Texas Federal Judge Rules Against HHS in Surprise Billing Lawsuit

4/26/2022 update: This article has been updated to include the decision from HHS to appeal the ruling.

A federal judge in Texas has ruled in favor of the Texas Medical Association (TMA) in a surprise billing lawsuit, affirming that sections of the HHS interim final rule on surprise billing violate the policies presented by Congress in the No Surprises Act.

US District Court Judge Jeremy Kernodle granted TMA’s motion for summary judgment and denied the request from HHS for a cross-motion summary judgment.

“This decision is an important step toward restoring the fair and balanced process that Congress enacted to resolve disputes between health insurers and physicians over appropriate out-of-network payment rates,” Diana Fite, MD, immediate past president of TMA, said in a statement.

“The decision will promote patient access to quality care when they need it most and will guard against health insurer business practices that give patients fewer choices of affordable in-network physicians and threaten the sustainability of physician practices.”

The lawsuit centered on the No Surprises Act’s arbitration process for resolving payment disputes between out-of-network providers and payers.

If a provider and payer cannot agree on a payment rate for a surprise bill, they must go through an independent dispute resolution (IDR) process. In an IDR process, an IDR entity determines the final out-of-network reimbursement rate for the service.

The No Surprises Act states that IDR entities should consider several factors when determining a rate, including the qualifying payment amount—a payer’s median in-network rate for the service—the provider’s level of training and experience, the difficulty of the service, and if the provider or payer attempted to enter into a network agreement.

TMA filed the lawsuit against HHS in October 2021, stating that the interim final rule on surprise billing, which the Biden administration released in September 2021, goes against these policies.

According to the lawsuit, the interim final rule directs IDR entities to weigh the qualifying payment amount more than the other factors when determining a reimbursement rate. Because of this provision, TMA claimed that IDR entities have been neglecting other factors and only considering the median in-network rates, resulting in lower reimbursement rates for providers.

Additionally, the Association said it feared that the IDR process explained in the interim final rule would incentivize payers to reduce their provider networks if they could offer out-of-network physicians the same reimbursement rates as in-network providers.

The TMA lawsuit sought to vacate the IDR provisions included in the regulation. Judge Kernodle sided with the organization and stated that the HHS arbitration process goes against the federal provisions in the No Surprises Act, which does not say anywhere that the qualifying payment amount is the primary or most important factor.

“The District Court for the Eastern District of Texas adds to the consensus shared by physicians, hospitals, lawmakers, and others that the rules created by federal agencies for settling billing disputes between providers and health plans conflict with the plain text of the No Surprises Act as passed by Congress,” Gerald Harmon, MD, president of the American Medical Association, said in a statement.

“The AMA supports the court’s proper reading of the statute and remedy to the rule’s flawed interpretation of the independent dispute resolution process passed by Congress as a confirmation of the goals of the No Surprise Act and the patient protections it contains.”

AMA and the American Hospital Association (AHA) filed a separate lawsuit against HHS, challenging the IDR process.

A coalition of physician groups, including the Physicians Advocacy Institute and the American Association of Neurological Surgeons, filed an amicus brief supporting the AHA and AMA lawsuit. The groups stated that the IDR process would increase healthcare consolidation, limit patient choices, and boost healthcare costs for out-of-network services.

Additionally, a group of US House Representatives wrote to HHS in November 2021, asking the Department to amend the rule to align with the IDR policies in the No Surprises Act.

While provider groups are primarily against the surprise billing final rule, payer organizations feel differently.

AHIP and the Blue Cross Blue Shield Association (BCBSA) recently filed amicus briefs that supported HHS in the TMA lawsuit. The organizations stated that using the qualifying payment amount for services helps keep healthcare costs low for patients, as the amount reflects fair market rates.

HHS submitted a notice of appeal to the US Court of Appeals for the Fifth Circuit on April 22, 2022.