will drive the QPA downward,” the ruling states.
Federal agencies “may not ignore the plain requirements of the Act merely because insurers may be inconvenienced.”
“These provisions unfairly disadvantaged physicians in payment disputes with health insurers, ultimately robbing our patients of access to physicians’ care,” TMA President Rick Snyder, MD, said. The calculations required by federal regulators “meant physicians had the scales tipped against them from the outset of negotiations.”
While the court disagreed with TMA regarding disclosure requirements in the rules, “we remain pleased with the overall outcome,” Dr. Snyder said. “The federal agencies have work to do to revise their regulations to come into compliance with the court’s decision. TMA will remain vigilant to ensure that the federal agencies implement the No Surprises Act in a manner that is lawful and preserves patient access to care.”
TMA v. excessive fees
In a separate case, TMA’s fourth, the association challenged a steep jump in the administrative fee physicians must pay to participate in the arbitration process – from $50 to $350. TMA also took issue with regulators’ narrowing of the law’s “batching” provisions, which Congress authorized to encourage efficiency and minimize costs in the IDR process.
Together, the changes make the IDR process cost prohibitive for physicians, especially those with smaller claims, TMA argued.
Dr. Snyder said the 600% increase has had a chilling effect, “dramatically curtail[ing] many physicians’ ability to seek arbitration when a health plan offers insufficient payment for out-of-network care.” The decision “will aid in reducing barriers to physician access to the law’s arbitration process, which is vital to both patient access to care and practice viability,” he said in an Aug. 4 statement.
Judge Kernodle again agreed with TMA, this time regarding the rule’s unlawful bypassing of the notice-and-comment requirements in a 35-page ruling that nullified both the fee hike and the batching rule.
Not only did federal regulators have plenty of time to follow notice-and-comment procedures but also the errors were “not harmless,” Judge Kernodle wrote.
“The batching rule and administrative fee at issue here influence how, and at what cost, parties may present their claims to the arbitrator in the first place,” he said.
In addition to “dramatically” increasing the administrative fee, for instance, federal regulators unilaterally “elected to include, for the first time, costs of pre-eligibility review in their projected IDR costs. Nothing in the [No Surprises] Act requires that the total cost of ‘carrying out the IDR process’ include the cost in determining whether a dispute is ‘eligible for the process’ in the first place,” the court explained.
As for the batching rule, according to court documents referenced in Judge Kernodle’s decision, “one provider testified, for example, that ‘under the Departments’ current batching rules, 100% of claims submitted to IDR for services I furnished were not allowed to be batched by the Departments.’”
For the latest on TMA’s lawsuits and the No Surprises Act, visit TMA’s surprise billing resource page.