Air ambulance group sues feds over surprise billing rule's arbitration provisions

A federal court should strike down parts of a controversial rule that details how providers and payers must settle disputes over out-of-network charges because they are unfair, an air ambulance provider group argues in a new federal lawsuit.

The Association of Air Medical Services (AAMS) filed a lawsuit Tuesday in federal court challenging provisions in a federal rule that implements the No Surprises Act, which outlaws balance billing and sets up an arbitration process for payers and providers to deliberate over out-of-network charges.

The association, which represents air ambulance providers that are major sources of surprise medical bills, charges that the rule released in late September differs from the law passed late last year.

“The fair and transparent process that we all supported is not the process being implemented,” said Cameron Curtis, president and CEO of the AAMS, in a statement. “Instead, we are faced with a scenario in which a patient is in an emergency is transported by a helicopter at the request of a trained first responder or qualified physician, and that patient’s insurer gets to unilaterally determine the amount they pay.”

The association was concerned about an interim final rule issued by the Biden administration earlier this fall that details how the independent dispute resolution (IDR) arbitration process between payers and providers should work. The process is triggered if the payer and provider can’t reach an agreement on an out-of-network charge.

The lawsuit charges that the rule calls for the third-party arbiter to put too much weight on the qualified payment amount, which is the insurer’s median in-network rate for a service in an area.

The payment amount under the rule will be the “overriding factor in this decision-making process,” according to a release on the lawsuit. “This means that insurers will be able to know exactly how the IDR entities will resolve these disputes, making the IDR and the open negotiation that precedes it a foregone conclusion.”

The group charges that a fairer process would consider factors such as the type of aircraft used in transportation and the acuity of the patient. They also charge that the regulation is tilted too much in favor of insurers, and that could reduce payments to hospitals already facing a workforce shortage created under the COVID-19 pandemic.

AAMS wants a federal court to get rid of the “flawed provisions” in the dispute resolution rule.

The lawsuit comes a few weeks after 150 lawmakers wrote to the Biden administration (PDF) calling for changes to the final rule.

The lawmakers charge that the No Surprises Act specified the IDR process shall consider several factors that include the patient’s acuity, market share of the parties as well as median in-network rates.

But the interim final rule establishes a “de-facto benchmark rate, making the median in-network rate the default factor considered in the IDR process,” the letter said.

The rule goes into effect Jan. 1 and builds on another interim final rule released back in July that bans balance billing for emergency services as well as prohibiting out-of-network charges for items and services provided by out-of-network providers at an in-network facility.

Hospital groups slammed the arbitration rule, arguing that it moved away from congressional intent and created a “windfall” for insurers. Insurance groups, on the other hand, say the rule offers the right approach to getting providers and payers to negotiate in good faith.