Only a few days before the rule was set to go into effect, the American Hospital Association (AHA) lost its appeal challenging the measure on breach of executive power and cost-effective grounds.
In its opinion the court stated, “Requiring hospitals to disclose prices before rendering services undoubtedly qualifies as ‘traditional or ordinary economic regulation of commercial activity.’”
One specific point of challenge came with an allegation of First Amendment breach, i.e. compelling a company to disclose information about their product or service — likening it to “chilling protected commercial speech.”
Citing a 1985 ruling by the Ohio Supreme Court the appeals court dismissed this argument, stating, “As in Zauderer, the information the rule requires hospitals to disclose—rates negotiated with insurers and formalized in their contracts—is ‘factual and uncontroversial’ and directly relevant to ‘the terms under which [hospitals’] services will be available’ to consumers.
Another argument made by the AHA, that the rule would mislead consumers as to the real costs of care, was also shot down by the court, which asserted instead that “it is the current rule (preferred by the Association) that is misleading, as it requires disclosure of only chargemaster rates, even though they apply to fewer than ten percent of consumers.”
“Chargemaster” denotes the list of estimated prices published by hospitals that serve as starting points between the hospitals and ratepaying negotiators like insurance companies or individual patients.
The Trump administration issued the new rule by executive order in June of 2019. The order was then challenged in court by the AHA and others, alleging that it places an undue burden on the healthcare magnates and challenged the authority of the federal government to issue such a rule.
A D.C. district court judge sided with the administration in June of this year, and the decision was appealed to the next level. The U.S. Court of Appeals for the District of Columbia heard oral arguments back in October.
Cynthia Fisher, founder and chair of PatientRightsAdvocate.org, led much of the public advocacy of this rule — lobbying congress and the president to cement such measures into law. Fisher estimates the rule will save patients 30 to 50 percent on healthcare costs.
A study by Vanderbilt University Health Economist Larry Van Horn found that cash based care services were 39 percent less than the negotiated prices run through hospital-insurance company negotiations.
Fisher’s group filed an amicus brief in defense of the administration’s rule at the district court.
Of the appellate verdict, Fisher said, “Today’s important decision recognizes that healthcare price transparency will empower patients to make informed decisions and put downward pressure on prices.”
“This decision upholding HHS’ landmark hospital transparency rule will help ensure that healthcare providers play by the same rules as companies in every other industry. We applaud the court for its well-reasoned decision and HHS for its extraordinary efforts in adopting this rule.”
She added, “Clear prices will usher in a functional, competitive marketplace that allows consumers to shop for the best quality of care at the lowest possible prices. Consumers now have the information they need to lead a healthcare revolution that will fix American healthcare for generations to come.”
American Hospital Association General Counsel Melinda Hatton reacted to the opinion, stating, “America’s hospitals and health systems support the goal of increasing price transparency by making patient out-of-pocket cost estimates easier to access and understand. Our focus remains on providing patients with the knowledge they actually need to make informed decisions about their health care.”
“That is why we are disappointed in today’s decision to uphold the District Court rejection of hospitals’ challenge to the rule. Further, the decision to decline a stay in enforcement ignores the overwhelming burden of the pandemic on hospitals.”
Healthcare costs have ballooned and patients are often surprised with “surprise bills,” known as balance bills, amounting to the difference between the provider’s cost and the amount covered by the insurance company. Patients are often billed for that difference by the provider, sometimes for exorbitant sums.
The billowing cost problem has opened a window of opportunity for the upstart direct care model — which operates outside of the insurance system. An average hospital charge for a hip replacement is about $40,000 while the price for the same surgery at Texas Free Market Surgery is about half that.
Opponents of the rule also contend that the costs, whether of the balance billing or of compliance with the new rule, will be distributed back to patients in their premiums.
“The AHA continues to believe that the disclosure of privately negotiated rates does nothing to help patients understand what they will actually pay for treatment and will create widespread confusion for them,” Hatton added.
“We also believe it will accelerate anticompetitive behavior among commercial health insurers and hinder innovations in value-based care delivery. Lastly, the requirement imposes significant costs on care providers at a time when scarce resources are needed to fight COVID-19 and save lives.”
The Trump administration has made a point to roll back regulatory rules of yesteryear and issue new ones intended to reduce prices. Most recently, the administration issued an order to eliminate rebates given to insurance companies by drug manufacturers and tie prescription drug prices to the lowest within other western countries.
While the implementation of such measures may take time to develop, the rule is counted as a win by the Trump administration hoping to curtail the runaway costs of healthcare in America.
The AHA may still appeal to the Supreme Court, but with the new rule three days from consequence, hospitals will likely roll into the new year with the new task at hand: to provide consumers with specific prices for their services.