Just three days before its effective date, the United States Court of Appeals for the District of Columbia affirmed the legality of the Department of Health and Human Services (“HHS”) price transparency rule requiring hospitals to publicly disclose the prices they charge for items and services, including their negotiated reimbursement rates with third-party payers (the “Hospital Price Transparency Rule”). The rule is effective on January 1, 2021.

Legal Challenge Update

Relying on the Patient Protection and Affordable Care Act’s (“ACA”) requirement that every hospital publishes “a list of the hospital’s standard charges,” HHS promulgated the Hospital Price Transparency Rule, which broadened the definition of “standard charges” to require hospitals to publish their “standard charges” (defined to include the rates the hospital has negotiated with third-party payers for each item and service they provide). A more detailed summary of the Hospital Price Transparency Rule may be found here.

The American Hospital Association (“AHA”) challenged the rule, arguing that it violated the ACA, the Administrative Procedures Act (“APA”) and the First Amendment. The District Court for the District of Columbia granted summary judgment to HHS in June 2020, finding that the Hospital Price Transparency Rule was legally enforceable. AHA appealed the case to the Court of Appeals. In the proceeding case of AHA v. Azar, the appellate court affirmed the district court’s decision, finding that: (i) the best reading of the term “standard charges” in the ACA permits HHS to include within that definition negotiated charges between hospitals and payers; (ii) the Secretary adequately addressed the difficulties the hospitals may face in complying with the Hospital Price Transparency Rule, as required by the APA; and (iii) the rule did not violate the First Amendment rights of hospitals.

On the same day, the appellate court dismissed the AHA’s emergency motion to stay enforcement of the Hospital Price Transparency Rule. Accordingly, there will be no delay in enforcement. In fact, as we detailed in a previous alert, HHS has stated that it intends to audit a sample of hospitals for compliance starting in January. AHA immediately published a statement that the dismissal of the stay of enforcement ignores the overwhelming burden (both financially and administratively) that the COVID-19 pandemic has had, and will continue to have, on hospitals and that AHA is considering its next steps.

AHA and many hospitals continue to voice concern that the Hospital Price Transparency Rule will do nothing to help patients understand what they are actually going to pay for treatment and will increase prices of health care through the acceleration of anticompetitive behavior among commercial health insurers. As the effective date of this rule quickly approaches, hospitals are continuing to struggle with how they are to comply with a rule that does not take into consideration the complexity of these arrangements with payers that may have differing payment rates for the same service based on a variety of criteria.

Hospitals should, however, continue to prepare to make public their negotiated rates in accordance with the requirements of the Hospital Price Transparency Rule on January 1 or potentially suffer the financial penalties associated with non-compliance. Additionally, hospitals will be required to include some of the Price Transparency information in upcoming Medicare cost reports; more detail about that is forthcoming from the agency.