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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF TEXAS

TYLER DIVISION

TEXAS MEDICAL ASSOCIATION, et 

al.,

Plaintiffs,

v.

UNITED STATES DEPARTMENT OF

HEALTH AND HUMAN SERVICES,

et al.,

Defendants.

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Case No. 6:23-cv-59-JDK

MEMORANDUM OPINION AND ORDER

Plaintiff healthcare providers again challenge actions by the Defendant 

Departments in implementing the No Surprises Act (the “Act”). As explained in prior 

cases, the Act established an arbitration process for resolving payment disputes 

between certain out-of-network providers and group health plans and health 

insurers. See Tex. Med. Ass’n v. U.S. Dep’t of Health & Hum. Servs. (TMA I), 587 F. 

Supp. 3d 528, 533–35 (E.D. Tex. 2022), appeal dismissed, 2022 WL 15174345 (5th 

Cir. Oct. 24, 2022); Tex. Med. Ass’n v. U.S. Dep’t of Health & Hum. Servs. (TMA II), 

2023 WL 1781801, at *1–3 (Feb. 6, 2023), appeal filed, No. 23-40217 (5th Cir. filed 

Apr. 6, 2023). The Act also directed the Departments to issue regulations to govern

the arbitration proceedings. E.g., 42 U.S.C. § 300gg-111(c)(2)(A). 

In this case, Plaintiffs complain that the Departments dramatically increased 

the administrative fee for participating in the arbitration process, rendering the 

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process cost prohibitive for providers with small-value claims. This problem is 

exacerbated, Plaintiffs argue, by the Departments’ rule making it difficult to “batch” 

related claims for resolution in a single arbitration proceeding. Plaintiffs contend 

that the Departments’ actions—both increasing the fee and restricting batching—

violate the Administrative Procedure Act because they were made without notice and 

comment and are arbitrary and capricious. 

As explained below, the Court concludes that the fee increase and batching 

rule violate the APA’s notice-and-comment requirement and must be set aside. The 

Court also concludes that vacatur of these rules is the proper remedy. Plaintiffs, 

however, have not shown that a refund of previously paid fees or a deadline extension 

are proper here. The Court thus GRANTS-in-part Plaintiffs’ motion for summary 

judgment (Docket No. 18) and DENIES the Departments’ cross-motion for summary 

judgment (Docket No. 41). 

I.

Congress enacted the No Surprises Act in 2020 to address “surprise medical 

bills.” Pub. L. No. 116-260, div. BB, tit. I, 134 Stat. 1182, 2758–2890 (2020). 

Generally, the Act limits the amount an insured patient will pay for emergency 

services furnished by an out-of-network provider and for certain non-emergency 

services furnished by an out-of-network provider at an in-network facility. 42 U.S.C. 

§§ 300gg-111, 300gg-131, 300gg-132.1 

1 The Act amended three statutes: the Public Health Service Act (“PHSA”) (administered by the 

Department of Health and Human Services), the Employee Retirement Income Security Act 

(“ERISA”) (administered by the Department of Labor), and the Internal Revenue Code

(administered by the Department of the Treasury). For ease of reference, this Opinion cites to the 

PHSA.

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The Act also addresses the payment of these out-of-network providers by group 

health plans or health insurers (collectively, “insurers”). In particular, the Act 

requires insurers to reimburse out-of-network providers at a statutorily calculated 

“out-of-network rate.” § 300gg-111(a)(1)(C)(iv)(II), (b)(1)(D). In states with an AllPayer Model Agreement or specified state law, the out-of-network rate is the rate 

provided by the Model Agreement or state law. Id. § 300gg-111(a)(3)(K). In states 

without a Model Agreement or state law, the out-of-network rate is either the amount 

agreed to by the insurer and the out-of-network provider or an amount determined 

through an independent dispute resolution (“IDR”) process. Id.

When an insured receives certain out-of-network medical services, insurers 

must issue an initial payment or notice of denial of payment to a provider within 

thirty days after the provider submits a bill for that service. Id. 

§ 300gg-111(a)(1)(C)(iv), (b)(1)(C). If the provider disagrees with the insurer’s 

determination, the provider may initiate a thirty-day period of open negotiation with 

the insurer over the claim. Id. § 300gg-111(c)(1)(A). If the parties cannot resolve the 

dispute through negotiation, the parties may then proceed to IDR arbitration. Id. 

§ 300gg-111(c)(1)(B).

The IDR process is a “baseball-style” arbitration. The provider and insurer

each submits a proposed payment amount and explanation to the arbitrator. Id. 

§ 300gg-111(c)(5)(B). The arbitrator must then select one of the two proposed 

payment amounts “taking into account” several specified factors that were the subject 

of prior lawsuits. Id. § 300gg-111(c)(5)(A); see TMA I, 587 F. Supp. 3d at 540–43; 

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LifeNet, Inc. v. U.S. Dep’t of Health & Human Servs., 617 F. Supp. 3d 547, 560–62

(E.D. Tex. 2022); TMA II, 2023 WL 1781801, at *11. 

The Act also instructs the Secretaries of Health and Human Services, Labor, 

and the Treasury (collectively, the “Departments”) to “establish by regulation” this 

arbitration—or IDR—process. § 300gg-111(c)(2)(A). 

Two aspects of the IDR process are at issue here: the administrative fee and 

the criteria for batching claims.

A.

The Act requires each party to pay an administrative fee “for participating in 

the IDR process.” Id. § 300gg-111(c)(8)(A). The Act instructs the Departments to 

“specif[y]” the “time” and “manner” of payment. Id. § 300gg-111(c)(8)(B). The Act

also charges the Departments with “establish[ing]” the amount of the fee, such that 

“the total amount of fees paid” in a given year “is estimated to be equal to the amount 

of expenditures estimated to be made by the [Departments] for such year in carrying 

out the IDR process.” Id.

On September 30, 2021, the Departments issued an interim final rule 

implementing the IDR process. Requirements Related to Surprise Billing: Part II, 86 

Fed. Reg. 55,980 (Oct. 7, 2021). Under the September Rule, each party must pay the 

administrative fee “at the time the certified IDR entity is selected.” 45 C.F.R. 

§ 149.510(d)(2)(i).2 The September Rule, mirroring the statute, requires that the total 

2 As with the Act, identical interim final rules were published in three separate sections of the Code 

of Federal Regulations, specifically Title 45 – Public Health, Title 26 – Internal Revenue, and Title 

29 – Labor. For ease of reference, this Opinion cites to Title 45.

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fees paid in any year be equal to the projected amount of the Departments’ 

expenditures in carrying out the IDR process. Id. § 149.510(d)(2)(ii). Finally, the 

September Rule makes clear that “[t]he administrative fee amount will be established 

in guidance published annually.” Id. 

Contemporaneously with the September Rule, the Departments issued 

“guidance” setting the fee at $50 for calendar year 2022. CTRS. FOR MEDICARE &

MEDICAID SERVS., CALENDAR YEAR 2022 FEE GUIDANCE FOR THE FEDERAL 

INDEPENDENT DISPUTE RESOLUTION PROCESS UNDER THE NO SURPRISES ACT: CHANGE

IN ADMINISTRATIVE FEE (Sept. 30, 2021). In October 2022, the Departments issued 

guidance for calendar year 2023, again setting the fee at $50. CTRS. FOR MEDICARE &

MEDICAID SERVS., CALENDAR YEAR 2023 FEE GUIDANCE FOR THE FEDERAL 

INDEPENDENT DISPUTE RESOLUTION PROCESS UNDER THE NO SURPRISES ACT (Oct. 31, 

2022). 

