A federal appeals court has tossed key methodology used to resolve out-of-network claims under the No Surprises Act.
The Fifth Circuit Court of Appeals ruling issued (PDF) Tuesday sides with a group of providers and tosses the established methods to determine the qualifying payment amount (QPA), which is central to the first phase of dispute resolution.
In initial negotiations, payers come to the table with a QPA based on the median of its in-network rates for a service. The court ruled that these amounts should not include so-called "ghost rates," or those established for services that they do not actually offer.
These rates are often very low, as providers do not have an incentive to negotiate for care they won't provide, the courts said. Federal agencies later clarified that payers should exclude $0 "ghost rates," but that allowed amounts that are still very low—such as $1—to remain in the calculations, even through they were similarly not established though negotiation.
"The inclusion of ghost rates in the QPA calculation is no minor problem," the judges wrote.
The court also determined that payers cannot exclude bonus or incentive payments from the QPA calculations. It did, however, agree with agencies in allowing insurers to exclude one-off agreements in determining the QPA.
The suit was initially brought by the Texas Medical Association alongside an individual hospital and physician. A federal district court sided with the providers, leading to an appeal from the feds.
Federal officials have argued that if the methodology is struck down, it could lead patients to face out-of-network bills in the interim, but the courts did not agree. Agencies "cannot survive judicial review simply by making mistakes that are so colossal that the sky will fall if a court reviews them," per the opinion.
"The agencies have been exercising enforcement discretion while their appeal from the district court has been pending, so they are more than capable of preventing immediate chaos," the judges ruled.