Association of Air Medical Services v. U.S. Department of Health & Human Services

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

ASSOCIATION OF AIR MEDICAL ) SERVICES, )

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Plaintiff, )

)

v. ) Civil Case No. 21-3031 (RJL)

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U.S. DEPARTMENT OF HEALTH ) AND HUMAN SERVICES, et al., )

)

Defendants. )

l\1EMO M OPINION

�

(August£, 2023) [Dkts. 5, 1 O]

The No Surprises Act was passed in 2020 to end surprise medical billing. The

Department of Health and Human Services ("HHS"), the Department of Labor, and the Department of the Treasury, along with the Office of Personnel Management ("OPM") (collectively, the "defendants") promulgated regulations under the authority of the No Surprises Act. Plaintiff, Association of Air Medical Services (AAMS), is a trade association representing most air ambulance providers in the United States and brought this action against the defendants claiming that the regulations implementing the No Surprises Act violate the Administrative Procedure Act. Both sides have moved for summary judgment. For the reasons explained below, the plaintiffs Motion for Summary Judgment is DENIED and the defendants' Cross Motion for Summary Judgment is GRANTED.

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13, 2021). Interim Final Rule Part II ("IFR Part II") was issued in October 2021 and established an independent dispute resolution ("IDR") process.2 See Requirements Related to Surprise Billing; Part II, 86 Fed. Reg. 55,980 (Oct. 7, 2021).

Plaintiff AAMS, the international trade association that represents over 93% of air ambulance providers in the United States, sued under the Administrative Procedure Act ("APA") on November 16, 2021 to set aside both rules. Compl. ,r,r 1, 20.

In December 2021, AAMS moved for Summary Judgment. Mot. for Summ. J. by Ass'n of Air Med. Servs. ("AAMS Mot. for Summ. J.") [Dkt. 5]. In January 2022, the defendants in the case against AAMS filed a Cross Motion for Summary Judgment, Def.'s Cross Mot. for Summ. J. ("Defs.' Cross Motion") [Dkt. 10], and a memorandum in opposition to AAMS' Motion for Summary Judgment, Mem. in Opp'n to Mot. for Summ. J. [Dkt. 11]. On February 1, 2022, AAMS replied in support of its Motion for Summary Judgment and in opposition to the Cross Motion. Consolidated Reply in Supp. of Pl. 's Mot. for Summ. J. [Dkt. 31]; Opp'n to Cross Mot. for Summ. J. [Dkt. 32].

On February 2, 2022, the related case of Ass 'n ofAir Medical Services v. Dep 't of Health & Human Services et al., No. 21-cv-3031 was consolidated with American Medical Association, et al. v. Dep 't of Health & Human Services et al., No. 21-cv-3231. Minute Order, Feb. 2, 2022. The American Medical Association ("AMA"), Stuart M. Squires, M.D., Victor F. Kubit, M.D., the American Hospital Association, Renown

2 The !DR process arbitrates disputes between a group health plan or health insurance issuer and an out-of-network provider over the payment owed.

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cv-3031 [Dkt. 79]. Therefore, the only remaining claim before the Court is Count II (the challenge to IFR Part I) in the Complaint filed by AAMS. See Compl.

II. ST AND ARD OF REVIEW

This case comes before the Court on the parties' cross-motions for summary judgment. In resolving a motion for summary judgment in a challenge to a rule brought under the AP A, courts must decide, "as a matter of law, whether the agency action is supported by the administrative record and otherwise consistent with the AP A standard of review." Coe v. McHugh, 968 F.Supp.2d 237, 240 (D.D.C. 2013). "[W]hen review is based upon the administrative record ... [s]ummary judgment is an appropriate procedure for resolving a challenge to a federal agency's administrative decision." Bloch v. Powell, 227 F. Supp. 2d 25, 31 (D.D.C. 2002). In such cases, the district court "sits as an appellate tribunal" and "[t]he entire case ... is a question oflaw." Am. Biosci., Inc. v. Thompson, 269 F.3d 1077, 1083 (D.C. Cir. 2001) (internal quotation marks omitted).

Under the APA, courts must set aside agency action that is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A); Taurus Records, Inc. v. DEA, 259 F.3d 731, 736 (D.C. Cir. 2001). While review of agency action is generally deferential, Blanton v. Office of the Comptroller of the Currency, 909 F.3d 1162, 1170 (D.C. Cir. 2018), courts must "ensur[e] that agencies have engaged in reasoned decision making," Iaccarino v. Duke, 327 F. Supp. 3d 163, 173 (D.D.C. 2018) (quotation marks and citations omitted). At a minimum, agencies must "examine the relevant data and articulate a satisfactory explanation for its actions

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including a rational connection between facts found and the choice made." Taurus Records, Inc., 259 F.3d at 736 (quoting Motor Vehicle Mfrs.' Ass'n of United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)). However, the "scope of review under the arbitrary and capricious standard is narrow and a court is not to substitute its judgment for that of the agency." Iaccarino, 327 F. Supp. 3d at 173 (internal quotation marks omitted) (citing State Farm, 463 U.S. at 43).