In December 2022, however, the Departments dramatically raised the fee for 

2023 to $350, citing a surge in the volume of disputes and burgeoning costs associated 

with conducting dispute eligibility. CTRS. FOR MEDICARE & MEDICAID SERVS.,

AMENDMENT TO THE CALENDAR YEAR 2023 FEE GUIDANCE FOR THE FEDERAL 

INDEPENDENT DISPUTE RESOLUTION PROCESS UNDER THE NO SURPRISES ACT: CHANGE 

IN ADMINISTRATIVE FEE, at 4 (Dec. 23, 2022) (“Fee Guidance”); see also Docket No. 43, 

Ex. 12 at 619 (administrative record with Fee Guidance). 

B.

The Act also instructs the Departments to create rules for “batching.” Batching 

permits “multiple qualified IDR dispute items and services . . . to be considered 

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jointly as part of a single determination” by an IDR entity. § 300gg-111(c)(3)(A). In 

other words, providers may bring several distinct “items and services” for 

consideration in one IDR arbitration if certain criteria are met. The Act specifies that 

items and services may be batched if:

(i) such items and services to be included in such determination are 

furnished by the same provider or facility;

(ii) payment for such items and services is required to be made by the 

same group health plan or health insurance issuer;

(iii) such items and services are related to the treatment of a similar 

condition; and

(iv) such items and services were furnished during the 30 day period 

following the date on which the first item or service included with 

respect to such determination was furnished or an alternative period as 

determined by the Secretary, for use in limited situations, such as by 

the consent of the parties or in the case of low-volume items and services, 

to encourage procedural efficiency and minimize health plan and 

provider administrative costs.

Id. § 300gg-111(c)(3)(A). 

The Departments addressed batching in the September Rule. The Rule 

permits items and services to be batched—or to be considered jointly in a single IDR—

if they satisfy four requirements. Plaintiffs challenge only one such requirement, 

which corresponds to the Act’s related-items-and-services requirement. Docket 

No. 18 at 7; § 300gg-111(c)(3)(A)(iii). Under the September Rule, items and services 

qualify for batching if: 

(C) The qualified IDR items and services are the same or similar items 

and services. The qualified IDR items and services are considered to be 

the same or similar items or services if each is billed under the same 

service code, or a comparable code under a different procedural code 

system, such as Current Procedural Terminology (CPT) codes with 

modifiers, if applicable, Healthcare Common Procedure Coding System 

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(HCPCS) with modifiers, if applicable, or Diagnosis-Related Group 

(DRG) codes with modifiers, if applicable . . . .

§ 149.510(c)(3)(i)(C).3 By requiring the same service code, the Departments sought to 

“promot[e] efficiency” by encouraging the IDR entity to “more efficiently focus on 

where the value” of the item or service is “consistently materially different from the 

QPA [median rate for that item or service].” 86 Fed. Reg. at 56,064.

C.

Plaintiffs are healthcare providers.4 They challenge the Fee Guidance and the 

September Rule on batching. First, Plaintiffs contend that these provisions “were 

unlawfully issued without notice and comment and therefore must be ‘set aside’”

under the APA. Docket No. 18 at 16 (quoting 5 U.S.C. § 706(2)(D)). Second, Plaintiffs 

contend 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.” Id. at 22. Accordingly, Plaintiffs request vacatur of the Fee 

Guidance and certain provisions of the September Rule, a refund of fees, and an 

extension of IDR deadlines. Docket No. 1 at 48. 

3 CPT codes provide “a uniform language to describe a physician’s work, which facilitates patient 

billing for medical and surgical procedures, diagnostic tests, laboratory studies, and other medical 

services rendered.” Prompt Med. Sys., L.P. v. Allscriptsmysis Healthcare Sols., Inc., 2012 WL 

678216, at *1 (E.D. Tex. Feb. 13, 2012). The other listed codes provide similar functions. See 86 

Fed. Reg. at 56,008.

4 Plaintiffs are the Texas Medical Association, a trade association representing more than 56,000 

Texas physicians and medical students; Dr. Adam Corley, a Tyler, Texas physician; Tyler Regional 

Hospital, LLC, a hospital in Tyler, Texas; and two trade associations for Texas radiologists. Docket 

No. 1 ¶¶ 13–17. The Texas Medical Association, Dr. Corley, and Tyler Regional Hospital were also 

plaintiffs in prior cases against the Departments. See TMA I, 587 F. Supp. 3d at 536; TMA II, 2023 

WL 1781801, at *7 n.6.

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Defendants are the Departments responsible for promulgating the September 

Rule and issuing the Fee Guidance—the Departments of Health and Human 

Services, Labor, and the Treasury, along with the Office of Personnel Management,

Centers for Medicare & Medicaid Services, and the current heads of those agencies 

in their official capacities. Docket No. 1 ¶¶ 11–18. Together, the Departments

contend that the challenged provisions of the Fee Guidance and September Rule are 

exempt from notice and comment, and further, that they are not arbitrary and 

capricious because the Departments reasonably explained their decision making. 

Docket No. 41.

Both sides now move for summary judgment under Federal Rule of Civil 

Procedure 56. Docket Nos. 18, 41. Summary judgment is proper when the pleadings, 

depositions, answers to interrogatories, and admissions on file, together with the 

affidavits, if any, show that there is no genuine issue of material fact and that the 

moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c); Celotex 

Corp. v. Catrett, 477 U.S. 317, 323–25 (1986); Ragas v. Tenn. Gas Pipeline Co., 136 

F.3d 455, 458 (5th Cir. 1998). On April 19, 2023, the Court heard oral argument on 

the cross motions. Docket No. 46.

Both sides agree that the Court can determine Plaintiffs’ APA challenge as a 

matter of law. 

II.

As an initial matter, the Departments argue that “the doctrines of claim 

preclusion and claim splitting” bar two Plaintiffs from bringing this lawsuit. Docket 

No. 41 at 10–12. They contend that Plaintiffs TMA and Dr. Adam Corley, who 

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challenged the September Rule in TMA I, 587 F. Supp. 3d at 536, should have brought 

all their September Rule challenges at that time. The Court disagrees.

Under the doctrine of claim preclusion, “a final judgment forecloses successive 

litigation of the very same claim . . . .” Taylor v. Sturgell, 553 U.S. 880, 892 (2008). 

Similarly, the rule against claim splitting “prohibits a plaintiff from prosecuting its 

case piecemeal and requires that all claims arising out of a single wrong be presented 

in one action.” Ameritox, Ltd. v. Aegis Scis. Corp., 2009 WL 305874, at *4 (N.D. Tex. 

Feb. 9, 2009) (quoting Sensormatic Sec. Corp., v. Sensormatic Elecs. Corp., 273 F. 

App’x 256, 265 (4th Cir. 2008)). Claim-splitting focuses on the “district court’s 

comprehensive management of its docket, whereas [claim preclusion] focuses on 

protecting the finality of judgments.” Verde v. Stoneridge, Inc., 137 F. Supp. 3d 963, 

973 (E.D. Tex. 2015) (quoting Katz v. Gerardi, 655 F.3d 1212, 1218 (10th Cir. 2011)). 

