Latest In No Surprises Act Litigation And New Guidance

Litigation continues over the No Surprises Act (NSA) as the Biden administration issues new guidance regarding the independent dispute resolution (IDR) process, good faith estimates, and more. This article summarizes the status of at least eight lawsuits filed by health care providers over the NSA and recent guidance on implementation of the law. Federal officials have suggested that there will be a final IDR rule issued by early summer.

Litigation Continues Over The No Surprises Act

Most providers and facilities do not send surprise out-of-network bills to patients. However, the NSA’s protections and the IDR process are highly relevant for the types of specialty providers that patients do not choose and where surprise billing is the most common (such as emergency providers and anesthesiologists). Many of these providers, including those backed by private equity firms, have set very high charges, leading to higher premiums and out-of-pocket costs.

With much money at stake, NSA implementation has been closely watched by industry. To implement the key provisions of the NSA, the Biden administration issued several interim final rules, one proposed rule, and several rounds of guidance. Displeased with implementation of the federal IDR process, doctors, hospitals, and air ambulance companies sued.

When we began tracking NSA lawsuits earlier this year, there were six legal challenges. Since then, additional providers—namely air ambulance companies—filed additional lawsuits. The eight current lawsuits are tracked here and have been filed by the:

• Texas Medical Association and Dr. Adam Corley in the eastern district of Texas before Judge Jeremy D. Kernodle;
• Association of Air Medical Services in the District of Columbia before Judge Richard J. Leon;
• American Medical Association (AMA), the American Hospital Association, Renown Health, UMass Memorial Health, Dr. Stuart Squires, and Dr. Victor Kubit in the District of Columbia before Judge Leon;
• American Society of Anesthesiologists (ASA), American College of Emergency Physicians, American College of Radiology in the northern district of Illinois before Judge Marvin E. Aspen;
• Georgia College of Emergency Physicians (GACEP) and Dr. Brett Cannon in the northern district of Georgia before Judge Mark H. Cohen;
• Dr. Daniel Haller (Haller) and Long Island Surgical PLLC in the eastern district of New York before Judge Ann M. Donnelly;
• LifeNet (an air ambulance company) in the eastern district of Texas before Judge Jeremy D. Kernodle; and
• PHI Health (an air ambulance company) and Empact Midwest (an emergency room physician staffing firm) in the eastern district of Kentucky before Judge Robert E. Wier.

All eight lawsuits challenge an interim final rule on the IDR process. In particular, they take issue with the rule’s requirement that IDR entities presume that the qualifying payment amount (QPA)—the insurer or plan’s median in-network rate—is the appropriate out-of-network payment amount unless a party submits credible information that clearly demonstrates that this amount is materially different from the appropriate out-of-network rate. This “rebuttable presumption,” they argue, violates the Administrative Procedure Act and is beyond the scope of the agencies’ legal authority, inconsistent with the NSA, or arbitrary and capricious. Some, such as PHI Health, go further to argue that this part of the rule is unconstitutional and violates the Fifth Amendment. And plaintiffs in six of the lawsuits—by the TMA, the AMA, the ASA, the GACEP, LifeNet, and PHI Health—further argue that the interim final rule is improper because there was no opportunity for advance public notice and comment.

Some of the lawsuits make other arguments too. As discussed more here, two of the air ambulance lawsuits—by AAMS and PHI Health—additionally challenge an interim final rule on the methodology to calculate the QPA for air ambulances specifically. As discussed below, PHI Health makes many new claims that go beyond those filed in other cases, including constitutional claims. And the Haller lawsuit argues that major provisions of the NSA (both the IDR process and the ban on balance bills) are unconstitutional. The Haller lawsuit, if successful, would undo hard-fought, bipartisan protections, and millions of patients might no longer be protected from surprise out-of-network bills.

In each case, the plaintiffs asked the court to set aside the challenged provisions because they are unlawful. They also ask that federal officials be enjoined from enforcing these provisions or adopting replacement provisions without first providing an opportunity for notice and comment. The plaintiffs’ main arguments are consistent with those summarized in a prior article on the TMA and AAMS lawsuits.

