Key Takeaways
- On Thursday, August 3, 2023, a federal court issued a memorandum and order in Texas Medical Association, et al. v. United States Department of Health and Human Services, Case No. 6:23-cv-59-JDK ("TMA IV"), tossing the sharp fee increase to participate in the independent dispute resolution ("IDR") process under the No Surprises Act ("NSA") and vacating a regulation that significantly limited the ability to batch multiple items and services into a single dispute.
- This is the third time in approximately 18 months that aspects of the NSA's rules and regulations have been vacated as unlawful.
- In response, the Biden administration has suspended the IDR process pending further guidance.
Overview
The NSA protects consumers from unexpected medical bills for certain out-of-network health care services and requires providers and insurers to resolve payment disputes directly through an IDR process administered by CMS. Congress authorized three federal executive agencies (the "Departments") to draft and issue rules on how the IDR process would function. In a decision issued on August 3, 2023 in TMA IV, a federal court in Texas struck down as unlawful two significant aspects of the Departments' NSA rules for IDR: (1) the non-refundable $350 administrative fee each party must pay to participate in IDR; and (2) the regulation that limits batching of multiple claims at IDR to claims billed under identical service codes.
Court Holds that Increase to IDR Administrative Fee is Unlawful
The NSA provides that each party to an IDR process must pay a non-refundable administrative fee to participate in the federal IDR process. The NSA instructs the Departments to "establish" the amount of the fee, such that "the total amount of fees paid" in a given year "is estimated to be equal to the amount of expenditures estimated to be made by the [Departments] for such year in carrying out the IDR process." In September of 2021, the Departments issued an interim final rule ("Rule"), without notice and comment, providing that the Departments will establish the amount of the administrative fee in guidance that is published annually.
For calendar year 2022, the Departments set the administrative fee at $50. However, in late December of 2022, the Departments raised the administrative fee dramatically to $350, citing a high volume of disputes and costs associated with determining dispute claim eligibility for IDR.
In TMA IV, a suit brought by a medical association and several provider groups challenging the administrative fee increase, the United States District Court for the Eastern District of Texas held that the Departments' decision to raise the administrative fee by 600% was a substantive decision, not a mere procedural decision. As a result, the Departments were required to provide notice and comment pursuant to the Administrative Procedure Act. Given the Departments' failure to provide notice and comment, the court determined that the administrative fee increase was unlawful and must be vacated.
The court stated that the Departments' decision to bypass notice and comment deprived Plaintiffs and other stakeholders of the opportunity to submit comments and explain how the $350 fee makes it economically irrational for some providers to pursue additional reimbursement through IDR. To demonstrate the impact of the fee increase, the court pointed to an affidavit submitted by a radiology practice, which explained that the new fee makes it "economically unviable to submit 97% of its claims to IDR" given the fact that the amount in dispute on the majority of the practice's IDRs would be below the administrative fee. The court also noted that, without notice and comment, stakeholders were unable to offer alternative solutions for handling eligibility disputes apart from the costly pre-eligibility review, such as a "variable fee tied to the amount in controversy."
Court Vacates Regulation that Limited Batching to Claims with Identical Service Codes
The NSA states that items and services may be batched in a single IDR if, among other things, they are related to the treatment of a similar condition. The NSA also instructs the Departments to create batching rules that permit multiple items and services to be considered jointly in a single dispute. The Departments' Rule, issued without notice and comment, outlined these batching rules. To be considered the same or similar items and services, the Rule required the items and services to be billed under the exact same service code or procedural code. Given that most patient encounters involve multiple service codes and/or procedural codes, the Rule effectively forced providers to split a single patient encounter into multiple IDRs, one for each individual service code or procedural code. Ultimately, claim batching was significantly restricted across all IDRs, resulting in a much greater number of separate IDRs needed to dispute underpayments.
The Plaintiffs in TMA IV also challenged the Rule's batching restrictions which, like the administrative fee increase, were issued without notice and comment. As a result, Plaintiffs and other stakeholders were unable to express their concerns with the rules. The court therefore determined they were unlawful and must be vacated. The court noted that the Departments' Rule failed to address "the preclusive effect of requiring multiple IDR arbitrations for providers with small-value claims" and also failed to consider "broader batching criteria that would give providers increased opportunity to bring their claims to arbitration."
CMS Pauses Federal IDR Process
Immediately following the release of the court's decision in TMA IV, CMS issued a notice stating that the Departments have temporarily suspended the federal IDR process. As a result, IDR entities cannot render decisions on pending disputes, and parties cannot initiate any new disputes until the Departments issue further guidance. The Departments stated that they are currently reviewing the court's decision and are working on updating the IDR process in order to comply with the court's order, and they intend to provide IDR entities and disputing parties with new instructions for implementing the process in the near future. It is unclear how long the IDR process will remain suspended, but stakeholders should not be surprised if it is several weeks, or longer, before the federal IDR process is back up and running.
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