By The Epoch Times | Created at 2026-08-12 09:51:57 | Updated at 2026-08-12 10:06:24
23 minutes ago
A Jefferson County, Colo., Sheriffs Department deputy is stationed outside of the St. Anthony's Hospital emergency entrance in Lakewood, Colo., on Sept. 10, 2025. Andy Cross/The Denver Post via AP
A federal appeals court on Tuesday mostly sided with physicians and air ambulance companies in a challenge to how insurers calculate a key rate under a law designed to protect patients from surprise medical bills.
In an unsigned opinion from the full 17-judge 5th U.S. Circuit Court of Appeals, a majority
heldthat federal agencies improperly allowed insurers to include “ghost rates,” or contracted amounts for services providers never actually deliver, when setting the qualifying payment amount, or QPA. The court also ruled that insurers must consider bonus and incentive payments, rather than exclude them.
The decision leaves intact the agencies’ exclusion of one-off, case-specific agreements, such as those often used in air ambulance services, from the QPA calculation.
The No Surprises Act, which was enacted in 2020, bars providers from balance-billing patients for most out-of-network emergency care and certain non-emergency services at in-network facilities.
Instead of sticking patients with the full bill, insurers and providers must negotiate reimbursement. If talks fail, an independent dispute resolution process determines the amount. That process relies on the QPA, defined in the statute as the median of the contracted rates recognized by a plan “as the total maximum payment … 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.”
The Texas Medical Association, Tyler Regional Hospital, and others, along with air ambulance operators including LifeNet Inc. and Air Methods Corp., challenged aspects of a July 2021 interim final rule issued by the Departments of Health and Human Services, Labor, and the Treasury. A district court generally agreed with the providers. A three-judge panel later reversed. The full court then reheard the case.
On ghost rates, the majority found the agencies’ approach contrary to the statute’s plain text. Contracts often contain unnegotiated default rates for services a given provider does not offer. For instance, obstetrical rates in a gynecologist’s fee schedule when that physician does not deliver babies. Some of those rates run as low as zero or one dollar.
The July rule directed insurers to treat each listed rate as a data point “regardless of the number of claims paid at that contracted rate.” Later guidance told insurers to drop pure zero-dollar rates but keep other ghost rates.
“The Act limits the QPA to an ‘item or service that is provided by a provider,’” the court wrote.
Services never performed and never paid for do not meet that standard. The majority ruled that including them artificially depresses the median, noting that providers have won a large share of arbitrations and that arbitrators have frequently chosen rates above the QPA.
The court reached a similar conclusion on bonuses and incentives. The statute requires the “total maximum payment.” The agencies’ rule excluded risk-sharing, bonuses, penalties, and other incentive-based adjustments. The majority decided this practice understates the full amount available under the contract.
On single-case agreements, the court sided with the government. Such arrangements, especially prevalent for air ambulances, are not the kind of generally applicable contracted rates recognized under a plan that the statute contemplates for the QPA. The point of the QPA is to approximate typical in-network market rates, not one-off emergency charges.
The court affirmed the decision to vacate the unlawful provisions as the default solution under the Administrative Procedure Act. It also threw out arguments that striking the rules would create chaos or leave patients exposed to balance billing. Agencies have already exercised enforcement discretion during the litigation and can continue doing so while new calculations are prepared, the opinion said.
“Indeed, the agencies have been exercising enforcement discretion while their appeal from the district court has been pending, so they are more than capable of preventing immediate chaos,” the opinion said.
Reuters contributed to this report.
