NSA Update: IDR Process Suspended After TX District Court Invalidates Batching and Fee Increases

Health Highlights

Last week, after several slow news months for the No Surprises Act (NSA), a Texas district court issued its most recent decision in a series of cases brought by the Texas Medical Association and other health care providers challenging the implementation of the NSA by the Departments of Health and Human Services, Labor and the Treasury (the Departments).  The court invalidated certain regulations and guidance implementing the Independent Dispute Resolution (IDR) process, a key element of the NSA.  The Departments responded on Friday temporarily suspending the IDR process, including the ability to initiate new disputes, and the Departments directed all certified IDR entities to pause all IDR activities effective August 3.  The Departments stated that they are currently reviewing the Texas court’s decision and evaluating what updates would be necessary to comply with the court’s order.


In September 2021, the Departments issued an Interim Final Rule (the September Rule) that addressed both the administrative fee to initiate claims under the IDR process and the batching of those claims in a single proceeding. The September Rule provides that each party must pay an administrative fee to participate in the IDR process and that the amount of the fee is to be set by the Departments in guidance published annually. In December 2022, the Departments raised the fee to $350, citing a large volume of disputes and increasing costs. The September Rule permitted items and services to be batched in the IDR process but only if they satisfied four requirements, including that the items and services be “related.” “Batching” refers to considering “multiple qualified IDR dispute items and services . . . as part of a single determination.” Under the rule, items and services for which payment is sought are considered “related” if they are billed under the same or similar service codes, such as Current Procedural Terminology (CPT) codes.

The plaintiffs challenged the September Rule and the Departments’ decision to increase the administrative fee on two main grounds:

  • First, the plaintiffs argued that the Departments’ rules were unlawfully issued without notice and comment rulemaking and therefore must be set aside under the Administrative Procedure Act (APA).
  • Second, the plaintiffs contended that the rules are arbitrary and capricious because the Departments failed to consider the adverse effects their decisions would have on providers’ ability to access the IDR process.

The plaintiffs complained that both the fee hike and the limits on batching made the IDR process cost-prohibitive for small-value claims.

The Court’s Decision

The court agreed with the plaintiffs, finding that the Departments’ actions violated the APA.

The court’s decision turned on whether the Departments’ actions were interpretive or substantive. As the court explained, substantive rules, which have the force of law, must go through notice and comment, while interpretive rules, general statements of policy or rules of agency organization, procedure or practice need not.

The court rejected the Departments’ arguments that the fee guidance was interpretive because it did not advise the public of the Departments’ construction of the NSA or the September Rule. The court pointed out that the fee guidance did not provide linguistic clarity to imprecise terms or derive the $350 administrative fee from vague statutory text. Instead, the Departments imposed a specific fee after applying their cost methodology. The court also noted that the fee guidance binds “would be” participants in the IDR process by requiring them to pay $350 to participate in the process. The fee guidance provides the legal basis for the Departments to impose the fee and enforce compliance, making it more like a substantive rather than interpretive rule. The court also rejected the Departments’ arguments that there was good cause to excuse the Departments from notice and comment rulemaking because the procedure was impractical, unnecessary or contrary to the public interest and that any error was harmless.

With respect to the rule on batching, the court rejected the Departments’ arguments that the batching rule was a rule of agency procedure and that the Departments had good cause. Applying the U.S. Court of Appeals, Fifth Circuit’s “substantial impact test,” the court found that the rule was substantive, not procedural, as it modified substantive rights and interests by “severely” limiting the claims that providers and payers could batch. The court noted that the rule had significant financial implications for providers, as submitting separate claims to separate arbitrators required paying separate administrative fees.


The court found that the fee guidance and the rule on batching should be vacated because the rules were “unlawful,” and the deficiencies were serious. The court also found that the Departments had not provided sufficient evidence for their assertion that vacatur would lead to “chaos” including “imminent disruption”, a somewhat surprising result given that the IDR process was immediately disrupted. However, the court rejected the plaintiffs’ demand that the $350 fee previously charged should be refunded and that the court should extend the deadlines to file IDR disputes for providers that did not file claims because of the challenged rules. The court found that there was no authority for a refund of the fees and that judicial extension of an agency deadline was an extraordinary remedy that was not warranted including because it would give providers a “second bite at the apple” placing them in a better position than they would have been in but for the Departments’ mistakes.

Please visit our NSA web page for more information about the NSA and look for further updates from us as the Departments work through the impact of this decision.



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