Fifth Circuit Affirms District Court Judgment Vacating Surprise Billing Rule Provisions

On August 2, 2024, the Fifth Circuit Court of Appeals (Fifth Circuit) affirmed the district court’s decision to vacate regulations promulgated by three federal agencies: the DOL, HHS, and IRS (the agencies). The regulations established priorities for independent arbitrators appointed to resolve disputes between healthcare providers and payors through an Independent Dispute Resolution (IDR) process established under the No Surprises Act (NSA).

The IDR process is the subject of ongoing litigation between the Texas Medical Association and the federal government. In this case, the issue revolved around the qualifying payment amount (QPA), which is the median in-network rate for a given service in each market. The QPA is one of several factors that independent arbitrators must consider when determining the appropriate payment for services provided out-of-network. At the district court level, the plaintiffs argued that the government’s rules placed too much emphasis on the QPA. The district court agreed with the plaintiffs, determining that the agencies did not follow legislative intent when they promulgated these rules. As a result, the district court vacated the rules and remanded the matter back to the agencies to rewrite them. We covered this controversy in an article in the February 16, 2023, edition of Compliance Corner.

The agencies appealed, and the Fifth Circuit affirmed the trial court’s decision. Although the agencies argued that they properly interpreted the NSA, the Fifth Circuit determined that nothing in the NSA gave the agencies the authority to put more emphasis on one factor over other factors when determining the appropriate payment amount. Citing a recent Supreme Court case, Loper Bright Enters. v. Raimondo, which provides courts more latitude when adjudicating agency rules, the Fifth Circuit concluded that the NSA did not bestow upon the agencies the authority to set substantive standards for arbitrators. In this case, the Fifth Circuit determined that the agencies exceeded their authority by:

• Requiring arbiters to consider the QPA first.
• Requiring arbiters to disregard information deemed not credible or unrelated or that is already accounted for in the QPA.
• Requiring arbitrators to explain why they deviated from the QPA in coming to their decision.

The Fifth Circuit concluded that these requirements had the effect of placing the QPA above all other factors that arbiters must consider. Since the NSA did not expressly grant the agencies the authority to do this, the rules must be vacated.

This ruling puts another log on the fire that is the IDR process. This process's status is in constant flux, and there is uncertainty about how the growing number of payment disputes will be resolved. Although this case does not explicitly halt the IDR process, it is not unreasonable to expect the agencies to pause the process while they figure out what to do next, which will likely create more backlog and uncertainty. Accordingly, employers should be aware of this issue.

Texas Med. Ass’n v. HHS »