Latest Developments And Current Status Of Lawsuits

Even with all this litigation, there has only been one court decision so far. In February 2022, Judge Kernodle in the TMA challenge invalidated parts of the IDR rule, vacating provisions related to the rebuttable presumption in favor of the QPA. He held that the plaintiffs had standing to challenge the rule, that the rule is inconsistent with the NSA, that the federal agencies should not have bypassed notice and comment procedures, and that the challenged provisions should be vacated and remanded to the agencies for revisions. A complete list of the invalidated provisions is here.

Judge Kernodle did not disturb the overall IDR process, which is currently being used to resolve payment disputes between payers and out-of-network providers. But he set aside the rule’s directive for IDR entities that was meant to help keep health care costs down.

Cases On Hold: TMA, GACEP, ASA

On April 22, 2022, the Department of Justice appealed Judge Kernodle’s decision to the Court of Appeals for the Fifth Circuit. One week later, the government filed an unopposed request to hold the appeal in abeyance. The Biden administration asked for this delay because federal officials are in the process of issuing a final rule that will supersede the provisions in the challenged IDR rule (which was an interim final rule). The government noted that the final rule “will address the substantive issues that were the subject of the district court’s decision.” The Fifth Circuit granted this request on May 3, meaning the appeal of the TMA decision is currently on hold with a status report due every 60 days.

Several other district court lawsuits are also on hold in light of the TMA decision. The lawsuits filed by GACEP (in Georgia) and ASA (in Illinois) have been stayed since March with status reports due on June 16 in the GACEP challenge and on July 7 (with a status hearing set for August 4) in the ASA challenge.

Cases That Are Proceeding: Haller, AAMS/AMA, LifeNet, PHI Health

We may soon have at least a preliminary decision in the lawsuit filed by Haller, which argues that major parts of the NSA are unconstitutional. Haller argues that the provisions that establish the federal IDR process and that bar providers from sending balance bills to patients for emergency services and non-emergency services violate the Seventh Amendment, due process under the Fifth and Fourteenth Amendments, and the Takings Clause. Briefing on Haller’s motion for a preliminary injunction and the government’s motion to dismiss occurred throughout April and May. A hearing will be held on June 7.  

The AAMS and AMA cases, both pending in district court in DC, were consolidated before Judge Leon, who held a hearing on March 21. I attended this hearing and left with the impression that Judge Leon is not inclined to issue a ruling ahead of a final rule from the Biden administration. Following the hearing, he asked the parties—the government, the AMA, and AAMS—to file supplemental briefs to respond to any issues discussed during the hearing.

We still have no formal indication of whether Judge Leon will issue a decision before a final rule, but the parties have continued to notify the court of new developments. This includes guidance issued by the Biden administration in response to the TMA decision, the government’s appeal of the TMA decision (and subsequent stay by the Fifth Circuit), and the filing of LifeNet’s related case in Texas.

In the latter filing, the government argues that AAMS and LifeNet are seeking the same relief (i.e., they want a court to vacate the same provisions) and involve the same parties (i.e., LifeNet has a partnership with Air Methods, which is a member of AAMS and has actively participated in the AAMS litigation). Given this, the Department of Justice asked to transfer the LifeNet case in Texas to Judge Leon’s courtroom so that the challenges brought by the AMA, AAMS, and LifeNet can be consolidated and considered together. Judge Kernodle has not yet ruled on this request to transfer LifeNet’s case to DC.

LifeNet filed its lawsuit on April 27 in the eastern district of Texas and asked that the case be assigned to Judge Kernodle, since it addresses similar issues as the TMA litigation. In particular, LifeNet wants Judge Kernodle to invalidate a separate provision of the IDR rule related to air ambulances. Because there are some statutory differences between the IDR factors used for air ambulances versus other providers, there are separate regulations that govern the IDR process. The TMA decision did not affect the IDR process for air ambulances, so LifeNet wants the court to invalidate the rebuttable presumption that remains in federal rules for air ambulances only.

LifeNet requested expedited briefing with “an order simply and expressly extending the holding of TMA to air ambulance IDRs.” The government opposed this request and asked the court to transfer the litigation to Judge Leon (since AAMS represents 93 percent of the nation’s air ambulance industry). Pointing to the declarations filed by LifeNet, the government argues that the organizations in the Texas litigation have been active participants in the DC litigation. Judge Kernodle granted LifeNet’s request for expedited briefing anyway. LifeNet filed its motion for summary judgment on May 18, and the government filed a response on June 1 as required. Briefing should be completed by mid-June.

