Hospitals sued HHS on Wednesday over a new rule that would force them to disclose the rates they negotiate with insurers.
The complaint alleges HHS doesn't have the legal authority to require hospitals to publicly disclose the prices that commercial health insurers and hospitals negotiate with each other. The lawsuit also claims that the mandate violates the First Amendment rights of hospitals and health insurers.
The Trump administration has shown a willingness to go to court over its healthcare regulatory agenda. The courts have recently ruled against the administration on its policies for site-neutral payments, 340B drug payments and drug price disclosure in direct-to-consumer TV ads.
"I think they were fully expecting that they would have to defend (the rule) in court," said Melinda Hatton, general counsel for the American Hospital Association. "They're no strangers to lawsuits over there."
The AHA, the Association of American Medical Colleges, the Children's Hospital Association and the Federation of American Hospitals are suing the federal government in the U.S. District Court for the District of Columbia.
HHS hopes the new policy will boost hospital competition and put downward pressure on healthcare spending by allowing consumers to shop around.
"Hospitals should be ashamed that they aren't willing to provide American patients the cost of a service before they purchase it," said Caitlin Oakley, national spokesperson and senior advisor for HHS.
But provider groups argue that the mandate won't do anything to help consumers because it won't give them information about their out-of-pocket costs, which can vary based on their health coverage.
"CMS' final rule fails to offer patients easy-to-understand information regarding their out-of-pocket obligations for care," said Chip Kahn, president and CEO of the FAH.
Hospitals also claim that disclosing their negotiated rates could increase healthcare prices by increasing the administrative work required for compliance and decreasing competition among insurers.
"This rule will lead to widespread confusion and even more consolidation in the commercial health insurance industry," said Rick Pollack, president and CEO of the AHA.
Hospitals say that they're sympathetic to the Trump administration's concerns that patients need better information about how much they will pay for healthcare services. They say that they've tried to work with the administration to develop better solutions to no avail.
Providers don't want to sue the administration because they would "prefer to have discussions with the administration about how hospitals could work with commercial insurers and others to give patients information about their out-of-pocket costs," Hatton said.
"Yes, a solution has been put forward, but is it the right solution? Is it a workable solution?" said Mike Strazzella, head of federal government relations at Buchanan, Ingersoll and Rooney.
Still, many healthcare experts, patient advocates and economists think that making hospitals reveal their negotiated discounts could lower healthcare prices long-term, especially if employers can figure out how to leverage the information. Employers and smaller insurers are "proxy shoppers of healthcare" so they have the potential to drive down healthcare costs if they have more pricing information, according to Dr. Martin Makary, a White House health policy advisor under both Presidents Obama and Trump. He thinks hospital groups are just looking out for their own self-interest.
"Price transparency is the right side of history," he said. "Asking how many patients will use pricing information is a distracting argument."