Hospital groups urge court rejection of ‘unlawful’ charge transparency rule

• State hospital groups tried to explain the real-world functioning of hospital charges, hoping to sway an appeals court.
• HFMA highlighted how the requirement departs from statutory authority.
• A hospital said costs of complying with the requirement could run as high as $2 million.

A growing number of hospital groups urged an appeals court to reject a looming requirement for their members to publicly post the charges they privately negotiate with health plans.

Hospitals and national advocacy groups are appealing a June 23 federal district court decision in The American Hospital Association, et al. v. Azar to allow a January start of new requirements for hospitals to post negotiated charges.

The plaintiffs were recently joined through amicus briefs by other hospital groups, including state hospital associations and HFMA.

Although the groups supported providing patients with clear price information, they objected that the Trump administration lacked the legal authority to issue the specific transparency approach in question.

“The only question for this court is one of administrative law, i.e., ‘whether the agency appreciated the scope of its discretion or exercised that discretion in a reasonable manner,’” wrote 40 state and regional hospital associations in a July 24 amicus brief filed with the federal appeals court in Washington, D.C. “HHS did not do so here. It instead chose to achieve its laudable goals in unlawful ways.”

Previously, 37 state hospital associations filed a friend-of-the-court brief at the district-court level during the initial case. The new filing followed increased attention and scrutiny of the transparency requirements as the start date approaches.

The looming requirements also took on increased importance as Medicare moved to build on them with recently issued additional requirements as part of the FY21 Inpatient Prospective Payment System (IPPS) proposed rule.

The state hospital associations focused on explaining to the appeals court how hospital charges and payments work, especially the role the chargemaster. They said the district court judge mistakenly thought the chargemaster creates standard charges, as opposed to properly interpreting the chargemaster as merely the starting point for nonstandard charges for commercial health plans.

“This distorts ‘standard’ beyond both its common meaning and the realities of the current hospital payment system,” the state groups wrote.

HFMA raises statutory objections

The amicus brief submitted this week by HFMA focused on the many ways CMS overstepped its legislative authority by expanding the definition of standard charges to include hospital prices.

In establishing terms such as the payer-specific negotiated charge, self-pay discount rate and minimum, median and maximum negotiated charges, CMS aimed to redefine standard charge to mean something very different from what Congress intended in the relevant statute, the HFMA brief states. Instead, the CMS definitions resemble the industry definition of prices for various services.

“CMS is expanding the definition of standard charge to include ‘charges’ that vary by third-party payer and are therefore not uniform across all patients,” HFMA wrote. “As such, HFMA’s members do not believe the agency has the statutory authority to finalize this definition and strongly encourage the agency not to do so.”

Hospitals highlight financial burdens

Like many hospitals and health systems responding to the expansion of the transparency requirement in the FY21 IPPS proposed rule, Trinity Health warned against the requirements that hospitals are challenging in AHA v. Azar. For instance, Trinity said the requirements will create “a significant new burden for hospitals” and be “exceptionally challenging” for patients to use.

“We are in the midst of a pandemic and have had to divert precious resources to preparing to comply with the price transparency requirements,” wrote Tina Weatherwax Grant, JD, vice president of public policy and advocacy for the 22-state health system.

Hospitals rejected CMS’s contention that implementation of the charge transparency requirement will cost only $11,898.60 per hospital.

One hospital system in Washington, D.C., estimated it would cost more than $500,000 to build a database to track the required information and more than $300,000 each year to maintain it, according to the state groups’ amicus brief.

One Ohio hospital system estimated compliance with the transparency requirement could cost as much as $2 million to cover the needed analysis, outside vendors and increased support staff.

“Here, the regulatory burdens demonstrate just how far HHS has stretched the statutory language to achieve its policy preferences,” the hospital groups wrote.