In a triumphant culmination of several years of relentless legal efforts by the Texas Medical Association, the full 5th U.S. Circuit Court of Appeals released a decision agreeing with all TMA’s remaining arguments in “TMA III.”
This lawsuit successfully challenged certain rules that set a faulty methodology for calculating the “qualifying payment amount” or “QPA,” which is a factor arbitrators consider, among several other statutory factors, when resolving disputes over health plans’ payment for certain out-of-network care in No Surprises Act (NSA) federal arbitrations.
The decision has a nationwide effect. Now, federal agencies must rewrite their rules to re-calculate the QPA used in physician-insurer federal arbitrations but will likely use enforcement discretion to avoid any disruption to the process in the meantime.
“TMA has repeatedly urged the federal government to implement the NSA in a manner that is lawful and preserves patient access to care and physician practice viability. The appellate court’s decision is another step in the right direction for both patients and the physicians who care for them,” said TMA President Bradford W. Holland, MD.
The Aug. 11 decision upholds a lower district court ruling and represents the last outstanding decision among a clean sweep of four separate NSA-related lawsuits TMA has won against federal regulators tasked with implementing the 2020 federal law. Those lawsuits have addressed a wide range of NSA implementation issues, such as administrative fee hikes, unlawful limitations on batching of claims for federal arbitration, and improper QPA calculations and weightings.
The NSA requires physicians and insurers to work out payment disputes for certain out-of-network care via an independent dispute resolution (IDR) process, rather than leaving patients responsible for the difference. While TMA has long supported protecting patients from surprise medical bills, TMA repeatedly argued for agencies’ implementation to follow the law.
In this third of four lawsuits against federal regulators, TMA argued federal rules passed in 2021 for calculating the QPA allowed payers to artificially lower the amount offered in negotiation, forcing physicians to undergo the law’s costly and time-consuming arbitration process to obtain fair payment. Even then, since the QPA is one of several factors required to be considered by arbitrators in the federal IDR process, results would still be skewed in health plans’ favor. More specifically, TMA argued in its lawsuit that federal rules:
- Permitted health plans to include rates of physicians who are not in the same or a similar specialty as the physician involved in the dispute;
- Allowed self-insured plans to effectively opt in to a lower QPA for payment disputes with physicians by using the rates of other self-insured plans;
- Allowed insurers to calculate the QPA with “ghost rates,” which are contract rates with physicians and other health care professionals who do not provide the item or service in question; and
- In situations where a contracted rate includes contingent payments, such as risk-sharing or incentive-based bonuses, required payers to calculate QPAs based on an amount other than the total maximum payment.
TMA won on all four of the challenged provisions at the district court level. Two of the four provisions were dropped from federal agencies’ subsequent appeal (leaving TMA’s favorable district court decision intact). But the issues of ghost rates and total maximum payment amounts were appealed to the 5th Circuit. A three-judge panel of the 5th Circuit then ruled in favor of the federal agencies on those two issues, giving TMA a split victory in TMA III.
In a rare move, the 5th Circuit granted TMA’s request for a rehearing in 2025, known as an en banc hearing, before the entire court. Now, almost a year later, the full court handed TMA a complete victory in the lawsuit by reversing the prior decision of the appellate court on both the ghost rate and total maximum payment issues.
In its ruling, the 5th Circuit called the inclusion of ghost rates in the QPA calculation “no minor problem ... The agencies’ error has upended the NSA’s dispute-resolution process.”
Additionally, the 5th Circuit noted that “[p]laintiffs contend that [the federal] rule [regarding bonus and incentive payments] contravenes the plain text of the NSA and artificially deflates the [qualifying payment amount] calculations. We agree.”
“These unlawful rules contributed to unfair negotiating practices by insurers and a dramatic increase in physicians and providers having to seek arbitration with insurers in order to obtain fair payment and keep their practices viable enough to provide patient care,” said Dr. Holland.
San Antonio orthopedic surgeon Adam Bruggeman, MD, called the decision a “direct result” of TMA’s work to protect physician practices – and patients’ access to care.
“This is the latest chapter in a fight TMA has been leading since day one, and I’m proud to be a longstanding TMA member,” Dr. Bruggeman, a past chair of TMA’s political arm, TEXPAC, said in a statement. “TMA’s litigation strategy on QPA methodology has been one of the most consequential efforts in the country for protecting independent physician practices.”
“And anytime we talk about physicians’ financials, the conversation always concerns patients’ access to care,” he told Texas Medicine for an upcoming in-depth issue of the magazine on the NSA and other insurance topics.
Get the latest developments on TMA’s federal advocacy.
Alisa Pierce
Reporter, Division of Communications and Marketing
(512) 370-1469