American Hospital Association to appeal ruling on price transparency lawsuit

The American Hospital Association is appealing a decision handed up in federal court today requiring hospitals to disclose their privately negotiated rates with commercial health insurers.

The AHA said it plans to appeal on an expedited basis.

The final rule on price transparency is scheduled to go into effect on January 1, 2021.

"The proposal does nothing to help patients understand their out-of-pockets costs," the AHA said. "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."

Earlier on Tuesday, a federal judge ruled against the lawsuit brought by the American Hospital Association and other providers, which claimed a final rule requiring them to post their negotiated prices with payers violated their First Amendment rights, was arbitrary and capricious, and exceeded the statutory authority of the U.S. Department of Health and Human Services.

United States District Court Judge Carl J. Nichols sided with HHS and granted its motion for summary judgment.

Nichols rejected all of the arguments made by the plaintiff providers.

HHS Secretary Azar Statement called the decision a victory for President Trump's price transparency agenda.

WHY THIS MATTERS

The final rule, issued in November 2019, requires hospitals, other healthcare providers and insurance companies to disclose their cash and negotiated contract prices to patients in an easy-to-access format. 

Hospitals, insurers and advocacy groups objected on a number of grounds.

The plaintiffs argued that the publication of payer-specific negotiated rates would chill negotiations between hospitals and insurers.

They disputed the agency's statutory authority to require disclosures of specific negotiated charges or to require the publication of information they believed constituted trade secrets.

Hospitals were especially skeptical that the disclosures would lead to lower costs or would benefit consumers because the disclosed charges would not represent patients' actual out-of-pocket costs.

And hospitals expressed concern that the compliance burden could ultimately "get in the way of providers spending time with patients," according to court documents.

On December 4, 2019, the plaintiffs, American Hospital Association, Association of American Medical Colleges, Federation of American Hospitals, National Association of Children's Hospitals, Memorial Community Hospital and Health System, Providence Health System doing business as Providence Holy Cross Medical Center, and Bothwell Regional Health Center, filed the lawsuit against the rule.

THE LAWSUIT

The court said the rule requires only the publication of the final agreed-upon price – which is also provided to each patient in the insurance-provided explanation of benefits – and not any information about the negotiations themselves.

"Plaintiffs are essentially attacking transparency measures generally, which are intended to enable consumers to make informed decisions; naturally, once consumers have certain information, their purchasing habits may change, and suppliers of items and services may have to adapt accordingly," the court said.

The final rule requires hospitals to publish five types of standard charges: gross charges, the discounted cash price, payer-specific negotiated charges reflected in hospital contracts, and the minimum and maximum charges – which are the highest and lowest charges that a hospital has negotiated with all third-party payers for an item or service, but are not linked to a particular payer.

CMS said that this information would allow insured patients to analyze their insurers' abilities to negotiate effectively and "promote value choices in obtaining a healthcare insurance product."

Approximately 90% of hospital patients rely on a third-party payer to cover a portion or all of the cost of healthcare.

Uninsured patients could also use the ranges to negotiate with hospitals for a reduced rate from the inflated gross charges, court documents said.

THE LARGER TREND

Originally, CMS required hospitals to post only their chargemaster rates.

Hospitals rely on the chargemaster rates as their starting point in negotiating reimbursement payments, especially with third-party private payers. But these rates are inflated and do not reflect the real price.

On June 24, 2019, President Trump issued an executive order related to "informing patients about actual prices."

ON THE RECORD

"We are disappointed in today's decision in favor of the administration's flawed proposal to mandate disclosure of privately negotiated rates," AHA said in a statement.

"Today's court decision is a resounding victory for President Trump and HHS's agenda to lower Americans' healthcare costs," HHS Secretary Alex Azar said. "President Trump has been clear: American patients deserve to be in control of their healthcare. With today's win, we will continue delivering on the President's promise to give patients easy access to healthcare prices. Especially when patients are seeking needed care during a public health emergency, it is more important than ever that they have ready access to the actual prices of healthcare services."

The Independent Women's Law Center called it a win for patients, saying, "The Price Transparency Rule injects market-forces into the healthcare economy, making sure that hospital patients – like the consumers of any other product – know upfront the price of a healthcare product or service."

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com