As expected, a federal appeals court on Tuesday shot down the hospital industry's attempt to block new rules on price transparency from taking effect at the end of this week.
The U.S. Court of Appeals for the District of Columbia Circuit affirmed a District Court judge's decision to grant HHS' motion for summary judgment, rejecting a challenge from the American Hospital Association. The three judges who issued the ruling had appeared poised to affirm the lower court's ruling in an October hearing on the case.
As a result of Tuesday's decision, hospitals on Jan. 1, 2021, will have to start posting their negotiated rates online in a machine-readable format and, separately, list their negotiated rates for at least 300 shoppable services in a consumer-friendly manner, including 70 picked by CMS.
The AHA said it's disappointed by the decision. Refusing to delay enforcement ignores the burden the COVID-19 pandemic is placing on hospitals, AHA General Counsel Melinda Hatton said in a statement.
"We are reviewing the decision carefully to determine next steps," Hatton said.
A major thrust of the hospital lobby's argument was that the Affordable Care Act does not give CMS the authority to force hospitals to post negotiated rates, only chargemaster prices, as they're currently required to do. The AHA did not immediately respond to a request for comment.
The judges disagreed, writing that the ACA's Public Health Service Act indeed allows HHS to require hospitals to display negotiated rates. The judges also shot down the association's argument that requiring hospitals to post the information in two ways—the machine-readable list and the shoppable services list—violates the law's reference to "a list." That was another win for the Trump administration, which had argued that the shoppable information was included in the larger, machine-readable file.
The appeals court also wasn't swayed by the AHA's argument that negotiated rates in many cases aren't known until after patients receive care, noting that the rule applies to base negotiated rates, not final payments to hospitals.
The AHA had also argued that hospitals use different payment methodologies and store information across different systems, making it difficult to put into a single, comprehensive list. In response, the court noted that the rule's effective date had already been delayed by one year, that it only applies to base rates, and that HHS increased the burden estimate tenfold. They wrote that the newer, 150-hours-per-hospital estimate in the rule's first year is similar to one provided by the Healthcare Financial Management Association, a trade group for healthcare finance leaders, which filed an amicus brief in support of the AHA.
The AHA also criticized the rule's reliance on researchers, government officials, clinicians, employers and other third parties to use the data to "bring more value to healthcare."
Expecting third parties to bring more efficiency to an industry as big as healthcare "hardly strikes us as irrational," the ruling stated. "Indeed, such services are ubiquitous in other industries where prices are publicly available, such as travel booking websites and used car price aggregators."
The judges also rejected the AHA's argument that the price transparency rule will mislead consumers, siding with HHS that it's actually the current rule that's misleading. Hospitals have since the beginning of 2019 been required to post their chargemaster rates, even though they apply to fewer than 10% of patients.
Rick Gundling, a vice president with the HFMA, said patients need to see price estimates that consider their particular health plan benefits to make informed decisions.
"The cost that matters to patients is their out-of-pocket, and this final rule really didn't do anything to help patients learn that," he said.
In its statement, the AHA went on to say that it is urging the incoming Biden administration to reevaluate the rule and to exercise discretion while enforcing it during the public health emergency.