Fifth Circuit Rejects “Ghost Rates” in No Surprises Act QPA Calculations
Nutex Health, a physician-led integrated healthcare delivery system, is welcoming a recent decision by the U.S. Court of Appeals for the Fifth Circuit that invalidates key portions of federal regulations governing how insurers calculate the Qualified Payment Amount (QPA) under the No Surprises Act (NSA).
The ruling addresses a long-running dispute between healthcare providers and insurers over how payment benchmarks should be calculated when patients receive certain out-of-network services. At the center of the case are so-called “ghost rates”—non-negotiated payment rates that providers argue can artificially reduce the QPA used during payment disputes.
For Nutex Health and other healthcare providers, the decision could have significant implications for reimbursement negotiations and the federal Independent Dispute Resolution (IDR) process.
The Fifth Circuit issued its decision on Aug. 11, 2026, while sitting en banc. The court ruled in favor of the Texas Medical Association and its co-plaintiffs on two of the three principal issues presented in the case. The decision, however, may still be subject to further appeal or rehearing.
Nutex Health said it supports the court’s decision and believes the ruling could contribute to more accurate payment benchmarks and reduce the administrative burden associated with resolving out-of-network payment disputes.
“We applaud the court’s decision on this important issue,” said Tom Vo, M.D., MBA, Chairman and Chief Executive Officer of Nutex Health. “Since the NSA took effect in 2022, the agencies had directed the insurers to include non-negotiated ghost rates, artificially deflating the QPA calculations.”
According to Nutex Health, artificially depressed QPAs have created financial challenges for providers and have frequently required them to pursue the IDR process to seek what they consider to be fair median in-network reimbursement rates.
Understanding the No Surprises Act
The No Surprises Act was introduced to provide federal protections for patients who unexpectedly receive out-of-network healthcare services.The law generally protects patients from receiving unexpected balance bills in certain circumstances, including emergency care provided by an out-of-network provider and certain out-of-network services delivered at an in-network facility.
Under these protections, patients generally pay only the cost-sharing amount they would have owed for comparable in-network care. The dispute over the remaining payment is handled between the healthcare provider and the insurer rather than being transferred to the patient.The law also established a federal IDR process to help resolve payment disagreements between providers and insurers when the parties cannot reach an agreement.
The QPA is one of the factors considered during this process.
What Is the Qualified Payment Amount?
The QPA serves as a benchmark in the federal dispute-resolution system.Under the No Surprises Act, the QPA is calculated by the insurer and is intended to represent the median contracted rate for a particular service, specialty and geographic region.The calculation is based on the insurer’s contracts for the relevant service and involves the total maximum payment specified under those agreements.
The QPA can therefore play an important role when an out-of-network provider and an insurer disagree about reimbursement.Although the QPA is not the only factor considered by an independent dispute resolution entity, it is an important component of the process.
Providers have argued that inaccurate or artificially low QPAs can influence the outcome of payment disputes and place them at a disadvantage during negotiations.
The Controversy Over “Ghost Rates”
The Fifth Circuit case focused in part on how insurers treated certain rates when calculating the QPA.The federal regulations at issue excluded contracted rates of $0 from the QPA calculation. However, they allowed insurers to include nonzero rates that had not actually been negotiated, including placeholder rates as low as $1.Providers and their representatives argued that these rates could distort the median because they did not necessarily represent genuine negotiated payment arrangements.
The Fifth Circuit agreed that the distinction between a $0 rate and a nominal nonzero rate lacked a sufficient statutory basis.The court upheld the earlier district court conclusion that the 2021 federal agency rule was inconsistent with the No Surprises Act in this respect.As a result, the ruling invalidates the treatment of these non-negotiated placeholder rates under the challenged methodology.
Why the Decision Matters to Healthcare Providers
For providers, the QPA is more than an administrative calculation.It can influence the payment dispute process when an insurer and an out-of-network provider cannot agree on reimbursement.If a QPA is artificially reduced by rates that do not reflect genuine negotiated payments, providers may have to spend additional time and resources challenging the reimbursement amount.