A related (albeit broader) lawsuit was filed in Kentucky on April 29 by PHI Health (which is represented by the same attorneys as LifeNet in the Texas case). In addition to arguing that the rebuttable presumption for air ambulances must be invalidated, PHI Health makes several broader arguments not seen in the other lawsuits. The timeline for briefing in the PHI Health case is not yet clear.

First, PHI Health argues that federal NSA rules violate the Takings Clause of the Fifth Amendment by “taking” their physical property, their services, and their right to state law causes of action without just compensation. Why is there not just compensation? Because PHI Health thinks the IDR process will result in “confiscatory rates” that they assert will fail to cover their operating costs.

Second, PHI Health wants other parts of both the first and second interim final rules—including cost-sharing protections for consumers and the full IDR process for air ambulance services—to be set aside for procedural issues and for payers to be required to disclose how the QPA was determined. Third, PHI Health wants a court to instruct IDR entities not to give any weight to the QPA unless the IDR entity finds that the payer’s disclosures comply with the statute. Fourth, group health plan sponsors should not be able to rely on the rates of their plan administrator (such as a third-party administrator). Finally, PHI Health wants patients to pay higher cost sharing, arguing that federal rules should not have limited patient out-of-pocket costs for air ambulances to the lesser of the QPA or billed charges.

Latest NSA Guidance

As all this litigation proceeds, the Biden administration has continued to implement the NSA. In response to the TMA decision, federal officials issued revised manuals for certified IDR entities and parties. Consistent with guidance issued on February 28, these new materials eliminated the rebuttable presumption for non-air ambulance providers. This did, however, lead to a delay in the launch of the IDR portal, which occurred on April 15.

Beyond revising the IDR manuals, the Centers for Medicare and Medicaid Services (CMS) posted new informational resources. This includes 1) a summary chart to help determine whether a particular claim is subject to the federal IDR process, state law, or an all-payer model agreement; and 2) an IDR checklist for plans and insurers. The four-page checklist focuses on claims processing requirements, written notification standards, the open negotiation process, and initiation of the IDR process.

Separately, federal officials issued frequently asked questions for providers. This document explains various NSA requirements—including some lesser-known requirements such as continuity of care standards—and exceptions to these requirements. Federal officials also confirm that the NSA’s protections do not apply to non-emergency services at an out-of-network facility, meaning a patient in those circumstances can be balance billed even without their consent.

FAQs For Good Faith Estimates

Federal officials also issued frequently asked questions on good faith estimates for uninsured or self-pay individuals. This guidance clarifies some finer points of what must be reflected on a good faith estimate and when this document must be provided to patients.

First, providers do not have to list a diagnosis code on the good faith estimate if the diagnosis is not known or there is no relevant code for an item or service. The good faith estimate must still be provided and reflect expected charges and service codes, but a specific diagnosis code is not necessary. This estimate should be treated as part of a patient’s medical record, so privacy requirements apply.

Second, a good faith estimate can be limited to an initial visit and does not have to include costs associated with future care or a period of care. This future care can be addressed in a new good faith estimate after an initial visit. Alternatively, the provider can provide a single good faith estimate with recurring costs within the span of 12 months. Good faith estimates must be updated if there are changes (e.g., new charges, different frequency of care, etc.). This new estimate must be provided no later than one business day before scheduled care is to be furnished.

Third, providers and facilities do not have to provide a good faith estimate to walk-in clients or those who scheduled their care on the same day. This is because the requirement to provide a good faith estimate is not triggered if a patient schedules care that will occur in less than 3 business days from the date of scheduling. As an example, a lab or testing facility is not required to provide a good faith estimate to an uninsured or self-pay patient that schedules same-day lab services.

Finally, a provider or facility does not have to provide a good faith estimate to an individual who was insured when she scheduled her care but, by the time of the appointment, is uninsured or self-pay. Said another way, patient care should not be rescheduled just so a provider or facility can issue a good faith estimate. (In the future, insured patients will receive an advanced explanation of benefits with an estimate of expected charges. But this requirement has not been implemented yet, so federal officials are not currently enforcing it.)