Fifth Circuit Upholds Surprise Medical Bill Dispute Pay Formula

The Biden administration’s method for calculating health-provider rates in resolving surprise medical billing disputes was upheld by the Fifth Circuit Wednesday.

The panel reversed a lower court’s ruling that the federal government’s methodology to determine a key benchmark under the No Surprises Act of 2020 exceeded the statute’s bounds.

The surprise billing law protects patients from out-of-network medical bills for certain emergency care, as well as care received from out-of-network clinicians at in-network facilities. Medical providers and health insurers must now settle most out-of-network disputes through the law’s arbitration process.

Courts have instructed the Centers for Medicare and Medicaid Services, which oversees the law, to revamp its rules four times.

The latest lawsuit challenged how the median in-network rate, or qualifying payment amount, is formulated.

The QPA plays a major role in billing arbitration and has been subject to a number of legal challenges. The Fifth Circuit in August invalidated federal guidance that instructed arbitrators to make the rate a primary factor in their decisions, and air ambulances are embroiled in a fight with insurance companies over alleged deceptions around the number.

The Texas Medical Association has racked up a series of wins that spurred significant changes in the law’s implementation. US District Court for the Eastern District of Texas Judge Jeremy Kernodle ruled against the administration in each of four cases around the QPA’s calculation method, the weight given to the QPA in arbitration decisions, guidance for grouping disputed services, and the fees associated with filing for arbitration.

The Fifth Circuit previously affirmed those decisions in both instances where the administration appealed.

The Texas Medical Association in this latest Fifth Circuit case argued the administration’s inclusion of “ghost rates”—in which contracted rates technically exist but have never been used—often exist for providers who don’t offer the service and therefore artificially lower the median rate.

The appeals court concluded in Wednesday’s ruling that the law did not prohibit the inclusion of such rates, and that other parameters sufficiently limited any negative impact. The judges reversed the district court’s rejection of a provision excluding case-specific rates from the QPA, agreeing that those rates are typically outside the usual network contract.

The court also rejected the Texas Medical Association’s argument that the agencies illegally exclude bonus payments from QPA calculations, saying the law gives the government the authority to do so.

The litigation also questioned the administration’s decision to define a medical bill as a “clean claim” that is free from errors and disputes. Air ambulance plaintiffs led by LifeNet, Inc. had argued the definition allowed insurance companies to delay the arbitration process. The appeals court agreed with the district judge that the provision violated the statute, noting that the definition changed the start date of the arbitration process.

“The Departments’ argument about industry practice cannot cure such a blatant departure from the Act’s plain language,” the appeals court wrote.

Lastly, the court upheld the agencies’ disclosure requirements for insurance plans, rejecting the doctors’ argument that the lack of additional requirements hindered the arbitration process.

The Texas Medical Association is represented by Sidley Austin LLP. LifeNet is represented by Susman Godfrey, LLP

The case is Texas Med. Ass’n v. HHS, 5th Cir., No. 23-40605, Opinion issued 10/30/24