Fifth Circuit sides with providers challenging No Surprises Act billing formula

The Fifth Circuit of the U.S. Court of Appeals has struck down the methodology the U.S. Department of Health and Human Services (HHS) uses to calculate the qualifying payment amount (QPA) within the No Surprises Act, calling into question the legality of decisions made during the arbitration process that manages disputes between providers and payers.

The ruling is a big win for provider groups, who were represented in the case by the Texas Medical Association. Along with other plaintiffs, the group was challenging multiple rules issued by the HHS and other bodies in the federal government that guided arbitration rulings, with the federal court agreeing with plaintiffs on the primary challenge to payment calculations.

As a result, insurers will no longer be allowed to calculate “ghost rates” into QPA calculations, something allowed under federal rules that the court found to be unlawful. Ghost rates refer to services added to contracts between payers and providers that the latter doesn’t actually offer. For example, a rate for anesthesia services may be included in a primary care physician’s contract, despite that doctor not performing surgeries.

Insurers were including these rates for these immaterial services in their median calculations for rates, which, adjusted for inflation, determine QPAs. As a lower court noted in its ruling, such a rule allows insurers to include rates for care delivery that is “not provided, never have been provided, and never will be provided.”

The Fifth Circuit concurred, adding that such a policy has “upended” the arbitration process, which notoriously has been heavily favoring providers, with proceedings siding against insurers 80% of the time.

But as the court noted in its ruling, that may be because QPA calculations were found to be inadequate during proceedings. In 85% of resolved disputes, arbitrators are siding with providers and reimbursing care at rates higher than benchmarks set by insurers.

Now, with this ruling, insurers will be required to raise some of those benchmarks and adjust the way they calculate QPAs to reflect the actual services reimbursed to a provider.

Previously, one-off contracts between insurers and single-service patient care groups, such as an air ambulance company, were excluded from broader insurer QPA calculations. The court ruled that exclusion will stay in place, as those encounters unfairly inflate the benchmark for what an insurer typically pays for a particular healthcare service in-network, something the QPA calculation aims to measure.