Court of Appeals Upholds CMS Rule Requiring Public Disclosure of Prices Negotiated Between Hospitals and Insurance Companies

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On December 29, 2020, the U.S. Court of Appeals for the District of Columbia Circuit upheld a CMS final rule promulgated in November 2019 that requires hospitals to disclose various forms of pricing information related to the items and services they provide. In particular, the rule requires hospitals to disclose charge rates including gross charges from chargemasters; payer-specific negotiated charges; standardized discounted cash prices offered to self-pay patients before any individualized discounts; and the maximum and minimum third-party negotiated charges for a given item or service. The American Hospital Association (AHA), joined by other associations and individual hospitals, challenged the rule but the district court awarded summary judgment to the government. AHA appealed, and the D.C. Court of Appeals has now upheld the rule that went into effect January 1, 2021. The case is American Hospital Assoc. v. Azar, D.C. Cir., No. 20-05193 and is available here .

In 2010, Congress passed the Affordable Care Act (ACA), which added section 2718, entitled “Bringing down the cost of health care coverage,” to the Public Health Service Act. Subsection 2718(e) requires “[e]ach hospital operating within the United States” to “each year establish (and update) and make public (in accordance with guidelines developed by the Secretary) a list of the hospital’s standard charges for items and services provided by the hospital, including for diagnosis-related groups established under [the Medicare reimbursement statute].” 42 U.S.C. § 300gg-18(e). The statute does not define “standard charges.” Until recently, hospitals could comply with this requirement by making their chargemasters available to the public in a machine-readable format.

In June 2019, President Trump issued Executive Order 13877, which directed the Secretary of HHS to “propose a regulation, consistent with applicable law, to require hospitals to publicly post standard charge information, including charges and information based on negotiated rates and for common or shoppable items and services.” After taking comments on its proposed rule, the Secretary issued a final rule in November 2019 that defines “standard charge” as “the regular rate established by the hospital for an item or service provided to a specific group of paying patients.” Price Transparency Requirements, 84 Fed. Reg. 65,524, 65,540 (Nov. 27, 2019). The rule lists five categories of standard charges that hospitals must disclose: gross charges from chargemasters; payer-specific negotiated charges; standardized discounted cash prices offered to self-pay patients before any individualized discounts; and maximum and minimum third-party negotiated charges for a given item or service. Id. at 65,540. The Secretary delayed the rule’s effective date until January 1, 2021.

AHA challenged the rule, arguing that the interpretation of “standard charges” violates section 2718(e), the APA, and the First Amendment. The Court disagreed, finding that the Secretary’s interpretation of “standard charges” was reasonable under the language of the statute and held that “section 2718(e) permits the Secretary to require disclosure of negotiated rates, and requiring hospitals to display certain datapoints separately falls squarely within the Secretary’s authority to develop guidelines for making the list public.” The Court was also unpersuaded by AHA’s arguments regarding the feasibility and administrative burdens of complying with the rule. The Court lastly held that “the Association’s argument that the rule violates the First Amendment” was “squarely barred” by relevant Supreme Court and D.C. Circuit caselaw.

In a December 29, 2020 press release, AHA has said it is reviewing the ruling to determine next steps and urged the next administration “to evaluate whether the rule should be revised, and to exercise enforcement discretion for the duration of the public health emergency.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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