Texas Judge Vacates No Surprises IDR Fee Increase, Batching Rule

Disclaimer: This information is for educational purposes only and is current as of August 8, 2023. Not intended to be used as or constitute legal or medical advice.  

On August 3, 2023, a Texas judge issued a memorandum opinion and order in Texas Medical Association v. HHS (TMA IV) vacating the December 2023 Fee Guidance that increased the mandatory administrative fee for the federal independent dispute resolution (IDR) process from $50 to $350. The increase has been a significant barrier to physicians and other practitioners seeking IDR, particularly for claims where the amount in dispute was near or below $350. 

At the same time, the judge vacated regulations strictly limiting batching of claims for IDR by interpreting “same or similar items and services” to mean billed under the same Current Procedural Terminology (CPT®)code.  

The batching restrictions significantly increased the number of cases in IDR (and along with it, the backlog for timely determinations) by requiring most disputes to solely cover a single claim. The judge noted that the fee increase exacerbated provider access issues caused by the batching restrictions, resulting in providers having to submit more administrative fees for individual claims than if batching were more permissive. 

Federal IDR Process Suspension 

As a result of the court’s decision, the U.S. Departments of Health and Human Services, Labor, and the Treasury (the Departments) immediately suspended the federal IDR process, including the ability to initiate new disputes.  

On August 7, the Departments announced that while the IDR process remains suspended for new disputes and many disputes in progress, IDR entities are directed to move forward with the following types of disputes: 

1. Single and bundled disputes where administrative fees were due (collected or deadline expired) before August 3, 2023. 
2. Batched disputes where the IDRE determined eligibility for the batch AND administrative fees were due (collected or deadline expired) before August 3, 2023.

All other federal IDR disputes (whether not yet initiated, administrative fees were not due prior to August 3, and/or the IDRE has not yet determined batch eligibility) remain suspended. All other deadlines and requirements continue to apply, including prohibitions against billing out-of-network patients in excess of applicable cost sharing, and all state processes. 

R1 Regulatory is closely following developments in this area and will provide timely updates as appropriate.  

What the Ruling Means for Providers 

For out-of-network reimbursement disputes, healthcare providers should continue to follow No Surprises Act procedures for patient billing, and for opening negotiation periods with payers according to the regular timelines. Once the negotiation period ends, providers should hold claims to be submitted to IDR once the portal reopens.

For IDR disputes that were filed between January 1 and August 3 and where the now-vacated $350 administrative fee has already been paid, providers should not expect a full or partial refund. Similarly, there will not be a deadline extension for any claims that a provider did not submit to IDR due to the large administrative fee or batching restrictions. 

The Departments are in the process of creating guidance and instructions that comply with the court’s decision. It is unclear how long it will take for new guidance to be issued, but it is likely that providers will have some time to make necessary adjustments based on the guidance. For example, if batching restrictions are loosened, there may be an opportunity to batch ongoing disputes that had been filed separately. For previous suspensions, the Departments have allowed an extension to initiate new disputes as the volume of held claims may be significant and require additional time to submit.  

Background 

In September 2021, the Departments issued an interim final rule establishing, among other regulations, (1) a methodology to calculate the administrative fees parties must pay to participate in IDR; and (2) rules permitting multiple qualified IDR items and services to be considered jointly as part of a single determination, known as “batching.”  

The interim final rule was effective immediately and bypassed the requisite notice-and-comment period, resulting in regulations that were adopted without stakeholder input—that is, the Departments failed to consider provider feedback on how these rules would impact their ability to participate in IDR.  

For 2022, the IDR’s mandatory administrative fee was $50; in October 2022, the Departments announced that the fee would remain $50 for 2023. On December 23, 2022, however, the Departments issued a Fee Guidance changing the 2023 fee from $50 to $350, a sevenfold increase, based on a cost that had not been mentioned as part of the fee calculation methodology: the cost of pre-eligibility review.  

The Texas Medical Association (TMA)—along with two other trade associations, a physician, and a hospital–sued the Departments for unlawfully increasing the administrative fee and unlawfully adopting restrictions on batching, which compounded the inaccessibility of the IDR process for many providers. 

$350 Administrative Fee Vacated by Court 

The court first reviewed the administrative fee, dismissing the Departments’ arguments that the fee was not subject to notice-and-comment requirements. In doing so, the court found that both the fee regulation itself and the 600% increase imposed by the Fee Guidance are substantive rules that provide the legal basis for the Departments to impose the fee and enforce compliance. These rules created an obligation to pay the mandatory $350 administrative fee to participate in the IDR process.  

The court vacated the Fee Guidance, including the $350 administrative fee. 

Batching Restricted by CPT Code Vacated 

With regard to batching regulations, the court found that the Departments severely limited which claims providers could batch—resulting in separate claims being submitted to separate IDR entities, each of which was charged a separate administrative fee.  

Because the regulation did not allow providers to explain how the batching rule would impact them and failed to consider batching by a provider’s subspecialty or by service-code section, the lack of notice-and-comment was not harmless. The court vacated the batching regulations at 45 CFR 149.510(c)(3)(i)(C). 

This Is the Fourth Case Filed by TMA Related to No Surprises Act Regulations 

This is the fourth case that the TMA filed against the Departments relating to the No Surprises Act’s regulations.  

In TMA I and II, the court determined that the Departments’ regulations improperly restricted arbitrators’ discretion by favoring the payer-calculated qualifying payment amount (QPA) over other factors relevant to a payment determination.  

TMA III challenges specific calculation methodologies for the QPA and has not yet been decided. 

The Departments have appealed TMA II; it is unclear whether the Departments will also appeal this decision (TMA IV). R1 Regulatory is tracking these and several other lawsuits across the country regarding different aspects of the No Surprises Act and its implementation. 

Explore these additional R1 Resources on the No Surprises Act 

• Revenue Cycles Challenged by Mandates of No Surprises Act – Article 
• The Future of Good Faith Estimates Under the No Surprises Act – Article 
• The Future of Good Faith Estimates Under the No Surprises Act – On-Demand Webinar