Nutex Health said that this situation has resulted in providers pursuing the IDR process simply to obtain what they view as fair median in-network rates.Tom Vo said the process can be “time-consuming and costly for both insurers and providers.”A methodology that produces more representative QPAs could potentially reduce the number of disputes that require formal resolution.However, the ultimate impact will depend on how federal agencies implement the Fifth Circuit’s decision and whether the ruling is appealed.
Court Also Addresses Bonus and Incentive Payments
The court’s decision was not limited to ghost rates.
The Fifth Circuit also considered how bonus and incentive payments should be treated when calculating the QPA.Under the challenged federal rule, insurers were permitted to exclude certain bonus and incentive payments from the calculation.The court determined that this treatment was inconsistent with the statute’s requirement to consider the “total maximum payment.”
As a result, the ruling requires the federal agencies to revisit the methodology governing these payments.The decision could therefore affect how insurers calculate QPAs beyond the issue of nominal or non-negotiated rates.Including applicable bonus and incentive payments could change the resulting benchmark in situations where such compensation is part of the contractual payment structure.
Single-Case Agreements Remain Excluded
The Fifth Circuit also addressed one-off single-case agreements.In this area, the court upheld the exclusion of these agreements from QPA calculations.
Single-case agreements can be used when an insurer and provider establish payment terms for an individual patient or specific episode of care rather than entering into a broader contractual arrangement.The court’s decision therefore distinguishes these agreements from the non-negotiated placeholder rates challenged by the plaintiffs.This distinction will remain relevant as federal agencies develop updated rules and guidance following the decision.
IDR Process Remains Central to Payment Disputes
The IDR process is an important component of the No Surprises Act’s approach to resolving provider-insurer payment disagreements.When a provider and insurer cannot reach an agreement, an independent dispute resolution entity evaluates the case and considers several factors in determining the appropriate payment.
Those factors include the QPA as well as information concerning the provider’s training and experience, the complexity of the case, the provider’s market position and other circumstances specified under the law.The independent dispute resolution entity is not required to simply accept the insurer’s QPA as the final payment amount.
Nutex Health noted that the Fifth Circuit’s opinion states that certified IDR entities selected a payment amount higher than the insurer-calculated QPA in approximately 85% of decided cases.This statistic underscores the importance of the QPA methodology and the potential difference between insurer-calculated benchmarks and payment amounts ultimately determined through the dispute-resolution process.
Patient Protections Are Not Affected
Importantly, the Fifth Circuit’s ruling concerns the relationship between insurers and healthcare providers rather than changing the protections provided to patients under the No Surprises Act.Patients receiving qualifying out-of-network emergency care or certain out-of-network services at an in-network facility remain protected from surprise balance billing under the law.
Generally, these patients are responsible only for the applicable in-network cost-sharing amount.The payment dispute between the provider and insurer takes place separately.Nutex Health emphasized that nothing in the court’s ruling changes these patient protections.
This distinction is important because the litigation focuses on the methodology insurers use to calculate payment benchmarks rather than the amount patients are required to pay.
What Happens Next?
Although the Fifth Circuit has invalidated portions of the federal rules, the decision does not immediately resolve every practical question surrounding QPA calculations.Federal agencies will need to determine how to revise regulations and guidance to comply with the court’s ruling.
The timing and substance of those future rules remain uncertain.Nutex Health said it cannot predict when the relevant federal agencies will issue new regulations or guidance or exactly how the revised methodology will work.The situation is also subject to potential further litigation.The decision could be appealed, or parties could seek rehearing, meaning the ultimate legal framework may not be settled immediately.
Transitional Enforcement Relief
In the meantime, existing enforcement relief provides insurers with some flexibility regarding QPA calculations.Under the current relief described by Nutex Health, insurers may continue using prior QPA methodologies for items and services furnished before Oct. 1, 2026, subject to possible extension.
This creates a transition period while federal agencies determine how to implement the court’s ruling.Healthcare providers and insurers will therefore need to monitor future federal guidance closely.
