TEXAS MEDICAL ASSOCIATION; TYLER REGIONAL HOSPITAL, L.L.C.; DR. ADAM CORLEY, Plaintiffs-Appellees/Cross-Appellants, versus UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES; OFFICE OF PERSONNEL MANAGEMENT; UNITED STATES DEPARTMENT OF LABOR; UNITED STATES DEPARTMENT OF TREASURY; XAVIER BECERRA, Secretary, U.S. Department of Health and Human Services, in his official capacity; KIRAN AHUJA, in her official capacity as the Director of the Office of Personnel Management; JANET YELLEN, Secretary, U.S. Department of Treasury, in her official capacity; JULIE A. SU, Acting Secretary, U.S. Department of Labor, in her official capacity, Defendants-Appellants/Cross-Appellees. LIFENET, INCORPORATED; AIR METHODS CORPORATION; ROCKY MOUNTAIN HOLDINGS, L.L.C.; EAST TEXAS AIR ONE, L.L.C., Plaintiffs-Appellees/Cross-Appellants, versus UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES; OFFICE OF PERSONNEL MANAGEMENT; UNITED STATES DEPARTMENT OF LABOR; UNITED STATES DEPARTMENT OF TREASURY; XAVIER BECERRA, Secretary, U.S. Department of Health and Human Services, in his official capacity; KIRAN AHUJA, in her official capacity as the Director of the Office of Personnel Management; JANET YELLEN, Secretary, U.S. Department of Treasury, in her official capacity; JULIE A. SU, Acting Secretary, U.S. Department of Labor, in her official capacity, Defendants-Appellants.
No. 23-40605
United States Court of Appeals for the Fifth Circuit
October 30, 2024
Appeal from the United States District Court for the Eastern District of Texas, USDC Nos. 6:22-CV-450, 6:22-CV-453
HAYNES, Circuit Judge:
A group of healthcare providers and air-ambulance providers challenge certain agency rules regarding the No Surprises Act (the “Act“), which Congress enacted to protect patients from surprise medical bills.1 The majority of provisions at issue concern how to calculate the “qualifying payment amount” or “QPA,” which helps to determine patients’ and insurers’ obligations to out-of-network providers under the Act. The others involve deadlines and disclosure requirements.
For the reasons that follow, we REVERSE the district court‘s vacatur of the QPA-calculation provisions, AFFIRM the district court‘s vacatur of the deadline provision, and AFFIRM the district court‘s holding that the disclosure requirements are not arbitrary and capricious.
We begin by providing relevant information about the Act; then we turn to the procedural history of this case.
A. Statutory Background
Congress passed the Act to protect patients from surprise medical bills in situations where they have no choice over whether their provider is in-network. See
the median of the contracted rates recognized by the plan or issuer, respectively (determined with respect to all such plans of such sponsor or all such coverage offered by such issuer that are offered within the same insurance market . . . as the plan or coverage) as the total maximum payment (including the cost-sharing amount imposed for such item or service and the amount to be paid by the plan or issuer, respectively) under such plans or coverage, respectively, on January 31, 2019, for the same or a similar item or service that is provided by a provider in the same or similar specialty and provided in the geographic region in which the item or service is furnished.
Id.
For health plans, the QPA factors into their payment obligations as follows. When a provider submits a bill for an out-of-network service to the health plan, the plan must respond within thirty days by issuing either an initial payment or a notice of denial of payment; if the provider is dissatisfied with the plan‘s response, the provider may initiate a thirty-day period of open negotiation. Id.
The Act directs the Departments5 to establish through rulemaking the methodology for health plans to determine the QPA and the information health plans must share with providers regarding QPA determinations. Id.
The Departments invoked
B. Procedural Background
Plaintiffs7 sued the Departments under the APA, alleging that provisions of the Rule violated the Act‘s unambiguous terms and were arbitrary and capricious. The district court consolidated the lawsuits.
Both sides moved for summary judgment. The district court held certain provisions of the Rule lawful and others unlawful. The district court vacated the provisions of the Rule that it held unlawful and entered final judgment. Shortly after the district court‘s decision, the Departments exercised their enforcement discretion to permit insurers to temporarily continue using their existing QPAs. FAQs about Consolidated Appropriations Act, 2021 Implementation Part 62 at 6-7 (Oct. 6, 2023). The Departments timely appealed the district court‘s judgment as to certain QPA calculation provisions and the thirty-day deadline provision. Plaintiffs timely cross-appealed the district court‘s judgment upholding the disclosure provision.