The requirements for claim preclusion are: 

First, the parties in the instant action must be the same as or in privity 

with the parties in the prior action in question. Second, the court that 

rendered the prior judgment must have been a court of competent 

jurisdiction. Third, the prior action must have terminated with a final 

judgment on the merits. Fourth, the same claim or cause of action must 

be involved in both suits.

Gulf Island-IV, Inc. v. Blue Streak-Gulf Is Ops, 24 F.3d 743, 746 (5th Cir. 1994). The 

requirements for claim splitting are similar, but the doctrine does not require a final 

judgment. Ameritox, Ltd., 2009 WL 305874, at *5.

Neither doctrine applies here because the Departments cannot satisfy the 

fourth requirement—that the suits involve the same claim or cause of action. “Suits 

involve the same claim (or ‘cause of action’) when they ‘arise from the same 

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transaction,’ or involve a ‘common nucleus of operative facts’ . . . .” Lucky Brand 

Dungarees, Inc. v. Marcel Fashions Grp., Inc., 140 S. Ct. 1589, 1595 (2020) (citations 

omitted and cleaned up); see also Davis v. Dall. Area Rapid Transit, 383 F.3d 309, 

313 (5th Cir. 2004); accord Ameritex, Ltd., 2009 WL 305874, at *4 (“In a claim 

splitting case, the second suit will be barred if the claim involves the same parties 

and arises out of the same transaction or series of transactions as the first claim.”). 

What constitutes a “transaction” or a “series of transactions” “must be determined 

pragmatically, giving weight to such considerations as whether the facts are related 

in time, space, origin, or motivation, and whether they form a convenient trial unit.” 

Davis, 383 F.3d at 313 (cleaned up).

In this case, Plaintiffs challenge the Fee Guidance and the portion of the 

September Rule governing batching. In the prior case, Plaintiffs challenged the 

September Rule’s unlawful presumption in favor of the “qualifying payment amount,” 

or QPA, in determining the proper payment amount. See TMA I, 587 F. Supp. 3d 

at 535, 540–48. Although both cases involve the September Rule, there are 

“meaningful differences” between the pre-IDR requirements at issue here and the

regulation governing the use of the QPA in TMA I. Whole Woman’s Health v. 

Hellerstedt, 136 S. Ct. 2292, 2308 (2016), abrogated on other grounds by Dobbs v. 

Jackson Women’s Health Org., 142 S. Ct. 2228 (2022). The QPA provisions govern 

the IDR arbitrator’s decision making; whereas, the batching rule and administrative 

fee at issue here influence how, and at what cost, parties may present their claims to 

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the arbitrator in the first place. Id. (noting that rules that set “different, independent 

requirements” are distinct). 

The Departments, moreover, issued the Fee Guidance more than a year after 

the September Rule and months after the Court issued its opinion in TMA I. The 

fee’s seven-fold increase changed the operative facts surrounding the batching rule

because now providers must pay a much higher fee to bring a single claim than they 

did during the previous litigation. See Docket No. 18, Ex. 1 at 3 (affidavit of Houston 

Radiology Associated explaining how the new fee makes it economically unviable to 

submit 97% of its claims to IDR); see Students for Fair Admissions, Inc. v. Univ. of 

Tex. at Austin, 37 F.4th 1078, 1089 (5th Cir. 2022) (holding claim preclusion did not 

bar case where the “operative facts” changed since the previous litigation); cf. Steen 

v. Harvey, 247 F. App’x 511, 514–15 (5th Cir. 2007) (per curiam) (applying claim 

preclusion where the claims were “based on identical facts occurring during the same 

time period”). 

“[L]ower courts normally treat challenges to distinct regulatory requirements 

as ‘separate claims,’ even when they are part of one overarching ‘[g]overnment 

regulatory schem[e].’” Whole Woman’s Health, 136 S. Ct. at 2308 (quoting 18 

CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 4408 (2d ed. 

2002, Supp. 2015)). Accordingly, the Court concludes that this lawsuit does not 

involve the same cause of action as in TMA’s and Dr. Corley’s prior case and that the 

Departments’ claim preclusion and claim splitting argument fails. 

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III.

Plaintiffs argue the Departments improperly bypassed the APA’s notice-andcomment requirement when they issued the Fee Guidance and the September Rule

on batching. Docket No. 18 at 16–22. The Departments counter that they were 

exempted or excused from notice and comment, and alternatively, that any error was 

harmless. Docket No. 41 at 16–20, 24–26. 

The APA requires agencies to publish a “notice of proposed rule making” and 

“give interested persons an opportunity to participate . . . through submission of 

written data, views, or arguments.” 5 U.S.C. § 553(b), (c). The purpose of this 

requirement is to “assure fairness and mature consideration of rules having a 

substantial impact on those regulated” and for the agency to “disclose its thinking on 

matters that will affect regulated parties.” United States v. Johnson, 632 F.3d 912, 

931 (5th Cir. 2011). Agencies must undergo this “notice-and-comment” procedure 

when issuing substantive rules, which “have the force of law, meaning that they bind 

the regulated public.” Walmart Inc. v. U.S. Dep’t of Just., 21 F.4th 300, 308 (5th Cir. 

2021).

Not all rules, however, must go through notice and comment. See 

§ 553(b)(3)(A). The list of exempted rules includes “interpretative rules, general 

statements of policy, or rules of agency organization, procedure, or practice.” Id.; see 

also Flight Training Int’l, Inc. v. Fed. Aviation Admin., 58 F.4th 234, 240 (5th Cir. 

2023). “The APA’s notice and comment exemptions must be narrowly construed.” 

Texas v. United States, 809 F.3d 134, 171 (5th Cir. 2015) (cleaned up). Further, 

agencies may skip notice and comment where “good cause” exists. § 553(b)(3)(B). 

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Unless an agency can show an exception to the APA’s notice-and-comment 

requirement, the regulation is “contrary to law” and must be “set aside.” Id. 

§ 706(2)(A).

A.

First, the Fee Guidance. The Departments argue they were excused from 

notice and comment because the Guidance is an “interpretative,” not substantive,

rule and because notice and comment would be “impracticable” here. Docket No. 41 

at 16–21. The Court disagrees on both grounds and further finds that the error was 

not harmless.

1.

Interpretative, or “interpretive,”5 rules “are those that merely advise the public 

of the agency’s construction of the statutes and rules which it administers.” Azar v. 

Allina Health Servs., 139 S. Ct. 1804, 1811 (2019). They “explain what an agency 

thinks a statute or regulation actually says.” Flight Training Int’l, Inc., 58 F.4th 

at 242. Substantive rules, in contrast, have “the force of law, meaning that they bind 

the regulated [parties].” Walmart Inc., 21 F.4th at 308. They “modify [and] add to” 

the statute “based on the agency’s own authority.” Syncor Int’l Corp. v. Shalala, 127 

F.3d 90, 95 (D.C. Cir. 1997). Put another way, the difference between an interpretive

rule and a substantive rule often “turns on how tightly the agency’s interpretation is 

drawn linguistically from the actual language of the statute.” Id. at 94.

5 The latter is the more common modern spelling and the one used by the Court throughout this 

Opinion. See Perez v. Mortgage Bankers Ass’n, 575 U.S. 92, 96 n.1 (2015). 

