Federal Judge Throws Out Yet Another Portion of “Surprise” Medical Billing Rule

On the heels of his decision[1] in Texas Medical Association (“TMA”) v. United States Department of Health and Human Services (“HHS”), Judge Jeremy Kernodle of the United States District Court for the Eastern District of Texas decided to throw out yet another portion of the “No Surprise Act” in Lifenet, Inc., v. United States Department of Health and Human Services.  This time, it was an interim final rule that applied to air ambulance service providers but did exactly what the court ruled unlawful in TMA—it created a qualifying payment amount (“QPA”) presumption by requiring the arbitrator to select the QPA unless credible information clearly demonstrated that it was materially different from that of an appropriate out-of-network rate.  Despite the court’s ruling in TMA, HHS continued to apply the QPA presumption to air ambulance service providers, prompting LifeNet, an air ambulance service provider that transports “hundreds of patients each year,” to file suit and thereafter move for summary judgment.

The “No Surprise Act,” took effect on January 1, 2022, and limits the amount patients can be billed for most emergency services, non-emergency services from out-of-network providers at in-network facilities, and services from out-of-network air ambulance service providers.  It also establishes an independent dispute resolution (“IDR”) for payment disputes between health-insurers and providers.

On July 26, 2022, using the same analysis from TMA, the court granted LifeNet’s motion for summary judgment and set aside the interim final rule under the Administrative Procedure Act (“APA”).

The interim rule purported to implement § 300gg-112, the already clear and unambiguous portion of the Act that established the IDR process for determining payments to out-of-network providers for air ambulance services. Similar to the statutory provision in TMA, this process required both the provider and insurer to submit a proposed payment amount and explanation to an arbitrator in a “baseball-style” arbitration.  The arbitrator then had to select one of the two proposed amounts by considering various factors including the following:

  • qualifying payment amounts (typically the median rate the insurer would have paid for the service if provided by an in-network provider/facility) for items or services that are both comparable to the qualified IDR air ambulance service and furnished in the same geographic region;
  • quality and outcome measurements of the provider;
  • acuity of the individual receiving service or complexity of furnishing such service;
  • training, experience and quality of medical personnel furnishing services;
  • ambulance vehicle type and clinical capabilities;
  • population density of the pick-up location; and
  • good faith effort demonstrations made by the non-participating provider/facility or plan/issuer to enter into network agreements and if applicable, contracted rates from previous years.

In granting LifeNet’s motion for summary judgment, the court held that while “nothing in the Act instructs arbitrators to weigh any one factor or circumstance more heavily than the others;” the interim rule “places its thumb on the scale for the QPA, requiring arbitrators to presume the correctness of the QPA and then imposing a heightened burden on the remaining statutory factors to overcome that presumption.”  The court held that by implementing the interim rule, HHS essentially rewrote statutory terms that were already clear and unambiguous.  Because the interim rule conflicted with the unambiguous terms of the Act and the remaining provisions provided a sufficient framework for interested parties to resolve payment disputes, the court vacated three provisions[2] of the interim rule.

There is no doubt that more decisions will follow and continue to alter the Act as it stands.   With each new decision, HHS will have to take steps to conform with the court’s order and will need to update the rule and its accompanying guidance.  As it stands now, HHS has paused its appeal of TMA[3] while it continues to draft the new final rule.

[1] HHS filed appeal on April 26, 2022, and as of May 3, 2022, a motion to stay further proceedings pending “ongoing rulemaking proceedings involving provisions of the No Surprises Act” was granted.

[2] The vacated provisions of the interim rule were the final sentences of: 1) 45 C.F.R. § 149.520(b)(2); 2) 26 C.F.R. § 54.9817-2T(b)(2); and 3) 29 C.F.R. § 2590.717-2(b)(2).

[3] As of July 27, 2022, there is no documented appeal of this case and HHS has not yet addressed the court’s holding.