UL ANALYSIS

The QPA is essentially the median rate the insurer would have paid for emergency care if it had been provided by an in-network provider or facility. The No Surprises Act defines the QP A as the "median of the contracted rates recognized by the plan or issuer ... for the same or a similar item or service that is provided by a provider in the same or similar specialty and provided in the geographic region in which the item or service is furnished, consistent with the methodology established by the Secretary ... " 42 U.S.C. § 300gg-l l l(a)(3)(E)(i); see also id. § 300gg-l 12(c)(2). However, determining what the QP A is for a certain item or service requires a precise methodology that involves data gathering and calculations. As such, the Act instructs the defendants to promulgate regulations that establish the "methodology ... to determine the qualifying payment amount," including a definition of the geographic regions used to make that determination. Id.§ 300gg-l l l(a)(2)(B)(i), (iii).

The plaintiff contends that the defendants are implementing the definition through a QP A methodology that intentionally lowers the QP A for air ambulance services and runs

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contrary to the statute in three ways: ( 1) excluding most types of contracted rates between air ambulance providers and plans or issuers; (2) treating hospitals and independent air ambulance services as providers in the "same or similar specialty"; and (3) using overbroad geographic regions that generate QP As wholly divorced from real-world pricing in reasonable geographic markets. AAMS Mot. for Summ. J. 21-22. The plaintiff makes a separate but related argument concerning patient cost-sharing amounts being tied to the QP A. Unsurprisingly, the defendants argue that they reasonably exercised their statutory authority to set the QP A methodology and patient cost-sharing amounts in IFR Part I and reasonably explained their decisions, thereby meeting the requirements of the APA. See FCC v. Prometheus Radio Project, 141 S. Ct. 1150, 1158 (2021). For the reasons discussed below, I find the defendants' position to be eminently reasonable.

a. Calculation of Median of Contracted Rates

First, the plaintiff argues that the QPA methodology established by the defendants impermissibly excludes single case agreements and other similar agreements from the calculation of the median in a way that is contrary to law and is arbitrary and capricious. AAMS Mot. for Summ. J. 22-27. 4 I disagree. The plain text of the No Surprises Act itself requires the defendants to exclude single case agreements from the QPA calculations. Moreover, doing so most "closely aligns with the statutory intent of ensuring that the

4 Plaintiff contends that the plain meaning of the statute suggests that if the plan or issuer recognizes a rate from an in-network contract as the total maximum payment under a plan or coverage, then the plan or issuer must include that rate in its calculation of the median. Id. at 23. Plaintiff claims the same must hold true for any amount paid or charged under any other type of contract, including single case agreements, letter agreements, or similar contractual agreements. Id.

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QP A reflects market rates under typical contract negotiations" and is not arbitrary and capricious. See 86 Fed. Reg. at 36,889. As such, the defendants acted "within a zone of reasonableness and, in particular, has reasonably considered the relevant issues and reasonably explained the decision." Inteliquent, Inc. v. FCC, 35 F.4th 797, 802 (D.C. Cir. 2022) (quoting Prometheus, 141 S. Ct. at 1158).

Under the No Surprises Act, the QPA is the "median of the contract rates recognized by the plan or issuer." 42 U.S.C. § 300gg-l l l(a)(3)(E)(i); see also id.§ 300gg-l 12(c)(2). The median, in a set of numbers arranged from smallest to largest, can be thought of as the middle value. IFR Part I states that contracted rates do not include "a single case agreement, letter of agreement, or other similar arrangement between a provider, facility, or air ambulance provider and a plan or issuer, used to supplement the network of the plan or coverage for a specific participant, beneficiary, or enrollee in unique circumstances ... " 45 C.F.R. § 149.140(a)(l). Therefore, IFR Part I excludes these "single case agreement[ s]" from the calculation of the median of the contract rates, the QPA.

The plaintiff claims that under the plain meaning of the statute, all amounts paid or charged under any kind of contract, including single case agreements, should be included in the calculation of the median. AAMS Mot. for Summ. J. 23. However, as the defendants correctly note, the plain text of the statute directs the Departments to include only the payment rates that are contracted for under the generally applicable terms of a health plan or health insurance policy. Under the No Surprises Act, the fuller definition of the QPA is as follows: "the median of the contracted rates recognized by the plan or