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The Fee Guidance is not interpretive because it does not advise the public of 

the Departments’ construction of the Act or September Rule. Id. It does not, for 

example, provide linguistic clarity to imprecise terms or derive the $350 

administrative fee from vague statutory text. See Cath. Health Initiatives v. Sebelius, 

617 F.3d 490, 494 (D.C. Cir. 2010) (“To fall within the category of interpretive, the 

rule must ‘derive a proposition from an existing document whose meaning compels or 

logically justifies the proposition.’”); Hoctor v. U.S. Dep’t of Agric., 82 F.3d 165, 170 

(7th Cir. 1996) (holding a rule is interpretive “only if it can be derived from the 

regulation by a process reasonably described as interpretation”).

Warshauer v. Solis is illustrative. 577 F.3d 1330 (11th Cir. 2009). There, the 

Eleventh Circuit held that an agency’s $250 reporting threshold was interpretive 

because it represented the agency’s interpretation of a vague term, “insubstantial 

value.” Id. at 1340–41. Here, by contrast, there is no vague term. Rather, both the 

Act and the September Rule impose an “administrative fee” in an amount to be 

established by the Departments to cover their projected expenses. In setting the fee 

at $350, the Departments did not interpret that term for the public, but imposed a 

specific fee after applying their cost methodology. 

The Fee Guidance, moreover, “binds” would-be participants by requiring them 

to pay $350 to participate in the IDR process. Fee Guidance at 6; Walmart Inc., 21 

F.4th at 308 (“Substantive rules . . . bind the regulated public.”); see also Texas v. 

United States, 809 F.3d at 171 (“An agency pronouncement will be considered binding 

as a practical matter if it . . . is applied by the agency in a way that indicates it is 

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binding.” (cleaned up)). And because neither the Act nor the September Rule requires 

participants to pay a $350 fee, the Fee Guidance provides the legal basis for the 

Departments to impose the fee and enforce compliance. That makes the Fee 

Guidance much more like a substantive, rather than interpretive, rule. See Kisor v. 

Wilkie, 139 S. Ct. 2400, 2420 (2019) (“[A]n agency bringing an enforcement action 

must always rely on a rule that went through notice and comment.”). As the Fifth 

Circuit explained, a rule that “create[s],” rather than “interprets,” law—as the Fee 

Guidance does here—is substantive and subject to the APA’s notice-and-comment 

requirement. Brown Exp., Inc. v. United States, 607 F.2d 695, 700 (5th Cir. 1979). 

The Departments argue the Fee Guidance is interpretive because it is labeled 

“Guidance.” Docket No. 41 at 26. But that’s not enough. Brown Exp., 607 F.2d at 700 

(“The label that the particular agency puts upon its given exercise of administrative 

power is not, for our purposes, conclusive; rather it is what the agency does in fact.”

(cleaned up)). The Departments also say the Fee Guidance “simply supplies the 

specific dollar amount dictated by the statute and regulations.” Docket No. 41 at 17. 

But, as noted above, neither the statute nor the September Rule dictates $350. 

Rather, they require only that the administrative fee offset the Departments’

estimated expenditures in carrying out the IDR process. See § 300gg-111(c)(8)(B); 

§ 149.510(d)(2)(ii). And the statute leaves to the Departments to determine what 

expenditures are included. See § 300gg-111(c)(8)(B). This is similar to the situation

in Five Flags Pipe Line Co. v. United States Department of Transportation, in which

the court held that a “fee schedule” was a substantive rule. 1992 WL 78773, at *4 

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(D.D.C. Apr. 1, 1992). In that case, a statute required users of a gas pipeline to pay

“user fees,” but it directed the agency to set the fee in an amount “sufficient to meet 

the costs of activities” under the statute. Id. at *1. The court held that the agency’s 

fee schedule created the obligation to pay the fees in the “precise amount” that the 

agency calculated, and was thus substantive. Id. at *4. 

Finally, the Departments argue that notice and comment was not required 

because they were simply updating and issuing a new fee following an established 

methodology. Docket No. 41 at 18 (citing City of Idaho Falls v. FERC, 629 F.3d 222, 

227 (D.C. Cir. 2011)). Not so. In the September Rule, the Departments identified

several costs they planned to include in determining the fee amount. 86 Fed. Reg. 

at 56,001–02. But in the Fee Guidance, the Departments acknowledged they 

included an additional cost not previously mentioned—the cost of pre-eligibility 

review. Fee Guidance at 3. “For [the Departments] to make such a change, APA 

section 553 required notice-and-comment rulemaking.” City of Idaho Falls, 629 F.3d 

at 231 (holding that an agency’s new “rental fees” were a substantive rule because 

the agency calculated them using a new methodology).

In conclusion, the Court holds that the Fee Guidance is not an interpretive

rule, and the Departments were not exempted from the APA’s notice-and-comment 

requirement on that basis. 

2.

Alternatively, the Departments invoke the good cause exception to notice and 

comment. Docket No. 41 at 20–21. 

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The APA excuses agencies from notice and comment “when the agency for good 

cause finds . . . that [the] notice and public procedure thereon are impracticable, 

unnecessary, or contrary to the public interest.” § 553(b)(B). The burden of 

establishing good cause is on the agency. Coal. for Workforce Innovation v. Walsh, 

2022 WL 1073346, at *5 (E.D. Tex. Mar. 14, 2022). The good cause exception “should 

be read narrowly in order to avoid providing agencies with an escape clause from the 

requirements Congress prescribed.” Johnson, 632 F.3d at 928. It applies only in 

situations where “delay would do real harm.” U.S. Steel Corp. v. EPA, 595 F.2d 207, 

214 (5th Cir. 1979). If, for example, “a safety investigation shows that a new safety 

rule must be put in place immediately” or if a rule was of “life-saving importance to 

mine workers in the event of a mine explosion,” then notice and comment is not 

required. Mack Trucks, Inc. v. E.P.A., 682 F.3d 87, 93 (D.C. Cir. 2012) (citing Jifry v. 

F.A.A., 370 F.3d 1174, 1179 (D.C. Cir. 2004); Util. Solid Waste Activities Grp. v. 

E.P.A., 236 F.3d 749, 755 (D.C. Cir. 2001); Council of the S. Mountains, Inc. v. 

Donovan, 653 F.2d 573, 581 (D.C. Cir. 1981)). 

Here, the Departments have identified no such harm. Rather, they argue 

notice and comment was “impracticable” because they “only obtained the actual cost 

data necessary to calculate the annual fee after October 2022—leaving them with 

only a matter of weeks to update the guidance for 2023.” Docket No. 41 at 20. But 

“an agency invoking the good cause exception must ‘incorporate[] the finding and a 

brief statement of reasons therefor in the rules issued.’” United States v. Garner, 767 

F.2d 104, 120 (5th Cir. 1985) (quoting 5 U.S.C. § 553(b)(B)); Texas v. Becerra, 577 F. 

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Supp. 3d 527, 548 (N.D. Tex. 2021) (declining to rely on post hoc argument to justify 

good cause). And the Departments did not invoke this exception or provide any 

“reasons therefor” when it issued the Fee Guidance. 

The Departments, moreover, had from October 2022 until January 2023 to 

undergo notice and comment—yet they fail to explain why that was insufficient. See 

U.S. Steel Corp., 595 F.2d at 213 (agency failed to show the “impracticability of 

affording notice and comment” where it could have accepted comments during the 60-

day period Congress gave the agency to review and publish a list); Louisiana v. 

