Hospitals, Doctors Sue Administration Over Surprise Billing Rule

Inside Health Policy

December 9, 2021 3:52 pm

Key hospital and doctors’ lobbies have asked a federal court to immediately block the Biden administration from moving forward with a controversial piece of its most recent surprise billing rule that they allege illegally limits what an arbitrator can consider when resolving a payment dispute. The American Hospital Association, American Medical Association and several other providers say the interim final rule (IFR) released in September runs afoul of the law and unfairly favors insurers.

The plaintiffs ask the U.S. District Court for the District of Columbia for injunctive relief and ultimately to vacate the part of the IRF that directs arbitrators to primarily consider the qualifying payment amount (QPA), or median in-network rate, when deciding which party will win a payment dispute. The lobbies argue the rule clearly deviates from the statute, which they say requires the QPA – and five additional factors — be weighed equally.

Although the providers seek to scrap that piece of the rule, they stress they support shielding patients from surprise bills and say their challenge will not stop those core protections from going into effect Jan. 1 as mandated.

The suit comes after providers recently laid out their strong objections to the rule in comments sent to the administration, already hinting at that point they might sue.

The American Hospital Association argued in its comments that the latest interim final rule conflicts with the statutory language of the No Surprises Act and violates the Administrative Procedure Act by requiring arbitrators primarily consider the QPA when resolving a payment dispute.

Prior to Thursday’s suit, the Texas Medical Association (TMA) and the Association of Air Medical Services had already challenged the QPA language in separate district courts. Initial briefings in the TMA case are due Dec. 10, and a hearing has been scheduled for Feb. 4 at the U.S. District Court Eastern Division of Texas, Tyler.

The No Surprises Act, which was passed last December as part of the Continuing Appropriations Act, bans providers from balance billing patients for out-of-network emergency room care and care performed in-network by an out-of-network provider.

The law also requires HHS establish an independent dispute resolution process to address payment fights between payers and providers. The process is baseball style — meaning the arbitrator must choose either the offer submitted by the provider or the payer.

The law also details what factors those arbitrators can consider in their decision-making — including the QPA and five other factors — but lawmakers and stakeholders disagree on whether all the factors should be weighed in every case. The other factors include patient acuity, provider training levels, market share held by both parties, teaching status of the hospital and prior contracted rates.

Insurers, employers, some health experts and some lawmakers say Congress wanted the arbitrators to primarily consider the QPA, or median in-network rate, while providers and other lawmakers say Congress intended for all of the factors to be weighed equally.

The IFR released Sept. 30 lands on the insurers’ side, saying that arbitrators must consider the QPA while the other factors can be looked at if more information is needed.

Providers say that’s a misinterpretation.

“Rather than honoring this statutory requirement, the departments instead have chosen to make the QPA the presumptively appropriate payment amount, thus relegating all other factors to second-tier status and to be considered only as what the IFR preamble refers to as ‘rebuttal evidence’ to demonstrate that the QPA is materially different from the appropriate out-of-network rate. The departments lack the authority to put their collective thumb on the scale in this manner,” AHA said in its comments. “Because the IFR impermissibly limits the IDR entity’s ability to consider fully all of the statutory factors, it fundamentally alters the statutory structure and guts the independence of the IDR entity. For these reasons, these provisions in the IFR are contrary to law, arbitrary and capricious, and otherwise violate the Administrative Procedure Act (APA).”

FAH voiced similar concerns in its comments, and said it was exploring its legal options. First, the lobby blasted the administration for not first doing a proposed rulemaking, even as the departments conceded there might have been time for a notice and comment process. FAH also argued the administration went beyond the statute by prescribing the factors the IDR can consider.

AHA and FAH both pointed to recent letters from bipartisan groups of lawmakers to back up their arguments, including a letter from House Ways & Means leaders from both parties and another from more than 150 lawmakers who argue the rule is contrary to congressional intent and must be revised.

Hospitals also urged the administration to provide more flexibility on batching claims.

While the statute allows parties to batch claims, the IFR limits that ability to claims that are for the same items or services or use the same or a comparable code. “This limitation on the batching of claims will substantially reduce the potential efficiencies gained from batching,” AHA said. The lobby requested broader discretion for batching, which it said would benefit all parties in several ways: “First, more comprehensive batching will significantly reduce the number of requests brought before the IDR process. It also may help disincentivize plans and issuers from adopting inappropriate out-of-network payment methodologies that would trigger IDR in the first place. Finally, by implicating a larger number of claims in a single IDR decision, providers and facilities are not incentivized to batch unless they have strong evidence to support their position.”