II. Jurisdiction & Standard of Review
The district court had jurisdiction over this APA suit under
III. Discussion
We first address the various challenges to the Rule before turning to the question of the proper remedy.
Pursuant to the APA, the Departments’ Rule must be “set aside” if it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”
On the question of reasoned decision-making, “[t]he petitioner has the burden of proving that the agency‘s determination was arbitrary and capricious.” Medina Cnty. Env‘t Action Ass‘n v. Surface Transp. Bd., 602 F.3d 687, 699 (5th Cir. 2010). “Judicial review under that standard is deferential, and a court may not substitute its own policy judgment for that of the agency.” FCC v. Prometheus Radio Project, 592 U.S. 414, 423 (2021). “A court simply ensures that the agency has acted within a zone of reasonableness and, in particular, has reasonably considered the relevant issues and reasonably explained the decision.” Id. Although the reviewing court “may not supply a reasoned basis for the agency‘s action that the agency itself has not given,” courts are to “uphold a decision of less than ideal clarity if the agency‘s path may reasonably be discerned.” Motor Vehicle Mfrs. Ass‘n of U.S. v. State Farm Mut. Auto Ins., 463 U.S. 29, 43 (1983) (quotations omitted).
A. The QPA Calculation Provisions
We first address Plaintiffs’ challenges to the provisions concerning how to calculate the QPA. Pursuant to Loper Bright, we must first determine the boundaries of the Departments’ delegated authority in this area. 144 S. Ct. at 2263. The Act directs the Departments to “establish through rulemaking . . . the methodology the group health plan or health insurance issuer offering group or individual health insurance coverage shall use to determine the qualifying payment amount.”
The Rule instructs that “the rate negotiated under a contract constitutes a . . . contracted rate regardless of the number of claims paid at that contracted rate.”
The district court held that this provision conflicts with the Act because the Act requires insurers to include in the QPA calculation rates for services that are “provided by a provider.” See
Based on the plain meaning of “provide,” the Act contains no requirement that a service must previously have been performed by a provider for that rate to be included in the QPA calculation. As we have previously explained, “[t]o ‘provide’ ordinarily means ‘to make available,’ ‘furnish,’ or ‘to supply something needed or desired.‘” Green Valley Special Util. Dist. v. City of Schertz, 969 F.3d 460, 476 (5th Cir. 2020) (en banc) (quoting Provide, AMERICAN HERITAGE DICTIONARY, https://ahdictionary.com/word/search.html?q=available (last visited Nov. 26, 2019)). Accordingly, the Act requires only that a given service be “available,” id. (quotation omitted), regardless of whether, or how many times, it has actually been performed.
Additionally, the Act reasonably addresses concerns about the QPA‘s inclusion of rates for services that a given provider would never perform. It states that the QPA is “the median of the contracted rates recognized by the plan or issuer . . . for the same or a similar item or service that is provided in the same or similar specialty and provided in the geographic region in which the item
Plaintiffs argue that even providers in the same or similar specialty might not provide the same services. But Plaintiffs do not suggest how to otherwise draw and police the line separating the within-specialty services each provider might perform sometime in the future from those that they would never perform. Limiting the field of comparison rates to those agreed upon by providers in the same specialty and geographic area is a reasonable way of ensuring that services that a provider is unlikely to provide are not included in the QPA calculation.
For these reasons, we conclude that this provision is neither inconsistent with the Act nor arbitrary and capricious. We therefore REVERSE the district court‘s vacatur of this provision.
2. Excluding case-specific agreements
The next provision of the Rule that Plaintiffs challenge is the exclusion from the QPA calculation of ad hoc, case-specific agreements.
The Rule recognizes “that plans and issuers sometimes enter into special agreements with providers and facilities that generally are not
Notes
The district court concluded that this provision conflicts with the Act‘s definition of QPA. It reasoned that case-specific agreements are “‘contracted rates recognized by’ an insurer ‘under such plans or coverage’ . . . because they are contracts to pay a specific rate for an air ambulance transport for the insurers’ beneficiaries, participants, or enrollees” (quoting
We disagree and hold that this provision of the Rule does not conflict with the Act. Even assuming arguendo that case-specific agreements constitute “contracted rates,” as Plaintiffs contend, that does not end the matter. To be included in the QPA calculation, the Act requires that “contracted rates” must be “recognized by the plan or issuer . . . under such plans or coverage . . . on January 31, 2019.”
