December 5, 2019

The American Hospital Association (AHA) and other hospital groups on Wednesday filed a lawsuit against the Trump administration that seeks to block a final rule that aims to increase price transparency among health care providers and insurers.

CMS' latest transparency rules: A true game changer or much ado about nothing?

Final rule details

The rule is the final piece of the 2020 Hospital Outpatient Prospective Payment System (HOPPS) final rule. CMS in a fact sheet said the rule updates calendar year 2020 HOPPS regulations to require all hospitals operating in the United States to publish the negotiated prices they reach with insurers for health care services.

Under the final rule, hospitals beginning in 2021 will be required to post online "a machine-readable file … that includes all standard charges (including gross charges, discounted cash prices, payer-specific negotiated charges, and de-identified minimum and maximum negotiated charges) for all hospital items and services." Hospitals under the rule also will have to publicly post "discounted cash prices, payer-specific negotiated charges, and de-identified minimum and maximum negotiated charges for at least 300 'shoppable' services."

The rule finalizes methods for CMS to monitor hospital compliance with the requirements, as well as actions the agency can take against non-compliant hospitals, including warning notices, requesting corrective action plans, and levying civil monetary penalties of as much as $300 per day. CMS also can publicize penalties against non-compliant hospitals. Under the final rule, hospitals will be able to appeal the penalties.

The final rule is scheduled to take effect in January 2021.

Lawsuit details

The hospital groups in the lawsuit claim the final rule violates the First Amendment of the Constitution by requiring hospitals to disclose "highly confidential" rates. The lawsuit argues that the disclosures would amount to "compelled speech" in violation of the First Amendment.

The hospital groups also contend the final rule surpasses the administration's authority because it reaches beyond the Affordable Care Act's (ACA's) statutory intent. The lawsuit notes that the ACA requires hospitals to report their "standard charges" for services. However, it argues that the final rule's attempt to extend the definition of "standard charges" to include negotiated rates for health care services go beyond the ACA's intent and would require them to disclose confidential contractual information.

In addition, the lawsuit states, "The burden of compliance with the rule is enormous, and way out of line with any projected benefits associated with the rule." For example, the hospital groups in the lawsuit claim the rule would require hospitals to produce spreadsheets with hundreds of thousands of columns, which would cause most standard computer systems to crash. The lawsuit also notes that some hospitals "worry about the ability of their websites to function at all with such a large file."

Further, the lawsuit claims the final rule's requirements would not provide patients with "the information [they] need." It states, "Mandating the public disclosure of negotiated charges would create confusion about patients' out-of-pocket costs, not prevent it."

The hospital groups also claim the final rule could result in hospitals no longer negotiating rates with insurers, which would undermine competition and remove incentives for insurers to enter contracts that potentially lower health care costs.

The hospital groups in the lawsuit ask the court to block the final rule from taking effect, and request that the court issue an expedited decision in the case, saying hospitals otherwise might spend needless time and resources preparing for requirements that might be invalidated in court.

AHA, the Association of American Medical Colleges, the Children's Hospital Association (CHA), the Federation of American Hospitals, and three hospitals in California, Missouri, and Nebraska filed the lawsuit in the U.S. District Court in Washington.

Admin officials react

Administration officials said they are disappointed by the lawsuit.

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

Judd Deere, a White House spokesperson, said, "It is highly disappointing, but not surprising, that these organizations are suing to keep patients, the very people they are supposed to be most interested in helping, in the dark on cost. Without greater transparency, we cannot reform a broken system propped up by untethered list prices, unexplained discounts, and expensive middlemen" (Armour, Wall Street Journal, 12/4; Coleman, The Hill, 12/4; Sibi Joseph, Reuters, 12/4; Brady, "Transformation Hub," Modern Healthcare, 12/4; Owens, "Vitals," Axios, 12/5).

A full exploration of CMS' Final Rule on hospital price transparency

CMS has been pushing providers on price transparency for several years. This year, CMS is making their boldest move to-date, requiring all hospitals to publish payer-specific negotiated charges, and more.

Get the slides from our recent webinar where we examined key details of the Final Rule, including what hospitals will be required to disclose, how they will be required to disclose it, and potential market implications of this heretofore unprecedented level of hospital price disclosures.

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