Hospitals on Thursday pushed a federal judge to throw out a rule that would force them to disclose the prices they negotiate with commercial health insurers, saying that Congress didn't give HHS the power to do it.
Lawmakers only allowed the federal government to make hospitals post a list of so-called "standard charges" and the rates they charge for diagnostic-related groups, argued Cate Stetson, an attorney for Hogan Lovells representing hospitals, during a telephonic hearing before the U.S. District Court for the District of Columbia.
HHS "is trying to solve a problem with a tool that it doesn't have," Stetson said.
Negotiated rates, by their nature, cannot be standard charges because they are the result of private negotiations, she said. Besides, HHS' own research shows that consumers only care about their out-of-pocket costs. Stetson said there are better ways to achieve that, including the agency's proposed rule to require health plans to provide beneficiaries with price and cost-sharing information in advance of their treatment. It would also be extremely burdensome for hospitals to have to post thousands of unique charges, she added.
The government's definition of a standard charge includes a massive amount of granular, one-off information, Stetson said.
"That completely explodes the definition of what it means to be a standard charge," she said.
The Trump administration isn't advancing a legitimate federal interest through the rule, Stetson argued, so Judge Carl Nichols should toss it out.
But Department of Justice lawyer Michael Baer, representing HHS, said hospitals' interpretation of federal law is misguided because it wouldn't make sense for Congress only to allow the agency to force hospitals to post their chargemaster lists and rates for diagnostic-related groups, especially since the latter can vary significantly by patient.
The fact that Congress included so-called DRGs as an example of charges that hospitals need to post is evidence that lawmakers wanted standard charges to go beyond chargemaster information. Likewise, Congress said that hospitals needed to "establish" and "update" their standard charges each year. Both Baer and Nichols questioned why hospitals would need to "establish" a chargemaster list since all hospitals have them. If Congress only wanted hospitals to post their chargemasters and DRGs, they would have said so directly. They wouldn't have used the term "standard charges" at all, Baer said.
Plus, most people don't pay the chargemaster rate or cash discounted rates, so hospitals' definition of standard charges wouldn't be useful. Third-party payers cover some or all hospital expenses for roughly 9 in 10 consumers, so limiting the definition of standard charge to chargemaster rates would "write off" nearly all paying patients, Baer said.
Even more, there's a public interest in knowing the rates that hospitals negotiate with private payers because it would allow consumers to make more informed decisions and force providers to compete on price like any other market, Baer argued.
"There just is not another market that looks like the market for hospital services," he said.
Nichols said that he wasn't sure how he would decide the case but promised to reach a judgment soon since the losing side is likely to appeal and the rule goes into effect in January.