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issuer, respectively (determined with respect to all such plans of such sponsor or all such coverage offered by such issuer that are offered within the same insurance market ... as the plan or coverage) as the total maximum payment ... under such plans or coverage, respectively, on January 31, 2019," adjusted for inflation. 42 U.S.C. § 300gg- l l l(a)(3)(E)(i) (emphasis added). As the defendants note, "plans" and "coverage" are terms of art under the Public Health Service Act ("PSHA") and the Employee Retirement Income Security Act ("ERISA"). 5 A "group health plan" is an employee welfare plan that provides medical care for employees and their dependents. Id. § 300gg-9l(a)(l). And "health insurance coverage" means benefits consisting of medical care under a policy offered by a health insurance issuer. Id. §300gg-9l(b)(l). Read together, the plain text of the No Surprises Act directs the Departments to include in the QPA calculation only the payment rates that are contracted for under the generally applicable terms of a health plan or health insurance policy. See also Br. Of Amici Curiae Health Policy Experts in Supp. ofDefs. 19 [Dkt. #35] ("[S]ingle-case agreements should not be included in the calculation of the Q PA because they are different in kind from the agreements that air ambulance providers make to join payers' contracted networks.").

The plaintiff also contends that the Departments' choice to exclude single case agreements is arbitrary and capricious because Congress doesn't require the QPA to reflect "market rates" as contained only in "typical" in-network contracts between air ambulance providers and plans and issuers. AAMS Mot. for Summ. J. 24-27. However,

5 The No Surprises Act makes parallel amendments to the PSHA (administered by HHS) and ERISA (administered by the Department of Labor).

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Congress recognized that a majority of air ambulance services are furnished by out-of- network providers, creating a "market failure" that has permitted air ambulance providers to charge far more than the price they would command if the services were provided in network. See H.R. REP. No. 116-615, at 52-53 ("Economists generally regard the practice of surprise medical billing as arising from a failure in the health care market ... These circumstances enable some providers to charge amounts for their services that ... result[ s] in compensation far above what is needed to sustain their practice."). As a result, Congress sought to limit patients' cost-sharing responsibilities to an amount based on a comparable in-network rate, and providers' payments were calculated based on the same amount. See 42 U.S.C. § 300gg-l 12(a)(l). 6 Thus, the Departments' decision to exclude single case agreements from QP A calculations is reasonable and is in line with Congress's intent to address the market failure stemming from air ambulance providers' ability to remain out-of-network and charge high out-of-network rates.

Finally, the plaintiff contends that the Departments acted arbitrarily by treating single case agreements differently in other contexts. For example, the plaintiff points out that the Departments defined the terms "participating emergency facility" and "participating health care facility" to include any facility with a contractual relationship with a plan or issuer through a single case agreement. See AAMS Mot. for Summ. J. 27-29; 45 C.F.R. § 149.30. The defendants adequately justify the different treatment by explaining that the

6 See also Br. Of America's Health Insurance Plans as Amicus Curiae in Support ofDefs.' Cross-Mot. for Summ. J. and Opp'n to Pl.'s Summ. J. Mot. 9-10 [Dkt. #34] ("The QPA rule interpreted 'contracted rate' (for the purpose of identifying the median) to include only network agreements and to exclude such one-off agreements ... [This is] essential to the statutory purpose of protecting consumers from unpredictable and uncontrolled health care costs ... Including [single case agreements] would distort the calculation of median market rates the QPA represents.").

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division and one region consisting of all other portions of the Census division." See id. § 149.140(a)(7)(ii)(B). The plaintiff contends that the use of Census divisions, relative to the alternative to use third-party databases, to calculate the QPA is "absurdly overbroad." See AAMS Mot. for Sunnn. J. 29-30.

However, Congress deferred to the Departments to define the geographic regions, see 42 U.S.C. § 300gg-l 1 l(a)(2)(B)(iii), and the Departments reasonably explained their decision. They decided against defining geographic regions for air ambulance services too narrowly because such an approach would more likely "result in more instances of insufficient information" to calculate the QP A. 86 Fed. Reg. at 36,893. This is due to the nature of air ambulance services which operate relatively less frequently compared to other items and services subject to the No Surprises Act as well as the lower prevalence of participating providers of air ambulance services. Id. Although the No Surprises Act permits the use of third-party databases of allowed amounts in situations where there is otherwise insufficient information to calculate the QPA, see 42 U.S.C. § 300gg- 11 l(a)(3)(E)(iii), the Departments decided against using third-party databases. The Departments did so because they read the statute to mean that the use of third-party databases would only be in "limited circumstances where the plan or issuer cannot rely on its contracted rates as a reflection of the market dynamics in a geographic region." 86 Fed. Reg. at 36,888. Moreover, the Departments reasoned that the use of larger geographic regions will allow plans and issuers to have access to more information and thereby "reduce the likelihood that the median of contracted rates would be skewed by

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IV. CONCLUSION

For the foregoing reasons, the plaintiff's Motion for Summary Judgment is DENIED and the defendants' Cross Motion for Summary Judgment is GRANTED.

United States District Judge