Following the Departments of Labor, Treasury, and Health and Human Services’ (collectively, the “Departments”) issuance of a final rule for the No Surprises Act (which we previously reported on here), the Fifth Circuit recently struck down the government’s methodology for determining qualifying payment amounts (“QPA”) in a major win for providers.

In July 2021, the Departments promulgated an interim-final rule (the “July Rule”) establishing the methodology for calculating the QPA. Providers challenged the methodology on three grounds, arguing that the Departments’ rules artificially depressed QPAs and unfairly favored insurers.

In its August 11, 2026 en banc decision, the Fifth Circuit explained that the QPA is the “median of the total maximum rates in an insurer’s contract for an item or service that a provider provides and furnishes.” The QPA is an important figure in the NSA’s independent dispute resolution (“IDR”) process, which adjudicates how much an insurer owes to an out-of-network provider. The issue before the Fifth Circuit was whether insurers could include certain rates and payments in their QPA calculations, including “ghost rates” (i.e., rates appearing in contracts between insurers and providers for items and services the providers do not actually provide), as well as bonus and incentive payments.

Ghost Rates

The most significant portion of the Fifth Circuit’s decision was its exclusion of ghost rates from QPA calculations. Insurers are incentivized to keep QPAs low to minimize cost-sharing obligations. The Fifth Circuit emphasized that these artificially low QPAs are leading to more favorable IDR rulings for providers, noting that providers have prevailed in over 80% of arbitrations and that arbitrators selected a reimbursement rate higher than the QPA in 85% of arbitrations.

Under the July Rule, insurers were directed to include “each contracted rate” appearing in their contracts with providers. When insurers and providers negotiate contracts, insurers typically present form contracts with default fee schedules covering all services. Providers generally negotiate rates only for services they actually provide, leaving unnegotiated rates for services they never perform untouched. These ghost rates can be as low as $0 or $1. Under the government’s methodology, issued in August 2022 guidance, the Departments instructed insurers to exclude $0 ghost rates from their QPA calculations—but any non-zero ghost rate was fair to include.

The Fifth Circuit held that the inclusion of ghost rates was contradicted by the plain text of the NSA, which limits the QPA to an “item or service that is provided by a provider” and “provided in the geographic region in which the item or service is furnished.”[1] The Fifth Circuit reasoned that, “[i]f the provider submitted no claims and received no payments for a particular item or service . . . then that item or service was neither ‘provided by a provider’ nor ‘furnished’.”  Therefore, the NSA precludes the inclusion of ghost rates in QPA calculations, as they are rates for services that are neither provided nor furnished.

Bonus and Incentive Payments

The Fifth Circuit also ruled that the July Rule’s exclusion of “risk sharing, bonus, penalty, or other incentive-based or retrospective payments” from QPA calculations was contrary to law. The NSA requires that each contracted rate reflect the “total maximum payment” for an item or service. The Fifth Circuit explained that “total” means the entire amount and “maximum” means the highest possible amount. Therefore, if payments come in the form of bonuses or incentives, they must still be included in the QPA calculation.

Single-Case Agreements

The Fifth Circuit agreed with the Departments that one-off, single-case agreements, which are particularly prevalent in the air ambulance industry, are properly excluded from “contracted rates” used to calculate the QPA. The Fifth Circuit reasoned that “the word ‘rate’ connotes a per-unit price for multiple units,” not one-off transactions. Additionally, single-case agreements are “not rates ‘recognized’ ‘under’ an insurer’s plan or coverage” because they arise in emergency situations when insurers pay out-of-network providers at exceedingly high rates apart from any generally applicable health plan.

Next Steps

Based on the Fifth Circuit’s ruling, insurers can expect much higher calculated QPAs when engaging in IDR under the NSA due to the exclusion of ghost rates and bonus and incentive payments. Providers and payors should monitor agency guidance for additional developments on QPA calculations.

[1] See 42 U.S.C. § 300gg-111(a)(3)(E)(i)(I).