Trump Hospital Price Policy May Face Obstacle in 2015 FTC Warning

The Health and Human Services Department may have a big hurdle to overcome in defending its hospital disclosure rule in court: another government agency.

One of the leading industry groups challenging the new requirement that hospitals publicly disclose their negotiated rates says the only real precedent for the regulation is an amendment to a Minnesota law that the Federal Trade Commission sharply criticized more than four years ago.

The American Hospital Association’s general counsel, Melinda Reid Hatton, said the FTC’s prior statements serve as “a good backdrop” for why the HHS rule is not only legally infirm but also a bad idea.

Harm Competition

In Minnesota, state lawmakers changed the Minnesota Government Data Practices Act in 2014 to classify health provider contracts as public data.

In a letter responding to state lawmakers’ request for comment in 2015, the FTC said it was concerned the enacted change would lead to the public disclosure of fees, discounts, and other pricing terms that typically are negotiated in confidence between health-care providers and health insurance plans.

The agency said mandating public disclosure of plan specifics and negotiated fee schedules between the insurance plans, hospitals, and physician service entities “may harm competition and consumers by facilitating coordination or outright collusion on prices or other terms, especially in highly concentrated markets.”

The amendment expanded the disclosure law to cover all data collected by health maintenance organizations, health plans, and other health services vendors contracting with the state to provide health-care services for Minnesota residents, the agency said.

Attorneys say the FTC’s comments could play a significant role in the litigation over the HHS rule.

“Any court hearing and challenge is going to have to consider the fact that you have two different agencies of the federal government that have said very, very different things, so that’s a real issue,” said Joel McElvain, a King & Spalding partner and former Justice Department attorney specializing in health-care litigation.

If the FTC were to come out and say something different now, McElvain said he doesn’t know if it would even matter “because it would be a statement that comes out after this rule was issued, so it would be a statement HHS couldn’t have considered at the time it issued the rule.”

The FTC did not respond to a request for comment on the HHS regulation and whether it has any concerns about the rule’s impact.

Patients as Consumers

Minnesota studied the economic impact its newly enacted provisions would have on the health-care market in 2015. It found that “classifying plan-provider contracts as public data would offer little benefit but could pose substantial risk of reducing competition in health care markets,” as the FTC also warned.

“Despite that input, the law went into effect and there have been no subsequent legislative changes or court opinions affecting the law,” a legislative analyst in the Minnesota House of Representatives Research Department said in an email to Bloomberg Law.

Although health plan companies in the state are now subject to the provision, the pricing information that FTC took issue with disclosing could be withheld if it meets the definition of “trade secret information” under a separate provision in the state law, the state analyst said.

A spokeswoman for the HHS said the agency has “nothing to add about the FTC” comments but noted Secretary Alex Azar’s Nov. 15 remarks in which he called the argument that disclosing prices will lead to higher prices a “canard.”

“When we have transparent pricing information, we actually enable a marketplace,” Azar said during a call with reporters. “We empower patients as consumers. We create shopping, and prices go down. Every example points to prices going down in these instances.”

The AHA, the Association of American Medical Colleges, Federation of American Hospitals, National Association of Children’s Hospitals Inc., and the three hospital systems suing the administration say the rule exceeds the agency’s rulemaking authority under the Public Health Service Act.

The law requires hospitals to list their “standard charges” for the items and services they provide. But “‘standard charges’ do not include the charges privately negotiated between hospitals and insurers,” the groups argue in their Dec. 4 complaint.

In its rule, the HHS says the Public Health Service Act doesn’t define standard charges.

“Obviously judges might differ, but it’s not necessarily really that unreasonable to conclude HHS would have that authority,” said Josh LaRosa, a policy associate at Wynne Health Group, a health policy, public interest consulting firm that focuses on health policy.

“The jump to me doesn’t seem that wide,” he said.

As for the FTC’s comments on the Minnesota law, LaRosa doesn’t think they will be the “nail in the coffin for challenging the legality of what HHS can do,” though he does think “there is probably some truth to the concern the FTC communicates.”

Hospitals are not expected to begin complying with the rule until Jan. 1, 2021, but litigation could stretch past that point.

It will be hard to get a district court ruling and an appeals court ruling all within the next 12 months, McElvain said.

Whether the dispute goes to the U.S. Supreme Court after that is “too uncertain to say,” he added.

The case is Am. Hospital Ass’n v. Azar, D.D.C., No. 1:19-cv-03619, 12/4/19.