Background
The No Surprises Act uses an independent dispute-resolution process to resolve payment disputes between insurers and out-of-network healthcare providers. Central to that process is the qualifying payment amount, or QPA, generally defined as the median of contracted rates recognized by a health plan for the same or similar service, provider specialty, and geographic region.
Healthcare-provider and air-ambulance plaintiffs challenged three features of federal rules governing QPA calculations: inclusion of “ghost rates” appearing in contracts for services a provider does not furnish; exclusion of bonuses, incentives, and other payment adjustments; and exclusion of one-off, single-case agreements. The district court ruled for the plaintiffs and vacated the challenged agency actions. A Fifth Circuit panel reversed, but the court granted rehearing en banc and vacated the panel opinion.
The Court’s Holding
A majority of the en banc court held that the agencies acted unlawfully by directing insurers to include nonnegotiated ghost rates in QPA calculations. Because the statute limits the calculation to services provided and furnished, rates for services a provider does not perform—including nonzero placeholder rates—could not be included merely because they appeared in a form contract. A majority also held that excluding bonuses and incentive payments tied to an item or service conflicted with the statutory requirement to use the “total maximum payment.”
The court ruled for the agencies on single-case agreements, holding that one-off arrangements, including those common in the air-ambulance industry, need not be treated as contracted rates recognized under generally applicable plan terms. Applying Fifth Circuit precedent that treats vacatur as the APA’s default remedy, the court upheld vacatur of the unlawful agency actions. It therefore affirmed in part, reversed in part, and remanded.
The en banc decision was divided. The per curiam opinion was joined in full by Chief Judge Elrod and Judges Jones, Smith, Richman, Willett, Ho, Duncan, Engelhardt, and Wilson; Judge Southwick concurred in Parts I and III, and Judge Oldham concurred in part. Judge Haynes, joined by Judges Stewart, Graves, Higginson, Douglas, and Ramirez, agreed with the ruling on single-case agreements but dissented from the ghost-rate and incentive-payment holdings and opposed vacatur as the remedy.
Key Takeaways
- Insurers may not calculate QPAs using nonnegotiated ghost rates for services that providers do not furnish merely because those rates appear in provider contracts.
- Payments tied to an item or service cannot categorically be omitted when doing so excludes part of the statute’s required “total maximum payment.”
- One-off, case-specific agreements may be excluded because they are not generally applicable contracted rates recognized under a health plan.
- Judge Ho concurred separately, questioning universal vacatur but following circuit precedent. Judge Oldham concurred only in part, reasoning that the agencies could not correct a legislative rule through an informal FAQ without notice and comment.
Why It Matters
The ruling requires QPA methodology to reflect negotiated compensation more closely and rejects calculations that can be depressed by unused placeholder rates or by categorical exclusion of qualifying incentive payments. Because QPAs influence patient cost sharing and provider-insurer arbitration, recalculation may materially affect No Surprises Act disputes.
At the same time, the court preserved the agencies’ exclusion of single-case agreements, limiting the decision’s benefit to air-ambulance providers that rely on one-off arrangements. The separate opinions also expose continuing disagreement within the Fifth Circuit over both the statutory methodology and whether courts may universally vacate agency rules.