Tex. Med. Ass'n v. United States Dep't of Health & Human Servs.

Docket Number6:23-cv-59-JDK
Decision Date03 August 2023
CourtUnited States District Courts. 5th Circuit. United States District Court of Eastern District Texas


Plaintiff healthcare providers again challenge actions by the Defendant Departments in implementing the No Surprises Act (the Act). As explained in prior cases, the Act established an arbitration process for resolving payment disputes between certain out-of-network providers and group health plans and health insurers. See Tex. Med. Ass'n v. U.S. Dep't of Health & Hum. Servs. (TMA I) 587 F.Supp.3d 528, 533-35 (E.D. Tex. 2022), appeal dismissed, 2022 WL 15174345 (5th Cir. Oct. 24, 2022); Tex. Med. Ass'n v. U.S. Dep't of Health &amp Hum. Servs. (TMA II), 2023 WL 1781801, at *1-3 (Feb. 6 2023), appeal filed, No. 23-40217 (5th Cir. filed Apr. 6, 2023). The Act also directed the Departments to issue regulations to govern the arbitration proceedings. E.g., 42 U.S.C. § 300gg-111(c)(2)(A).

In this case, Plaintiffs complain that the Departments dramatically increased the administrative fee for participating in the arbitration process, rendering the process cost prohibitive for providers with small-value claims. This problem is exacerbated, Plaintiffs argue, by the Departments' rule making it difficult to “batch” related claims for resolution in a single arbitration proceeding. Plaintiffs contend that the Departments' actions-both increasing the fee and restricting batching- violate the Administrative Procedure Act because they were made without notice and comment and are arbitrary and capricious.

As explained below, the Court concludes that the fee increase and batching rule violate the APA's notice-and-comment requirement and must be set aside. The Court also concludes that vacatur of these rules is the proper remedy. Plaintiffs, however, have not shown that a refund of previously paid fees or a deadline extension are proper here. The Court thus GRANTS-in-part Plaintiffs' motion for summary judgment (Docket No. 18) and DENIES the Departments' cross-motion for summary judgment (Docket No. 41).


Congress enacted the No Surprises Act in 2020 to address “surprise medical bills.” Pub. L. No. 116-260, div. BB, tit. I, 134 Stat. 1182, 2758-2890 (2020). Generally, the Act limits the amount an insured patient will pay for emergency services furnished by an out-of-network provider and for certain non-emergency services furnished by an out-of-network provider at an in-network facility. 42 U.S.C. §§ 300gg-111, 300gg-131, 300gg-132.[1] The Act also addresses the payment of these out-of-network providers by group health plans or health insurers (collectively, “insurers”). In particular, the Act requires insurers to reimburse out-of-network providers at a statutorily calculated “out-of-network rate.” § 300gg-111(a)(1)(C)(iv)(II), (b)(1)(D). In states with an All-Payer Model Agreement or specified state law, the out-of-network rate is the rate provided by the Model Agreement or state law. Id. § 300gg-111(a)(3)(K). In states without a Model Agreement or state law, the out-of-network rate is either the amount agreed to by the insurer and the out-of-network provider or an amount determined through an independent dispute resolution (“IDR”) process. Id.

When an insured receives certain out-of-network medical services, insurers must issue an initial payment or notice of denial of payment to a provider within thirty days after the provider submits a bill for that service. Id. § 300gg-111(a)(1)(C)(iv), (b)(1)(C). If the provider disagrees with the insurer's determination, the provider may initiate a thirty-day period of open negotiation with the insurer over the claim. Id. § 300gg-111(c)(1)(A). If the parties cannot resolve the dispute through negotiation, the parties may then proceed to IDR arbitration. Id. § 300gg-111(c)(1)(B).

The IDR process is a “baseball-style” arbitration. The provider and insurer each submits a proposed payment amount and explanation to the arbitrator. Id. § 300gg-111(c)(5)(B). The arbitrator must then select one of the two proposed payment amounts “taking into account” several specified factors that were the subject of prior lawsuits. Id. § 300gg-111(c)(5)(A); see TMA 1, 587 F.Supp.3d at 540-43; LifeNet, Inc. v. U.S. Dep't of Health & Human Servs., 617 F.Supp.3d 547, 560-62 (E.D. Tex. 2022); TMA II, 2023 WL 1781801, at *11.

The Act also instructs the Secretaries of Health and Human Services, Labor, and the Treasury (collectively, the Departments) to “establish by regulation” this arbitration-or IDR-process. § 300gg-111(c)(2)(A).

Two aspects of the IDR process are at issue here: the administrative fee and the criteria for batching claims.


