For the second time in 12 months, a federal district court has set aside provisions of the No Surprises Act’s Independent Dispute Resolution Final Rule on the grounds that the portions of the rule that provide guidance to arbitrators on how to weight price submissions violate the statute’s requirements.

This decision from Judge Jeremy D. Kernodle for the U.S. District Court for the Eastern District of Texas in a group of challenges to the rule, consolidated under Texas Medical Association v. U.S. Department of Health & Human Services (No. 6:22-cv-372), follows closely on the Requirements Related to Surprise Billing Final Rule issued in August 2022 (August Rule), which sought to address earlier criticisms of the independent dispute resolution process, and marks the second time that the rule has been vacated in part and sent back to the three agencies for another chance.

The previous remand was covered in an earlier post on this blog. In both that instance and in this one, the court took issue with the prominence of the “qualifying payment amount” or QPA. The QPA is a statutorily defined payment rate that represents the median contracted rates recognized by an insurer for the same or similar items or services in the same geographic area.

Earlier Remand Generated Second Final Rule

That earlier remand faulted the three agencies that authored the initial rule, The Centers for Medicare and Medicaid Services (CMS) the Internal Revenue Service (IRS) and Employee Benefits and Security Administration (EBSA), for using what the court saw as a de facto rebuttable presumption in favor of the QPA during the arbitration process and effectively putting a thumb on the scale in favor of insurers during arbitration disputes.

After that remand, the agencies appealed to the U.S. Court of Appeals for the Fifth Circuit, but later asked for that appeal to be dismissed pending the second rulemaking process. That rulemaking process generated the August Rule at issue in this most-recent case. The August Rule is covered in another earlier post on this blog.

Because the August Rule required an arbitrator to first consider the QPA and then consider the other information presented, Judge Kernodle again found that the agencies were promoting the QPA to a higher status than other factors required to be considered by the No Surprises Act statute.

Court Vacated and Remanded Portions of Rule

As a result, the court in its memorandum opinion vacated specific provisions of the rule related to the method in which arbitrators are supposed to evaluate price claims. Specifically, the court ordered that the following sections of the regulation are going to be vacated and returned back to the agencies for reconsideration:

  1. The word “then” in 45 C.F.R. § 149.510(c)(4)(iii)(B); the entirety of 45 C.F.R. §§ 149.510(c)(4)(iii)(E) and (c)(4)(iv); and the final sentence of 45 C.F.R. § 149.510(c)(4)(vi)(B);
  2. The word “then” in 26 C.F.R. § 54.9816-8(c)(4)(iii)(B); the entirety of 26 C.F.R. § 54.9816-8(c)(4)(iii)(E) and (c)(4)(iv); and the final sentence of 26 C.F.R. § 54.9816-8(c)(4)(vi)(B);
  3. The word “then” in 29 C.F.R. § 2590-716-8(c)(4)(iii)(B); the entirety of 29 C.F.R. § 2590-716-8(c)(4)(iii)(E) and (c)(4)(iv); and the final sentence of 29 C.F.R. § 2590-716-8(c)(4)(vi)(B);
  4. The entirety of 45 C.F.R. § 149.520(b)(3);
  5. The entirety of 26 C.F.R. § 54.9817-2(b)(3); and
  6. The entirety of 29 C.F.R. § 2590-717-2(b)(3).

Reed Smith will continue to follow developments of the No Surprises Act, its implementing regulations, and the dispute resolution and court processes around application of both. For more information about this rule or for advice on how this will apply to your business, please reach out to the health care attorneys at Reed Smith, LLP.