Becerra, 577 F. Supp. 3d 483, 500 (W.D. La. 2022) (agency defendants failed to show 

good cause where they “could have completed notice and comment TWICE” during a 

three-month period); see also Nat. Res. Def. Council, Inc. v. Evans, 316 F.3d 904, 912 

(9th Cir. 2003) (agency failed to show good cause when it “did not demonstrate that 

some exigency apart from generic complexity of data collection and time constraints 

interfered with its ability to promulgate” rule). 

The Departments repeatedly claim “it would be eminently ‘impracticable’” to 

undergo annual notice-and-comment for the IDR administrative fee. Docket No. 41 

at 20. But courts routinely hold that yearly notice and comment under similar 

circumstances is not only feasible but required by law. See, e.g., Nat. Res. Def. 

Council, Inc., 316 F.3d at 912 (notice and comment of “fishery management plans”

could be accomplished on an annual basis even given geographic complexities); CalAlmond, Inc. v. U.S. Dep’t of Agric., 14 F.3d 429, 441 (9th Cir. 1993) (same regarding

annual calculation of “budget and assessment rates” for crops); see also 12 Percent 

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Logistics, Inc. v. Unified Carrier Registration Plan Bd., 2019 WL 450676, at *2 

(D.D.C. Feb. 4, 2019) (“When the Board proposes changes to the annual rates, the 

Secretary must act within 90 days of receiving the Board’s recommendations, a 

timeline that includes a period of notice and comment.”).

Accordingly, the Court finds the Departments lacked good cause to bypass 

notice and comment.

3.

When an agency fails to provide notice and comment, courts must consider 

whether the error was harmless, a burden borne by the party asserting error. 

Johnson, 632 F.3d at 930; City of Arlington v. FCC, 668 F.3d 229, 243 (5th Cir. 2012), 

aff’d, 569 U.S. 290 (2013). “[T]he touchstone is ‘whether it is clear that the lack of

notice and comment did not prejudice the petitioner.’” City of Arlington, 668 F.3d 

at 244 (citing Johnson, 632 F.3d at 931). 

Courts should “rare[ly]” find harmless error because the “vast majority of 

agency rulemaking, which produces nuanced and detailed regulations[,] greatly 

benefit[s] from expert and regulated entity participation.” Johnson, 632 F.3d at 932. 

Even when the public is generally aware that an agency is considering an issue, “[t]he 

agency’s rationale for the rule must be made clear and subjected to public comment.” 

Tex. Ass’n of Mfrs. v. U.S. Consumer Prod. Safety Comm’n, 989 F.3d 368, 382 (5th 

Cir. 2021) (remanding because agency failed to provide notice and comment regarding 

its changed justification for a rule).

Here, Plaintiffs argue that if the Departments had provided notice and 

comment, Plaintiffs could have submitted that a flat $350 fee is cost prohibitive for 

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many providers, or that there were “multiple alternative ways” to address eligibility 

disputes apart from the costly pre-eligibility review. See Docket No. 44 at 8. At oral 

argument, Plaintiffs suggested that a variable fee tied to the amount in controversy 

could have ameliorated the fee’s cost-prohibitive nature, permitting more small-value 

claims to proceed to IDR. Hearing Tr. 4/19/2023 13:21–14:2. There is no indication 

that the Departments considered any of these alternatives. This case is therefore

unlike those in which a procedural error was deemed harmless because the agency 

“considered the [plaintiff’s] arguments . . . and responded to those arguments during 

the . . . rulemaking.” Johnson, 632 F.3d at 932; see also City of Arlington, 668 F.3d 

at 245 (holding failure to provide notice and comment was harmless because court 

was “not aware of a single argument the [plaintiffs] now present to this court that 

was not considered by the FCC in the agency proceedings below”). 

The Departments argue “there is no indication [their] conclusions would have 

been materially different” after notice and comment because the amount of the fee is 

statutorily required to offset estimated costs. Docket No. 41 at 22. The Court rejected 

a similar argument in TMA I, as have many courts before it. 587 F. Supp. 3d at 547 

(collecting cases); see also Paulsen v. Daniels, 413 F.3d 999, 1006 (9th Cir. 2005) (“[A]n 

agency could always claim that it would have adopted the same rule even if it had 

complied with the APA’s procedures.”). Further, in formulating the $350 fee—a 600% 

increase from the 2022 fee—the Departments elected to include for the first time costs

of pre-eligibility review in their projected IDR costs. Fee Guidance at 4; cf. Riverbend 

Farms, Inc. v. Madigan, 958 F.2d 1479, 1488 (9th Cir. 1992) (finding harmless error 

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where agency had employed same APA-violative process “for decades”). Nothing in 

the Act requires that the total cost of “carrying out the IDR process,” § 300gg111(c)(8)(B), include the cost in determining whether a dispute is “eligible for the 

process” in the first place, Fee Guidance at 3. The Departments’ unilateral 

determination that it should be included constitutes the kind of internal deliberation

that, if made without notice and comment, could “virtually repeal section 553’s 

requirements.” Sugar Cane Growers Co-op. of Fla. v. Veneman, 289 F.3d 89, 96 (D.C. 

Cir. 2002). 

The Departments also suggest that Plaintiffs forfeited their harm argument 

by failing to comment on the September Rule and the two previous guidance 

documents setting administrative fees. Docket No. 41 at 21. But as noted above, the 

Departments included a new cost in setting the 2023 fee that was not discussed in 

prior rules or fee guidance documents. California v. Azar, 911 F.3d 558, 580 (9th Cir. 

2018) (“multiple opportunities to comment” are “irrelevant” where the “prior rules 

were materially different”). And the significant fee increase presents a new set of 

problems not present in prior iterations.

The Court thus concludes it is not “clear that the lack of notice and comment 

did not prejudice [Plaintiffs].” Johnson, 632 F.3d at 931.

* * *

The Departments’ failure to provide notice and comment for the Fee Guidance

violates the APA. It is therefore “contrary to law” and must be “set aside.” 5 U.S.C. 

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§ 706(2)(A); see also Dialysis Patient Citizens v. Burwell, 2017 WL 365271, at *4–6 

(E.D. Tex. Jan. 25, 2017). 

B.

The Court now turns to the September Rule on batching. The Departments 

argue the batching rule is exempt from notice and comment because it is “a rule of 

agency procedure,” or alternatively they had good cause to “forgo it here.” Docket 

No. 41 at 24–26. Again, the Court disagrees on both grounds and finds that the error 

was not harmless.

1.

“[R]ules of agency organization, procedure, or practice” are exempt from the 

APA’s notice-and-comment requirement. § 553(b)(3)(A)). This exception is “limited,” 

intended only for “agency activities” and “internal house-keeping measures 

organizing agency activities.” Am. Fed’n of Lab. & Cong. of Indus. Orgs. v. Nat’l Lab.

Rels. Bd. (AFL-CIO), 57 F.4th 1023, 1034 (D.C. Cir. 2023); Walmart Inc. v. U.S. Dep’t 

of Just., 21 F.4th 300, 308 (5th Cir. 2021) (describing procedural rules as directing 

“internal agency organization”). In American Hospital Ass’n v. Bowen, for example, 

the court held that an agency rule was procedural where it required its own 

investigators to increase the number of hospital inspections. 834 F.2d 1037, 1051 

(D.C. Cir. 1987). The rule imposed “no new burdens” on the regulated public, but 

rather merely reallocated agency resources. Id. at 1050–51; see also AFL-CIO, 57 

F.4th at 1044 (rule was procedural where it specified when an agency would schedule 

adjudications).

