Yesterday, a federal judge in Texas granted the Texas Medical Association and Dr. Adam Corley’s motion for summary judgment, vacating portions of the October 7, 2021 Interim Final Rules (IFRs) to the No Surprises Act (NSA). See Tex. Med. Ass’n & Adam Corley v. United States HHS, No. 6:21-cv-425-JDK, 2022 U.S. Dist. LEXIS 31807, at *1 (E.D. Tex. Feb. 23, 2022). The decision concerns sections of the IFRs that would greatly influence independent dispute resolution (IDR), which is a baseball-style arbitration process whereby parties can settle payment disputes under the NSA.
Specifically, this lawsuit challenges the provisions in the IFRs that effectively create a rebuttable presumption in IDR proceedings that the “qualifying payment amount” (QPA) is an appropriate payment amount. As further detailed in previous regulations, QPA is generally the median contracted rate on January 31, 2019, updated annually based on the consumer price index. The IFRs require the IDR decision-maker to select the offer closest to QPA unless credible information demonstrates that QPA is materially different from the appropriate payment amount. The first date IDR proceedings may be initiated is March 1, 2022.
The Texas Medical Association argued that the QPA presumption grants one statutory factor special consideration and weight above and beyond all others, thereby giving payors an advantage that did not exist in the legislative text. Several other complaints filed in different jurisdictions contain similar allegations.
The Texas Medical Association case is the first to reach a ruling on these issues. U.S. District Judge Jeremy D. Kernodle held that those portions of the IFRs giving rise to the QPA presumption were invalid and thus vacated several portions of the federal regulations relating to the QPA presumption. In the court’s memorandum opinion, Judge Kernodle found that the QPA presumption contradicted the legislative intent behind the statute by placing too great a weight on QPA, to the exclusion of the other factors enumerated in the statute, and it was not supported by the text of the NSA. Judge Kernodle further found that the regulators did not have good cause for issuing the affected portions of the NSA without following the standard notice-and-comment procedures of the Administrative Procedure Act, providing separate grounds for invalidating the applicable rules. Concerning the scope of the invalidation, the Departments argued that any vacatur should only be applicable to the named plaintiffs, but the court held that the rules were generally vacated and invalidated, not only as applied to the individual plaintiffs.
The decision will likely have a great impact in Texas and other jurisdictions. At a minimum, the ruling may be appealed to the Fifth Circuit and the U.S. Supreme Court and thus be on a fast track for consideration by those courts. Moreover, there is a body of law that holds that when a court vacates administrative rules generally ‒ rather than only as applied to the individual petitioners ‒ that vacatur has effect across jurisdictions, although there has not been definitive guidance from the U.S. Supreme Court on these issues. Thus, it is possible that parties and courts will cite the ruling in the Texas Medical Association suit as an important legal authority.
The authors of this alert are closely evaluating the impact of this decision on the looming March 1, 2022 initiation date for IDR proceedings, and they are available to answer any questions as the situation evolves.
Client Alert 2022-054