Thu 11/18/2021 07:00 AM
Share this article:
Two trade groups representing healthcare providers have filed lawsuits against the Department of Health and Human Services, the Department of the Treasury, and the Department of Labor and their respective heads, challenging the interim final rule part 1 and part 2 released in connection with the No Surprises Act. In particular, they seek to vacate provisions in the rules stipulating that median in-network rates - “qualifying payment amount” under the rules - should be the presumptive appropriate out-of-network amount owed, even though, according to the lawsuits, Congress intended for an arbitrator considering billing disputes to also consider factors including the quality of outcomes, market share of parties, and patient acuity when determining the appropriate out-of-network rate.

A bipartisan group of more than 150 lawmakers also sent a letter to the departments mentioned above asking them to amend the interim final rule to align the law’s implementation with the legislation Congress passed.

On the other hand, two Democratic lawmakers as well as a group of more than 60 organizations representing unions and employers also sent letters applauding the interim rule. An official with the Employee Benefits Security Administration also defended the rules.

The comment period for part 2 of the interim final rule runs through Dec. 6, and the comment period for part 1 expired earlier this year. The departments have until Dec. 27 to issue the rules, which implement the independent dispute resolution process contemplated by the legislation. The NSA bill is set to become effective Jan. 1, 2022.

AAMS, TMA Litigation

Thus far, at least two federal lawsuits have been filed challenging HHS’ interim final rules implementing the No Surprises Act.


On Tuesday, Nov. 16, the Association of Air Medical Services, or AAMS (a trade association representing over 93% of air ambulance providers in the United States), filed an action for declaratory and injunctive relief in the D.C. District Court, asserting that the interim final rules are “inconsistent with the statute’s text and purpose” and “impose through administrative fiat policies that Congress expressly considered and rejected.”

According to AAMS, the interim final rules undermine the No Surprises Act’s independent arbitration provisions by deeming the “qualifying payment amount,” or QPA, determined by plans and insurers to be “presumptively dispositive” in any out-of-network payment dispute and requiring the arbitrator “to select the offer that is closest to that amount.” To rebut this presumption under the interim final rules, AAMS says, the provider “must offer information that ‘clearly demonstrates’ that the QPA is ‘materially different’ from the ‘appropriate out-of-network rate.’”

AAMS maintains that this presumption, and the “clearly demonstrates” burden required to overcome it, conflicts with the No Surprises Act’s “enumerated list of circumstances” that the arbitrator “‘shall consider,’ only one of which is the QPA.” An arbitration “rigged simply to reaffirm the QPA” is “neither an independent process nor faithful to Congress’s directive to consider multiple enumerated factors in making a decision,” AAMS concludes.

Further, AAMS says, the interim final rules depress the QPA for air ambulance services in particular in “a manner contrary to the statutory language and wholly divorced from market realities.” According to AAMS, under the No Surprises Act, “the QPA is supposed to reflect the median of the ‘contracted rates recognized by the plan’ offering the ‘same or similar’ service provided by a provider in the ‘same or similar specialty’ and ‘geographic region.’” The interim final rules, AAMS contends, defy this statutory standard by excluding “most categories of agreed-upon payments between air ambulance providers and health plans,” failing to “distinguish between hospital-based air ambulance services and independent air ambulance services” and relying “on overbroad geographic regions.” These exclusions result in “QPA deflation” that undermines the statutory definition of QPA, AAMS concludes.

The agencies responsible for implementing the No Surprises Act, AAMS summarizes, have “adopted a policy that was rejected by Congress in the Act itself to administratively deflate the amount an out-of-network provider can hope to get from a group health plan” and “dictated the outcome” of the arbitration process “by making the QPA presumptively dispositive, forcing the provider to take that purposefully deflated rate.” The interim final rules, if allowed to take effect, would jeopardize “the ongoing viability of air ambulance providers.”

On the same day that AAMS filed its lawsuit, a research note published by Brookings concluded that private equity-owned air ambulances receive higher payments and generate larger and more frequent surprise bills.

The think tank said allowed amounts for helicopter air ambulance transports from providers owned by private equity or publicly traded parent companies averaged $32,051 in the years 2016 and 2017, 60% higher than the standardized average allowed amount for rides provided by hospitals, nonprofits, and independent companies. The standardized average charge set by providers owned by private equity and publicly traded companies across 2016 and 2017 was $48,155, more than 75% higher than other providers’ standardized average charges, the Brookings note said. In addition, 55% of all helicopter transports delivered by private equity and publicly traded carriers had the potential to result in a balance bill in 2017, compared with 29% of transports from hospital, nonprofit, and independently owned providers.

