Knowledge Center

On August 11, the U.S. Court of Appeals for the Fifth Circuit issued an important decision concerning how insurers calculate the Qualifying Payment Amount (“QPA”) under the No Surprises Act. For out-of-network providers, the principal significance of the decision is that it could result in higher and more accurate QPAs.

The court held that insurers may not calculate QPAs by including non-negotiated “ghost rates” – contracted rates listed in provider agreements for services that the provider does not actually perform or furnish. The court found that including those rates had produced artificially low QPAs.

The court also held that bonus, incentive, and other payment adjustments attributable to the relevant item or service cannot categorically be excluded from the QPA. The court separately upheld the exclusion of one-off, single-case agreements from the QPA. The most significant practical implication for providers is that recalculated QPAs may be higher. Because the Fifth Circuit found that the prior methodology permitted artificially low ghost rates to depress the QPA, excluding those rates could produce a benchmark that more closely reflects actual negotiated market rates. In turn, that could reduce the effect of artificially low QPAs in negotiations and the Federal IDR process and place providers on more even footing when reimbursement disputes are resolved.

One of the most important questions for providers is how the Departments will determine which contracted rates for particular service codes must be removed from the QPA calculation.

The Fifth Circuit made clear that merely limiting the calculation to providers in the “same or similar specialty” does not eliminate the ghost-rate problem. Providers within the same specialty may perform different services, and their contracts may therefore contain rates for services they do not actually furnish.

For now, however, the precise methodology remains unresolved. On August 13, the Departments stated that they were reviewing the Fifth Circuit’s decision and anticipated issuing additional guidance. They also confirmed that the Federal IDR process remains operational. The Departments have not yet provided post-decision guidance establishing the standard plans must use to determine, at the service-code level, which contracted rates must be excluded from the QPA calculation.

Multiple Courts of Appeals Are Addressing Enforcement of Unpaid IDR Awards

A separate question is now before several federal courts of appeals: whether providers can use the courts to enforce unpaid IDR awards.

The Second Circuit (Connecticut, New York, and Vermont), Third Circuit (Delaware, New Jersey, and Pennsylvania), Seventh Circuit (Illinois, Indiana, and Wisconsin), and Ninth Circuit (Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington) have pending appeals concerning whether providers can use the courts to enforce unpaid NSA IDR awards.

The Fifth Circuit (Louisiana, Mississippi, and Texas) has already ruled on that issue. In Guardian Flight v. Health Care Service Corp., the court held that the NSA does not create a private right of action allowing providers to sue to enforce an IDR award. The Supreme Court declined to review that decision.

If another circuit reaches a different result, the resulting disagreement among the federal appeals courts could increase the likelihood that the Supreme Court addresses the issue.

Payors Are Bringing IDR-Related Lawsuits

Insurers are also bringing IDR-related lawsuits against providers and companies that assist them with billing or the IDR process. Federal trial courts have dismissed a number of insurer lawsuits challenging alleged IDR-related misconduct or completed IDR determinations, and some of those dismissals are now on appeal in the Fifth, Ninth, and Eleventh Circuits. Other insurer-initiated cases raising similar issues remain pending in the federal trial courts.

We will continue to monitor these developments affecting the out-of-network provider community and keep you informed.