Reed Smith Client Alerts

The most recent No Surprises Act (NSA) decision in the case Tex. Med. Ass’n v. U.S. Dep’t of Health & Hum. Servs. (TMA III), No. 6:22-cv-00450 (E.D. Tex.) materially changes the rules for calculating the qualifying payment amount (QPA) and invalidates additional independent dispute resolution (IDR) requirements. In the case, the provider plaintiffs argued that the regulations allow payors to “artificially depress” QPA and challenged certain regulations specific to air ambulance services. Like his decisions in TMA I, TMA II, and TMA IV (filed after TMA III), Judge Kernodle ruled in favor of plaintiffs in nearly all respects and vacated several additional QPA and IDR regulations. Significant changes include requiring payors to (1) narrowly calculate QPA based on rates with providers in the same specialty who actually provide the services in question; (2) determine QPA for a self-funded plan by considering only that plan’s contracted rates; and (3) include single case agreements (SCAs) as “contracted rates” when calculating QPA for air ambulance services, and potentially all services.

Judge Kernodle set aside several rules regarding calculation of QPA, which the NSA generally defines as the median in-network rate for the services in question. First, he held that payors may not include “ghost rates” in calculating QPA, and must instead only consider rates for providers that actually provide the services in question. For instance, if a general practitioner who does not provide anesthesia services nevertheless has agreed to anesthesia-related rates in a payor’s standard fee schedule, those rates must be excluded in determining QPA for anesthesia services. Second, he ruled that including “out-of-specialty” rates in calculating QPA is unlawful and payors must only consider rates of providers in the same or similar specialty as the provider who rendered the out-of-network services. He therefore vacated the current rule that requires specialty-specific calculations only when payors purposefully vary contracted rates by specialty and that variance makes a material difference in rates. Third, he determined that the exclusion of bonus and incentive payments from the QPA calculation conflicts with the NSA and set aside the related regulation. Finally, he held that third-party administrators (TPAs) may only calculate QPA for self-funded plans by considering the contracted rates for the specific plan, rather than considering the rates of all self-funded plans the TPA administers per agency rules.

The TMA III ruling also invalidated several regulations in response to the specific challenges by air ambulance plaintiffs. Judge Kernodle first determined that the NSA unambiguously requires initial payment within 30 calendar days, so the regulation’s deadline for payment within 30 days of receiving “the information necessary to decide a claim” conflicts with the NSA and must be set aside. This ruling was specific to the air ambulance regulation (45 CFR § 149.130), but the agencies may decide to amend the same language in the regulations regarding emergency services and hospital-based providers (45 CFR §§ 149.110 & 149.120). Judge Kernodle also invalidated agency guidance requiring separate IDR proceedings for each procedural code associated with a single agency transport, which is typically billed with two codes: the lift-off code for a set amount, and the mileage code, which varies based on the distance traveled. He reasoned that because the NSA considers air transport a single “service,” it was improper to require multiple IDRs. This reasoning does not appear to impact the agency guidance as applied to other types of services, where separate IDRs must be initiated for each service code billed on a claim. Last, Judge Kernodle held that SCAs negotiated with air ambulance companies must be considered as a contracted rate when determining the median contracted rate for QPA. Although the ruling was based on air ambulance SCAs, the vacated regulation applies to SCAs for any service, so likely requires consideration of SCAs for emergency services and facility-based provider services as well. However, the temporal nature of SCAs may limit the relative impact of this decision because the QPA regulations relate to rates effective on a specific date (generally, January 31, 2019).