Rulings in Medical Billing Suits Create Fallout, Frustration

Doctors and other medical providers have won a string of legal battles against the government over how payment disputes are handled in surprise billing cases, but fallout from the rulings by a federal judge in Texas has left them and health insurers frustrated.

The decisions by Judge Jeremy Kernodle of the US District Court for the Eastern District of Texas involving the No Surprises Act have shut down the independent arbitration process designed to resolve billing disputes between doctors and insurers several times and forced federal agencies to issue new rules and guidance.

The sweeping impact of the decisions adds to mounting frustrations with the arbitration process and threatens to further delay arbitration outcomes and payments to doctors. More than 330,000 arbitration cases are clogging the system.

The No Surprises Act protects patients against bills for out-of-network services in emergencies and in situations where out-of-network providers provide services at facilities that are in patients’ insurance networks. It also lays out an arbitration process for medical providers and insurers to resolve any disputes.

In the court’s most recent decision in August, the Texas Medical Association won its fourth victory when Kernodle ruled in favor of the doctors’ group and its allies. The ruling overturned major provisions of regulations stipulating how qualifying payment amounts are to be calculated. The qualifying payment amount, based on median network rates, is a key factor arbitrators are supposed to consider.

The judge, nominated to the court in 2018 by President Donald Trump, found “all but one regulation pertaining to the calculation of the QPA violate the plain text of the Act.”

Providers haven’t fared as well when bringing challenges outside the Eastern District of Texas.

The government prevailed in a challenge to the constitutionality of the No Surprises Act in the Eastern District of New York; that case is on appeal in the US Court of Appeals for the Second Circuit. The government also won a suit filed by air ambulance companies in the US District Court for the District of Columbia.

Substantial Impact

Kernodle has had a substantial impact on implementation of the law, Zachary Baron, associate director of Georgetown University Law Center’s Health Policy and the Law Initiative, said in an interview.

Kernodle has handled seven of more than 20 No Surprises Act lawsuits that have been filed by providers—more than any other judge—and the four cases he has handed down have been in favor of providers. Some of the lawsuits providers filed in other jurisdictions have been voluntarily dismissed because his rulings apply nationwide.

A ruling by Kernodle in February that invalidated rules issued by the Departments of Health and Human Services, Labor, the Treasury, and the Office of Personnel Management that directed how much weight arbitrators should give the qualifying payment amount has been appealed by the agencies to the US Court of Appeals for the Fifth Circuit, where briefs are due from the providers Sept. 11.

Kernodle’s decisions have been focused on the independent dispute resolution (IDR), or arbitration, process set up under the law. Those decisions are largely “inside baseball in terms of fights between insurers and providers,” Baron said. But in addition to protecting patients from surprise bills in situations they can’t control, Congress intended to bring down health-care costs more broadly, which helps reduce premiums and out-of-pocket costs for consumers, he said.

In siding with the providers, Kernodle has rejected “any attempts by the administration to try and set up reasonable guardrails to try and prevent the arbitration process from becoming inflationary,” Baron said.

Self-insured employers that sponsor health plans are concerned about the onslaught of litigation and its outcome.

“We thought we won when the legislation was passed” by bipartisan votes in Congress and signed by Trump, Mark Wilson, vice president of health and employment policy for the HR Policy Association, said in an interview. Provider groups are trying to “diminish the safeguards for payers and employers” in the law through litigation, he said.

The Aug. 24 ruling invalidating the methodology for calculating the qualifying payment amount could mean patients’ out-of-pocket costs will be higher, Kinika Young, director of legal advocacy for the Leukemia & Lymphoma Society, said in an interview.

The decision is “really disruptive to the protections that the No Surprises Act was intended to provide for patients and consumers,” Young said.

Kernodle did not immediately respond to a request for comment.

“The federal agencies have work to do to revise their regulations to come into compliance with the court’s decision,” Texas Medical Association President Rich Snyder said in a statement posted Aug. 28. “TMA will continue to remain vigilant to ensure that the federal agencies implement the No Surprises Act in a manner that is lawful and preserves patient access to care.”

Arbitration Shut Down

The arbitration system has been temporarily shut down following an Aug. 3 ruling by Kernodle that threw out a fee increase the government had imposed in part to try to reduce the large number of disputes that have been filed.

“Each time one of these decisions comes through, the government has had to kind of pause the process” to update guidelines in accordance with the court’s decisions, Laura Wooster, senior vice president for advocacy and practice affairs with the American College of Emergency Physicians, said in an interview. “That’s been really problematic,” she said.

Even when arbitrators decide in favor of the physicians, insurers aren’t paying within the required timeframe, she said.

“That’s a big problem, especially for smaller practices,” Wooster said. “They’re struggling to stay in business as a result of that.”

Of those arbitration disputes being decided, providers are winning the majority.

Providers prevailed in 71% of more than 42,000 disputes, according to a report released April 27 by the Centers for Medicare & Medicaid Services. Many of the groups filing the most disputes were large practice management companies representing hundreds of individual practices, the CMS said.

“We think that as the rules have continued to get watered down, thanks to the Texas Medical Association, that win rates for providers are only going to go up, and that’s going to increase health-care costs,” Adam Beck, senior vice president of commercial product and employer policy with AHIP, said in an interview. AHIP represents commercial health insurers.

Beck also said many arbitrators appear to be a giving no consideration to the qualifying payment amount in deciding in favor of the providers despite that being a requirement of the law.

Next Stop: Fifth Circuit

Meanwhile, providers, insurers, and health policy researchers are watching closely as the cases move to the next level.

The case on appeal before the Fifth Circuit involves how important the qualifying payment amount should be in making the determinations.

ACEP plans to file a brief in that case with other provider groups by Sept. 18, Leslie Moore, the organization’s senior general counsel, said in an interview.

ACEP and other provider groups filed an amicus brief supporting the Texas Medical Association in the most recent case involving calculation of the qualifying payment amount. Many of the cases have overlapping issues involving the qualifying payment amount, she said.

The Fifth Circuit case is likely to reach the US Supreme Court, Loren Adler, associate director of the USC-Brookings Schaeffer Initiative on Health Policy, said in an interview.

“We’re awhile away from a resolution,” he said. “The big question here is what on earth happens in the interim” as the arbitration process is paused, he said.

Guidance is needed, Adler said. “You can’t go to arbitration if there’s no rules at all.”