On February 6, 2023, the United States District Court for the Eastern District of Texas ruled in favor of the Texas Medical Association^[1] and vacated portions of the final rule adopted in August 2022 (the “August 2022 Final Rule”) that applied to the Independent Dispute Resolution (“IDR”) process created by the No Surprises Act (the “Act”). ^[2] The August 2022 Final Rule was adopted by the Departments of Labor, Treasury and Health and Human Services (the “Departments”) and addressed, in part, the specific factors arbitrators must consider in resolving disputes between out-of-network (“OON”) health care providers/facilities and air ambulance providers (collectively, “Providers”), and health insurance plans, under the Act. This is the second time portions of final rules for the IDR decision-making methods have been vacated by this Court as a result of litigation brought by impacted Providers.

The October 2021 Interim Final Rule

The Departments had previously adopted interim final rules in October 2021^[3] with respect to the IDR process, portions of which were partially vacated in October 2022. ^[4] In that litigation, the same Texas Court held that portions of the interim final rules (i) violated the Administrative Procedures Act (“APA”) due to a lack of public notice and comment period; and (ii) improperly directed IDR entities to give more weight to the Qualified Payment Amount (“QPA”) – which is determined by the insurer, pursuant to a statutorily prescribed methodology – than to other required considerations. Those additional considerations, include (as applicable): the level of training, experience, and quality and outcomes measurements of the provider/facility; the market share held by the provider/facility or the plan in the geographic region; the acuity of the patient or the complexity of furnishing the items/services; good faith efforts (or lack thereof) by the parties to enter into network agreements; and previously contracted rates between the provider and the insurer, for the past 4 years (if and as applicable).

The August 2022 Final Rule

This past summer, the Departments again adopted rules addressing the IDR process (this time, with public notice and comment). Under the (now vacated) portions of the August 2022 Final Rule, a Federal IDR entity was required to weigh specific considerations and select the offer that “best represents the value of the qualified IDR service or item” as the OON rate. Specifically, the IDR entity was instructed to consider the QPA for the same or similar qualified IDR item/service, for the applicable year (regardless of whether the parties submitted information related to the QPA). The August 2022 Final Rule also, in essence, directed IDR entities to presume the credibility of the QPA while requiring that they evaluate the credibility of other factors. Additionally, the August 2022 Final Rule directed IDR entities to only consider information about additional circumstances or factors to the extent the information related to the offer submitted by either party, and was not already accounted for by the QPA.

Vacatur of the August 2022 Final Rule

The same plaintiffs challenged the August 2022 Final Rule, asserting that it conflicted with the arbitration process created by the Act and improperly limited the IDR entities’ discretion by requiring that they give the QPA more deference than the other required considerations. The plaintiffs also argued that the August 2022 Final Rule created a series of prerequisites before those non-QPA considerations could be taken into account. The Departments, they argued, unlawfully tilted the arbitration process impermissibly in favor of the insurer-determined QPA. 

The Court again agreed with the plaintiffs. In its decision, the Court reiterated that the Act is unambiguous as to what factors an IDR entity must consider, and that there is no presumption or weight to be attributed to any specific factor or any additional prerequisites or hurdles for non-QPA factors. The August 2022 Final Rule, the Court determined, “nevertheless continue[d] to place a thumb on the scale for the QPA by requiring arbitrators to begin with the QPA and then imposing restrictions on the non-QPA factors that appear nowhere in the statute.” The Court also determined that portions of the August 2022 Final Rule violated the APA; the Court vacated the challenged provisions and remanded the matter to the Departments for further consideration.

What Now?

Pursuant to the Court’s order, certified IDR entities will continue implementing the IDR process as set forth in the Act, as they have been doing before the August 2022 Final Rule. Earlier today, the Department of Health and Human Services Centers for Medicare and Medicaid Services announced that, in light of this recent ruling, certified IDR entities must hold all pending payment determinations until further guidance is issued. It has also instructed IDR entities to recall any payment determinations issued after the recent ruling on February 6, 2023.

Providers are reminded that the Federal IDR process is still and will continue to be available, and that the requirements for claims to be eligible for Federal IDR process remain in effect. Providers are encouraged to become familiar with the eligibility requirements for Federal IDR, including, for those providers in “bifurcated” states, claims that may be deemed ineligible for Federal IDR if there is a state law or state arbitration process that applies. This is especially important in light of a recent Interim Partial Report published by the Departments^[5] indicating that for the second and third quarters of 2022, almost 16,000 Federal IDR disputes (out of more than 90,000 initiated), were found to be ineligible for Federal IDR for various reasons.

FOOTNOTES

^[1] The Texas Medical Association was joined in this litigation by health care providers, including East Texas Air One; the American Society of Anesthesiologists, American Medical Association, American Hospital Association, and Emergency Department Practice Management Association submitted briefs in support of the plaintiffs’ position.

^[2] Tex. Med. Ass’n, et al v. U.S. Dep’t of Health and Hum. Servs., Case No. 6:22-cv-372-JDK (2023 WL 1781801).

^[3] Requirements Related to Surprise Billing; Part II, 86 Fed. Reg. 55980 (Oct. 7, 2021).

^[4] Tex. Med. Ass’n, et al v. U.S. Dep’t of Health & Hum. Servs., 587 F. Supp. 3d 528 (E.D. Tex. 2022), appeal dismissed, 2022 WL 15174345 (5th Cir. Oct. 24, 2022).

^[5] CMS’ Interim Partial Report is available here: https://www.cms.gov/files/document/initial-report-idr-april-15-september-30-2022.pdf.