Appellate Court Overturns Key No Surprises Act Payment Components in Victory for Providers

Payers suffered a significant setback this week in their efforts to limit payments to providers in surprise billing disputes.

A Tuesday ruling by the Fifth Circuit Court of Appeals invalidated key components of the regulatory methodology used to determine the No Surprises Act’s qualifying payment amount (QPA), agreeing with the Texas Medical Association that the existing formula has long favored payers in arbitration.

The decision does not take effect immediately; the court left the current QPA formula in place while the Departments of Health and Human Services, Labor, and Treasury develop a replacement. However, the ruling paves the way for higher provider payouts once a new calculation is implemented.

The QPA is designed to reflect the median in-network rate health plans pay for a given service in a specific geographic area. It serves as a central anchor in the No Surprises Act’s arbitration process, with both sides often referencing it when negotiating out-of-network claims.

The Texas Medical Association contended that regulators allowed payers to manipulate the median by incorporating “ghost rates”—contracted rates for services providers never intended to deliver—which artificially depressed the benchmark.

The court concurred, ruling that ghost rates must be excluded from the calculation and that QPAs must also account for bonus and incentive payments, which constitute a significant portion of many providers’ contracted compensation but had previously been omitted.

These changes are expected to raise QPAs—and consequently arbitration outcomes—across the board.

The Texas Medical Association did not secure every requested change; the court sided with HHS, permitting payers to continue excluding one-off contracts, such as those covering air ambulance services, from QPA calculations.

This marks the association’s fourth successful legal challenge to the law’s implementation since 2022, representing a series of cases that have progressively reshaped how the QPA is constructed.

Bradford Holland, President of the Texas Medical Association, issued a statement following the ruling, noting that the decision represents another step toward ensuring a lawful implementation of the No Surprises Act that preserves patient access and physician practice viability.

No deadline has been set for a new methodology, leaving both providers and payers in a waiting period as they observe how quickly and aggressively regulators move to reform the formula, which has been subject to near-constant litigation since the No Surprises Act took effect in 2022.

Photo: SimpleImages, Getty Images

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