backNo Surprises Act Developments – Reduced IDR Fee Schedule and Government Litigation Win
Last week, a number of developments arose stemming from the various lawsuits challenging the No Surprises Act. First, in response to the Eastern District of Texas’ order vacating the administrative fee guidance for the Independent Dispute Resolution (IDR) process, the Departments of Health and Human Services, the Treasury, and Labor (the Departments) released updated administrative fee FAQs reducing the administrative fee for disputes initiated on or after August 3, 2023, to $50 per party per dispute (IDR Process Administrative Fee FAQs). Additionally, the Departments obtained their first major victory in the collection of cases challenging the No Surprises Act. The summary judgment opinion out of the District of Columbia Federal District Court upheld regulations regarding the calculation of the qualifying payment amount (QPA) for air ambulance services.
IDR Administrative Fee
On August 3, 2023, the U.S. District Court for the Eastern District of Texas issued an opinion and order in Texas Medical Association v. United States Department of Health and Human Services vacating the administrative fee guidance that increased the IDR administrative fee from $50 per party per dispute to $350. The order also vacated regulatory text regarding the batching of claims for the IDR process. In response to this order, the Departments indefinitely suspended the IDR process, signaling an intent to release updated guidance to comply with the district court’s order. This opinion is covered in more detail in a previous issue of Health Headlines.
On August 11, 2023, the Departments issued updated IDR Process Administrative Fee FAQs returning the IDR administrative fee to $50 per party per dispute for disputes initiated on or after August 3, 2023. The IDR process remains suspended in the wake of the Texas Medical Association victory, so disputes may not yet be initiated under the updated fee schedule, but the IDR Process Administrative Fee FAQs signaled an intent to reopen the portal and notify interested parties “soon.”
Air Ambulance Opinion
On August 10, 2023, Judge Leon of the District of Columbia Federal District Court issued a memorandum opinion dismissing a challenge by the Association of Air Medical Services (AAMS) to the way in which the QPA is calculated for air ambulance services under Department regulations. AAMS challenged multiple aspects of the QPA calculation methodology applicable to air ambulance services. First, AAMS argued that the regulations used overly broad geographic regions that do not reflect actual market pricing. AAMS also challenged the Departments’ exclusion of single case agreements in the calculation of the QPA, arguing that these single case agreements make up the majority of “contracted rates.” AAMS also argued that hospital-based and independent air ambulance providers should not be considered as being in the “same or similar specialty,” but instead should have different QPAs calculated to reflect market dynamics.
Judge Leon rejected these arguments, holding the Departments’ determination of the QPA for air ambulance services was within their discretion granted by the No Surprises Act, and reflected the “very type of well reasoned analysis the APA requires.” Another suit challenging aspects of the QPA calculation for non-air ambulance services is pending in the Eastern District of Texas, and the Departments are expected to rely heavily on Judge Leon’s opinion for support.
The IDR Process Administrative Fee FAQs are available here. The District of Columbia Federal District Court’s opinion is available here.
Reporters, Alana Broe, Atlanta, + 1 404 572 2720, abroe@kslaw.com, and Amanda Hayes-Kibreab, Los Angeles, + 1 213 443 4375, ahayes-kibreab@kslaw.com.
Senators Issue Letter Pressing the Internal Revenue Service for More Transparency Over Nonprofit Community Hospitals – On August 7, 2023, a bipartisan group of four United States Senators issued a letter to the Internal Revenue Service (IRS), requesting information from the IRS on how it scrutinizes tax-exempt community hospitals. The letter expressed concern that nonprofit hospitals may not be providing sufficient “community benefit” required to justify their tax-exempt status.
The four senators who issued the letter were Elizabeth Warren, D-Massachusetts, Raphael Warnock, D-Georgia, Bill Cassidy, R-Louisiana, and Charles Grassley, R-Iowa. The letter requested information from the IRS regarding its oversight of how community hospitals receive and maintain their tax-exempt status. Currently, the IRS uses the “community benefit” standard to determine whether a nonprofit hospital qualifies for tax exemptions, which have been estimated to be worth over $28 billion in 2020.
The letter explained that under current IRS rules, nonprofit hospitals that provide “benefits to a class of persons that is broad enough to benefit the community” may qualify for tax exemptions. The senators expressed concern that nonprofit hospitals may take advantage of this broad standard, engage in practices that are not in the best interest of patients, and avoid having to provide essential care in the community to those in need. The letter cites several instances where nonprofit hospitals have placed liens on patients’ homes in poor and rural areas, charged full price for services that should have been free or discounted, and filed lawsuits against patients for unpaid medical bills.
The letter stated that the IRS uses annual tax forms and regular reviews of nonprofit hospitals’ community benefits to confirm nonprofit hospitals are complying with the law. Nonprofit hospitals are required to file a Form 990 each year, which requires hospitals to report information on compensation, revenue, assets, liabilities, and information on community benefits. The letter expressed concern that the “10 holistically analyzed metrics” relied upon by the IRS to determine a nonprofit hospital’s compliance are insufficient as currently used. The letter urged the IRS to review Form 990 so that it may better identify and review nonprofit hospitals’ community benefit activities.
The letter also requested answers to a series of questions to better understand the IRS’s existing oversight of nonprofit hospitals, including, among others, a request that the IRS list the most commonly reported community benefit activities that qualified a nonprofit hospital for tax exemptions for the past two years, disclose updates made to Form 990 to modify how it identifies a nonprofit hospital’s community benefit information, and list the names of nonprofit hospitals that lost their tax-exemption due to noncompliance with the community benefit standard since January 1, 2014.
The senators also wrote to the Treasury Inspector General for Tax Administration, requesting the agency investigate whether the IRS is sufficiently scrutinizing nonprofit community hospitals’ compliance with tax-exempt requirements and their obligations to provide community benefits.
The senators’ full letter can be read here.
Reporter, Brittany Bratcher, Austin, +1 512 457 2071, bbratcher@kslaw.com.