Policy & Regulation News

New Hospital Price Transparency Rule Challenged in Court

AHA, FAH, and other hospital stakeholders sued HHS over a hospital price transparency rule requiring the disclosure of payer-specific negotiated rates.

Hospital price transparency

Source: Thinkstock

By Jacqueline LaPointe

- Four leading healthcare associations and three hospitals filed a lawsuit today against HHS over the recently finalized hospital price transparency requirement that mandates the disclosure of payer-specific negotiated rates.

The lawsuit claims that the requirement violates the First Amendment by mandating “speech in a manner that fails to directly advance a substantial government interest, let alone in a narrowly tailored way.” It also alleges that HHS does not have the statutory authority to force hospitals to publish anything other than standard charges.

The plaintiffs – the Federation of American Hospitals (FAH), American Hospital Association (AHA), Association of American Medical Colleges (AAMC), Children’s Hospital Association (CHA), and three individual hospitals – asked a federal judge to grant preliminary and permanent injunctions preventing HHS from enforcing the requirement, which will take effect on January 1, 2021.

“America’s hospitals and health systems stand with patients and are dedicated to ensuring they have the information needed to make informed health care decisions, including what their expected out-of-pocket costs will be,” Rick Pollack, president and CEO of the AHA, said in a joint statement released by the four associations.

“Instead of giving patients relevant information about costs, this rule will lead to widespread confusion and even more consolidation in the commercial health insurance industry,” he continued. “We stand ready to work with CMS and other stakeholders to advance real solutions for patients.”

HHS finalized the hospital price transparency requirement at the center of the lawsuit in November 2019. The requirement mandates hospitals to publish online gross charges and payer-specific negotiated rates, as well as other pricing information like discounted cash prices. Pricing information for 300 shoppable services also needs to be displayed in a consumer-friendly manner by January 1, 2021. The requirement follows a 2018 rule that made the disclosure of standard charges mandatory for hospitals.

The new requirement faced staunch industry criticism, with hospitals and payers arguing that the disclosure of payer-specific negotiated rates will harm competition, which could potentially lead to higher prices in certain markets. Hospitals also contended that the requirement would impose an administrative burden despite HHS’ projection that compliance would only consume 12 hours on average.

Several hospital groups, including the associations listed as plaintiffs in the recent lawsuit, urged HHS to work with hospitals and payers to develop price transparency rules that would be more meaningful to consumers in lieu of finalizing the requirement. The groups pushed for alternative solutions that would allow hospitals to provide patients and consumers with cost-sharing information, such as out-of-pocket costs.

However, HHS moved forward with requiring the disclosure of payer-specific negotiated rates. This prompted the four associations and three hospitals to file the lawsuit earlier today, the joint statement explained.

“CMS’ final rule fails to offer patients easy-to-understand information regarding their out-of-pocket obligations for care - so we feel obligated to contest the regulation. We contend the agency exceeded its authority and should go back to the drawing board,” Chip Kahn, FAH president and CEO, said in the statement.

The associations intend for the lawsuit to help patients understand healthcare costs, which the hospital price transparency requirement will not do as it stands.

“Patients deserve to have the most relevant information when they are making decisions about their health care. Unfortunately, CMS’ final rule will only create confusion for patients,” explained David Skorton, MD, president and CEO of AAMC.

Mark Wietecha, president and CEO of CHA, added that children will be particularly affected by the confusion stemming from the requirement.

“Children’s hospitals care for children with the most complex conditions, and the majority of our patients are covered by Medicaid,” he said. “We are concerned our patient families may confuse these commercial rate disclosures and not seek essential care for their children.”

The associations urged HHS to work with hospitals and other healthcare stakeholders to develop an alternative hospital price transparency solution.