The Act requires each party to pay an administrative fee “for participating in the IDR process.” Id. § 300gg-111(c)(8)(A). The Act instructs the Departments to “specif[y] the “time” and “manner” of payment. Id. § 300gg-111(c)(8)(B). The Act also charges the Departments with “establish[ing] 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.” Id.

On September 30, 2021, the Departments issued an interim final rule implementing the IDR process. Requirements Related to Surprise Billing: Part II, 86 Fed.Reg. 55,980 (Oct. 7, 2021). Under the September Rule, each party must pay the administrative fee “at the time the certified IDR entity is selected.” 45 C.F.R. § 149.510(d)(2)(i).[2] The September Rule, mirroring the statute, requires that the total fees paid in any year be equal to the projected amount of the Departments' expenditures in carrying out the IDR process. Id. § 149.510(d)(2)(ii). Finally, the September Rule makes clear that [t]he administrative fee amount will be established in guidance published annually.” Id.

Contemporaneously with the September Rule, the Departments issued “guidance” setting the fee at $50 for calendar year 2022. CTRS. FOR MEDICARE & MEDICAID SERVS., CALENDAR YEAR 2022 FEE GUIDANCE FOR THE FEDERAL INDEPENDENT DISPUTE RESOLUTION PROCESS UNDER THE NO SURPRISES ACT: CHANGE IN ADMINISTRATIVE FEE (Sept. 30, 2021). In October 2022, the Departments issued guidance for calendar year 2023, again setting the fee at $50. CTRS. FOR MEDICARE & MEDICAID SERVS., CALENDAR YEAR 2023 FEE GUIDANCE FOR THE FEDERAL INDEPENDENT DISPUTE RESOLUTION PROCESS UNDER THE NO SURPRISES ACT (Oct. 31, 2022)..

In December 2022, however, the Departments dramatically raised the fee for 2023 to $350, citing a surge in the volume of disputes and burgeoning costs associated with conducting dispute eligibility. CTRS. FOR MEDICARE & MEDICAID SERVS., AMENDMENT TO THE CALENDAR YEAR 2023 FEE GUIDANCE FOR THE FEDERAL INDEPENDENT DISPUTE RESOLUTION PROCESS UNDER THE NO SURPRISES ACT: CHANGE IN ADMINISTRATIVE FEE, at 4 (Dec. 23, 2022) (Fee Guidance); see also Docket No. 43, Ex. 12 at 619 (administrative record with Fee Guidance).


The Act also instructs the Departments to create rules for “batching.” Batching permits “multiple qualified IDR dispute items and services . . . to be considered jointly as part of a single determination” by an IDR entity. § 300gg-111(c)(3)(A). In other words, providers may bring several distinct “items and services” for consideration in one IDR arbitration if certain criteria are met. The Act specifies that items and services may be batched if:

(i) such items and services to be included in such determination are furnished by the same provider or facility;
(ii) payment for such items and services is required to be made by the same group health plan or health insurance issuer;
(iii) such items and services are related to the treatment of a similar condition; and
(iv) such items and services were furnished during the 30 day period following the date on which the first item or service included with respect to such determination was furnished or an alternative period as determined by the Secretary, for use in limited situations, such as by the consent of the parties or in the case of low-volume items and services, to encourage procedural efficiency and minimize health plan and provider administrative costs.

Id. § 300gg-111(c)(3)(A).

The Departments addressed batching in the September Rule. The Rule permits items and services to be batched-or to be considered jointly in a single IDR- if they satisfy four requirements. Plaintiffs challenge only one such requirement, which corresponds to the Act's related-items-and-services requirement. Docket No. 18 at 7; § 300gg-111(c)(3)(A)(iii). Under the September Rule, items and services qualify for batching if:

(C) The qualified IDR items and services are the same or similar items and services. The qualified IDR items and services are considered to be the same or similar items or services if each is billed under the same service code, or a comparable code under a different procedural code system, such as Current Procedural Terminology (CPT) codes with modifiers, if applicable, Healthcare Common Procedure Coding System (HCPCS) with modifiers, if applicable, or Diagnosis-Related Group (DRG) codes with modifiers, if applicable ....

§ 149.510(c)(3)(i)(C).[3] By requiring the same service code, the Departments sought to “promot[e] efficiency” by encouraging the IDR entity to “more efficiently focus on where the value” of the item or service is “consistently materially different from the QPA [median rate for that item or service].” 86 Fed.Reg. at 56,064.


Plaintiffs are healthcare providers.[4] They challenge the Fee Guidance and the...

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