Favorable Decision for ACR Members in “TMA III” NSA Case

In the latest No Surprises Act legal victory for ACR^® members and their practices, the Fifth Circuit Court of Appeals ruled against key federal independent dispute resolution (IDR) policies that had negatively impacted physician reimbursement calculations.  ACR joined the American Society of Anesthesiologists (ASA) and the American College of Emergency Physicians (ACEP) in filing a friend-of-the-court brief supporting the Texas Medical Association in the “TMA III” case –— part of a coordinated advocacy effort to ensure fair reimbursement for out of network care.

In its new TMA III decision, a majority of the court ruled for TMA on two key issues. First, the court held that federal regulators unlawfully required insurers to include “ghost rates” in Qualifying Payment Amount (QPA) calculations—rates for services that physicians do not actually provide. Because physicians have no economic reason to negotiate rates for services they do not perform, those rates may be well below market and, in some cases, as low as $0 or $1. The court concluded that including those rates distorted the QPA and undermined the NSA’s requirement that reimbursement benchmarks reflect market-based payment levels.

The majority further emphasized the practical consequences of artificially low QPAs on the IDR process. For instance, the court noted that a significantly larger than expected volume of IDR arbitrations with physicians and providers prevailing in more than 80 percent of those cases, and arbitrators selecting reimbursement amounts above the QPA in “a whopping” 85 percent of them.  QPAs reflecting accurate median in-network rates should lead to decreased volume of IDR arbitrations. 

Second, the court ruled that the government’s 2021 regulation violated the NSA by excluding bonuses and incentive payments from QPA calculations. The NSA requires each contracted rate used in the QPA calculation to reflect the “total maximum payment” for an item or service. The court agreed with TMA and ACR that “total” means “all,” including risk-sharing, bonus, and other incentive arrangements. Excluding those payments would improperly suppress the QPA and fail to reflect the actual maximum payment available under payer contracts.

The court majority nationally vacated the portion of the government’s 2021 rule requiring insurers to include ghost rates. It also reinforced that the government may use enforcement discretion to allow insurers to continue using current QPAs temporarily while new QPAs are calculated in compliance with the NSA.

Congress enacted the NSA to reduce unexpected, or surprise, medical bills from out-of-network physicians and providers, particularly in emergency situations. The TMA III lawsuit challenged the federal government’s methodology for calculating the QPA, a central benchmark used in determining out-of-network physician reimbursement under the NSA. Physicians and insurers negotiate those rates through the IDR process, in which the QPA has significant practical influence.

In 2024, a three-judge panel of the Fifth Circuit upheld the government’s QPA methodology. TMA sought rehearing before the full appellate court, which granted review and issued its new decision this week.

ACR looks forward to CMS auditing insurers’ QPA calculations and directing them to meet the court’s ruling. ACR will also continue advocating for Congress to enact H.R. 4710 to strengthen NSA enforcement and impose appropriate penalties on insurers that fail to comply with the law.

The College will continue to monitor the TMA III decision with ASA and ACEP colleagues. For questions, contact Tom Hoffman, ACR General Counsel or Katie Keysor, Vice President, Economic Policy.