The AAMS case docket is available on Reorg HERE.


On Oct. 28, the Texas Medical Association, or TMA, and Dr. Adam Corley, M.D., filed a complaint for declaratory and injunctive relief in the District Court for the Eastern District of Texas asserting that the QPA arbitration presumption provisions of the interim final rules exceed the agencies’ authority under the No Surprises Act and were “unlawfully issued without notice and comment” under the federal Administrative Procedures Act, or APA.

Like AAMS, TMA contends that the interim final rule’s creation of a rebuttable presumption in favor of the QPA price unlawfully restricts the list of statutory factors an arbitrator in an out-of-network dispute must consider, of which the QPA is only one. The No Surprises Act, the TMA notes, did not assign priority to any one of the factors, leaving the arbitrator to determine how best to weigh the factors in light of all the facts and circumstances presented in a particular case.

According to TMA, the rebuttable QPA presumption “will unfairly skew” arbitration results “in payors’ favor, granting them a windfall they were unable to obtain in the legislative process.” The presumption would thus “undermine providers’ ability to obtain adequate reimbursement for their services, to the detriment of both providers and the patients they serve.”

With respect to APA compliance, TMA says it was denied an opportunity to raise its objections to the QPA presumption because the regulation was issued without notice and comment. To forego notice and comment under the APA, TMA asserts, the agencies must find “good cause,” a narrow exception that allows them “to bypass their fundamental obligation to provide notice and comment” only in “defined circumstances where delay would cause serious harm.” There was no exigency justifying the agencies’ decision not to provide notice and comment in this case, TMA maintains, because the No Surprises Act would not take effect until March 2022. Further, the statute itself did not require the agencies to issue regulations until December 2021, three months after the interim final rules.

The TMA case docket is available on Reorg HERE.

Bipartisan Opposition of IFR

A bipartisan group of more than 150 lawmakers signed a letter dated Nov. 5 asserting that the interim final rule runs counter to the legislative intent behind the No Surprises Act. The letter takes particular issue with the parameters of the independent dispute resolution, or IDR, process, which the lawmakers claim do not reflect the way the No Surprises Act was written, “do not reflect a policy that could have passed Congress, and do not create a balanced process to settle payment disputes.” In particular, the lawmakers point to the guidance laid out in the interim final rule which states that the IDR entities begin with the assumption that the median in-network rate is the appropriate payment amount prior to considering other factors. “This directive establishes a de-facto benchmark rate, making the median in-network rate the default factor considered in the IDR process,” states the letter, adding that this “approach is contrary to statute and could incentivize insurance companies to set artificially low payment rates,” and “could also have a broad impact on reimbursement for in-network services, which could exacerbate existing health disparities and patient access issues in rural and urban underserved communities.”

Support for IFR

Rep. Frank Pallone, D-N.J., and Sen. Patty Murray, D-Wash., chairs of the House Committee on Energy and Commerce and Senate Committee on Health Education, Labor and Pensions, respectively, assert in a separate letter, however, that the Biden Administration has implemented the law “in a manner consistent” with their intent as leaders of the congressional committees with jurisdiction over the legislation.

A group of 63 organizations representing unions and employers sent a letter on Nov. 16 to the heads of the departments of HHS, Treasury and Labor applauding the “vital consumer protections” in the form of the “thoughtful approach to IDR in the interim final rules.”

Additionally, Ali Khawar, acting Assistant Secretary of the Employee Benefits Security Administration, defended the interim final rules during a Nov. 10 webinar hosted by advocacy group the Council for Affordable Health Coverage.

“Obviously we did take an approach in the interim final rule that wasn’t an accident,” Khawar said (starting at 41:25). “We’ve been thinking about this issue a lot, and it was a deliberate decision.”

--Harvard Zhang, Mark Fischer, Kevin Eckhardt, Lucas Ballet
Share this article:
This article is an example of the content you may receive if you subscribe to a product of Reorg Research, Inc. or one of its affiliates (collectively, “Reorg”). The information contained herein should not be construed as legal, investment, accounting or other professional services advice on any subject. Reorg, its affiliates, officers, directors, partners and employees expressly disclaim all liability in respect to actions taken or not taken based on any or all the contents of this publication. Copyright © 2021 Reorg Research, Inc. All rights reserved.
Thank you for signing up
for Reorg on the Record!