Judge Dismisses Case Against New Hospital Price Transparency Rule

June 24, 2020 - A federal judge dismissed a case challenging a hospital price transparency rule that will require the providers to disclose privately negotiated rates with commercial payers.

The ruling released Tuesday by the US District Country for the District of Columbia upheld the rule published last year, which will require hospitals to make public five standard charges, including chargemaster rates and rates paid for by private payers.

A coalition of hospital groups and individual hospital systems sued HHS over the hospital price transparency rule late last year, arguing that HHS did not have the statutory authority to require and enforce the provision. The group also claimed the rule would violate the First Amendment by compelling hospitals to disclose charges that would confuse patients and burden hospitals.

The court, however, rebuffed their arguments, giving HHS the go-ahead to implement the hospital price transparency rule in January 2021.

“The publication of charges will allow the agency to further its interest of informing patients about the cost of care, which will in turn advance its other interest — bringing down the cost of health care,” Judge Carl Nichols wrote in his ruling.

Although Judge Nichols did describe the decision to interpret “standard charges” as privately negotiated rates as a “close call.”

“After all, the more charges published for any one item or service, the less any one of those charges can be considered ‘usual’ or ‘customary.’ But in this exceptionally unique market, the Court cannot conclude that CMS’s interpretation is unreasonable,” Judge Nichols wrote.

The standard charges language hails from the Affordable Care Act, which requires hospitals to make public “a list of the hospital’s standard charges for items and services provided by the hospital.”

Historically, stakeholders have interpreted the ACA provision to require hospitals to publish their chargemaster rates. But HHS recently used the provision to advance hospital price transparency to give healthcare consumers pricing information that could help them understand prices they would pay for care and compare prices across providers.

The ruling is a win for President Trump and HHS’ push to reduce healthcare costs, said HHS Secretary Alex Azar.

“President Trump has been clear: American patients deserve to be in control of their healthcare. With today’s decision, we will continue delivering on the President’s promise to give patients easy access to healthcare prices,” Secretary Azar stated. “Especially when American patients are seeking care during a nationwide public health emergency, it is more important than ever that they have ready access to the actual prices of healthcare services.”

But the American Hospital Association (AHA), which was part of the original coalition of hospital groups challenging the rule, stated that requiring the disclosure of commercial payer rates will further confuse patients about their medical bills.

“The proposal does nothing to help patients understand their out-of-pocket costs,” said AHA general counsel Melinda Hatton. “It also imposes significant burdens on hospitals at a time when resources are stretched thin and need to be devoted to patient care. 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 decision, Hatton stated.

Critics of the hospital price transparency rule have argued that the disclosure of privately negotiated rates will accomplish the opposite of HHS’ agenda by increasing healthcare costs for patients by reducing competition between hospitals.

Commercial payer rates are generally considered “trade secrets” that hospitals leverage to negotiate discounts on services and procedures private payers are willing to pay for, and disclosing these rates could make it harder for hospitals and payers to agree on competitive prices, stakeholders including America’s Health Insurance Plans (AHIP) have contended.

HHS maintains that “providing patients with clear, accessible information about the price of their care” will create a “patient-centered system” that provides affordability for higher quality care and puts patients in control of selecting the care they want.

Hospital price transparency requirements could work, according to a study published in Health Affairs last year. Researchers identified nearly a 13 percent savings opportunity for residents of Massachusetts if policymakers and payers used negotiated rates to steer patients to lower-priced providers.