Ghostbusters: In a New Win for Providers, No Surprises Act Rules Struck for Allowing Ghost Rates

Last week, the federal government met its fourth loss in a challenge brought by health care and air ambulance providers against No Surprises Act (NSA) regulations. We wrote about the previous victories by out-of-network providers and other NSA litigation in a recent client alert. In this latest decision, in a case known as TMA III,^[1] a court in the Eastern District of Texas vacated several aspects of regulations setting the methodology for calculating the qualifying payment amount (QPA) — a key data point provided by insurers to arbitrators in the NSA’s independent dispute resolution (IDR) process for resolving claims by out-of-network providers. The district court agreed that the QPA methodology outlined in the regulations, which many perceive favor insurers, deviated from the NSA statutory requirements, and it vacated those regulations as well as two other regulations governing the claim and IDR process. But it let stand the disclosure rules, which some have criticized as weak, for insurer QPA calculations, leaving the IDR process open to distortion.

The first victory for providers in TMA III concerned the definition of “contracted rates” in the regulations. Under the NSA, insurers calculate the QPA based on contracted rates “for the same or a similar item or service that is provided by a provider in the same or similar specialty and provided in the geographic region in which the item or service is furnished.”^[2] But under the regulations, insurers could include in the QPA for a given service the contracted rates entered into by a physician who never provided that service to patients. The agencies’ own example of this is an anesthesiologist whose contract includes contracted rates for dermatology services, which the anesthesiologist never provides and thus has no incentive to negotiate. These “ghost contracts” or “ghost rates” depress the QPA for that service and thus could be considered to favor insurers in the IDR process. The district court agreed with providers that the NSA did not allow the QPA to include ghost rates because “[w]hatever ‘is provided’ means … it cannot justify including rates for items or services that are not provided and never will be provided.”^[3]

The district court also sided with providers on the related question of whether the QPA must be calculated for each specialty. The NSA requires the QPA to be calculated based on rates for “provider[s] in the same or similar specialty.”^[4] The regulations and guidance, however, allowed an insurer to avoid calculating rates for different specialties unless the insurer “purposefully” varied rates by specialty or made its own determination that there is a material difference in its rates by specialty.^[5] Similar to ghost contracting, this allowed the higher rates contracted by more specialized providers to be diluted by the contracted rates entered into by other specialties or general practitioners. The district court rejected the agencies’ regulation because it deviated from the text by excusing insurers from the requirement to calculate the QPA by specialty.

Providers also prevailed on other challenges to the QPA regulations. They successfully challenged the regulations’ exclusion of risk-sharing payments, incentive payments, retrospective payments and payment adjustments from the QPA calculation because the NSA required the QPA to include the “total maximum payment,” without any exception. The district court also vacated a regulation that would allow self-insured group health plans to calculate the QPA based on all rates negotiated by their third-party administrator, rather than only the rates negotiated for the specific plan. And air ambulance providers defeated a rule that would exclude one-off, single-case agreements with insurers from the QPA, a carve-out not provided in the statute. The only challenged part of the QPA regulations that the district court did not strike down was a rule defining the geographic area used for QPA calculations for air ambulance providers based on Census regions.

While providers were largely successful in defeating the agencies’ QPA calculation methodology, the district court let stand the agencies’ decision to excuse insurers from disclosing data underlying their QPA calculations. The district court disagreed that the NSA required insurers to disclose information about each rate included in the QPA, and for each rate, the specialty of the provider, how often the rate was paid and whether incentive payments were excluded. The district court concluded that the NSA provided the agencies with discretion to balance transparency to providers and burden on insurers, which they did.

TMA III also addressed regulations governing the billing and IDR process under the NSA, with mixed results for providers. Providers prevailed against a rule allowing insurers to put off deciding whether to pay or deny a claim beyond the 30 days provided in the NSA if, in their discretion, they determined the claim did not provide sufficient information and thus was not a “clean claim.”^[6] Instead, the district court held that all that is required to start the clock for the insurer to decide the claim is the submission of a bill, regardless of whether the insurer considers it a clean claim ready for decision. The district court struck a rule requiring air ambulance providers to undertake two separate IDR processes for a single transport.

TMA III represents a significant victory for providers because it shuts the door to certain types of tactical behavior by insurers around QPA calculations, and it has led the agencies to call for a total halt of the NSA IDR process while they come up with a plan to comply with TMA III pending appeal. While this is a win for providers, it’s not without a cost. In the short term, during this temporary shutdown of the IDR process, out-of-network providers will not be able to turn to the IDR process to challenge nonpayment or underpayment of claims. Depending on how long the process is shut down, it may cause liquidity issues for providers with large out-of-network business.

In the long run, litigation alone is unlikely to lead to a satisfactory resolution for providers. Without improved disclosure requirements regarding QPA calculation, even if ghost contracts or the other specific tactics are not expressly permitted by the regulations, providers will not have an easy way to check insurers’ QPA for these issues or for other, not-yet-discovered QPA issues. Better and more neutral regulations by the agencies, including enhanced disclosure requirements in the IDR process, should be a key area of focus for providers and their advocates.

^[1] _{Tex. Med. Ass’n v. HHS (TMA III), No. 22-cv-450, 2023 WL 5489028 (E.D. Tex. Aug. 24, 2023).}                 

^[2] _{42 U.S.C. § 300gg-111(a)(3)(E)(i)(I) (emphasis added).}

^[3] _{TMA III, 2023 WL 5489028, at *6.}

^[4] _{42 U.S.C. § 300gg-111(a)(3)(E)(i)(I).}

^[5] _{TMA III, 2023 WL 5489028, at *7.}

^[6] _{45 C.F.R. § 149.130(b)(4)(i).}