On August 3, 2023, the U.S. District Court for the Eastern District of Texas (the “Court”) concluded that the Department of Health and Human Services, the Department of Labor and the Department of the Treasury (collectively “the Departments”) violated statutory rulemaking procedure and therefore vacated two aspects of the Departments’ guidance related to the No Surprises Act’s (the “NSA”) Independent Resolution (“IDR”) process. First, the Court struck down the Departments’ increase of the administrative fee for participating in the IDR process from $50 to $350. Second, the Court struck down the Departments’ addition of a requirement for all items and services to have the same service code in order for them to be “batched” together for a single IDR proceeding.
This decision arose out of a second lawsuit filed by the Texas Medical Association (“TMA”) challenging the Departments’ implementation of the NSA. For more information about the prior successful litigation brought by TMA against HHS in connection with the NSA and the IDR process, please see our previous articles on these actions here and here.
The Agency Actions: Guidance or Unlawful Rule?
In its lawsuit, the TMA argued that the Departments’ actions bypassed the notice and comment process prescribed by the federal Administrative Procedure Act (the “APA”). The Court ultimately agreed with the TMA, concluding that the Departments went beyond the actual language of the NSA by calculating the “precise amount” participants were obligated to pay for the IDR process and by adding new criteria for batching multiple items or services for a single IDR proceeding. Both actions entailed substantive changes to the methodologies previously used by the Departments to implement the NSA’s IDR provisions; thus, the Departments were required to follow the APA’s notice and comment process. The Court determined that the Departments failed to do so, and failed to demonstrate good cause for bypassing the APA’s process.
The Court further determined that the Departments’ failure to follow the APA’s notice and comment process wasn’t harmless. The significant increase in the IDR fee included a new cost that had not been addressed in prior rules or guidance. Therefore, the Court concluded that it wasn’t clear that providers were not prejudiced by the lack of notice and comment as to the Departments’ revised IDR fee.
In addition to increasing the IDR fee, the Departments also severely limited a provider’s ability to consolidate claims by permitting items and services to be batched only if they share the same service code. Several providers testified that the increased IDR fee along with the new same-service code batching requirement made it costly and sometimes cost-prohibitive to pursue appropriate payment for services through the IDR process. The Court thus concluded that the Departments’ failure to provide notice and comment for the new batching requirement in the IDR rule was also contrary to law and wasn’t harmless to the providers. Therefore, the Court determined that both actions by the Departments must be set aside.
Pending the Court’s decision, the Departments temporarily suspended processing of batched disputes and initiation of new IDR requests. As of August 11, 2023, the Departments directed the certified IDR entities to resume processing all single disputes and all batched disputes that were deemed eligible for IDR before August 3, 2023. However, processing of other pending batched disputes and initiation of new disputes remain temporarily suspended. CMS has also removed the webpage which used to host the Fee Guidance.
Practical Takeaways
- It is currently unclear when providers will be able to initiate new disputes or when pending batched disputes will be processed.
- Similarly, it is unclear what the IDR fee will be.
- CMS will presumably have to revisit both the fee guidance and the bundling requirement through a formal notice and comment rulemaking process if it wants to implement requirements different than those already lawfully implemented in the regulations.
- Hall Render will continue to monitor this case and will provide timely relevant updates.
For more information on the requirements of the No Surprises Act or the IDR process, please contact:
- Angela Smith at (317) 977-1448 or asmith@hallrender.com;
- Ben Fee at (720) 282-2030 or bfee@hallrender.com;
- Lisa Lucido at (248) 457-7812 or llucido@hallrender.com;
- Matt Reed at (317) 429-3609 or mreed@hallrender.com; or
- Your primary Hall Render contact.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot give legal advice outside of an attorney-client relationship.
