587 F.Supp.3d 528
E.D. Tex.2022Background
- The No Surprises Act (Dec. 2020) creates an independent dispute resolution (IDR) “baseball-style” arbitration for out-of-network payment disputes and lists factors arbitrators "shall consider," including the qualifying payment amount (QPA) and five additional circumstances.
- QPA is generally the median of insurers’ contracted in‑network rates (Jan. 31, 2019 baseline), and insurers calculate the QPA under the statute and prior regulations.
- In Sept. 2021 the Departments issued an interim final rule requiring certified IDR entities to select the offer closest to the QPA unless credible information "clearly demonstrates" the QPA is materially different—a rebuttable‑presumption framework.
- Texas Medical Association and Dr. Adam Corley sued under the Administrative Procedure Act, arguing the Rule (1) conflicts with the Act by privileging the QPA and (2) was issued without required notice-and-comment.
- The district court held plaintiffs had Article III and prudential standing, found the Rule contrary to the unambiguous statutory text, concluded the Departments lacked good cause to bypass notice-and-comment, and vacated specified CFR provisions implementing the QPA presumption.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing | Providers suffer procedural injury (deprivation of statutory arbitration) and imminent financial harm from QPA presumption | Injuries speculative; some providers act through corporations so individuals lack injury | Plaintiffs have Article III and prudential standing; affidavits establish likely procedural and economic harm |
| Statutory interpretation: QPA presumption | Rule impermissibly gives QPA outsized weight; statute requires arbitrators to "shall consider" QPA and all listed circumstances without mandated weighting | Rule fits statute; agencies entitled to Chevron deference and QPA is a natural starting proxy | Court: statute unambiguous—"shall consider" requires consideration of all factors; agency may not rewrite statute to create rebuttable presumption; no Chevron deference owed |
| APA notice-and-comment | Interim final rule was substantive; Departments lacked statutory authorization to skip notice-and-comment and had no good cause; error not harmless | Agencies point to statutory authorization to issue interim final rules and claim good cause and harmlessness | Court: authorizing language did not waive APA procedures; good‑cause exception not met; failure to provide notice-and-comment was not harmless |
| Remedy | Vacatur of challenged provisions is required | Remand without vacatur or vacatur limited to named plaintiffs to avoid disruption | Court vacated the identified provisions nationwide and remanded; vacatur appropriate given serious statutory conflict and limited disruption |
Key Cases Cited
- Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984) (two-step framework for reviewing agency statutory interpretations)
- Kisor v. Wilkie, 139 S. Ct. 2400 (2019) (use traditional tools of construction to determine statutory meaning)
- Util. Air Regul. Grp. v. EPA, 573 U.S. 302 (2014) (agency may not rewrite clear statutory terms)
- Kingdomware Techs., Inc. v. United States, 579 U.S. 162 (2016) (the word "shall" ordinarily imposes a requirement)
- U.S. Steel Corp. v. EPA, 595 F.2d 207 (5th Cir. 1979) (good-cause exception to notice-and-comment is narrow)
- United States v. Johnson, 632 F.3d 912 (5th Cir. 2011) (harmless‑error and notice‑and‑comment principles)
- City of Arlington v. FCC, 569 U.S. 290 (2013) (agency deference principles)
- Texas v. EEOC, 933 F.3d 433 (5th Cir. 2019) (procedural‑injury standing doctrine)