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Hospital Pricing Disclosure Rule Survives Appeals Court Test (2)

Dec. 29, 2020, 3:18 PMUpdated: Dec. 29, 2020, 8:07 PM

Hospitals will have to publicly disclose the prices they negotiate with insurance companies after a federal appeals court rejected a bid by industry groups to toss a rule that’s set to take effect Jan. 1.

The U.S. Court of Appeals for the District of Columbia Circuit upheld the rule Tuesday, handing President Donald Trump a win on a key piece of his health-care agenda at the end of his administration.

“The benefits of easing the burden for consumers justified the added burdens imposed on hospitals,” the court said in favor of Health and Human Services Secretary Alex Azar.

Under the hospital price transparency rule, some 6,000 U.S. hospitals will have to publicly provide their negotiated rates with insurers for 300 common medical services, along with the discounted cash price they’re willing to accept for those procedures.

In a statement on Twitter, Azar called the court’s ruling a “big win for American patients.”

“The DC Circuit ruling is another major victory for President Trump’s transformative healthcare agenda. Starting January 1, Americans will have access to the actual prices paid for the most common hospital services,” he said in a tweet.

Definition Dispute

Industry groups and health systems led by the American Hospital Association challenged the rule, arguing the HHS unlawfully expanded the definition of “standard charges” that a hospital must disclose under a provision in the Affordable Care Act.

But Azar “interpreted the undefined term ‘standard charges’ in a way that best effectuates congressional intent to lower healthcare costs,” the D.C. Circuit said in an opinion by Judge David Tatel.

“The best reading of the statute is that it permits such an interpretation,” the court said.

The industry groups also claimed the rule would do more harm than good, arguing in their appeal it won’t “tell consumers their actual out-of-pocket costs, will likely produce confusion and may be less effective than the price-transparency tools the hospital field has been developing.”

The rule recognized that’s a possibility but still concluded the disclosure scheme will benefit the vast majority of consumers, “especially because consumers are already ‘exceptionally frustrated at the lack of publicly available data,’ and because the availability of the data will lead to more price transparency tools developed by third parties,” the court said.

The American Hospital Association said it is reviewing the ruling to determine next steps and urged the Biden administration “to evaluate whether the rule should be revised, and to exercise enforcement discretion for the duration of the public health emergency.”

The rule will accelerate anticompetitive behavior among health insurers, hinder innovation in value-based care, and “impose significant costs on care providers at a time when scarce resources are needed to fight COVID-19 and save lives,” the group said in a statement.

Despite industry pushback, the rule garnered broad support from employers and the public. Patient rights advocates say it will make hospitals’ prices more transparent and allow patients to shop for their care.

“The implementation of price transparency means that Americans will no longer be blindfolded by hospitals and blindsided by outrageous and unexpected medical bills,” Cynthia Fisher, founder and chairman of PatientRightsAdvocate.org, said in a statement.

“They will never again have to pay for healthcare with a blank check,” she said.

Judge Merrick Garland was on the three-member panel of judges that heard the case when it was argued in October but didn’t participate in the final disposition of the case, the court said in a footnote.

The case is American Hospital Assoc. v. Azar, D.C. Cir., No. 20-05193, opinion 12/29/20.

(Updated with commentary throughout.)

To contact the reporter on this story: Lydia Wheeler in Washington at lwheeler@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Alexis Kramer at akramer@bloomberglaw.com

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