Hospitals, Legal

Judge rules against hospitals in price transparency lawsuit

A federal judge ruled against the American Hospital Association and other hospital groups that challenged the Department of Health and Human Services’ new price transparency rules.  AHA said it would appeal the decision.

A federal judge ruled against hospital groups in their lawsuit challenging new price transparency rules. The American Hospital Association and other hospital groups filed suit in December after the Department of Health and Humans Services finalized a rule that would require hospitals to disclose price information, including negotiated prices with insurers.

Hospitals claimed that the regulation was beyond HHS’ authority, that it was a violation of commercial speech, and that disclosing price information would actually lead to higher costs. Insurers also pushed back against the regulation, though none joined the lawsuit.

U.S. District Judge Carl Nichols dismissed these arguments, ruling in favor of HHS. He also dispelled concerns that disclosing negotiated prices could chill negotiations between hospitals and insurers, pointing out that patients still see those prices in their explanation of benefits.

“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,” he wrote in his decision.

Regulators have been pushing for greater transparency since the Bush administration. A portion of the Affordable Care Act required hospitals publish a list of standard charges for items and services. States also pushed hospitals to publish these chargemasters, which provide list prices for each service.

But while chargemaster prices may be useful for negotiating with insurers, the listed prices bear little resemblance to what patients actually pay — or should pay.

When the Centers for Medicare and Medicaid Services revisited pricing rules, it added that not only must hospitals publish list prices, but they must also post negotiated rates with insurers, cash discount prices, as well as the minimum and maximum negotiated charges for 300 “shoppable” services.

The American Hospital Association said it will appeal the case and seek expedited review.

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

The new requirements are slated to go into effect in January.

The case, The American Hospital Association et al v. Alex M. Azar II, Secretary of Health and Human Services, was filed in the U.S. District Court for the District of Columbia.


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