Bloomberg Law
Free Newsletter Sign Up
Bloomberg Law
Welcome
Go
Free Newsletter Sign Up

Hospitals Point to Possible Compromise in Price Disclosure Fight

June 11, 2020, 9:40 AM

The Trump administration has already come up with a compromise in the legal battle over its signature push to shine a light on hospital pricing, and it’s buried in a similar proposal for insurers, industry groups say.

The provision they’ve zeroed in on could give a federal district judge in the District of Columbia a way to rule narrowly in favor of four health-care industry groups and three hospitals in their fight to dismantle a rule that requires some 6,000 hospitals to publicly list the prices they negotiate with insurers by January 2021. It could also give hospitals an end run around a major policy initiative of the Trump administration that’s aimed at lowering health-care costs, one legal scholar said.

When the Centers for Medicare & Medicaid Services finalized the price transparency rule for hospitals, it proposed a similar rule that requires health insurance companies to tell participants, beneficiaries, and enrollees who ask how much they’re going to have to pay out of pocket for health services.

That breakdown would include the insurer’s negotiated rate with the hospital, but only if it’s relevant to how much the participant has to pay, the proposed rule says.

Tailored Alternative

That provision demonstrates “there is a much more tailored way, much more appropriate way,” to give consumers hospital pricing, Cate Stetson, a partner at Hogan Lovells, told a judge last month while arguing for a ruling in favor of the American Hospital Association and the other challengers.

A ruling on the parties’ motions for summary judgment is expected within the next few months. The hospital groups argue the administration overstepped its authority by including negotiated rates in its definition of standard charges hospitals must disclose.

The government counters that its definition is permissible under the Public Health Service Act, a law enacted in 2010 to bring down the cost of health-care coverage.

“At bottom, everyone agrees that consumers are fumbling in the dark for information about how much their hospital care will cost,” attorneys with the Department of Justice said in their request for a ruling in the government’s favor. “HHS chose to shine light on the problem; plaintiffs are quibbling over the agency’s choice of wattage.”

Health-care attorneys agree the provision in the rule that’s been proposed for insurers could be a good compromise.

“The goal is for consumers to understand what their liability is going to be and then provide them with information that is going to to help them make that determination rather than providing them with so much information, a lot of it that would be meaningless to what their final liability is,” said Delphine O’Rourke, a partner at Duane Morris LLP, who represents health companies, hospitals and health-care systems.

It’s certainly a way the judge could rule in favor of the hospital groups without looking necessarily like he’s ruling in favor of the hospital groups, said Jaime King, an associate dean and law professor at the University of California Hastings College of the Law in San Francisco.

But striking a compromise like that would allow insurers to change their pricing structure and focus on copays to avoid having to disclose their negotiated rates, King said. Copays are fixed and set by contracts, so disclosing the negotiated rate wouldn’t impact a patient’s cost-sharing, she said.

The hospital groups are supposed to “find alternatives that are more palatable to their organizations and their members than what is being proposed here, but I think they are doing it because it allows them to keep hiding their negotiated health-care prices,” she added.

Shopping Around

Attorneys for patient rights advocates say the price transparency rule aims to help everyone shop for their health services, regardless of whether they have insurance.

If it’s a world where only a narrow, highly targeted situation requires insurers to disclose their negotiated rates, that doesn’t do anything for comparison shopping, Jeffrey Harris, a partner at Consovoy McCarthy PLLC, who represents Patient Rights Advocate.Org, a nonprofit advocating for transparency in health-care costs.

The industry groups were only pointing to that one provision as a compromise, not advocating for the proposed rule to be adopted as is. A second prong to the proposal would still require insurers to make public a list of their negotiated rates with in-network providers and list historical data on allowed amounts to out-of-network providers through standardized, regularly updated, machine-readable files.

“The AHA supports the personalized disclosure to individual patients of the negotiated rates pertinent to their care to the extent they are needed to provide accurate and personalized cost-sharing information,” Melinda Hatton, the American Hospital Association’s general counsel, said in a statement.

Broad public disclosure of all negotiated rates would lead to widespread confusion among patients, even greater consolidation in the commercial health insurance industry, and create disadvantages for providers in negotiation, she added.

Congressional Action

The White House has been pushing Congress to write the rule into the next coronavirus relief bill. If it succeeds before the case is decided, that could quash at least some of the claims in the litigation. Timing on the next coronavirus package is uncertain. Senate Republican leaders have repeatedly said they’d prefer to see whether the economy begins to rebound this summer before taking on new stimulus legislation.

The White House has signaled to lawmakers it would like to codify the price transparency rule in law to help it survive legal challenges, according to a senior Republican aide.

“If Congress enacts this policy into statute, then the administrative procedural objections the industry have all become moot,” said Ronald Krotoszynski, a constitutional law professor at the University of Alabama School of Law.

The hospitals could initiate a new lawsuit to continue their claim that the rule compels speech in violation of the First Amendment, he said. If the court rules before the regulation is written into law, some doubt it will reach the constitutional question.

“Generally when the court is asked to make decisions in specific cases, they tend to not go to constitutional issues unless they absolutely have to,” King said. “I would be surprised if they end up holding this is a full violation of the First Amendment.”

—With assistance from Alex Ruoff

The case is American Hospital Ass’n v. Azar, D.D.C., No. 1:19-cv-03619.

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@bloomberglaw.com; Brent Bierman at bbierman@bloomberglaw.com