Hospital and Physician Groups File Lawsuit Over No Surprises Act Final Rules That Jeopardize Patient Access to Care

Complaint for Declaratory and Injunctive Relief

Plaintiffs American Medical Association (“AMA”), American Hospital Association (“AHA”), Renown Health, UMass Memorial Health Care, Inc. (“UMass Memorial Health”), Stuart S. Squires, M.D., and Victor F. Kubit, M.D., by and through their attorneys, bring this action for declaratory and injunctive relief against defendants the United States Department of Health and Human Services, Department of Labor, Department of the Treasury, Office of Personnel Management, and the current heads of those agencies in their official capacities, and allege as follows:

Introduction

1. This is an action under the Administrative Procedure Act to set aside specific and limited provisions of an interim final rule issued by the Department of Health and Human Services, the Department of Labor, the Department of the Treasury, and the Office of Personnel Management (collectively, the “Departments”) in violation of their statutory authority. The rule, titled “Requirements Related to Surprise Billing; Part II,” 86 Fed. Reg. 55,980 (Oct. 7, 2021) (“September Rule”), implements provisions of the No Surprises Act, Pub. L. 116-260 (the “Act”).¹ The Act was passed on December 27, 2020, as part of the Consolidated Appropriations Act, 2021, and its requirements generally go into effect on January 1, 2022.
2. The AMA and AHA strongly support Congress’s goal of protecting patients from surprise billing. For years, the AMA and AHA consistently advocated for a patient-first solution to surprise billing—namely, one that would shield patients from unexpected medical bills, while enabling physicians and hospitals (“providers”), on the one hand, and group health plans or commercial health insurance issuers (“insurers”), on the other, to determine fair payment among themselves.² The compromise set forth in the No Surprises Act did just that. It both protected patients from surprise medical bills and established an independent dispute resolution (“IDR”) process in which patients would be removed from the middle of negotiations between providers and insurers. In so doing, the Act adopted an intentionally balanced approach that did not skew towards either providers or insurers.³ The Departments’ implementation of the Act in the September Rule, however, deviates from Congress’s balanced design in a critical respect: the Rule places a heavy thumb on the scale during the independent arbitration process in a way that directly conflicts with the statutory text. The Departments reached this atextual result, moreover, without first providing notice or receiving the benefits of the public’s views, as the law requires.
3. The No Surprises Act was the result of “a long-fought and negotiated bipartisan and bicameral compromise to protect patients by ending surprise billing.” 166 Cong. Rec. H7290, H7291 (Dec. 21, 2020). A critical component of that compromise is the Act’s IDR process. It protects patients from surprise medical bills by limiting the amount a patient can be billed by a provider who is not in the network supplied by their insurer. That limit is the amount of cost-sharing the patient would pay to a provider in their insurer’s network. Providers not in the network are required to negotiate reasonable payment directly with the patient’s insurer. If that negotiation is unavailing, the Act provides for binding “baseball-style” arbitration before a certified arbitrator (or, as the Act calls it, an “IDR entity”). The provider and insurer submit to the arbitrator the payment amounts requested or offered, and the arbitrator must select one as the appropriate payment rate. This system was designed to ensure that the parties submit their most-reasonable and best-supported offers.

4. Congress expressly listed the factors that an arbitrator “shall” consider in determining which offer to select. Consistent with its goal of creating a balanced, independent process that protects patients by keeping them out of negotiations between providers and insurers, the Act did not assign any one statutory factor presumptive weight. Indeed, as key House and Senate Committee Leaders stated when announcing the final Act:

   “We have reached a bipartisan, bicameral deal in principle to protect patients from surprise medical bills and promote fairness in payment disputes between insurers and providers[.]”

   . . . .

   If the parties choose to utilize the IDR process, both parties would each submit an offer to the independent arbiter. When choosing between the two offers the arbiter is required to consider the median in-network rate, information related to the training and experience of the provider, the market share of the parties, previous contracting history between the parties, complexity of the services provided, and any other information submitted by the parties.

   Press Release, House Ways & Means Comm., Congressional Committee Leaders Announce Surprise Billing Agreement (Dec. 11, 2020), https://waysandmeans.house.gov/media-center/pressreleases/congressional-committee-leaders-announce-surprise-billing-agreement.

