The American Hospital Association, other hospital associations, and some individual hospitals have filed suit in the federal District Court for the District of Columbia to overturn the Department of Health and Human Services’ final hospital price transparency rule.

Beginning in January, 2021, the final rule requires hospitals to post details about their standard charges on-line, including their negotiated rates with insurers, and the amounts they are willing to accept in cash payments from patients. In addition, the rule requires hospitals to make public payer-specific negotiated charges for 300 “common shoppable services,” as well as the amount a hospital is willing to accept as payment in cash for these services. As stated in “plain English” in the complaint: “The Final Rule requires each hospital in the nation to publicize on its website a huge quantity of confidential pricing information reflecting individually negotiated contract terms with all third-party payers, including all private commercial health insurers, with which the hospital contracts.”

The complaint alleges that the rule is unlawful for three reasons. First, the hospitals allege that the rule exceeds HHS’s statutory authority because the statute on which HHS relies requires only that hospitals publish their “standard charges,” and negotiated rates are by definition not “standard.”

Second, the complaint alleges that the rule violates the First Amendment “because it compels disclosure of highly confidential individually negotiated pricing data without any reasonable expectation that it will advance any governmental interest in healthcare-pricing transparency.” In support of this allegation, the hospitals quote from the preamble to the final rule itself, which acknowledges that “the release of hospital standard charge information in not sufficient by itself to achieve our ultimate goals for price transparency.” This is because the most important information for patients is the amount that they will be required to pay out of pocket, which is determined by the specifics of their health plans rather than on a hospital’s charges.

Third, the complaint alleges that the rule is arbitrary and capricious under the Administrative Practices Act because it does not further HHS’s stated interest in promulgating the rule and because it would impose a “huge cost” on hospitals to implement.

The complaint seeks a declaratory judgment that the rule is unlawful, and a preliminary and a permanent injunction barring HHS from enforcing the rule. The complaint was filed on December 4, 2019 followed on December 9, 2019 with a motion for summary judgment. This motion seeks a quick resolution of the merits of the case because of the “daunting” burden on hospitals to comply with the rule and the need to start this work now to implement it in January, 2021.

The lawsuit is The American Hospital Association et al. v. Azar, Civil Action No. 1:19-cv-3619. For a copy of the complaint, please click here and for the memorandum in support of the summary judgment motion, click here. For Whatley Kallas, LLP’s previous article on the final rule at issue in the complaint, please click here. The attorneys at Whatley Kallas will continue to follow this litigation and will report on important developments.