Hospitals’ challenge to new transparency rule draws skepticism from appeals court

• An appeals court panel appeared hostile to many of the arguments posed by hospitals against a looming price transparency requirement.
• Hospital arguments focused on the challenge of complying, the cost and the likely inaccuracy of the data.
• The judges appeared to accept many of HHS’s arguments in the case.

A three-judge federal appeals court panel on Oct. 15 directed the vast majority of critical questioning at the attorney representing hospital challengers to a looming federal price transparency requirement.

The judges with the U.S. Court of Appeals for the District of Columbia appeared much more skeptical of the hospital challenge to the requirement to post privately negotiated rates online by Jan. 1, compared with their reaction to the impending requirement.

The oral arguments in American Hospital Association v. Azar were held to consider hospitals’ appeal of a June lower-court ruling that upheld the latest hospital transparency requirement.

Lisa Blatt, an attorney for Williams & Connolly who represented AHA and the suing hospitals, drew the judges’ skepticism with her argument that the required rates were difficult to identify and would require complex “reverse engineering.”

“I can be very honest with you that I am not buying your argument to the extent that you are making it,” said Judge Harry Edwards.

The hospitals’ objections to the new requirement focused on:

• Workability
• Compelling speech (by requiring “unintelligible and counterproductive” rate discussions)
•  Compliance burden

Hospital arguments get pushback

But Edwards also rejected Blatt’s argument that the information required would be so different from what patients actually would pay that it would amount to hospitals ”lying to their patients.”

“But you are lying to the patients, as I listen to your argument, in suggesting that the chargemaster rate is a rate,” Edwards said. “It’s not.”

The judges also repeatedly pressed Blatt on why the required data would not be accurate, as she argued. She repeatedly explained that charge variation occurs for the same services at the same facilities due to the use of differing pricing approaches such as volume discounts, billing per diem and billing per item.

Judge Merrick Garland rejected hospitals’ concerns regarding the HHS allowance for them to use not available when price listing is impossible due to volume discounts. Blatt warned consumers could interpret that to mean the service, not the price, was unavailable.

“That’s what the words ‘not available’ normally mean, that the answer’s not available, not that [the] service is not available,” Garland said.

Garland also questioned the hospitals’ assertion that the rule did not correspond with the underlying statute on which it was based because the legislation was aimed not primarily at the public but at potential third-party data companies, which were expected to use the statutory authority to create consumer tools.

“I would have thought when I saw this that this is an effort at transparency with patients,” Garland said. “Maybe not a good effort, not a perfect effort, maybe not even a constitutional effort.”

HHS also gets pressed a little

The panel also questioned — much less combatively — the attorney representing the U.S. Department of Health and Human Services (HHS).

The judges pressed Courtney Dixon, an attorney for the U.S. Department of Justice, on whether the rule could require hospitals to post two lists — all negotiated rates plus rates for 300 “shoppable services” — when the underlying statute authorized only one.

“The statute gives the secretary explicit discretion to specify how hospitals are to make public their list of standard charges,” Dixon said.

She also characterized the shoppable-services list as a subset of the machine-readable file of all negotiated rates, with some changes.

She responded to the hospitals’ assertion that the new requirement was complex and far more expensive than HHS’s initial estimate of a $1,000 cost in the first year, noting HHS since revised the estimate up to $11,000.

Also, she said HHS’s estimate of the time needed to comply was 150 hours in the first year — the same as HFMA’s estimate, as documented in an amicus brief. However, HFMA estimated that level of work would continue in subsequent years, while HHS believes the burden would taper off quickly.

“Many new regulations require substantial additional investment by regulated parties,” said Judge David Tatel.