Plaintiffs next argue that the Rule‘s exclusion of single-case agreements is arbitrary and capricious because of an alleged inconsistency regarding what constitutes a contractual relationship. They argue that the Act defines “participating emergency facilit[ies]” and “participating health care facilit[ies]” to mean facilities that have “a contractual relationship with” the insurer.
We do not agree. The definition of “contractual relationship” is used to determine whether the Act‘s surprise billing protections apply to a given facility in the first place. When a facility has a “contractual relationship” with an insurer, whether through a single case agreement or otherwise, the Act‘s surprise billing protections apply. That inquiry is wholly separate from whether a “contracted rate[]” was “recognized by the plan or issuer . . . under such plans or coverage . . . on January 31, 2019,” and therefore must be included in the QPA calculation.
We also conclude that the Departments reasonably explained their approach to case-specific agreements. The Departments stated in the Rule that their approach “most closely aligns with the statutory intent of ensuring that the QPA reflects market rates under typical contract negotiations.”
We therefore conclude that this provision is neither inconsistent with the Act nor arbitrary and capricious. Accordingly, we REVERSE the district court‘s vacatur of this provision.
3. Excluding bonus and incentive payments
The next provision of the Rule at issue is its instruction to “exclude” from rates used to calculate the QPA “risk sharing, bonus, or penalty, and other incentive-based and retrospective payments or payment adjustments.”
consistent with how cost sharing is typically calculated for in-network items and services, where the cost-sharing amount is customarily determined at or near the time an item or service is furnished, and is not subject to adjustment based on changes in the amount ultimately paid to the provider or facility as a result of any incentives or reconciliation process.
Id.
The district court held that this provision of the Rule conflicts with the Act. It reasoned that the phrase “total maximum payment,” as used in the definition of QPA,
Again, we disagree. The Act itself grants the Departments discretion on whether to include such adjustments. For example, it expressly delegates rulemaking authority regarding how to treat “account payments that are made by such plan or issuer, respectively, that are not on a fee-for-service basis.”
We therefore conclude that this provision is neither inconsistent with the Act nor arbitrary and capricious. Accordingly, we REVERSE the district court‘s vacatur of this provision.
B. The Deadline Provision
Moving on from the QPA-calculation provisions, we turn now to the Rule‘s deadline provision.
The Act states that the insurers shall send to the provider either an initial payment or notice of denial of payment “not later than 30 calendar days after the bill for such services is transmitted by such provider.”
The district court held unlawful this provision of the Rule on the basis that it contradicts the Act‘s unambiguous terms. The district court also
We agree that this provision of the Rule conflicts with the Act. First, it is important to note that the Act does not expressly delegate to the Departments rulemaking authority over the Act‘s deadlines, unlike it does for setting the methods of calculating the QPA. See
That general delegation of authority does not give the Departments license to alter the Act‘s unambiguous terms. It is a “core administrative-law principle that an agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate.” Util. Air Regul. Grp. v. EPA, 573 U.S. 302, 328 (2014).
The Departments argue that the Rule‘s deadline provision is lawful because its additional requirements align with the industry‘s understanding of “bill.” But imposing additional requirements on the term “bill” is not the only way in which the Rule‘s deadline provision departs from the plain language of the Act. It also changes the event that starts the thirty-day clock from when the provider transmits the bill,
C. Disclosure Requirements
Plaintiffs briefed the district court‘s upholding of the Rule‘s disclosure requirements, with which they disagree.14 They argue that this provision is neither reasonable nor reasonably explained. In their view, the Rule should also require insurers to disclose information such as the number of contracted rates used to calculate the QPA, the number of times each rate was paid, and the types of providers that agreed to each rate.
The Act grants the Departments considerable discretion in this area. It states that the Departments “shall establish . . . the information [an insurer] . . . shall share with” a provider.
