Skip to main content

Analysis

Hospital Groups File Lawsuit Challenging Price Transparency Rule

By Steven Porter  
   December 04, 2019

Without a prompt ruling, hospitals will have to divert significant resources from 'other pressing health care needs' to comply with the final rule.

Four hospital groups filed a lawsuit Wednesday to challenge the Trump administration's final rule on hospital price transparency.

The requirement that hospitals publish the rates they negotiate with insurers violates the First Amendment and oversteps the government's legal authority, the lawsuit claims.

The plaintiffs—the American Hospital Association (AHA), the Association of American Medical Colleges (AAMC), the Children's Hospital Association (CHA), and the Federation of American Hospitals (FAH), along with three individual hospitals—have asked that a federal judge impose preliminary and permanent injunctions to prevent the government from enforcing the rule, which is set to take effect January 1, 2021.

Since hospitals will need to start planning now to bring themselves into compliance by the effective date, the plaintiffs plan to file an early motion for summary judgment to sort out their claims as soon as practical, according to the complaint.

"Absent a prompt ruling, the hospital and health system field will need to immediately begin to expend substantial resources to prepare to come into compliance with the Final Rule, which will mean diverting significant personnel and financial resources from other pressing health care needs," the complaint states.

Health and Human Services spokesperson Caitlin Oakley released a statement Wednesday criticizing the pushback.

"Hospitals should be ashamed that they aren't willing to provide American patients the cost of a service before they purchase it," Oakley said. "President Trump and Secretary Azar are committed to providing patients the information they need to make their own informed healthcare decisions and will continue to fight for transparency in America's healthcare system."

Purported Legal Basis

The government claims it already has the statutory authority it needs to impose the new requirements.

The final rule cites three provisions: 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.

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

Matthew Fiedler, PhD, a fellow at the USC-Brookings Schaeffer Initiative for Health Policy, says it's ironic that the administration is citing two ACA provision as authorizing this rule. 

"The first ACA provision requires hospitals to publish a list of its 'standard charges,' which the administration is interpreting to encompass the prices hospitals negotiate with insurers," Fiedler tells HealthLeaders. "This provision is the main basis for the rule on hospital prices that the Administration recently finalized."

"The second ACA provision requires insurers to provide [HHS] and the public a range of information about their operations, which the administration is interpreting to include insurers' negotiated prices," Fiedler says.

Thomas P. Miller, JD, a fellow at the American Enterprise Institute, says the final rule incorporates a broad interpretation of the underlying statutory provisions. How the courts read those provisions, either broadly affirming the administration's interpretation or insisting on a more narrow approach, will ultimately determine whether the mandate survives, he says.

Fulfilling Political Promise

Mike Strazzella, head of federal government relations at Buchanan Ingersoll & Rooney in Washington, D.C., says President Donald Trump has campaigned aggressively on healthcare price transparency.

"I think the president has made it very clear that, regardless of the threat of a lawsuit, he's going to move forward with that agenda," Strazzella says. 

The administration finalized the rule as Trump prepares to face off with the Democratic presidential nominee in the 2020 election. By pushing the effective date back to 2021—a year later than originally proposed—the administration delayed most of the rule's impact until after voters decide whether to give Trump a second term.

Strazzella, who worked previously for The Hospital & Healthsystem Association of Pennsylvania and whose current clients include hospitals and insurers, says consumers need information about their out-of-pocket costs, not a confusing dump of price data that won't make sense without an intimate understanding of the industry's complicated price negotiations.  

"The reality is that it is a convoluted system," he says.

Confusion vs. Empowerment

While the administration says its rule will empower consumers to make cost-informed decisions about their own care, leaders for each of the plaintiff groups released statements highlighting the potential for consumers to be confused by the troves of information hospitals are being told to release.

"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," said AHA President and CEO Rick Pollack. "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. We stand ready to work with CMS and other stakeholders to advance real solutions for patients."

AAMC President and CEO David Skorton, MD, said the final rule "will only create confusion for patients."

CHA President and CEO Mark Wietecha said children's hospital patients are often Medicaid beneficiaries, many of whom are dealing with complex conditions.

"We are concerned our patient families may confuse these commercial rate disclosures and not seek essential care for their children," Wietecha said.

FAH President and CEO Chip Kahn said his organization feels "obligated" to challenge the rule because it "fails to offer patients easy-to-understand information regarding their out-of-pocket obligations for care."

CMS Administrator Seema Verma reiterated the rationale behind the rule in an opinion piece published Tuesday by The Chicago Tribune.

"Clearly, without first knowing the price, a patient cannot actively choose more affordable health care and, therefore, cannot put downward pressure on prices," Verma wrote. "It's not surprising then that health care costs continue to outpace inflation and now account for nearly $1 in every $5 in the economy."

The hospitals filed their suit in the U.S. District Court for the District of Columbia. 

Related: CMS Issues Final Rule on Hospital Price Transparency

Related: Price Transparency Is Coming. How Will You Prepare?

Related: Timelines of Trump's Push for Healthcare Price Transparency

Related: Enforcing Hospital Price Transparency: Is $300 Max Daily Fine Big Enough?

Related: Worthwhile Reform or Wasted Time? Unpacking the Hospital Price Transparency Final Rule

HealthLeaders news editor John Commins contributed to this report. This story was updated Wednesday afternoon with a statement from an HHS spokesperson and additional information throughout.

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

The hospitals are challenging the rule's statutory basis, arguing the administration overplayed its hand.

The legal authorities cited by the final rule include two provisions of the ACA, which the administration argues is invalid.

On a policy level, the hospitals contend the mandated disclosure of negotiated rates will lead to widespread confusion.


Get the latest on healthcare leadership in your inbox.