5. In contravention of the Act, the September Rule imposes a presumption in favor of just one of Congress’s enumerated factors. Under the Rule, the “qualifying payment amount” (“QPA”)—which is calculated exclusively by insurers—presumptively determines the appropriate payment rate, and hence the appropriate offer.
6. To effectuate this presumption, the September Rule erects two separate barriers to an arbitrator’s consideration of the other statutorily mandated factors.
   1. First, the September Rule provides that the arbitrator may not consider any of the non-QPA statutory factors unless a party submits “credible information” about them, 45 C.F.R. § 149.510(c)(4)(iii)(B), and the Rule defines “credible information” to require the arbitrator to skeptically analyze that information, id. § 149.510(a)(2)(v) (defining “credible information” as “information that upon critical analysis is worthy of belief and is trustworthy” (emphasis added)). In vivid contrast, the September Rule contains no such credibility requirement for the QPA factor. In fact, the Departments affirmatively forbid the arbitrator from scrutinizing the QPA, commanding her to take the insurer’s proffered QPA as given. See 86 Fed. Reg. at 55,996 (“[I]t is not the role of the certified IDR entity to determine whether the QPA has been calculated by the [insurer] correctly[.]”). To be clear: plaintiffs always assumed that parties would submit credible evidence and that arbitrators would take credibility into account in analyzing each of the statutorily mandated factors. Plaintiffs’ objection is that the September Rule sets up a skeptical, one-sided evidentiary burden that is found nowhere in the statute and makes it more difficult for the arbitrator to fairly consider all six statutory factors as Congress intended.
   2. Second, and more importantly, the September Rule provides that the arbitrator “must select the offer closest to the QPA” unless a party meets a heightened burden of proof found nowhere in the Act. 45 C.F.R. § 149.510(c)(4)(ii)(A) (emphasis added). Specifically, to overcome the presumption in favor of the QPA, a party must “clearly demonstrate[]” that the QPA is “materially different from the appropriate out-of-network rate.” Id.
7. In inventing these extra-statutory barriers, the Departments acted contrary to Congress’s deliberate compromise, which mandated that the arbitrator “shall” consider all enumerated factors, without giving categorical priority to any single one. Congress left it to the discretion of the arbitrator—not the Departments—to determine which factors were most important in light of the facts and circumstances of a particular case. And, as the principal architects of the final Act have explained, “the law provides for an IDR process overseen by an independent and neutral arbiter who must consider a number of factors equally in deciding whether to select the provider or [insurer]’s offer.” Letter from Chairman Neal and Ranking Member Brady of the House Ways and Means Committee to Department Secretaries (Oct. 4, 2021) (“Neal and Brady Letter”), https://www.gnyha.org/wp-content/uploads/2021/10/2021.10.04-REN-KBSurprise-Billing-Letter80.pdf. The September Rule undermines the independence of the IDR process and the fairness of the No Surprises Act by severely tilting the scales towards the QPA.
8. The Departments claim that theirs is the “best interpretation” of the Act. 86 Fed. Reg. at 55,996. But as the Act’s principal architects recently explained, the September Rule “strays from the No Surprises Act in favor of an approach that Congress did not enact in the final law,” given that “Congress deliberately crafted the law to avoid any one factor tipping the scales during the IDR process.” Neal and Brady Letter. Strikingly, Chairman Neal and Ranking Member Brady also wrote that the September Rule “affronts the provisions enacted into law.” Id. Amplifying these same concerns, a recent letter from 150 other Members of Congress explained that the September Rule’s presumption-based approach for determining payment rates “do[es] not reflect the way the law was written, do[es] not reflect a policy that could have passed Congress, and do[es] not create a balanced process to settle payment disputes.” Letter from Members of Congress to Departments Secretaries (Nov. 5, 2021), https://wenstrup.house.gov/uploadedfiles/2021.11.05_no_surprises_act_letter.pdf.
9. The September Rule will harm patients. First, the rule will encourage insurers to narrow the network of providers available to patients and potentially eschew providers with higher costs, including teaching and other hospitals that provide trauma care, burn units, and neonatal intensive care services that are critical for their communities. Because insurers can now rely on the IDR process for an unfairly low rate, they will have little incentive to include providers with higher costs (and frequently higher quality and specialized services) in their network, all to the detriment of patients. In fact, one insurer, Blue Cross Blue Shield North Carolina, has already threatened to “terminate agreements” with providers who do not agree to lower rates in light of the new rule, on the ground that “the Interim Final Rules provide enough clarity to warrant a significant reduction in your contracted rate with Blue Cross NC.” Letter from Mark Werner, Blue Cross Blue Shield of North Carolina, to Provider (Nov. 5, 2021), https://tinyurl.com/y3dfvtts. Second, undercompensating providers could, as the Departments themselves recognized, “threaten the viability of these providers [and] facilities,” which “in turn, could lead to participants, beneficiaries and enrollees not receiving needed medical care[.]” 86 Fed. Reg. at 56,044. Put simply, this lawsuit seeks to preserve access to care; the September Rule would reduce it. Congress did not intend that result.
10. The Court should accordingly set aside, as contrary to law and in excess of the Departments’ statutory authority, the provisions of the September Rule requiring arbitrators to employ a presumption in favor of the QPA when determining a payment amount in the IDR process.⁴

1. The Act made parallel amendments to provisions of the Public Health Service (“PHS”) Act, which is enforced by the Department of Health and Human Services (“HHS”); the Employee Retirement Income Security Act (“ERISA”), which is enforced by the Department of Labor; and the Internal Revenue Code (“IRC”), which is enforced by the Department of the Treasury. These Departments, along with the Office of Personnel Management (“OPM”) (which oversees health benefits plans offered by carriers under the Federal Employees Health Benefits Act), issued the September Rule.
2. See, e.g., Letter from AMA to Chairman Neal and Ranking Member Brady on Surprise Medical Billing (Feb. 7, 2019), https://searchlf.amaassn. org/undefined/documentDownload?uri=%2Funstructured%2Fbinary%2Fletter%2FLETTERS%2F2019-2-7-Surprise-Billing-Ways-and-Means-Signon.pdf; Letter from AHA to Chairman Neal et al. on Surprise Medical Billing (Dec. 13, 2020), https://www.aha.org/system/files/media/file/2020/12/AHA-Letter-No-Surprises-Act_12-13-20.pdf.
3. Press Release, House Ways & Means Comm., Neal and Brady Release Legislative Text of Surprise Medical Billing Proposal (Feb. 7, 2020), https://waysandmeans.house.gov/mediacenter/press-releases/neal-and-brady-release-legislative-text-surprise-medical-billing (“Our bipartisan approach differs from other proposals in that . . . we create a more balanced negotiation process to encourage all parties to resolve their reimbursement differences before using the streamlined and fair dispute resolution process.” (emphasis added)).
4. The September Rule contains a number of provisions, including those relating to providers’ obligation to send uninsured and self-pay patients good faith estimates of expected charges, as well as provisions governing a patient-provider billing dispute resolution process. This lawsuit challenges only the aspects of the Rule that relate to its requirement that the arbitrator presumptively select the offer closest to the QPA. It does not challenge or seek to set aside any other provision in the September Rule.

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