Reported / Citable
Background
The No Surprises Act protects patients from certain unexpected out-of-network medical bills and establishes an independent dispute-resolution process for providers and insurers. That process centers on the qualifying payment amount, or QPA, which generally reflects the median contracted rate for the same or a similar service furnished by a provider in the same or a similar specialty and geographic region.
Healthcare providers challenged three features of federal rules governing QPA calculations. The rules allowed insurers to count non-negotiated “ghost rates” for services a contracted provider did not furnish, excluded bonus and incentive payments, and excluded one-off agreements such as single-case air-ambulance arrangements. The district court ruled for the providers and vacated the challenged agency actions. A Fifth Circuit panel reversed, but the court vacated that decision and reheard the case en banc.
The Court’s Holding
The en banc court held that the agencies acted unlawfully by allowing insurers to include ghost rates in QPA calculations. The statute limits the calculation to services provided by a provider and furnished in the relevant geographic region. Rates appearing in form contracts for services a provider does not perform—including nonzero placeholder rates—do not satisfy that requirement and can artificially depress the QPA.
The court also held that the agencies unlawfully excluded bonus, incentive, and other payment adjustments connected to an item or service. Because the statute requires each contracted rate to represent the “total maximum payment,” relevant components of the provider’s entire potential payment must be included. The court rejected the agencies’ practicality objections, observing that the agencies had issued the interim-final rule without obtaining provider input through notice and comment.
The court reached the opposite result for one-off, case-specific agreements. It held that those arrangements need not be included because they are not generally applicable contracted rates recognized under an insurance plan or coverage. The court also upheld vacatur as the proper APA remedy. It therefore affirmed the district court in part, reversed in part, and remanded for further proceedings.
Key Takeaways
- Insurers may not calculate QPAs using non-negotiated ghost rates for services that providers do not furnish.
- Bonus and incentive payments tied to an item or service cannot categorically be excluded from the statutory “total maximum payment.”
- One-off agreements, including single-case air-ambulance arrangements, may be excluded from the contracted rates used to calculate QPAs.
- The Fifth Circuit left vacatur in place, rejecting the argument that implementation difficulties made the unlawful agency actions too disruptive to set aside.
Why It Matters
The decision requires substantial changes to how insurers calculate the benchmark that anchors payment negotiations and arbitrations under the No Surprises Act. Excluding ghost rates and accounting for relevant incentive payments may produce higher QPAs that more closely reflect negotiated market compensation.
The ruling also preserves an important limit: exceptional out-of-network payments negotiated for individual cases do not become benchmark rates merely because they arise from an agreement. More broadly, the decision confirms that, under Fifth Circuit precedent, vacatur remains the default APA remedy even when setting aside an agency rule creates significant administrative burdens.