On February 23, 2022, in the case captioned Texas Med. Ass’n v. U.S. Dep’t of Health & Human Servs., No. 6:21-cv-00425-JDK (E.D. Tex.), the U.S. District Court for the Eastern District of Texas issued the first major judicial decision addressing implementation of the new federal No Surprises Act, which went into effect nationally on January 1, 2022.  The Court’s decision significantly alters the landscape for claims qualifying for the No Surprises Act’s Federal Independent Dispute Resolution Process (IDRP), an arbitration process designed to resolve certain reimbursement disputes between commercial payors and out-of-network health care providers or emergency facilities.

About the Case

The new Federal No Surprises Act lists certain factors that arbitrators, also known as Independent Dispute Resolution Entities (IDREs), are required and prohibited from considering in the IDRP when determining appropriate out-of-network rates.[1] However, pursuant to an Interim Final Rule issued in October 2021, Federal agencies promulgated regulations directing IDREs to choose the payment rate closest to the commercial payor’s median contracted rate (also known as the Qualifying Payment Amount or QPA), unless the out-of-network provider or emergency facility submits credible information that clearly demonstrates a material difference between the QPA and the appropriate payment amount.  This regulatory language created what some describe as a “rebuttable presumption” favoring the payor’s median contracted rate.[2] In response, the Texas Medical Association filed suit seeking for the court to vacate the “rebuttable presumption” portions of the Federal IDRP regulations, arguing that the regulations conflicted with the No Surprises Act and that Federal agencies did not abide by procedural requirements when issuing the regulations.

In a comprehensive decision, the Court found in favor of the Texas Medical Association and vacated the language of Federal IDRP regulations that created the rebuttable presumption.  As a result, an IDRE must equally weigh each of the factors set forth in the No Surprises Act when resolving claims submitted through the Federal IDRP for disputes involving payors and out-of-network providers or emergency facilities.

Looking Forward

All stakeholders expecting to participate in the Federal IDRP should be aware of the Court’s decision, as it fundamentally changes how IDREs approach reimbursement disputes through the Federal IDRP.  The Court’s decision also paves a path in a similar Federal case filed by the Association of Air Medical Services and currently pending in the U.S. District Court for the District of Columbia, which seeks to strike similar provisions in regulations concerning the No Surprises Act’s independent dispute resolution process for air ambulance services.[3]

Stakeholders should also monitor whether Federal agencies decide to appeal or take other administrative action in response to the Texas decision.

[1] 42 U.S.C. § 300gg-111(c)(5)(C); 26 U.S.C. § 9816(c)(5)(C); 29 U.S.C. § 1185e(c)(5)(C);

[2] 86 Fed. Reg. at 55995; 45 CFR § 149.510; 26 CFR § 54.9816-8T; 9 CFR § 2590.716—8.

[3]  Association of Air Medical Services v. U.S. D.H.H.S., No. 1:21-cv-3031 (D.D.C., filed Nov. 16, 2021); see 42 U.S.C. § 300gg-112; 26 U.S.C. § 9817; 29 U.S.C. § 1185e