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Federal Judge Rules Against Hospitals in Price Transparency Case; Hospitals Will Appeal

A federal judge ruled against the American Hospital Association (AHA) and others on Tuesday in a lawsuit attempting to block a U.S. Health and Human Services (HHS) final rule pushing for price transparency. Under the final rule issued during November 2019, hospitals are required to disclose the standard charges, including payor-specific negotiated rates, for all services beginning January 1, 2021. 

The AHA the Association of American Medical Colleges, the Children's Hospital Association, and the Federation of American Hospitals filed suit in the U.S. District Court for the District of Columbia on December 4, 2019, and argued that HHS lacked the statutory authority to require public disclosure of individually negotiated rates between commercial insurers and hospitals. They further alleged that the rule violated the First Amendment because it requires "highly confidential" negotiated rates to be disclosed. HHS argued that this action is necessary for price transparency that will ultimately lower the overall cost of health care.  

Both sides filed motions for summary judgment, and Judge Carl Nichols with the U.S. District Court for the District of Columbia granted HHS' motion and denied the hospital groups' motion on June 23. 

Nichols said HHS acknowledged and considered the arguments of provider organizations and payors when it issued the final rule and "did not act arbitrarily and capriciously in concluding that the final rule could have substantial benefits." He also highlighted the steps HHS took to address some of the concerns raised about the rule, including proposing a complementary rule that would require insurers to post data, such as negotiated rates, and delaying the effective date of the rule by a year. "In sum, CMS [the Centers for Medicare & Medicaid Services] considered commenters' concerns, echoed here in plaintiffs' briefs, about the rule but determined that those concerns were not persuasive," reads the opinion. "By acknowledging conflicting data and articulating which information it found most convincing, the agency fulfilled its duty to examine the evidence before it and connect it to the final rule." 

Nichols was not persuaded by AHA's argument that forcing hospitals to publicly disclose rates violates their First Amendment rights by forcing them to reveal proprietary information nor did he agree with the claim that it would chill negotiations between providers and payors. However, Nichols seemed convinced that the requirement will empower patients, noting that "all of the information required to be published by the Final Rule can allow patients to make pricing comparisons between hospitals."

HHS Secretary Alex Azar called the decision “a resounding victory for President Trump and HHS’s agenda to lower Americans’ health care costs.”  However, Melinda Hatton, the AHA’s general counsel stated, “The proposal does nothing to help patients understand their out-of-pocket costs. It also imposes significant burdens on hospitals at a time when resources are stretched thin and need to be devoted to patient care.” Hatton went on to say, “Hospitals and health systems have consistently supported efforts to provide patients with information about the costs of their medical care. This is not the right way to achieve this important goal.”

The AHA plans to appeal the court’s decision and seek an expedited review. However, with the January effective date still in place, hospitals should continue to take operational steps toward compliance with the final rule. For more information, contact Jolene Calla, Esq., HAP’s vice president of health care finance and insurance.


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