By Jonathan Stempel
Aug 11 (Reuters) – A federal appeals court on Tuesday struck down a formula used by healthcare providers, insurers and the government that is designed to shield patients from staggeringly high “surprise” medical bills.
• In an unsigned decision, a majority of the 17-judge 5th U.S. Circuit Court of Appeals in New Orleans assured the ruling would not lead to “all-out chaos,” because the government could let insurers retain the existing formula while a replacement is crafted.
• The case concerned the No Surprises Act, a 2020 law requiring healthcare providers and insurers to negotiate reimbursement rates themselves rather than stick patients with huge bills for out-of-network treatments, especially in emergencies.
• Providers including the Texas Medical Association and air ambulance operators challenged the method for calculating the “qualifying payment amount” (QPA), a median rate for providing specific in-network services in specific regions, saying the calculations favored insurers at their expense.
• Tuesday’s majority sided with the providers in finding it improper for the QPA to include “ghost rates,” or rates for services they never provided, and exclude bonus and incentive payments.
• It also sided with the government in letting insurers exclude one-off agreements for services such as air ambulances from “contracted rates” used to calculate the QPA.
• The majority rejected warnings by the government and insurers that vacating the formula could leave patients on the hook for sky-high medical bills.
• “Indeed, the agencies have been exercising enforcement discretion while their appeal from the district court has been pending, so they are more than capable of preventing immediate chaos,” the majority said.
• Tuesday’s decision partially restored a district court ruling favoring the healthcare providers, which a three-judge 5th Circuit panel later reversed.
• It came three weeks after the U.S. Centers for Medicare and Medicaid Services told the New York Times the system was being “gamed” by doctors to obtain higher prices. CMS said awards to doctors through the No Surprises Act’s arbitration process more than tripled to $14.9 billion in 2025 from $4.1 billion in 2024, according to the Times.
• Six judges partially dissented from Tuesday’s decision, saying QPAs should include contracted rates regardless of whether claims were paid, and exclude bonus and incentive payments.
• Lawyers for the healthcare providers did not immediately respond to requests for comment. The Texas Medical Association had no immediate comment.
• The government defendants included the U.S. Treasury, Labor, and Health and Human Services departments. None immediately responded to requests for comment outside business hours.
(Reporting by Jonathan Stempel in New York; Editing by Jamie Freed)
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