Hospitals received a blow this week when a federal judge ruled in favor of the Trump administration’s push to make hospitals disclose their negotiated rates with insurers.
HHS issued a final rule in November that required hospitals to make public their gross charges, payer-specific negotiated charges, discounted cash prices and de-identified minimum and maximum negotiated charges for every item and service offered. They also must make public negotiated charges for 300 “shoppable services.”
A group of hospital industry associations and hospital systems filed suit soon after, arguing that HHS violated their First Amendment rights, exceeded its statutory authority and acted in an arbitrary and capricious manner. They argued that the rule would confuse consumers and chill negotiations with insurers while driving up prices.
US District Judge Carl Nichols rejected the hospitals’ argument that “standard charges” only referred to a chargemaster and could not mean negotiated charges with insurers. In his ruling, Nichols wrote that “chargemaster rates are highly inflated and often ‘bear little resemblance’ to the actual payment tendered to a hospital by a patient or third-party provider (private insurance companies or Medicare and Medicaid).”
As to the hospitals’ argument that it would chill negotiations, “the Rule requires only the publication of the final agreed-upon price—which is also provided to each patient in the insurance-provided explanation of benefits—and not any information about the negotiations themselves,” the judge wrote.
The American Hospital Association pledged an appeal on an expedited basis, arguing that the ruling places a burden on hospitals while the industry responds to a pandemic.
“We are disappointed in today’s decision in favor of the administration’s flawed proposal to mandate disclosure of privately negotiated rates. The proposal does nothing to help patients understand their out-of-pocket costs,” AHA General Counsel Melinda Hatton said in a statement. “Today’s decision was also premised on the erroneous conclusion that the ‘standard charges’ referenced in current law can be interpreted to include rates negotiated with third-party payers. While the Court ruled that this was a close call, that conclusion clearly does not reflect the experience of hospitals and health care systems.”
Hospitals and insurers should not expect the issue of price transparency to dissipate; the administration has made it a focus since its earliest days. Donald Trump, during his 2016 presidential campaign, made price transparency for providers one of his healthcare priorities. In addition, consumer frustration over lack of transparency in billing has propelled congressional discussions in both parties about how to respond.
Employers, which have taken a more active role in trying to manage healthcare costs, may welcome the new information as they choose insurers and negotiate plans.