On November 30, 2022, the Texas Medical Association (TMA) filed a third lawsuit challenging the regulations implementing the No Surprises Act (NSA). TMA’s latest suit before the United States District Court for the Eastern District of Texas challenges the portions of the first set of interim final rules (the First IFR) that provide guidance on how to calculate the Qualifying Payment Amount (QPA). TMA argues that the regulations artificially deflate the QPA, which consequently skews payor–provider disputes and negotiations against providers.

Background

In July 2021, the Departments of Health and Human Services, Labor, and the Treasury (the Departments) issued the First IFR implementing the NSA. Among other topics, the First IFR provided guidance on the calculation of the patient’s cost-sharing amount and the QPA. On September 30, 2021, the Departments issued the second set of implementing regulations (the Second IFR) which, in part, provided significant additional detail regarding the IDR process, but also made the QPA the presumptive out-of-network rate, thereby downgrading the other factors that Congress specified and permitted for consideration. A Federal court twice held that the Departments’ elevation of the QPA to the presumptive out-of-network rate in the IDR process violated the text of the NSA. King & Spalding reported on the these successful challenges to the Second IFR in previous issues of Health Headlines (available here and here).

In response, the Departments issued new guidance implementing the IDR process in the form of a final rulemaking in August 2022 (the Final Rule), and while the Departments did not make the QPA the presumptive rate, they continued to give the QPA elevated importance in the determination of the out-of-network rate in the IDR process. At the same time, the Departments also issued a set of FAQs addressing a number of topics, including the calculation of the QPA. TMA has challenged these aspects of the Final Rule, arguing that they suffer from the same flaws as the Second IFR. That challenge is currently pending in the United States District Court for the Eastern District of Texas with a hearing scheduled for December 20, 2022.

The QPA Challenge

TMA’s latest challenge focuses on the portions of the First IFR that provided the method for calculating the QPA. TMA argues that the First IFR conflicts with the text of the NSA and depresses the QPA in four ways:

1. Ghost Rates. The rule allows the plans to include in the QPA “ghost rates.” By this, TMA means that plans may include in their calculation of the QPA contracted rates for services that a contracting provider or facility never expects to provide. Because the providers do not provide such a service, the provider has no incentive to negotiate a fair and reasonable price, and these rates are typically lower than rates for services that are actually provided, sometimes as low as $0. The Departments clarified in the August 2022 FAQs that $0 rates are not to be included in the QPA, but that non-$0 rates (such as a $1 ghost rate) should be included. TMA argues that this contradicts the text of the NSA that states the QPA should include rates for services “provided by a provider,” and improperly drives down the QPA.

2. Specialty Rates. The rule permits plans to include the rates of physicians that are not in the same or similar specialty as the physician involved in the payment dispute in some instances. The First IFR instructs insurers to only calculate separate rates where the insurer otherwise varies its contracted rates based on provider specialty. In the August 2022 FAQs, the Departments clarified that separate rates for specialty need only be calculated if there is a “material difference” in the contracted rates between providers of different specialties. TMA argues that this rule conflicts with the NSA’s directive that the QPA alwaysbe calculated based on the rates of providers in the same or similar specialty.

3. Impact of Adjustments. The First IFR permits insurers to use an amount less than the total payment amount if a contracted rate includes risk sharing, bonus, penalty, or other incentive-based and retrospective payments or payment adjustments. Even though these adjustments and retrospective payments are included in the total amount paid to a provider, the Departments instruct that they are not to be included in the QPA. TMA argues that this conflicts with the NSA’s mandate that the QPA include the contracted rate for the “total maximum payment” under a plan.

4. ERISA Plan Administrator Rates. The First IFR permits self-funded plans to allow their third-party administrators to determine the QPA for the plan sponsor by using the contracted rates recognized by all self-insured group health plans administered by the third-party administrator. Alternatively, the plan sponsor may calculate the QPA using only its contracted rates, meaning the plan sponsor may determine which method results in lower QPAs and opt into that method. TMA argues that this conflicts with the language of the NSA that states that the QPA is to be determined with respects to allplans of a sponsor or all coverage offered by an issue in an insurance market.

TMA argues that these four methods operate to systematically and improperly lower the QPA and to undermine healthcare providers’ ability to obtain adequate reimbursement for their services in the IDR process. These effects are compounded by the fact that providers are not permitted to review the plans’ calculations and have limited ability to obtain information on the plans’ calculation methods. The only limited recourse providers have to challenge the calculations is to submit a complaint to the Departments, who have authority to conduct an audit of the plan. However, the Departments have stated their intention to conduct no more than nine audits annually.

TMA asserts that even if its separate challenge to the final rules implementing the IDR process is successful, the method for calculating the QPA will continue to harm providers because the QPA will remain a factor in the IDR process, and the QPA colors the whole negotiation process between payors and providers.

TMA’s complaint is available here.