CMS pauses surprise billing arbitration after court ruling

By Alex Kacik / August 7, 2023

The federal government stopped processing payment disputes between providers and insurers regarding out-of-network bills following last week's court ruling that vacated parts of the surprise billing law.

The Centers for Medicare and Medicaid Services and Health and Human Services Department paused the independent dispute resolution process Thursday as the agencies adapt to a court ruling earlier Thursday that invalidated the federal government’s fee increases for filing disputes and batching requirements that would bundle multiple claims in a single dispute.

It's the second time the federal government has paused the dispute resolution process this year. CMS also paused the filing of new disputes.

In his ruling, U.S. District Court for the Eastern District of Texas Judge Jeremy Kernodle said the fee increases and batching requirements parts of the No Surprises Act violate rulemaking’s requirement and must be set aside. Kernodle did not grant requests by the Texas Medical Association, which filed the suit, for a refund of previously paid fees or a deadline extension.

The case is the fourth lawsuit brought by the association challenging the law. The association applauded the latest ruling, claiming it will allow more physicians to participate in the arbitration process, while legal experts argued that healthcare costs could increase as more providers file disputes. Meanwhile, the backlog of disputes continues to grow, dragging out pending cases.

CMS said in an April report that there were more than 330,000 disputes filed from mid-April 2022 through March 2023, nearly 14 times more disputes than expected. The dispute resolution process also was paused after a Feb. 6 ruling that sided with the association in a related lawsuit.

“The developments in [the latest lawsuit] and other ongoing litigation only magnify such challenges,” said Zachary Baron, an associate director of the Health Policy and the Law Initiative at Georgetown University’s O'Neill Institute.

CMS said last week the departments are reviewing the court's decision, evaluating updates to its dispute resolution process and will issue updates "in the near future."   

The No Surprises Act prevents providers from billing privately insured patients more than typical in-network, out-of-pocket costs for most emergency services, excluding ground ambulance transportation. While a patchwork of state laws has stopped many surprise bills, the federal government aims to, in part, lower healthcare costs by reducing health insurance premiums by filling the gaps in state regulation.

The latest lawsuit from the Texas Medical Association involved administrative fees for filing a dispute. In December 2022, the Health and Human Services, Labor, and Treasury departments raised the fee to $350, from $50, citing a surge in the volume of disputes, particularly those involving small-value claims, and related costs. The association also argued the regulatory guidance made it difficult to combine more than two claims in a single dispute.

Kernodle ruled the “fee increase and batching rule violate the [Administrative Procedure Act’s] notice-and-comment requirement and must be set aside.”

The association said in a statement that the ruling will “aid in reducing barriers to physician access to the law’s arbitration process, which is vital to both patient access to care and practice viability.”

The group's other lawsuits challenge the arbitration process, questioning in part how much emphasis a third-party mediator should place on the qualified payment amount, which is the median rate insurers pay for a service in a particular market. The association argues the qualified payment amount gave insurers unfair leverage in negotiations.

The first lawsuit, filed in October 2021, led to a favorable ruling for the association at the district court level. The second lawsuit, filed in September 2022, also led to a favorable ruling for the association. The federal government filed an appeal in April. The third lawsuit filed in November, which alleges the qualified payment amount calculations are flawed, is pending.

“Any decision siding with TMA in [the third] case could unleash even more disruption to the arbitration process and expose consumers to higher out-of-pocket costs when receiving certain out-of-network services,” Baron said.