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As an initial matter, the Departments did not rely on this ground when it 

issued the September Rule, which may foreclose it from doing so now. Union of 

Concerned Scientists v. Nuclear Regul. Comm’n, 711 F.2d 370, 382 n.27 (D.C. Cir. 

1983) (court was “foreclosed” from determining whether a rule was procedural 

because the agency relied only on the “good cause” exception in issuing the challenged 

rule (citing Sec. & Exch. Comm’n v. Chenery Corp., 332 U.S. 194, 196 (1947))).

In any event, the September Rule on batching is not one of agency procedure. 

The Rule governs providers and insurers and directs the manner in which they 

submit payment disputes to “independent arbitrations” adjudicated by third-party 

arbitrators. TMA II, 2023 WL 1781801, at *12; 45 C.F.R. § 149.510(a)(1) (setting 

forth requirements for the “independent dispute resolution (IDR) process”). The 

challenged portion of the Rule states that items and services may be “considered 

jointly as part of one payment determination” only if they satisfy certain criteria, 

including being “billed under the same service code, or a comparable code under a 

different procedural code system, such as Current Procedural Terminology (CPT) 

codes with modifiers, if applicable . . . .” § 149.510(c)(3). This is not an “internal 

house-keeping measure,” but one that governs private parties “outside the context of 

an agency proceeding.” AFL-CIO, 57 F.4th at 1036 (holding that rule was substantive 

where it facilitated party-to-party, not party-to-agency, information sharing). 

The Fifth Circuit has held that the “substantial impact test” is the “primary 

means by which [it] look[s] beyond the label ‘procedural’ to determine whether a rule 

is of the type Congress thought appropriate for public participation.” Texas v. United 

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States, 809 F.3d at 176 (quoting U.S. Dep’t of Lab. v. Kast Metals Corp., 744 F.2d 

1145, 1153 (5th Cir. 1984)). Under that test, a “nominally procedural” rule is 

considered substantive if it “modifies substantive rights and interests.” Id. The 

September Rule on batching is substantive, not procedural, under this test. By 

permitting batching only if items or services share the “same service code,” the Rule 

severely limits what claims providers and insurers may batch. One provider testified, 

for example, that “under the Departments’ current batching rules, 100% of claims 

submitted to IDR for services I furnished were not allowed to be batched by the 

Departments.” Docket No. 18, Ex. 3 at 4. And submitting separate claims to separate 

arbitrators (or IDRs) requires paying separate administrative fees—a costly and 

sometimes cost-prohibitive consequence of the Rule. § 300gg-111(c)(8)(A); 

§ 149.510(d)(2)(i). 

The Departments contend that the Rule is procedural because it does not 

concern “the substantive rights of the parties.” Docket No. 41 at 25. But this ignores 

the Rule’s impact described above. For Plaintiff Houston Radiology Associated, even 

a $50 administrative fee makes it unviable to submit “30% of the radiology services 

that [its] radiologists furnish” to IDR under the current batching rule. Docket No. 18, 

Ex. 1 at 3–4.6 The Rule’s “same service code” requirement thus effectively forces 

6 Houston Radiology provided an example. For CPT code 74176—the code associated with abdominal 

and pelvic computerized tomography (CT) scans—the amount the provider typically seeks will be 

$242.29. Docket No. 18, Ex. 1 at 4. Insurers, however, typically offer to pay only the QPA, which is 

$90.66 for this CPT code. Id. The difference between these two amounts, $151.63, is the effective

amount in controversy. But because “88% of the claims for CPT code 74146 cannot be batched 

together” under the September Rule, disputes over this service must be brought individually—and 

the provider must pay the administrative fee for each IDR. With a $350 administrative fee, it is 

“economically irrational” for providers to submit these claims, “as paying the fee itself far outweighs 

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providers out of IDR for some claims, substantially impacting the ability to recover 

their proposed payment amount. AFL-CIO, 57 F.4th at 1036 (holding rule was 

substantive where it altered “regulated parties’ substantive rights and interests” by 

tilting union election rules in favor of employers); id. at 1041–42 (same where a rule 

intimidated employees and disincentivized them from voting); La Union del Pueblo 

Entero v. Fed. Emergency Mgmt. Agency, 141 F. Supp. 3d 681, 710 (S.D. Tex. 2015)

(same where a rule “alter[ed] the outcomes for” applicants for federal emergency 

relief).

Because the September Rule on batching is not “procedural,” the Departments 

were not exempted from the APA’s notice-and-comment requirement on that basis. 

2.

The Departments alternatively argue that notice and comment was

“impracticable and contrary to the public interest.” Docket No. 41 at 25–27.

Congress, the Departments explain, gave them only “one year to promulgate rules 

relating to the IDR process,” and “providers, facilities, plans, and issuers[] . . .

need[ed] months of lead time to prepare for the new legal regime.” Id. at 26. 

The Court rejected this argument in a prior challenge to the September Rule. 

TMA I, 587 F. Supp. 3d at 545–46. As the Court explained, “the mere existence of 

deadlines for agency action, whether set by statute or court order, does not in itself 

constitute good cause for a § 553(b)(B) exception.” Id. at 545 (quoting U.S. Steel Corp., 

any possible ‘recovery’ of $151.63 per claim.” Id. Even with a $50 fee, it is economically unviable 

for Houston Radiology to bring 30% of the radiology services it performs to IDR under the September 

Rule on batching. Id. at 3. 

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595 F.2d at 213; City of Waco v. EPA, 620 F.2d 84, 86 (5th Cir. 1980)). In fact, in U.S. 

Steel, an agency failed to show the “impracticability of affording notice and comment” 

where it could have accepted comments during the 60-day period Congress gave the 

agency to review and publish a list. U.S. Steel Corp., 595 F.2d at 213; see also, e.g., 

Johnson, 632 F.3d at 929 (“Full notice-and-comment procedures could have been run 

in the [seven months] time taken to issue the interim rules.”). The Departments, 

moreover, failed to explain why they could not have provided notice and comment in 

the time they had—a full year. See TMA I, 587 F. Supp. 3d at 545. 

The Departments’ desire, moreover, to provide regulated entities time to 

familiarize themselves with the September Rule did not excuse the lack of notice and 

comment. Id. at 546 (quoting Johnson, 632 F.3d at 929 (“[The] desire to provide 

immediate guidance, without more, does not suffice for good cause.”)). Indeed, the 

Departments’ claimed “goal of reducing uncertainty” was undercut by their “request 

for post-promulgation comments, which could have resulted in a [final] rule change.” 

Id. (quoting Johnson, 632 F. 3d at 929); 86 Fed. Reg. at 55,994 (requesting comments). 

The Departments fail to explain why this reasoning does not control here, and 

thus the Court finds that the Departments erred in bypassing notice and comment

on this basis. 

3.

The Court also finds that the error was not harmless. If the Departments had 

provided notice and comment, Plaintiffs could have explained how the batching rule

would impact them as providers. On the record before the Court, the Departments 

cannot demonstrate that they considered and fully addressed these issues. Mock v. 

