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

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
18