Health Law Alert by Lamb McErlane PC attorneys Vasilios J. Kalogredis, Esq. and Sonal Parekh, Esq.

Health care practitioners across the United States have won a series of legal battles against the government regarding how payment disputes are handled under the Federal No Surprises Act (“NSA”). Decisions, in particular by Judge Jeremy Kernodle of the U.S. District Court for the Eastern District of Texas, have repeatedly rejected and invalidated provisions governing the independent dispute resolution (“IDR”) or arbitration process designed to resolve billing disputes between health care practitioners and insurers. Consequently, federal agencies are now forced to issue new rules and guidance in order to come in compliance with the courts’ decisions.

The NSA is a federal law that protects patients against surprise bills for out-of-network services in emergencies and in situations out of a patients’ control, such as where out-of-network providers provide services at facilities which are in-network, with an intent to help reduce premiums and out-of-pocket costs for patients. Accordingly, the NSA lays out an arbitration process, the IDR, for medical providers and insurers to resolve any disputes. In determining an outcome for the IDR process, the certified IDR entity considers the qualifying payment amount (“QPA”)[1], as well as five other factors.[2]

Judge Kernodle has had a substantial impact on the implementation of the NSA, handling more NSA-related lawsuits than any other judge.[3] His decisions have been focused on the IDR process set up under the law, specifically vacating challenged parts of the IDR rule.

In a stream of cases, the District Court for the Eastern District of Texas held that the interim rule conflicted with the NSA by improperly restricting arbitrators’ discretion by directing them to consider the QPA as more important than other factors, unlawfully tilting the arbitration process in favor of the QPA.[4] In a later case, Judge Kernodle found “all but one regulation pertaining to the calculation of the QPA violate the plain text of the Act.” The Court’s ruling overturned major provisions of regulations stipulating how QPAs are to be calculated.[5]

As a result, CMS has temporarily suspended all federal IDR process operations, with certain exceptions[6], until additional guidance can be provided.[7] However, certain consumers are worried that these decisions could be disruptive to the protections that the NSA was intended to provide by exposing patients to higher cost sharing, health care costs and premiums. Others are concerned that in face of the onslaught of litigation, the government has had to repeatedly pause the process, which only threatens to further delay arbitration outcomes and payments to doctors, as there are currently more than 330,000 arbitration cases clogging the system.[8] More cases are in the works, with one case[9] on appeal before the Fifth Circuit, which will determine how important the QPA should be in making determinations. The question now remains: What will happen in the interim while the arbitration process is paused?

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Vasilios J. Kalogredis, Esq. has been advising physicians, dentists, and other healthcare professionals and their businesses as to contractual, regulatory and transactional matters for over 45 years. He is Chairman of Lamb McErlane PC’s Health Law Department. Bill can be reached by email at bkalogredis@lambmcerlane.com or by phone at 610-701-4402.

Sonal Parekh, Esq. is an associate at Lamb McErlane PC who focuses on healthcare transactional matters and a broad range of healthcare regulatory-related issues on behalf of healthcare systems, physicians, dentists, and other healthcare providers. Sonal can be reached by email at sparekh@lambmcerlane.com or by phone at 610-701-4416.

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[1] The QPA is generally the median contracted rate for a specific service paid to in-network physicians, hospitals, and others in the same geographic region.

[2] The following factors are considered in addition to the QPA: (1) the level of training, experience, and quality and outcomes measurements of the provider or facility; (2) the market share held by the nonparticipating provider or facility; (3) the complexity of furnishing such item or service to such individual; (4) the teaching status, case mix, or scope of services of the nonparticipating facility that furnished the item or service; and (5) demonstrations of good faith efforts made by the nonparticipating provider or facility. 42 U.S.C. § 300gg-111(c)(5)(C).

[3] See Sara Hansard, Rulings in Medical Billing Suits Create Fallout, Frustration, Bloomberg, Sept. 5, 2023, https://news.bloomberglaw.com/us-law-week/rulings-in-medical-billing-suits-create-fallout-frustration.

[4] See Tex. Med. Ass’n v. U.S. Dep’t of Health & Hum. Servs., 587 F. Supp. 3d 528 (E.D. Tex. 2022), appeal  dismissed,  2022  WL  15174345  (5th  Cir.  Oct.  24,  2022)  [hereinafter  TMA]; LifeNet,  Inc.  v.  U.S. Dep’t of Health & Hum. Servs., 2022 WL 2959715 (E.D. Tex. July 26, 2022); and Tex. Med. Ass’n v. U.S. Dep’t of Health & Hum. Servs., Case No. 622-cv-372 (E.D. Tex.).

[5] See Tex. Med. Ass’n v. U.S. Dep’t of Health & Hum. Servs., Case No. 6:22-cv-450 (E.D. Tex).

[6] Effective September 5, 2023, the Departments have directed certified IDR entities to proceed with eligibility determinations for single and bundled disputes submitted on or before August 3, 2023. See Notice, Payment disputes between providers and health plans, Centers for Medicare & Medicaid Services, https://www.cms.gov/nosurprises/help-resolve-payment-disputes/payment-disputes-between-providers-and-health-plans.

[7] Notice, Payment disputes between providers and health plans, Centers for Medicare & Medicaid Services, https://www.cms.gov/nosurprises/help-resolve-payment-disputes/payment-disputes-between-providers-and-health-plans.

[8] See Sara Hansard, Rulings in Medical Billing Suits Create Fallout, Frustration, Bloomberg, Sept. 5, 2023, https://news.bloomberglaw.com/us-law-week/rulings-in-medical-billing-suits-create-fallout-frustration.

[9] See Tex. Med. Ass’n v. U.S. Dep’t of Health & Hum. Servs., Case No. 622-cv-372 (E.D. Tex.).