Appeals court strikes down formula used to calculate ‘qualifying payment amount’ under No Surprises Act

An appeals court on Tuesday struck down a critical formula used as the basis for payment negotiations under the No Surprises Act. 

A majority of members of the 17-judge, 5th U.S. Circuit Court of Appeals reached the ruling in a long running court battle tied to the landmark law. Judges ruled the “qualifying payment amount”—typically the median contracted in-network rate—cannot incorporate “ghost rates” for services that were never provided, Reuters reported. 

QPA calculations also must include bonus and incentive payments that are a key part of provider pay. The decision comes against insurers and the government and in favor of the Texas Medical Association and air ambulance providers, who have argued that the calculations have favored payers over providers. 

HaloMD—an Addison, Texas-based company that helps radiologists and other physicians in navigating the independent dispute resolution (IDR) process—praised the court’s “long awaited” decision on Wednesday.  

“QPAs have been completely detached from reality since the earliest days of the No Surprises Act," Alla LaRoque, president and CEO of HaloMD, said in a statement Aug. 12. "More honest and transparent QPA calculations will lead to durable networking agreements and sustainable access to care in communities across the country."

Appeals court judges contended that the flawed QPA methodology had “upended the NSA’s dispute resolution process.” They stated that “because the agencies directed to include non-negotiated ghost rates, the resulting QPAs were artificially low,” HaloMD noted. 

“Physicians are being forced to spend as much time fighting predatory insurance practices as they do caring for patients," added Patrick Velliky, chief external affairs officer of HaloMD. "For years, insurers have systematically underpaid doctors using QPAs that don't pass the laugh test. The Fifth Circuit just took away one of their tools to do it."

In their unsigned decision, appeals court judges assured that the ruling would not lead to “all out chaos.” That’s because the government will continue to let insurers retain the existing QPA formula while an alternative is crafted, according to Reuters. The court majority rejected warnings by the government and insurers that vacating the formula would leave patients on the hook for costly medical bills, the outlet reports. Judges, however, sided with HHS in letting payers exclude one-off agreements for services such as air ambulances from contracted rates use to calculate the QPA. 

Radiology Associates of North Texas—a vocal critic of shortfalls in the No Surprises Act—also applauded the decision on Wednesday. RANT believes the ruling validates radiologists’ concern that the QPA is “distorted when it includes placeholder ‘ghost’ rates that were never meaningfully negotiated.” Provider bonus and incentive payments also are a key part of actual compensation, and should be included in the QPA, RANT added. 

“This matters most in radiology because the specialty combines very high claim volume with relatively modest reimbursement on many individual procedures,” Dave Walker, chief revenue officer for RANT, told Radiology Business by email on Aug. 12. 

RANT’s own experience “illustrates the scale of the distortion,” he added. The QPA applied by Blue Cross Blue Shield of Texas has run about 21% below RANT’s prior contracted rates. This is well short of the median the NSA statute requires. By RANT’s calculations, the correct QPA would be about 235% of 2025 Medicare rates. BCBS of Texas’ actual qualifying payment amount has been closer to 150%. 

“A benchmark set that far below the market midpoint all but guarantees disagreement, pushing more claims into IDR rather than resolving them efficiently at the point of payment,” Walker said. 

A “counterintuitive part of this ruling,” he added, is that a more accurate QPA should help to reduce disputes and admin costs, not increase them. Using an accurate benchmark payment amount will help to move starting payments closer to what providers are seeking, so that fewer claims need to go to IDR. It also can give both sides a more realistic reference point for network negotiations. 

“How much actually changes, though, depends on implementation, not the opinion itself. The court's remedy leaves agencies room to use enforcement discretion, so insurers can keep applying their current QPAs until a corrected methodology is issued—there is no automatic day-one change to claim payments,” Walker added. 

“To be clear about what the ruling does not do: it does not weaken the No Surprises Act's patient protections, and it does not eliminate independent dispute resolution,” he added later. “It requires HHS, Labor, and Treasury to bring the QPA methodology in line with the statute's actual text. For radiology, getting that methodology right can shrink the volume of unnecessary disputes, eliminate a substantial share of batching and administrative waste, improve the odds of durable network agreements, and preserve the patient protections the law was built around.”