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Garland, 2023 WL 4882763, at *18 & n.58 (5th Cir. Aug. 1, 2023) (finding plaintiffs 

“easily prove[d]” harm where they were not given an opportunity to voice their 

concerns and agency did not consider comments they would have made); cf. City of 

Arlington, 668 F.3d at 245 (failure to provide notice and comment was harmless 

because court was “not aware of a single argument the [plaintiffs] now present to this 

court that was not considered by the FCC in the agency proceedings below”); Johnson, 

632 F.3d at 932 (failure to provide notice and comment was harmless in part because 

agency “nevertheless considered the arguments Johnson has asserted and responded 

to those arguments during the interim rulemaking”).

The Departments argue there is no harm because they “considered Plaintiffs’ 

arguments regarding the batching regulation, but ultimately disagreed with 

Plaintiffs.” Docket No. 41 at 28. But the September Rule does not address the 

preclusive effect of requiring multiple IDR arbitrations for providers with small-value 

claims. The Departments say they considered that providers may “bundle” claims for 

IDR, a batching-like procedure in which different services may be brought to one IDR. 

Docket No. 41 at 28; 86 Fed. Reg. 55,994; see also 45 C.F.R. § 149.510(c)(3)(ii). But 

the bundling regulations “are subject to the rules for batched determinations . . . .” 

§ 149.510(c)(3)(ii). This means that bundled items must still contain “the same 

service code.” Id. § 149.510(c)(3)(i)(C). At oral argument, Plaintiffs clarified that the 

insurer must create a “service code that captures a bundled service[,]” which will not 

apply in most circumstances. Hearing Tr. 4/19/2023 at 20:3–12. 

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The Departments, moreover, failed to consider batching by a provider’s subspecialty or by service-code section—broader batching criteria that would give 

providers increased opportunity to bring their claims to arbitration. Cf. City of 

Arlington, 668 F.3d at 245 (failure to provide notice and comment was harmless 

because court was “not aware of a single argument the [plaintiffs] now present to this 

court that was not considered by the FCC in the agency proceedings below”).

The Court thus concludes that lack of notice and comment here was not 

harmless.

* * *

The Departments’ failure to provide notice and comment for the batching 

portion of the September Rule likewise violated the APA. This portion of the Rule is 

thus “contrary to law” and must be “set aside.”7

IV.

The Court now considers the proper remedy. 

A.

Plaintiffs seek vacatur of the challenged rules—the Fee Guidance’s $350 

administrative fee and the batching provisions of the September Rule. Docket No. 1 

at 48; Docket No. 18 at 30. The Departments argue that vacatur “would be highly 

7 Plaintiffs also argue that the challenged rules should be set aside as arbitrary and capricious. See

Docket No. 18 at 22–29. Because the Court finds that the Departments improperly bypassed notice 

and comment and sets them aside on that basis, the Court need not address Plaintiffs’ alternative 

argument. See Flight Training Int’l, Inc. v. Fed. Aviation Admin., 58 F.4th 234 (5th Cir. 2023) (“In 

light of this disposition, we do not reach FTI’s alternative argument that the Rule is arbitrary, 

capricious, an abuse of discretion, or otherwise not in accordance with law.”); Marable v. Dep’t of 

Com., 857 F. App’x 836, 837 (5th Cir. 2021) (“Because we conclude that the first basis relied upon 

by the district court for summary judgment . . . is dispositive, we need not address” other grounds.).

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disruptive,” and instead request the Court “remand the matter to the Departments

without vacatur.” Docket No. 41 at 29. 

The APA requires courts to “hold unlawful and set aside” rules that fail to 

satisfy the notice-and-comment requirement. 5 U.S.C. § 706(2)(D); Texas v. Biden, 

20 F.4th 928, 942 (5th Cir. 2021) (“[The APA], among other things, requires courts to 

set aside agency actions. . . .”) abrogated on other grounds by Biden v. Texas, 142 S. 

Ct. 2528, 2548 (2022). And “the ordinary result” of setting aside unlawful rules is 

that “the rules are vacated.” Franciscan All., Inc. v. Azar, 414 F. Supp. 3d 928, 944–

45 (N.D. Tex. 2019) (quoting Nat’l Mining Ass’n v. U.S. Army Corps of Eng’rs, 145 

F.3d 1399, 1409 (D.C. Cir. 1998)).8 Indeed, “vacatur of an agency action is the default 

rule in this Circuit.” Cargill v. Garland, 57 F.4th 447, 472 (5th Cir. 2023) (en banc). 

Courts consider two factors to determine whether vacatur is appropriate: 

“(1) the seriousness of the deficiencies of the action, that is, how likely it is the agency 

will be able to justify its decision on remand; and (2) the disruptive consequences of 

vacatur.” Texas v. Biden, 20 F.4th at 1000 (citing United Steel v. Mine Safety & 

Health Admin., 925 F.3d 1279, 1287 (D.C. Cir. 2019)). And “[b]ecause vacatur is the 

default remedy . . . defendants bear the burden to prove that vacatur is unnecessary.” 

Am. Hosp. Ass’n v. Becerra, 2023 WL 14337, at *5 (D.D.C. Jan 10, 2023). 

8 Some jurists oppose this view. See, e.g., United States v. Texas, 143 S. Ct. 1964, 1981 (2023) 

(Gorsuch, J., joined by Thomas, J. and Barrett, J. concurring) (Section 706(2) of the APA “does not 

say anything about ‘vacating’ agency action (‘wholesale’ or otherwise). . . . Still, from those two words 

alone, the district court thought the power to nullify the Guidelines with respect to anyone anywhere 

surely follows . . . . Color me skeptical.”); Arizona v. Biden, 40 F.4th 375, 395 (6th Cir. 2022) (Sutton, 

C.J., concurring) (explaining that § 706’s “set aside” language does not support disregarding “the 

long-understood view of equity—that courts issue judgments that bind the parties in each case over 

whom they have personal jurisdiction”). 

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Under the first factor, the Departments contend there is a “serious possibility 

that [they] will be able to substantiate [their] decision given an opportunity to do so.” 

Docket No. 41 at 29. But remand on this basis is proper only where the agency failed

“adequately to explain why it chose one approach rather than another for one aspect 

of an otherwise permissible rule.” Heartland Reg’l Med. Ctr. v. Sebelius, 566 F.3d 

193, 199 (D.C. Cir. 2009); Cent. & S.W. Servs., Inc. v. U.S. E.P.A., 220 F.3d 683, 692 

(5th Cir. 2000) (remanding where EPA had solicited public comment but “failed to 

respond” to the comments or otherwise explain its reasoning in rulemaking). In 

contrast, a total “[f]ailure to provide the required notice and to invite public 

comment[,]” which is the situation here, “is a fundamental flaw that normally 

requires vacatur of the rule.” Nat. Res. Def. Council v. Wheeler, 955 F.3d 68, 85 (D.C. 

Cir. 2020); see also Daimler Trucks N. Am. LLC v. E.P.A., 737 F.3d 95, 103 (D.C. Cir. 

2013) (noting that “the court typically vacates rules when an agency ‘entirely fail[s]’ 

to provide notice and comment”); Standing Rock Sioux Tribe v. U.S. Army Corps of 

Eng’rs, 985 F.3d 1032, 1052 (D.C. Cir. 2021) (“[A]n agency that bypassed required 

notice and comment rulemaking obviously could not ordinarily keep in place a 

regulation while it completed that fundamental procedural prerequisite.”).

