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

• Court: District Court, District of Columbia
• Decided: August 9, 2023
• Docket: Civil Action No. 2021-3031
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

ASSOCIATION OF AIR MEDICAL ) SERVICES, ) ) Plaintiff, ) ) v. ) Civil Case No. 21-3031 (RJL) ) 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.

l 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.

3 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

5 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

6 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.

7 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

8 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).

9 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.").

10 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

15 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