The ultimate impact on reimbursement will depend not only on the court’s decision but also on how regulators translate that decision into operational requirements.
Remaining Implementation Questions
The Fifth Circuit ruling resolves important aspects of the dispute but leaves several implementation questions unanswered.One issue is whether a particular service must be provided more than once before its payment rate can be included in the QPA calculation.
This question could have implications for services that are relatively uncommon or have limited historical claims data.Another unresolved issue concerns how bonus, incentive and other non-fee-for-service payments should be attributed to individual services.
Because healthcare contracts can contain complex compensation structures, determining how these payments should be incorporated into QPA calculations may require additional regulatory guidance.Federal agencies will ultimately need to establish the mechanics for applying the court’s ruling in practical circumstances.
Potential Impact on Healthcare Reimbursement
The decision could influence how insurers and providers approach out-of-network reimbursement negotiations.If revised QPA calculations produce benchmarks that more accurately reflect actual negotiated rates, providers may have greater confidence in the figures used during the IDR process.
It could also potentially reduce the need for some providers to initiate disputes over artificially low payment benchmarks.However, the effects will vary depending on the final rules adopted by federal agencies.
Providers will need to understand how new QPAs are calculated, while insurers will need to update their systems and methodologies to comply with revised requirements.The changes could also affect administrative processes, contract analysis and revenue cycle operations across healthcare organizations.
Nutex Health’s Perspective
For Nutex Health, the decision is particularly significant because the company operates a physician-led healthcare delivery model that includes 28 micro hospitals and hospital outpatient departments across 12 states, along with primary care-focused, risk-bearing physician networks.
The company has argued that depressed QPAs can create financial challenges for providers by requiring additional work to obtain appropriate reimbursement.Nutex Health believes that a revised methodology could help improve the payment process and reduce reliance on formal disputes.Vo said the company hopes the ruling will lead to “fair and reasonable upfront payments,” allowing healthcare providers to focus resources on patient care rather than lengthy reimbursement disputes.
Broader Implications for the Healthcare Industry
The Fifth Circuit decision highlights the ongoing complexity of implementing the No Surprises Act.The law was designed to protect patients from unexpected medical bills while establishing a process for resolving disagreements between providers and insurers.However, the methodology used to determine QPAs has generated significant debate among healthcare stakeholders.
The latest ruling demonstrates that disputes over the calculation of these benchmarks can have meaningful financial and administrative consequences.For providers, the accuracy of payment benchmarks can influence reimbursement expectations and decisions about whether to pursue IDR.
For insurers, changes to QPA methodology may require adjustments to data systems, contracting processes and payment calculations.For patients, the key protection remains unchanged: qualifying patients continue to receive the federal protections against surprise balance billing established under the No Surprises Act.
The Fifth Circuit’s en banc decision represents an important development in the ongoing legal and regulatory debate surrounding the No Surprises Act.By rejecting the use of non-negotiated placeholder rates in QPA calculations and finding that certain bonus and incentive payments should not have been excluded under the challenged methodology, the court has required federal agencies to reconsider important aspects of the existing framework.
At the same time, the ruling leaves several practical questions unanswered.Future regulations and guidance will determine how insurers must calculate QPAs, how different types of payments are incorporated and how the revised requirements will be implemented.
The possibility of further appeal also means that the legal landscape could continue to evolve.For healthcare providers such as Nutex Health, the decision offers the prospect of more representative reimbursement benchmarks and potentially fewer costly payment disputes. For insurers, it signals the need to prepare for changes to QPA calculations and related administrative processes.
Ultimately, the impact of the ruling will depend on the next steps taken by federal agencies and the courts. Until those developments occur, providers, insurers and other healthcare stakeholders will need to closely monitor regulatory guidance and litigation surrounding the No Surprises Act.
For now, the Fifth Circuit’s rejection of the disputed “ghost rate” methodology marks a significant moment in the effort to establish a more accurate and transparent framework for out-of-network healthcare payment disputes.
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