The American Medical Association and the American Hospital Association filed suit under the Administrative Procedure Act in the District of Columbia District Court challenging portions of the interim final rule (the “Rule”) issued by the Department of Health and Human Services, the Department of Labor, the Department of the Treasury, and the Office of Personnel Management relating to the dispute resolution process under the No Surprises Act.  They are joined in the suit by two healthcare systems and two individual physicians.

The Rule implements provisions of the No Surprises Act, which was signed into law about a year ago and will take effect in early 2022.  The Act helps protect patients from surprise medical bills when they seek care from medical providers outside the patients’ insurance networks.  The Act also establishes an independent dispute resolution (“IDR”) process designed to resolve disagreements between providers and insurers (while leaving patients out of the disputes) over the appropriate rate of reimbursement for out of network services.  When a provider and an insurer reach an impasse in negotiations over a reimbursement dispute, the Act, if applicable, requires them to resolve their disagreement before a certified IDR entity.  The provider and insurer submit their offers to the IDR entity, which is supposed to select the most reasonable of the two offers.  In making that determination, the Act requires the arbitrator to consider an express list of statutory factors, such as the median in-network rate for the services, information relating to the training and experience of the provider, and the market share of the parties.

The plaintiffs argue that although Congress did not assign any one statutory factor presumptive weight, the new Rule essentially rewrites that legislative choice by imposing a presumption in favor of one factor:  the median in-network rate.  According to the plaintiffs, the Rule does that in two ways:  First, by requiring the IDR entity to not consider any of the other factors unless a party submits “credible information” about them.  And second, by requiring the IDR entity to select the offer closest to the in-network median rate unless a party can “clearly demonstrate” that the in-network median rate is “materially different from the appropriate out of-of-network rate.”  As such, the plaintiffs allege that the Rule impermissibly skews the IDR process in favor of insurers, who are exclusively responsible for calculating the in-network median rate.

The plaintiffs are asking the district court to declare that the relevant provisions of the Rule exceed the government’s statutory authority under the Administrative Procedure Act and the No Surprises Act.  In addition, the plaintiffs want the district court to vacate the relevant provisions of the Rule and enjoin the government from enforcing them.  The Biden administration has defended its interpretation of the No Surprises Act, including raising concerns about healthcare costs.  We will continue monitoring developments in this action.