The Rule requires insurers to provide, among other things: (1) “a statement certifying that . . . each QPA shared with the provider or facility was determined in compliance with” the Rule; (2) upon request, “whether the QPA includes contracted rates that were not set on a fee-for-service
The Rule also provides the following explanation for requiring these specific disclosure requirements:
The Departments recognize that providers, emergency facilities, and air ambulance providers subject to the surprise billing rules need transparency regarding how the QPA was determined. This information is also important in informing the negotiation process. In addition, IDR entities are directed by statute to consider the QPA when selecting an offer submitted by the parties through the IDR process. Therefore, to decide whether to initiate the IDR process and what offer to submit, a provider, emergency facility, or provider of air ambulance services must know not only the value of the QPA, but also certain information on how it was calculated.
Plaintiffs offer multiple theories for why the Rule‘s disclosure requirements are arbitrary and capricious. First, they argue that the lack of additional disclosure requirements dooms the complaint process by which providers can notify the Departments that an insurer‘s QPA may not satisfy the Act‘s definition of QPA. But the Act places the responsibility for auditing QPA calculations on the Departments rather than the providers. It requires the Departments to establish a process to audit a sample of plans each year and adds that the Departments may conduct an audit upon receipt of a “complaint or other information . . . that involves the compliance of the plan or coverage.”
Second, Plaintiffs assert that the lack of additional disclosure requirements hinders the purpose of the Act‘s IDR process and is therefore unreasonable. The Departments clearly recognized the relevance to the IDR process of “certain information on how [the QPA] was calculated.”
Finally, Plaintiffs contend that the Departments’ “paltry explanation” of the disclosure requirements makes them arbitrary and capricious. Plaintiffs fault the Departments for failing to consider a disclosure system under which insurers would be required “to disclose everything (or virtually everything) underlying their calculations.” But, as discussed above, the Departments reasonably explained that they sought to balance the benefits of disclosure against its administrative burdens. We therefore conclude that the Departments’ explanation “conform[s] to minimal standards of rationality.” Luminant Generation Co. v. EPA, 714 F.3d 841, 850 (5th Cir. 2013) (quotation omitted).
For these reasons, we hold that the Rule‘s disclosure requirements are not arbitrary and capricious and AFFIRM the district court‘s decision to uphold them.
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Our holdings on Plaintiffs’ various challenges to the Rule are summarized as follows. We conclude that the provisions of the Rule related to QPA calculations are lawful and therefore REVERSE the district court‘s holdings as to those provisions. We further conclude that the Rule‘s deadline provision is unlawful and therefore AFFIRM the district court‘s holding as to that provision. Finally, we conclude that the Rule‘s disclosure requirements are lawful and therefore AFFIRM the district court‘s holding as to those provisions.
We now turn to the proper remedy for the unlawful deadline provision. The Departments argue that remand, rather than vacatur, is the proper remedy for any provisions of the Rule that we hold unlawful.
We have previously explained that remand is the proper remedy for unlawful agency action when two conditions are met: (1) there is a “serious possibility that the agency will be able to correct the rule‘s defects on remand,” and (2) “vacating the challenged action would produce disruptive consequences.” Chamber of Com. of U.S. v. SEC, 88 F.4th 1115, 1118 (5th Cir. 2023) (internal quotation marks and citation omitted); see also Tex. Med. Ass‘n v. HHS, 110 F.4th 762, 779 (5th Cir. 2024).
The first condition has not been met. The Departments do not explain how they would correct the deadline provision‘s defects on remand, let alone contend that they even could. Regardless, we fail to see how they would be able to do so. The Rule‘s deadline provision is defective because it is an impermissible attempt to “rewrite clear statutory terms to suit [the Departments‘] own sense of how the statute should operate.” Util. Air Regul. Grp., 573 U.S. at 328.
But even if the first condition could be satisfied, the second cannot. Vacating the deadline provision of the Rule will not produce disruptive consequences; rather, it will retain the Act‘s more workable statutory deadline. See supra at 17 n.11 (explaining logistical difficulties with the Rule‘s deadline).
Finally, the Departments argue that any relief should apply only to Plaintiffs. While party-specific vacatur is definitely appropriate in other situations, we conclude it is not the appropriate thing to do in this case. As Plaintiffs point out, party-specific vacatur would result in one deadline for Plaintiffs and another (unlawful) deadline for all other entities. That would
We therefore hold that the district court did not abuse its discretion by vacating the Rule‘s deadline provision.
IV. Conclusion
For the reasons explained, we REVERSE the district court‘s vacatur of the QPA calculation provisions, AFFIRM the district court‘s vacatur of the deadline provision, and AFFIRM the district court‘s holding as to the disclosure provisions.