This week, payers lost a major battle over how much they can lowball providers in surprise billing disputes.
A ruling issued Tuesday by the Fifth Circuit Court of Appeals struck down key pieces of the methodology regulators use to set the No Surprises Act‘s qualifying payment amount (QPA). It sided with the Texas Medical Association’s argument that the formula has long tilted arbitration outcomes in payers’ favor.
The ruling doesn’t take effect immediately — the court left the existing QPA formula in place while the Departments of Health and Human Services, Labor and Treasury craft a replacement. But it sets the stage for higher payout for providers once a new calculation arrives.
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The QPA is meant to reflect the median in-network rate that health plans will pay for a given service in a given geographic area. It plays an outsized role in the No Surprises Act’s arbitration process, as the QPA is often the number both sides anchor to when negotiating out-of-network claims.
The Texas Medical Association argued that regulators let payers game that median by folding in “ghost rates,” which are contracted rates for services that providers never actually intended to deliver — which artificially dragged the benchmark down.
The court agreed, ruling that ghost rates have no place in the calculation and that QPAs must also account for bonus and incentive payments, which make up a significant share of many providers’ contracted compensation but had been excluded from the formula.
Those two changes are expected to push QPAs — and therefore arbitration outcomes — higher across the board.
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The Texas Medical Association didn’t get every one of its wishes granted, though. The court sided with HHS in allowing payers to continue excluding one-off contracts, like those covering air ambulance services, from the rates used to calculate the QPA.
It’s the association’s fourth successful legal challenge to the law’s implementation since 2022, part of a string of cases that have chipped away at how the QPA is built.
“TMA has repeatedly urged the federal government to implement the NSA in a manner that is lawful and preserves patient access 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,” Texas Medical Association President Bradford Holland said in a statement.
No deadline is set for a new methodology, so both providers and payers are stuck watching and waiting to see how quickly and how aggressively regulators move to rework the formula, which has been in near-constant litigation since the No Surprises Act took effect in 2022.
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