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Analysis

Court Upholds CMS' Hospital Price Transparency Final Rule

By John Commins  
   June 24, 2020

Trump claims "BIG VICTORY for patients." The plaintiffs, led by the American Hospital Association, will appeal the ruling.

A federal judge on Tuesday delivered a ringing victory for the Trump administration in a ruling that upheld a final rule mandating hospital price transparency.

"BIG VICTORY for patients – Federal court UPHOLDS hospital price transparency," President Donald J. Trump tweeted after U.S. District Judge Carl J. Nichols rejected an American Hospital Association-led attempt to strike down the final rule, which was issued last November.

"Patients deserve to know the price of care BEFORE they enter the hospital. Because of my action, they will. This may very well be bigger than healthcare itself. Congratulations America!," Trump tweeted.

The plaintiffs, American Hospital Association, and three other hospital associations, said they will appeal the ruling.

"We are disappointed in (Tuesday's) decision in favor of the administration's flawed proposal to mandate disclosure of privately negotiated rates," AHA General Counsel Melinda Hatton said.

"The proposal does nothing to help patients understand their out-of-pockets costs. It also imposes significant burdens on hospitals at a time when resources are stretched thin and need to be devoted to patient care," she said.

The final rule—which takes effect on January 1, 2021, one year later than initially proposed—requires hospitals to provide patients with easily accessible information about gross changes, payer-specific negotiated charges, discounted cash prices, and "deidentified" minimum and maximum negotiated charges.

The final rule also mandates that hospitals publicly display negotiated charges for 300 "shoppable services" on their websites in a consumer-friendly manner. 

The plaintiffs—AHA, the Association of American Medical Colleges (AAMC), the Children's Hospital Association (CHA), and the Federation of American Hospitals (FAH), and three individual hospitals—had argued, among other things, that the final rule is "arbitrary and capricious," and that the requirement that hospitals publish negotiated rates with insurers violates the First Amendment and oversteps the government's legal authority.

Nichols, appointed to the federal bench in June 2019 by Trump, dismissed those claims.

He noted that the final rule is legal under provisions of section 2718(e) of the Public Health Service Act, which pertains to disclosure of "standard hospital charges"; section 2718(b)(3) of the PHS Act, which pertains to enforcement; and section 1102(a) of the Social Security Act, which gives the HHS secretary general authority to establish rules and regulations as necessary.

Ironically, the PHS Act provisions cited in the rules were amended by the Affordable Care Act, which the Trump administration argues should be invalidated in its entirety.

Nichols also rejected the plaintiffs' claims that disclosing negotiated rates could thwart their efforts to obtain more favorable contracts that would ultimately benefit consumers.

"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," he wrote.

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

Hatton said Nichols' ruling was "premised on the erroneous conclusion that the 'standard charges' referenced in current law can be interpreted to include rates negotiated with third-party payers."

"While the Court ruled that this was a close call, that conclusion clearly does not reflect the experience of hospitals and health care systems. The AHA will appeal this decision and seek expedited review," she said.

“BIG VICTORY for patients – Federal court UPHOLDS hospital price transparency.”

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

The final rule requires hospitals to provide patients with easily accessible information about gross changes, payer-specific negotiated charges, discounted cash prices, and "deidentified" minimum and maximum negotiated charges.

U.S. District Judge Carl Nicols rejected arguments that the final rule is "arbitrary and capricious," that the requirement that hospitals publish negotiated rates with insurers violates the First Amendment, and oversteps the government's legal authority.


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