No Surprises Act Challenges, Win For Providers – Food, Drugs, Healthcare, Life Sciences

On Wednesday, February 23, 2022, U.S. District Court Judge
Jeremy Kernodle of the Eastern District of Texas granted the Texas
Medical Association’s and Adam Corley’s (the Plaintiffs)
motion for summary judgment on their challenge to portions of the
Federal No Surprises Act (NSA) and simultaneously rejected the
defendants’ cross motion for summary judgment. This is viewed
as a win for health care providers who argue that portions of the
NSA are disproportionately harmful to their industry and ability to
provide care to patients. For a discussion of all the requirements
applicable to the provider industry as of January 1, 2022, please
see our prior posts (Part I | Part II).

The Plaintiffs filed a complaint against the United States
Department of Health and Human Services, Department of Labor,
Department of the Treasury, Office of Personnel Management (the
Agencies), on October 28, 2021 (the Complaint). In the Complaint,
Plaintiffs claimed that the portion of the NSA governing the
arbitration process between out-of-network providers and health
plans/health insurance issuers for resolving payment disputes (the
Challenged Rule) violated the Administrative Procedure Act (APA).
This section was laid out in “Requirements Related to Surprise
Billing”; Part II, 86 Fed. Reg. 55,980 (Oct. 7, 2021)
(Implementing Regulation Part II).

The court agreed and held that:

• Plaintiffs have standing to challenging Implementing Regulation
  Part II;




• The Challenged Rule conflicts with the original statute;




• The Agencies “improperly bypassed” the notice and
  comment required by APA; and




• Vacatur and remand of the Challenged Rule is the proper
  remedy.

Specifically, the Court determined that the NSA requires
arbitrators to consider all the specified information, including
the qualifying payment amounts (QPA) and five circumstances set
forth at 42 U.S.C. 300gg-111(c)(5)(C)(ii) in determining which
offer to select to resolve a payment dispute.  Rather than
instructing arbitrators to consider all factors pursuant to the
Act, the Court held the Challenged Rule requires arbitrators to
select the offer closest to the QPA unless
“credible” information clearly demonstrates that the QPA
is materially different from the appropriate out-of-network rate.
Thus, in the Court’s words, the Challenged 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 specific sections of Implementing Regulations Part II that
were vacated are the parallel portions of the Independent Dispute
Resolution Process outlined by the Agencies, respectively:

• Definition of Material Difference in 45 C.F.R. §
  149.510(a)(2)(viii); 26 C.F.R. § 54.9816-8T(a)(2)(viii); and
  29 C.F.R. § 2590.716-8(a)(2)(viii)
  

  • Material difference means a substantial likelihood that a
    reasonable person with the training and qualifications of a
    certified IDR entity making a payment determination would consider
    the submitted information significant in determining the out of
    network rate and would view the information as showing that the
    qualifying payment amount is not the appropriate out-of-network
    rate.




• Second sentence of 45 C.F.R. § 149.510(c)(4)(ii)(A); 26
  C.F.R. § 54.9816-8T(c)(4)(ii)(A); and 29 C.F.R. §
  2590.716-8(c)(4)(ii)(A):
  

  • Select as the out-of-network rate for the qualified IDR item or
    service one of the offers submitted under paragraph (c)(4)(i) of
    this section, taking into account the considerations specified in
    paragraph (c)(4)(iii) of this section (as applied to the
    information provided by the parties pursuant to paragraph (c)(4)(i)
    of this section). The certified IDR entity must select the offer
    closest to the qualifying payment amount unless the certified IDR
    entity determines that credible information submitted by either
    party under paragraph (c)(4)(i) clearly demonstrates that the
    qualifying payment amount is materially different from the
    appropriate out-of-network rate, or if the offers are equally
    distant from the qualifying payment amount but in opposing
    directions. In these cases, the certified IDR entity must
    select the offer as the out-of-network rate that the certified IDR
    entity determines best represents the value of the qualified IDR
    item or services, which could be either offer.




• Final sentence of 45 C.F.R. § 149.510(c)(4)(iii)(C); 26
  C.F.R. § 54.9816-8T(c)(4)(iii)(C); and 29 C.F.R. §
  2590.716- 8(c)(4)(iii)(C).
  

  • Additional information submitted by a party, provided the
    information is credible and relates to the circumstances described
    in paragraphs (c)(4)(iii)(C)(1) through (5) of this section, with
    respect to a qualified IDR item or service of a nonparticipating
    provider, facility, group health plan, or health insurance issuer
    of group or individual health insurance coverage that is the
    subject of a payment determination. This information must also
    clearly demonstrate that the qualifying payment amount is
    materially different from the appropriate out-of-network
    rate.




• Examples as laid out in 45 C.F.R. § 149.510(c)(4)(iv); 26
  C.F.R. § 54.9816-8T(c)(4)(iv); and 29 C.F.R. §
  2590.716-8(c)(4)(iv)




• 45 C.F.R. § 149.510(c)(4)(vi)(B); 26 C.F.R. §
  54.9816-8T(c)(4)(vi)(B); and 29 C.F.R. §
  2590.716-8(c)(4)(vi)(B)
  

  • If the certified IDR entity does not choose the offer
    closest to the qualifying payment amount, the certified IDR
    entity’s written decision must include an explanation of the
    credible information that the certified IDR entity determined
    demonstrated that the qualifying payment amount was materially
    different from the appropriate out-of-network rate, based on the
    considerations allowed under paragraph (c)(4)(iii)(B) through (D)
    of this section, with respect to the qualified IDR item or
    service.

Notably, the vacatur of the above provisions is not limited to
the named Plaintiffs in the case. It is well established that when
a court sets aside agency rules that are arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with the law,
the ordinary result is that the rules are vacated.  As such,
Judge Kernodle’s decision may be telling for similar challenges
to the NSA brought by other health care providers (for example the
lawsuit brought by the American Medical Association and the
American Hospital Association on December 9, 2021). We will
continue to monitor these and other cases which challenge the
NSA.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.