Under the second factor, the Departments assert—in conclusory fashion—that 

vacatur will lead to “chaos” because providers will batch disputes “for as many items 

and services as possible . . . .” Docket No. 41 at 29. As one court held, however, this 

argument relies on nothing more than the “uncertainty that typically attends vacatur 

of any rule.” Nat. Res. Def. Council, 955 F.3d at 85 (rejecting agency’s disruption 

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argument). And it ignores that both the Act and the September Rule limit batching 

in other ways unchallenged here. 42 U.S.C. § 300gg-111(c)(3)(A)(iii) (requiring that 

batched items are “related to the treatment of a similar condition”); 45 C.F.R. 

§ 149.510(c)(3)(i)(A)–(B), (D) (requiring batched items or services be “billed by the 

same provider” within a 30-day period and will be paid for by “the same plan or 

issuer”). The Departments, moreover, recite no facts and submit no evidence of 

imminent disruption. Cf. Am. Hosp. Ass’n v. Becerra, 2023 WL 143337, at *4–5

(D.D.C. Jan. 10, 2023) (finding agency met its burden to justify departure from the 

“default remedy” of “vacatur” where it showed, with specific facts and evidence, the 

“staggering value and number of transactions at issue”). 

The proper remedy here is thus vacatur. See, e.g., Coal. for Workforce 

Innovation v. Walsh, 2022 WL 1073346, at *19 (E.D. Tex. Mar. 14, 2022) (vacating 

rule where agency bypassed notice and comment); see also Data Mktg. P’ship, LP v. 

U.S. Dep’t of Lab., 45 F.4th 846, 859 (5th Cir. 2022) (“The default rule is that vacatur 

is the appropriate remedy.”).

B.

Plaintiffs also request “equitable disgorgement of the administrative fees paid 

pursuant to the Fee Guidance.” Docket No. 1 at 48; Docket No. 18 at 30. 

The APA waives sovereign immunity only for “relief other than monetary 

damages.” 5 U.S.C. § 702. Courts thus lack jurisdiction under the APA to award 

money “to the plaintiff to substitute for a suffered loss.” Bowen v. Massachusetts, 487 

U.S. 879, 895 (1988) (citing § 702). Section 702, however, does permit “specific relief.” 

Dep’t of the Army v. Blue Fox, Inc., 525 U.S. 255, 262 (1999). Specific relief may in 

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some instances include the return of money. Bowen, 487 U.S. at 893 (“The fact that 

a judicial remedy may require one party to pay money to another is not a sufficient 

reason to characterize the relief as ‘money damages.’”). 

The Supreme Court and the Fifth Circuit have recognized at least two forms

of specific relief included within § 702’s waiver that involve the return of money. 

First, § 702 waives immunity for “a suit seeking to enforce [a] statutory mandate . . .

which happens to be one for the payment of money.” Id. at 900; see also Anderson v. 

Jackson, 556 F.3d 351, 359 (5th Cir. 2009) (“Suits seeking money may go forward 

under § 702 where the statute in question specifically mandates the payment of 

money.”). Second, § 702 waives immunity for the return of confiscated physical 

property, including currency. See, e.g., Armendariz-Mata v. U.S. Dep’t of Just., Drug 

Enf’t Admin., 82 F.3d 679, 682 (5th Cir. 1996) (finding jurisdiction under § 702 to 

grant an “equitable claim for the return of $8,819 in currency” confiscated by the Drug 

Enforcement Administration).

Plaintiffs’ requested remedy—a “refund” of the administrative fees paid 

pursuant to the Fee Guidance—does not fall within either of these two forms. Docket 

No. 18, Ex. 4 at 1 (Plaintiffs’ proposed order). Plaintiffs identify no statutory 

mandate entitling them to a refund. Texas v. United States, which Plaintiffs cite, is 

inapposite because the governing statute in that case explicitly exempted the plaintiff 

states from payment, entitling them to disgorgement. 336 F. Supp. 3d 664, 674 (N.D. 

Tex. 2018). And Plaintiffs have offered no support for characterizing their refund

request as the return of “confiscated property.” Armendariz-Mata, 82 F.3d at 682.

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Accordingly, the Court lacks jurisdiction to order the repayment of the 

Plaintiffs’ paid fees. E.g., Bowen, 487 U.S. at 910–11. 

C.

Finally, Plaintiffs seek an extension of IDR deadlines to permit “providers who 

forwent submitting claims to IDR because of the challenged actions” to file their 

claims. Docket No. 18 at 30; see also Docket No. 1 at 49 (requesting “[a]ny other just 

and proper relief”). 

“Judicial extension of [an agency’s] deadline is an extraordinary remedy not to 

be imposed as a matter of course.” Nat. Res. Def. Council, Inc. v. E.P.A., 22 F.3d 1125, 

1135 (D.C. Cir. 1994). Courts should award this extraordinary remedy only “if equity 

so requires.” Connecticut v. Schweiker, 684 F.2d 979, 997 (D.C. Cir. 1982). The Court 

is not persuaded that such an extraordinary remedy is warranted here. Indeed, the 

court in Plaintiffs’ cited case ordered a similar remedy only after the agency 

defendants failed to comply with a previously entered preliminary injunction. Gomez 

v. Trump, 490 F. Supp. 3d 276, 282, 295 (D.D.C. 2020). Plaintiffs, moreover, offer no 

meaningful criteria by which the Departments can distinguish between providers 

who “forwent” IDR because of the actions challenged here and those who may want 

only “a second bite at the apple.” Hearing Tr. 4/19/2023 at 45:7–10. “As a court of 

equity, the court cannot place Plaintiffs in a better position than they would have been 

in but for the [agency’s] legal mistakes.” Gomez, 490 F. Supp. 3d at 289. 

Accordingly, the Court declines to order a deadline extension.

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V.

In sum, the Court holds that the Departments improperly bypassed the APA’s 

notice-and-comment requirement in issuing the Fee Guidance and the September 

Rule’s batching regulations. The Court finds that vacatur of these rules is the proper 

remedy. Plaintiffs have failed to show, however, that either a refund of fees paid 

pursuant to the Fee Guidance or a deadline extension is warranted here. 

In their proposed order, Plaintiffs also seek vacatur of three provisions of the 

September Rule that permit the Departments to issue fee guidance annually. Docket 

No. 18, Ex. 4 at 1 (seeking vacatur of 45 C.F.R. § 149.510(d)(2)(ii), 26 C.F.R. 

§ 54.9816-8T(d)(2)(ii), and 29 C.F.R. § 2590.716-8(d)(2)(ii)). Plaintiffs, however,

provide no justification for holding these provisions unlawful under the APA, and 

thus vacatur is improper. 

Accordingly, the Court GRANTS-in-part Plaintiffs’ motion for summary 

judgment (Docket No. 18) as it relates to the Fee Guidance and the September Rule’s 

batching requirements, DENIES Plaintiffs’ motion for summary judgment (Docket 

No. 18) as it relates to the September Rule’s provision permitting annual fee 

guidance, DENIES the Departments’ cross-motion for summary judgment (Docket 

No. 41), and ORDERS that the following rules and provisions are VACATED and 

REMANDED for further consideration in light of this Opinion:

(1) The Fee Guidance’s $350 administrative fee;

(2) 45 C.F.R. § 149.510(c)(3)(i)(C); 

(3) 26 C.F.R. § 54.9816-8T(c)(3)(i)(C); and

(4) 29 C.F.R. § 2590.716-8(c)(3)(i)(C).

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So ORDERED and SIGNED this day of

___________________________________

JEREMY D. KERNODLE

UNITED STATES DISTRICT JUDGE 3rd August, 2023.

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