Feds win in surprise billing lawsuit, allowing insurers to include ‘ghost rates’

The Texas Medical Association had sued the federal government over the dispute resolution process in the No Surprises Act, which shields patients from surprise medical costs.

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The federal No Surprises Act (NSA), which regulates how health provider rates are calculated in resolving surprise medical billing disputes, was upheld by the Fifth Circuit last week – further complicating the already complex system for paying health claims.

The panel reversed a lower district court’s ruling that the federal government’s dispute resolution process under NSA, which went effect in 2022, exceeded the statute’s bounds. The Texas Medical Association was the leading plaintiff in the lawsuit.

The independent dispute resolution process set by the NSA has been the target of multiple lawsuits from provider groups that must now settle most out-of-network disputes through the law’s arbitration process. The NSA was passed to stop patients from receiving unexpected medical bills for out-of-network health care.

The surprise billing law protects patients for certain emergency care, as well as care received from out-of-network clinicians at in-network facilities. In 2023, the NSA prevented more than 10 million surprise medical bills from health care facilities and providers from reaching patients, according to an Association of American Hospitals survey.

Courts have instructed the Centers for Medicare and Medicaid Services, which oversees the law, to revamp its rules four times. The latest lawsuit challenged how the median in-network rate, or qualifying payment amount QPA), is formulated. The QPA plays a major role in billing arbitration.

The Texas Medical Association argued the administration’s inclusion of “ghost rates”—rates included in contracts with providers who do not actually provide the service —artificially lower the median rate. Medical providers and health insurers must now settle most out-of-network disputes through the law’s arbitration process.

Related: Surprise medical bills: What measures do hospitals have to take before filing a lawsuit?

The court is allowing insurers to include ghost rates in calculating the QPA because including them in the QPA is “reasonable,” according to the court document. Even if providers did not perform the same services, the plaintiffs “do not suggest how to otherwise” draw the line to separate them from services the provider might eventually perform, the judges wrote.

It is uncertain if the Texas Medical Association will appeal.