Federal judge rules against HHS — again — over surprise-billing arbitration rule

A federal judge in Texas has handed another win to the Texas Medical Association and medical providers nationwide against HHS over a challenge to the arbitration process between out-of-network providers and payers that was established under the No Surprises Act.

On Feb. 6, U.S. District Judge Jeremy Kernodle ruled that the revised arbitration process "continues to place a thumb on the scale" in favor of insurers and "that the challenged portions of the final rule are unlawful and must be set aside…"

"The decision will promote patients' access to quality care when they need it most and help guard against health insurer business practices that give patients fewer choices of affordable in-network physicians and threaten the sustainability of physician practices," TMA president Gary Floyd, MD, said.

A CMS spokesperson told Becker's in an email it is aware of the Feb. 6 ruling in Texas Medical Association v. HHS and is reviewing the decision.

The lawsuit was originally filed in September alongside UT Health Tyler Regional Hospital and a physician. The AHA and the AMA, along with 30 additional national and state medical groups, filed amicus briefs in support of the lawsuit. Insurance trade group AHIP filed in support of HHS.

Insurers had argued that there was "no basis" to providers' claims and that there were even "early signs of a beneficial trend, where the [No Surprises Act] has furthered good faith network negotiations over reasonable rates."

The 2020 No Surprises Act protects patients from unexpected medical bills and limits how much they can be charged for emergency and nonemergency services from out-of-network providers. It also established an arbitration process for when payers and providers disagreed about those rates.

Under an interim final rule unveiled in July 2021, CMS directed the arbitrator in the independent billing dispute resolution process to assume that the qualifying payment amount (QPA), or the median in-network rate set by payers, is the appropriate out-of-network rate for final payment determination. 

The TMA filed a lawsuit Oct. 28, 2021, challenging the rule, alleging that CMS, under President Joe Biden's leadership, failed to follow clear direction from Congress about implementing the dispute resolution process. At the time, the association said the process was a "short-sighted approach" that would drive down reimbursement rates and encourage payers to narrow their networks

A federal judge agreed and ruled against the administration in February 2022 — a decision that was appealed by HHS in April.

CMS released a revised final rule Aug. 19, which the TMA claimed still gave too much of an advantage to payers during arbitration.

"Similar to before, the new final rules unfairly advantage insurers by requiring arbitrators to give outsized weight or consideration to an opaque, insurer-calculated amount — called the qualifying payment amount — when choosing between an insurer's offer and a physician's offer in a payment dispute," TMA President Gary Floyd, MD, said. "This is unfair to physicians, providers, and the patients we care for, so we had to seek fairness."

In the Feb. 6 decision, Mr. Kernodle vacated all of the revised regulations challenged by the TMA, including HHS’ rule that arbiters must primarily consider the QPA. 

The TMA filed a third lawsuit against HHS in November 2022, alleging portions of the rule "artificially deflate the QPA." 

A fourth lawsuit from the association was filed in January 2023 that challenges a 600 percent hike in administrative fees when seeking dispute resolutions. 

"The AHA is pleased with yesterday’s ruling, which restores the balanced, patient-friendly dispute resolution that Congress chose when it enacted the No Surprises Act," Melinda Hatton, AHA's general counsel, said in a statement to Becker's. "The district court correctly observed that the government’s final rule would have tilted arbitrations in favor of insurers, thereby inappropriately lowering payments to health care providers and threatening patient access to care."

Becker's has reached out to the AMA and AHIP for comment and will update this article if more information becomes available.

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