TMA Considers Next Steps in Split Victory Over Payment Calculations in Surprise-Billing Arbitrations
By Amy Lynn Sorrel

After winning half the battle when the federal government dropped its appeal of two major components of the Texas Medical Association’s lawsuit early on, TMA is considering next steps after an appeals court upheld a portion of federal rules governing qualifying payment amount calculations in surprise-billing disputes that medicine says conflict with federal law and unfairly favor health plans.  

The ruling comes in the third of TMA’s overwhelmingly successful four-lawsuit crusade to ensure federal rules implement the federal No Surprises Act (NSA) as intended by Congress.  

“TMA has led the nation’s physicians in our efforts to seek fair and lawful implementation of the federal No Surprises Act,” TMA President G. Ray Callas, MD, said. “These efforts have been essential to promoting patient access to care and physician practice viability. As we evaluate next steps in TMA III, we remain staunchly committed to advocating for patients and physicians to ensure that the law functions fairly as intended by Congress.”    

In this third TMA lawsuit, the association took issue with the methodology federal regulators established to calculate the qualifying payment amount (QPA) arbitrators consider, among other statutory factors, when resolving disputes over health plans’ payment for certain out-of-network care. Whereas the QPA is supposed to be the median contracted rate insurers would pay for the service in the same geographic area (adjusted by inflation), TMA argued the federal rules unlawfully deflate that amount using factors outside of what the NSA intended, namely by:  

• Including “ghost rates” – or contract rates with physicians and other health professionals who don’t provide the particular service;  

• Including rates of physicians who are not in the same or similar specialty as the physicians involved in the dispute;  

• Requiring payers 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  

• Permitting 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 August 2023, the U.S. District Court for the Eastern District of Texas struck down all four rule provisions, ruling they conflicted with the plain language of the law.    

Federal regulators – including the U.S. departments of Health and Human Services, Labor, and the Treasury – initially appealed the district court’s decision on all four provisions. However, early in their briefing, federal regulators dropped their appeal of two of the four provisions (ultimately only appealing the district court’s ruling prohibiting the inclusion of ghost rates and requiring the inclusion of bonus and incentive payments in the QPA).     

That left intact TMA’s district court win on two of its four challenges in this lawsuit, namely the court’s findings that QPA calculations must include only rates of physicians who are in the same or similar specialty; and plan sponsors cannot pick and choose rates from their own plans or those administered by their third-party administrator to calculate QPAs.    

On the remaining two QPA methodology challenges, U.S. 5th Circuit Court of Appeals Judge Catharina Haynes said in an Oct. 30 ruling that regulators were given “a fairly broad delegation of authority” in rulemaking, but also acknowledged “because the [NSA] contains a definition of QPA, the Departments’ methodology must be consistent with that definition.”   

In the end, the appeals court found regulators operated with those bounds when it ruled QPA calculations can:  

• Include so-called “ghost rates”– or contract rates for a given service that is “available regardless of whether, or how many times, it has actually been performed;” and 

• Exclude risk-sharing, bonus, and incentive payments, saying federal regulators have discretion to include such non-fee-for-service adjustments.  

The court also agreed health plans do not have to disclose any more information on their QPA calculations than what’s currently required in federal rules.  

In another partial victory for medicine, however, the court found federal rulemakers unlawfully cut the clock short in interpreting the NSA’s mandate that insurers send physicians either an initial payment or notice of denial of payment “not later than 30 calendar days after the bill for such services is transmitted by such provider.”   

Deference to what may be considered “industry practice cannot cure such a blatant departure from the [NSA’s] plain language,” Judge Haynes wrote.    

As TMA considers its legal and regulatory options in response to the appellate decision, it will continue to monitor ongoing federal rulemaking and legislative attention related to the NSA.  TMA has 45 days from the appellate court’s judgment to decide whether to file an en banc appeal with the 5th U.S. Court of Appeals on the ghost rates and bonus and incentive payment decisions.   

Read Texas Medicine Today for further developments in the case. Get the latest news and resources on the No Surprises Act on TMA’s Surprise Medical Bills webpage.