Challenges without surprises, winner for suppliers | Blogs | Health law today

On Wednesday, February 23, 2022, U.S. District Court Judge Jeremy Kernodle for the Eastern District of Texas granted the motion for summary judgment of the Texas Medical Association and Adam Corley (the plaintiffs) regarding their challenge to certain portions of the statute. Federal Unsurprisingly (NSA) and simultaneously denied defendants’ cross motion for summary judgment. This is seen as a victory for healthcare providers who argue that parts of the NSA are disproportionately harmful to their industry and their ability to provide patient care. For a discussion of all requirements applicable to the supplier industry as of January 1, 2022, please see our previous publications (Part I | Part II).

Plaintiffs filed a lawsuit against the U.S. Department of Health and Human Services, Department of Labor, Department of Treasury, Office of Personnel Management (the Agencies), on October 28, 2021 (the Complaint). In the complaint, the plaintiffs claimed that the part of the NSA governing the arbitration process between out-of-network providers and health plans/health insurance issuers to resolve payment disputes (the challenged rule) violated the law. on the administrative procedure (APA). This section was introduced in “Requirements for surprise billing”; Part II, 86 Fed. Reg. 55,980 (7 Oct. 2021) (Implementing Rules, Part II).

The court agreed and ruled that:

  • The plaintiffs have standing to challenge Part II of the Regulations;
  • The challenged rule conflicts with the original law;
  • The Agencies “Improperly Circumvented” Notice and Comments Required by the APA; and
  • Vacatur and dismissal of the disputed rule is the appropriate remedy.

Specifically, the Court determined that the NSA requires arbitrators to consider all specified information, including eligible payment amounts (QPAs) and five circumstances set forth at 42 USC 300gg-111(c)(5)(C ) (ii) to determine which offer to select to resolve a payment dispute. Rather than requiring arbitrators to consider all factors in accordance with the Act, the Court ruled that the disputed rule requires arbitrators to select the offer closest to the QPA unless “credible” information clearly demonstrates that the QPA is materially different from the appropriate off-grid rate. Thus, in the words of the Court, the impugned rule “places its thumb on the QPA scale, forcing arbitrators to presume the accuracy of the QPA, and then placing an increased burden on the remaining statutory factors to overcome that presumption.” .

The specific sections of the Regulations, Part II, that have been struck down are the parallel parts of the Independent Dispute Resolution Process described by the agencies, respectively:

  • Definition of material difference in 45 CFR § 149.510(a)(2)(viii); 26 CFR § 54.9816-8T(a)(2)(viii); and 29 CFR § 2590.716-8(a)(2)(viii)
    • A material difference means a substantial likelihood that a reasonable person with the training and qualifications of a Certified IDR Entity making a payment decision would consider the information submitted to be material in determining the out-of-network rate and would consider the information to show that the amount of the eligible payment is not the appropriate out-of-network rate.
  • 45 CFR § 149.510(c)(4)(ii)(A), second sentence; 26 CFR § 54.9816-8T(c)(4)(ii)(A); and 29 CFR § 2590.716-8(c)(4)(ii)(A):
    • Select as the Out-of-Network Rate for the Qualified IDR Item or Service one of the Bids submitted pursuant to paragraph (c)(4)(i) of this Section, taking into account the considerations specified in paragraph (c)( 4)(iii) of this section (as applied to information provided by the parties pursuant to paragraph (c)(4)(i) of this section). The Certified IDR Entity shall select the offer closest to the Eligible Payment Amount unless the Certified IDR Entity determines only credible information submitted by either party under paragraph (c) (4)(i) clearly demonstrate that the eligible payment amount is materially different from the relevant out-of-network rate, or whether the offers are also far from the eligible payment amount but in opposite directions. In these cases, the Certified IDR Entity should select the offering as an out-of-network rate that the Certified IDR Entity believes best represents the value of the Qualified IDR Item or Services, which could be one of either of the offers.
  • Last sentence of 45 CFR § 149.510(c)(4)(iii)(C); 26 CFR § 54.9816-8T(c)(4)(iii)(C); and 29 CFR § 2590.716-8(c)(4)(iii)(C).
    • Additional information submitted by a party, provided that the information is credible and relates to the circumstances described in paragraphs (c)(4)(iii)(C)(1) through (5) of this section, with respect to a qualified IDR item or service from a nonparticipating provider, facility, group health plan, or issuer of group health insurance or individual health insurance coverage that makes the object of a payment determination. This information must also clearly demonstrate that the eligible payment amount is materially different from the appropriate out-of-network rate..
  • Examples as defined in 45 CFR § 149.510(c)(4)(iv); 26 CFR § 54.9816-8T(c)(4)(iv); and 29 CFR § 2590.716-8(c)(4)(iv)
  • 45 CFR § 149.510(c)(4)(vi)(B); 26 CFR § 54.9816-8T(c)(4)(vi)(B); and 29 CFR § 2590.716-8(c)(4)(vi)(B)
    • If the Certified IDR Entity does not select the offer that is closest to the eligible payment amount, the Certified IDR Entity’s written decision must include an explanation of the credible information that the Certified IDR Entity has determined demonstrates that the amount of the qualifying payment was materially different from the relevant outflow. – the Network Rate, based on the considerations permitted under paragraphs (c)(4)(iii)(B) through (D) of this Section, with respect to the Qualified IDR Item or Service.

Notably, the vacatur of the above provisions is not limited to the plaintiffs named in the case. It is well established that when a court strikes down rules of agency that are arbitrary, capricious, an abuse of discretion, or otherwise inconsistent with law, the ordinary result is that the rules are struck down. As such, Judge Kernodle’s decision may be indicative of similar NSA challenges brought by other healthcare providers (e.g., the lawsuit filed by the American Medical Association and the American Hospital Association on December 9, 2021). We will continue to monitor these and other cases that challenge the NSA.

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