The federal government prevailed at summary judgment in a case brought by the Association of Air Medical Services (the “Association”) against the U.S. Department of Health and Human Services et al. (“HHS”), marking it the government’s first major victory in the string of court challenges to the No Surprises Act (the “NSA”).
No Surprises Act
The NSA is a U.S. federal law enacted to protect patients from unexpected and potentially high out-of-network medical bills, including those related to air ambulance services. The NSA aims to address situations where patients receive care from out-of-network healthcare providers or facilities, often resulting in significant financial burdens due to surprise billing.
Included in the NSA final rules is a provision for an Independent Dispute Resolution (IDR) process. The IDR process is a baseball style arbitration process meant to resolve billing disputes between healthcare providers and payers in cases where the patient received out-of-network care, and the parties are unable to agree on a payment amount. The goal of the IDR process is to provide a fair and efficient way to resolve billing disputes without involving the patient in the negotiations. It helps prevent patients from receiving unexpected and potentially high bills for out-of-network care.
The Qualifying Payment Amount (the “QPA”) is a key concept within the NSA and aids the arbitrator in the IDR process with determining the appropriate out-of-network rate to be paid by the payer. Typically, payers reimburse air ambulance providers using air mileage service codes and taking into account the amount of miles the patient is transferred. The final payment amount is calculated by multiplying the negotiated rate for these codes and the number of miles. For purposes of calculating the QPA, the negotiated rates do not include single case agreements (which make up the bulk of the contractual agreements between non-hospital based air ambulance providers).
Case Overview: Association Of Air Medical Services v. U.S. Department of Health and Human Services et al., United States District Court for the District of Columbia Case No. 21-cv-03031
The Association challenged several aspects of the government’s regulations concerning QPA methodology. It contended that the government’s QPA methodology ran counter to the NSA by excluding most types of contracted rates between air ambulance providers and plans or issues, by treating hospitals and independent air ambulance services as providers in the “same or similar specialty,” and by using overly broad geographic regions that generate QPAs divorced from actual market pricing. HHS asserted that its rules complied with the Administrative Procedure Act (the “APA”) and were a reasonable exercise of its statutory authority.
In U.S. District Judge Richard Leon’s memorandum opinion, the Court rejected the Association’s arguments and found that certain government regulations regarding how to define and calculate the QPA for air ambulance services were consistent with the NSA and the APA. The Association argued that all amounts charged under any type of contract, including single case agreements which make up the bulk of the contracts between air ambulance companies and insurers, should be included when determining the median contracted rate. The Court held that the NSA expressly directs HHS to include only the payment rates that are contracted for under the generally applicable terms of a plan or policy and requires HHS to exclude single case agreements.
The Court also held that HHS provided a solid justification for treating air ambulance providers and hospitals providing air ambulance services as the same “single provider specialty.” The Court further concluded that HHS’s use of broad “census divisions” was reasonable because it provided the amount of data necessary to calculate the QPA. Restricting the “census divisions” or using another approach would have led to insufficient data to determine an appropriate QPA.
The Court also approved of the government’s basing of patient cost-sharing obligations for air ambulance services on the QPA, as opposed to an amount through open negotiation or the IDR process, remarking that the government had engaged in the “type of well-reasoned analysis that the APA requires.”
This ruling will have a significant impact on air ambulance companies bottom lines. The median price of air ambulance transport by private equity or publicly-traded parent companies was $32,051 in 2016 (and has only increased). Those rates were 60% higher than the average amount for rides provided by hospitals, nonprofits, and independent companies. As a result of this ruling, an air ambulance bill will be significantly less as hospital-based air ambulance fees will continue be included (and single case agreements will continue to be excluded) in the calculation of the QPA. A great win for payers.