Healthcare Dive: Federal government notches rare win in surprise billing lawsuit

By Sydney Halleman | November 5, 2024

This article was originally published on HealthcareDive.com here.

Dive Brief:

• Insurers can once again use a wider variety of rates in calculating a key metric meant to help arbiters determine fair payment amounts in disputes with providers over out-of-network bills, thanks to a recent appeals court decision.
• Last week, the 5th Circuit Court of Appeals reversed rulings made by a district court that excluded ghost rates, rates stemming from case-specific agreements and bonus and incentive payments from determining the qualifying payment amount, or QPA — a key metric in disputes over surprise billing.
• The ruling is a rare loss for providers and a partial win for federal regulators, who appealed the case in October 2023 after the district court’s ruling prompted months-long delays in dispute processing. However, the 5th Circuit upheld the lower court’s rulings concerning disclosures and dispute timing.

Dive Insight:

The independent dispute resolution process set up by the No Surprises Act has been the target of multiple lawsuits in the past several years, mainly from frustrated provider groups.

No Surprises was passed to stop patients from receiving unexpected bills for out-of-network care. The law does so by making providers and insurers responsible for determining their own payment obligations over contested bills, and creating an arbitration process for cases when both sides can’t agree on a fair amount.

However, how regulators set up that arbitration process has been heavily criticized by providers, including the Texas Medical Association, the leading plaintiff in this suit.

Providers have particularly taken aim at the QPA’s role in dispute resolution, which they argue unfairly benefits insurers.

That’s because insurers set the QPA. The metric is meant to represent the median in-network rate for a service in a geographic area, and is important as arbiters can consider QPAs in deciding what providers are owed. However, providers say insurers are setting QPAs artificially low, which could lead arbiters to side with insurers instead of them.

A flurry of successful lawsuits from the TMA led judges to vacate numerous provisions of the QPA within the past two years — and forced regulators to start and restart dispute processing multiple times.

In its third lawsuit, the TMA sued the government in 2022 arguing again that standard QPA calculations weighted disputes against providers.

Judge Jeremy Kernodle of the Eastern District of Texas agreed with the TMA in his August ruling and vacated certain rates from QPA calculations.

But now, the 5th Circuit is once again allowing insurers to include ghost rates, or rates for items and services that providers have no intention to provide, in calculating the QPA.

Ghost rates were originally included because they are contracted rates for similar services provided by clinicians, though providers argued the rates can be below fair market value because providers have little incentive to negotiate them.

However, the appellate court ruled that including the rates in the QPA is reasonable. Even if providers in the same or similar specialty did not perform the same services, the plaintiffs “do not suggest how to otherwise” draw the line to separate them from services the provider might eventually perform, the judges wrote in their decision.

The 5th Circuit also reversed the lower court’s ruling vacating QPA calculations that excluded case-specific agreements, or narrow agreements between insurers and providers about coverage for select services. The court is also allowing insurers to include risk-sharing, bonus, penalty and other incentive-based payments in QPA calculations. 

The 5th Circuit did uphold two of Kernodle’s rulings, vacating a provision that providers argued gave insurers the power to delay dispute resolutions and upholding regulators’ determination of how much information insurers must disclose during the process.

Regulators have not said whether the latest court ruling will disrupt the dispute resolution process. The HHS did not respond to a request for comment.