Court Vacates No Surprises Act Regulations Favoring Payors in Reimbursement Disputes

On February 23, 2022, a Texas district court found that portions of the No Surprises Act regulations implementing the provider–payor independent dispute resolution (IDR) process are invalid. The vacated regulatory text conflicts with the Act’s requirements on how disputes between providers and payors should be resolved. While the law lists multiple factors that could determine the appropriate reimbursement rate, the regulations created a presumption in favor of the payor-calculated qualifying payment amount (QPA) to the exclusion of all other factors.  

The court called the regulations treating the QPA as the default payment amount “unlawful” and vacated all portions of the regulations that created a presumption in favor of the QPA. The court explained that while the law lists multiple factors that could determine the appropriate reimbursement rate, the regulations created a presumption in favor of the QPA to the exclusion of all other factors. While federal agencies may appeal this ruling, arbiters are now able to consider all information submitted by providers when determining the appropriate reimbursement amount for out-of-network services, as Congress intended.  

Note: Because this decision deals directly with the regulatory text, it applies to all provider–payor IDR under the No Surprises Act. This decision solely impacts the federal IDR regulations, not any others including regulations concerning good faith estimates and balance billing prohibitions. 

No Surprises Act IDR 

• The No Surprises Act removes patients from reimbursement disputes where the patient is unable to choose an in-network provider. Patient cost-sharing is restricted to what the patient would have paid if they had received in-network services.

• Provider–payor disputes over any remaining balance are settled through arbitration before an IDR entity. This type of arbitration is known as “baseball style,” where both the provider and the payor submit their “best last” offer for the appropriate reimbursement rate, and the arbiter chooses one of the offers.  

• The No Surprises Act directs arbiters to consider multiple factors in determining the reimbursement rate, including the provider’s level of training and experience, patient acuity and complexity, and other information that may impact reimbursement in addition to the payor’s calculated QPA or median in-network rate. 

IDR Regulations and TMA Lawsuit 

• When the No Surprises Act IDR regulations were promulgated, the regulations directed arbiters to presume that the QPA is the appropriate out-of-network reimbursement rate. The QPA had outsized importance above all other factors, making it difficult for providers to demonstrate a different appropriate reimbursement amount. 

• The Texas Medical Association sued the federal agencies that promulgated the regulations and argued that the regulations conflicted with the statutory language and were not properly subject to notice-and-comment rulemaking requirements. The court agreed and chose to strike portions of the regulatory text that favored the QPA. 

The Court Decision’s Impact on Regulations 

The court vacated certain provisions of the IDR regulations from the regulatory text. The order is directed to the federal agencies responsible for the regulations and therefore is immediately in effect nationwide for all provider–payor IDR under the No Surprises Act.  

Under the revised regulations, arbiters are directed to consider all relevant information equally when determining which offer to select. The QPA remains one of the factors but is no more important than any other information. 

What Happens Next 

HHS and the other federal agencies that created the IDR regulations can appeal the court’s decision and seek to have the stricken regulatory language reinstated. If they appeal, they will also likely ask for the district court’s decision not to be implemented immediately but held until a higher court is able to review.   

There are other lawsuits pending in different courts concerning the same issues raised by the Texas Medical Association, including a similar lawsuit filed by the American Medical Association and American Hospital Association in the D.C. District Court. While other courts may find the Texas decision useful and persuasive, they are not required to reach the same conclusion or provide the same remedy. 

More Updates Coming 

Watch for updates to the No Surprises Act IDR process. To date, the IDR portal allowing providers to request arbitration is not available. 

In the meantime, continue preparing for IDR, including opening negotiation periods with payors and gathering information to submit to the arbiter.  

Watch R1’s On-demand Training on Navigating the No Surprises Act 

Generating Good Faith Estimates to Avoid the Unexpected 

*The case is Texas Medical Association v. HHS, Case No. 6:21-cv-425-JDK in the Eastern District of Texas. 

R1 Regulatory Update.* This information is for educational purposes only and is current as of February 25, 2022. Not intended to be used as, or constitute, legal or medical advice.