Appeals Court Throws Out Hospital Price Transparency Challenge

December 30, 2020 - A federal appeals court has recently rejected the hospital industry’s challenge of the upcoming hospital price transparency rule that will require hospitals to disclose payer-specific rates to the public.

On Tuesday, the US Court of Appeals for the District of Columbia affirmed a previous decision from the District Court, which greenlit HHS’ request for summary judgment and dismissed arguments from the American Hospital Association (AHA) and other hospital groups that, among many items, privately negotiated rates are “unknowable.”

Judge David S. Tatel said in the appeals court’s decision that AHA’s arguments “miss the mark” and providing negotiated rates are “a critical piece of information” for patients to determine their out-of-pocket cost estimates.

The decision paves the way for the hospital price transparency rule to take effect on Jan. 1, 2021, when hospitals are expected to post a list of their standard prices, including negotiated rates, in a machine-readable format, as well as a rate list for at least 300 shoppable services in a consumer-friendly format.

The AHA said it was “disappointed” in the court’s decision and it is determining its next steps.

“The AHA continues to believe that the disclosure of privately negotiated rates does nothing to help patients understand what they will actually pay for treatment and will create widespread confusion for them. We also believe it will accelerate anticompetitive behavior among commercial health insurers and hinder innovations in value-based care delivery,” Melinda Hatton, the Association’s general counsel, said in a statement.

The Association closed its statement saying it has urged the upcoming Biden administration to consider revising the rule and to “exercise enforcement discretion” during the ongoing COVID-19 pandemic.

The AHA also filed an emergency stay of enforcement motion last week to get the court to prevent HHS from enforcing the hospital price transparency rule starting on Friday.

HHS issued a bulletin earlier this month saying it will audit a sample of hospitals in January to ensure compliance with the rule. Hospitals face fines of up to $300 per day if they fail to post the list of standard pricing information and shopping services.

The hospital group told the court that complying with the rule would take away limited hospital resources from the fight against COVID-19, especially since most providers anticipate an uptick in new cases and hospitalizations after the holidays.

But Judge Tatel in the appeals court’s opinion shot down the AHA’s argument, emphasizing that HHS clarified in the final rule that hospitals would only need to post base rates, delayed the effective date by a year, and increased the estimated burden tenfold.

And as previously indicated by oral arguments in October, the judge was also not convinced by the Association’s argument that some prices cannot be known prior to service.

Judge Tatel brought up the example AHA raised during oral arguments of a patient receiving two x-rays instead of one for medically necessary reasons. The patient would not pay for two x-rays since the hospital has negotiated a volume discount with the patient’s insurer, therefore the hospital would not be able to provide an accurate price estimate for the patient, the AHA argued.

However, the judge leaned on the requirement that hospitals must disclose base rates for items and services, not the final payment the hospital ultimately receives from the insurance company.

Even these base rates are enough for patients to determine out-of-pocket cost estimates if the patient knows she is responsible for a certain percentage of the negotiated rate, according to the opinion.