Federal regulators recently won a large legal victory when the Fifth Circuit Court of Appeals upheld several provisions of the rule regulating Qualified Payment Amount (“QPA”) calculations under the No Surprises Act (the “Act”). The QPA is used to calculate reimbursement rates for out-of-network providers. (See Texas Medical Association v. United States Department of Health and Human Services, No. 23-40605, 2024 WL 4615744 (5th Cir. Oct. 30, 2024)).
In December 2020, Congress passed the No Surprises Act to protect patients from surprise medical bills. Before the Act, when an out-of-network healthcare provider furnished medical care to a patient, the patient’s insurer could refuse to pay or unilaterally determine what to pay the provider. This often left patients responsible for so called “balance bills.” The Act aims to cap patient’s share of liability to out-of-network providers when a patient has no choice over the matter; for example, when an insured patient receives emergency care from an out-of-network provider.
The QPA is defined as “the median of the contracted rates recognized by the plan or insurer, respectively […] as the total maximum payment […] under such plans or coverage, respectively, on January 31, 2019, for the same or a similar item or service that is provided by a provider in the same or a similar specialty and provided in the geographic region in which the item or service is furnished.” 42 U.S.C. § 300gg-111(a)(3)(E)(i)(I).
For patients, the QPA plays a primary role in determining cost sharing responsibility. A patient’s responsibility is calculated as if the total cost of the services was no greater than the QPA, and as if the service had been provided in-network. For health plans and providers, the QPA impacts payment. When a provider submits a bill to a health plan for an out-of-network service, the plan must respond within 30 days with payment or notice of denial. If the provider is dissatisfied with the response, the provider may initiate a 30-day period of open negotiation. If the claim remains unresolved, the parties may proceed to independent dispute resolution (“IDR”), wherein both parties offer a payment amount, along with justification, and the arbitrator selects one of the offers. The QPA is a factor the arbitrator must consider when selecting an offer.
The Act directs the Department of Health and Human Services to establish a methodology for health plans to determine the QPA. The Requirements Related to Surprise Billing; Part I (the “Rule”) sets forth the QPA calculation provisions. 86 Fed. Reg. 36,872 (July 13, 2021). Following its implementation, a group of health care providers challenged the Agency Rule and specifically took issue with that calculation procedure. The District Court held several provisions unlawful, and the defendant agencies appealed. Last week, in Texas Med. Ass’n v. U.S. Dept. of Health and Human Servs., the Fifth Circuit reversed the District Court’s vacatur of the challenged QPA calculation provisions.
Methodology for Determining Qualified Payment Amount
I. Including rates regardless of the number of claims paid at that rate
The Rule states that “the rate negotiated under a contract constitutes a […] contracted rate regardless of the number of claims paid at that contracted rate.” 86 Fed. Reg. 36,889. The District Court initially held that the provision conflicted with the Act; however, the Fifth Circuit disagreed, holding that the Act does not contain a requirement that a service be previously performed by a provider for that rate to be included in the QPA. The Act only requires that the service be “available” regardless of whether, or how many times, it has actually been performed. According to the Fifth Circuit, the Act reasonably addresses concerns about the QPA’s inclusion of rates for services that a given provider would never perform by requiring (in the QPA definition) that the QPA is the median of the contracted rates “provided in the same or similar specialty and provided in the geographic region in which the item is furnished.” According to the Circuit Court, this ensures that QPA for a given services excludes rates from providers outside of the same specialty and geographic areas.
This will have a significant impact for providers. Providers in the same or similar specialty might not provide the same services. Allowing unused or rarely used services, so called “ghost rates,” to be factored into QPA calculations will drive down the rate for those delivering care. These rates are often well below fair market value because providers have very little incentive to negotiate rates for services they do not provide.
II. Excluding case-specific agreements and bonus and incentive payments
The Agency Rule excludes case-specific agreements from QPA calculations. The District Court held that this provision conflicted with the Act’s definition of QPA. The Fifth Circuit reversed, holding that the most natural reading of the applicable section of the QPA definition, “contracted rates must be recognized by the plan or issuer … under such plans or coverage,” excludes rates not previously agreed to under a plan. Furthermore, the Circuit Court held that the Department reasonably explained its approach to case specific agreements in that it most closely aligns with the statutory intent of ensuring that the QPA reflects market rates under typical contract negotiations. Payments made to out-of-network providers, which are often single case contract agreements, can no longer be included in the QPA calculation.
The Fifth Circuit also held that, with respect to bonus and incentive payments, the Act itself grants the Department discretion on whether to include such adjustments. Therefore, the Rule’s exclusion of those payments is not inconsistent with the Act. The Circuit Court reversed the District Court’s vacatur. Bonus payments for meeting certain quality benchmarks are often the primary reason for health care providers to agree to the contracts. Excluding these types of incentive payments and case-specific agreements will lower the QPA and reduce provider reimbursement rates.
III. Deadline Provision and Disclosure Requirements
Thee Fifth Circuit held that the deadline to respond to a provider’s request for payment outlined in the Rule directly conflicts with the Act and affirmed the District Court’s vacatur of the provision. The Rule states the 30-day clock to send payment or notice of denial starts on the date the plan receives “the information necessary to decide a claim for payment for such services.” 86 Fed. Reg. at 36,900. The District Court held, and the Circuit Court agreed, that the Rule’s provision turned a firm 30-day deadline, outlined in the Act, into an indefinite delay, ultimately leaving providers at the mercy of the insurer.
The Fifth Circuit also affirmed the District Court’s decision to uphold the challenged provision related to disclosure. The Circuit Court stated, “the Act grants considerable discretion to the Department in this area and sought to ensure transparent and meaningful disclosure about the calculation of the QPA while also balancing the need for disclosure against the administrative burdens on plans and issuers.”
Lasting Implications for Providers
This is a large setback for providers, and the QPA’s role in dispute resolution will continue to unfairly benefit insurers. This decision will likely lead to artificially low QPAs and negatively impact providers’ reimbursement rates and future contract negotiations.
