No Surprises Act: CMS Halts IDR Process After Texas Court Ruling

On February 10, 2023, the Centers for Medicare and Medicaid Services (CMS) instructed Independent Dispute Resolution (IDR) entities to hold all payment determinations in out-of-network disputes until CMS issues further guidance. IDR entities were further instructed to recall any payment determinations issued after February 6, 2023. This surprise instruction comes on the heels of a February 6 win by the Texas Medical Association (TMA) against a Final Rule promulgated under the No Surprises Act (NSA) that gave preference to health plans' Qualifying Payment Amount (QPA). The TMA and other plaintiffs had challenged the portions of a Final Rule related to the NSA, arguing that the Final Rule continued to give undue weight to the Qualifying Payment Amount. A Texas federal court judge granted summary judgment in favor of the TMA and the other plaintiffs and remanded pieces of the regulation back to federal agencies to reconsider. While the judge's ruling was that the IDR process could continue so long as arbitrators do not give preference to any of the factors outlined in the Final Rule, CMS ordered a standstill while it takes another look at the IDR process and the guidance under which IDR entities operate.

The NSA includes an IDR process to resolve payment disputes between out-of-network providers and payors related to NSA-covered services. The Department of Health and Human Services, the Department of the Treasury, and the Department of Labor (the Departments) issued an Interim Final Rule (IFR) in July 2021 that included a presumption in favor of the Qualifying Payment Amount to determine out-of-network rates. The QPA is generally the median of the payor's in-network rates on January 31, 2019, for the same or similar item or service by a provider in the same or similar specialty in the same geographic region. The TMA had successfully challenged aspects of the IFR, with the U.S. District Court for the Eastern District of Texas ruling that the IDR improperly created a "rebuttable presumption" that the amount closest to the QPA was the proper payment amount. Following the ruling, the Departments revised the IFR and issued a Final Rule in August 2022, stating that the Final Rule complies with the ruling and relies less heavily on the QPA. The Final Rule required arbitrators to consider the QPA first and then consider certain non-QPA factors while still presuming the credibility of the QPA.

In a consolidated case, the TMA, a Texas physician, Tyler Regional Hospital, and two air ambulance companies challenged the Final Rule, again in the U.S. District Court for the Eastern District of Texas, arguing that the Final Rule "replaces the earlier presumption [in favor of the QPA] with a new set of requirements that, although not described by the Departments as a 'presumption,' have the same effect." Specifically, the Plaintiffs contended that the use of a QPA-centered process has a harmful effect on providers because it results in lower reimbursement rates for providers. The Plaintiffs also argued that the Final Rule exceeds the Departments' authority under the NSA, and the NSA is not ambiguous in regard to factors arbitrators should consider. Among the government's arguments was that the Final Rule does not impose a presumption for the QPA and that the Departments have discretion to fill a gap in the NSA. The American Hospital Association and the American Medical Association, along with thirty other national and state medical groups, filed amicus briefs supporting the Plaintiffs.

Consistent with its ruling in the first TMA case, the Court vacated portions of the Final Rule related to the use of the QPA to determine out-of-network rates and remanded the Final Rule to the Departments. The Court held that the NSA is unambiguous and has no statutory "gap" related to the IDR process. The Court explained that the NSA "specifies in meticulous detail . . . the information for [arbitrators] to consider" and "plainly requires arbitrators to consider all the specified information" instead of weighing any one factor more heavily over the others. The Court then concluded that the challenged provisions of the Final Rule conflict with the NSA's "unambiguous statutory text" and must be set aside under the Administrative Procedure Act.

In its February 10 announcement of the halt to the IDR process, CMS indicated that its review of the IDR process will be wide-ranging, stating "[t]he Departments are currently reviewing the court's decision and evaluating current IDR processes, guidance, templates, and systems for updates that will be necessary to comply with the court's order." CMS went on to state that "[t]he Departments will provide specific directions to certified IDR entities for resuming the issuance of payment determinations that are consistent with the court's judgment and order" and that "[c]ertified IDR entities should continue working through other parts of the IDR process, including eligibility determinations, as they wait for additional direction from the Departments."

The case is Texas Medical Association et al. v. United States Department of Health and Human Services et al., case number 6:22-cv-00372 (U.S. District Court for the Eastern District of Texas).

Davis Wright Tremaine is collaborating with healthcare providers and systems to develop efficient and compliant processes to comply with the No Surprises Act. Contact John Barnes or Christine Parkins Johnson if you would like to learn more.

Save the Date for Davis Wright Tremaine's annual healthcare regulatory and compliance seminar on March 30, 2023, in Culver City, California. John and Christine will host a revenue cycle-related session that will include a No Surprises Act update. For more information on the seminar, please contact McKenzie Conte at mckenzieconte@dwt.com.

*Wei Wei (University of Washington School of Law) is Davis Wright Tremaine's first 2L Diversity Healthcare Law Clerk. We are pleased to have Wei join our team for the spring term.