TMA Wins Fourth Lawsuit Challenging Payment Calculations in Surprise Billing Arbitration
By Amy Lynn Sorrel

Marking a fourth victory for the Texas Medical Association in as many lawsuits, a court 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 U.S. District Court for the Eastern District of Texas found such regulations conflict with the plain language of the federal No Surprises Act.  

“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. [The Aug. 24] decision regarding the unfair and unlawful portions of the departments’ July 2021 Interim Final Rule is critical to implementing the law as intended by Congress, which is vital to both patient access to care and physician practice viability.”  

This latest lawsuit was the third in a series TMA filed challenging regulators' implementation of the arbitration process under the federal law. In this case, 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 involved 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.   

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 qualifying payment amount," and "the net effect of prioritizing the QPA was to favor insurers at the expense of plaintiff providers."   

In this third 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."  

In addition, TMA and the other plaintiffs in the case “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.”  

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 continue to 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 filed this lawsuit in November 2022.   

TMA’s other lawsuits related to the No Surprises Act include:  

• One filed in 2021, which TMA later won at the federal district court level, alleging that, in the interim final rules governing arbitrations between insurers and physicians, federal agencies unlawfully required arbitrators to “rebuttably presume” the offer closest to the QPA was the appropriate out-of-network rate. 
• A second filed in September 2022, which TMA also later won at the federal district court level, alleging that the final rules unfairly advantaged health insurers by requiring arbitrators to give outsized weight or consideration to the QPA. The federal government is appealing the decision.  

In TMA’s fourth lawsuit, the court found earlier this month that federal regulators "unlawfully bypassed" certain rulemaking procedures when drastically raising the arbitration fee and narrowing the law’s provisions on grouping claims together in the arbitration process. TMA filed that case in January 2023.  

Get the latest news and resources on the No Surprises Act on TMA’s Surprise Medical Bills webpage.