Lawsuit Filed by Physicians, Hospitals Seeks Change in Surprise Billing Cases

The American Medical Association (AMA) and American Hospital Association (AHA) filed a lawsuit challenging a Biden administration decision on how to implement the law shielding patients from most surprise medical bills. 

The lawsuit does not seek to halt the law from going into effect in January. Instead, it seeks a change in a key provision in regulations issued in September. At issue is how arbitrators will decide the amount insurers pay toward disputed out-of-network bills. That was a main point of dispute in the long and contentious debate leading up to the passage of the No Surprises Act in late 2020 — and remains so a year later.

Two other lawsuits have been filed over the regulation, by the Texas Medical Association and the Association of Air Medical Services.

The No Surprises law is designed to address providers sending large, unexpected bills to patients who receive out-of-network care from physicians, laboratories, hospitals or air ambulance services. Starting in January, the law bars most such balance bills. Instead, insured patients will pay only what they would have if the care had been provided by an in-network facility or physician. It directs insurers and the medical providers to work out whether any more is owed.

If they can’t agree, the dispute moves to “baseball-style” arbitration, in which both sides put forth their best offer and an arbitrator picks one, with the loser paying the arbitration cost, which the rule sets for next year as between $200 and $500.

The regulation issued Sept. 30 directs arbitrators to lean toward picking the amount closest to the median in-network rate negotiated for the type of care involved, although they can also consider other factors, such as the experience of the provider, the type of hospital and the complexity of the treatment.

Congress wrote into the legislation that arbitrators could not consider “billed charges,” which are often highly inflated amounts hospitals and doctors set as what they want to be paid, nor could they consider the lowest payment amounts, including reimbursement rates from Medicaid and Medicare.

The lawsuit, filed in U.S District Court for the District of Columbia, alleges that giving weight to the in-network median rate “places a heavy thumb on the scale” against medical providers and “barely resembles” the process Congress created.

Congress, it alleges, prescribed “no particular weight or presumption for any one factor,” instead directing arbitrators to consider all factors. Focusing on median in-network rates will “prevent fair and adequate compensation.”

The rule has also drawn a bipartisan rebuke from 152 lawmakers, although most members of Congress who helped shepherd the law to passage support the regulation.

The full Kaiser Health News article is available here. The AMCNO will continue to follow this issue and report updates to our members.