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Surprise Medical Bill Rule Lawsuit Heading Toward Texas Court

Sept. 27, 2022, 3:25 PM

Medical providers are putting all their eggs in one basket by moving to support a federal lawsuit filed in Texas against the Biden administration’s No Surprises Act rule on settling payment disputes.

The Texas Medical Association, one doctor, and a hospital sued the US Department of Health and Human Services in the US District Court for the Eastern District of Texas on Sept. 22. The same week, the American Medical Association, and the American Hospital Association agreed to end their similar D.C.-based case and said they support the Texas case.

Medical providers and health insurers and employers that foot much of America’s health-care bill have been battling in court to try to ensure that the 2020 law designed to protect patients from many high out-of-network bills is implemented by arbitrators in a way that favors their side. The law is meant to prevent providers from billing patients in emergencies and in situations where patients have procedures at network facilities, but they are served by providers, such as anesthesiologists, who are not in their insurance network.

Rules implementing the law required arbitrators to select the amount closest to the median in-network rate in settling payment disputes between insurers and certain out-of-network health-care providers. Providers argue that relying on median contract rates gives insurers too much power, while payers say that allowing arbitrators to weigh many factors equally could inflate health-care costs.

“It seems like providers are clearing the decks for this to be litigated in Texas,” Katie Keith, director of the Health Policy and the Law Initiative at the O’Neill Institute for National and Global Health Law at Georgetown University Law Center, said in an interview. Appeals would then go through the US Court of Appeals for the Fifth Circuit, she said. Keith has been supportive of the administration’s rules implementing the dispute resolution provisions of the No Surprises Act.

Dispute Resolution Challenged

The lawsuit challenges the government’s August 2022 final rule regarding the No Surprises Act’s independent dispute resolution process. It’s the second time in less than a year that TMA has challenged federal agencies related to the same rulemaking. US District Judge Jeremy Kernodle previously ruled in favor of providers who challenged a rule issued by four federal agencies that gave preference to using the qualifying payment amount as the primary factor in deciding billing disputes.

“The Texas court previously held that the interim final rule impermissibly rewrote clear statutory terms by placing a thumb on the scale in favor of commercial insurers,” the AMA and the AHA said in a joint statement. “The final rule suffers from the same problems.”

The groups said they “want to see the law’s core patient protections move forward.”

“We look forward to supporting the Texas Medical Association’s efforts to restore the balanced, patient-friendly approach that Congress passed and the AHA and AMA supported,” the statement said.

In other words, Keith said, the provider organizations are saying, “‘We’re going to support this other challenge before a judge who I think has been sympathetic,’” to their arguments.

Several lawsuits were previously filed against the Biden administration’s 2021 interim final rule that instructed arbitrators to give precedence to the qualifying payment amount, based on median contract rates negotiated by health insurers and providers, in settling payment disputes under the No Surprises Act.

The Biden administration issued a new final rule in August in response to Kernodle’s earlier decision against the dispute resolution process.

Provider Groups Coalesce

The Georgia College of Emergency Physicians also recently ended their Georgia-based case, Keith said. And the Association of Air Medical Services, which has a separate lawsuit against the administration’s rule, said in a recent hearing in the US District Court for the District of Columbia that it might challenge the final rule “somewhere else,” which could be in Texas, Keith said.

The Physician Advocacy Institute Inc. “strongly supports the Texas Medical Association in their latest lawsuit challenging federal regulatory agencies’ flawed approach to resolving disputes between physicians and insurers under the No Surprises Act, which President Biden signed into law last year.” according to a statement issued Monday from the group’s CEO, Kelly Kenney. PAI has affiliated state medical associations representing more than 170,000 physicians and medical students.

If Kernodle, the Texas judge, rules against the most recent rule on how payment disputes should be decided, “You would lose the guardrails on the arbitration process,” Keith said. “It runs the risk that IDR would become more inflationary,” and “that out-of-network providers further use arbitration to get higher out-of-network prices,” she said.

There should be incentives for insurers and providers to work out rates through negotiation, with dispute resolution being used as a back-up, Keith said. The danger is IDR could be used “to garner higher out-of-network reimbursements, even when the circumstances don’t warrant it.”

The Department of Labor reported in August that disputing parties had more than 46,000 initial disputes through the federal independent dispute resolution portal, substantially more than what federal agencies had expected for an entire year.

The case is Tex. Med. Ass’n. v. Dep’t of Health and Human Serv., E.D. Tex., No. 6:22-cv-00372, 9/22/22.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bloomberglaw.com

To contact the editors responsible for this story: Cheryl Saenz at csaenz@bloombergindustry.com; Karl Hardy at khardy@bloomberglaw.com