D.C. Circuit Upholds Hospital Price Transparency: Regulations Paving Way for January 1, 2021 Effectiveness

On December 29, 2020, the United States Court of Appeals for the District of Columbia issued its opinion in American Hospital Association v. Azar (the Opinion) upholding the Hospital Transparency Regulation (the Rule) issued by the Secretary of Health and Human Services. The Opinion paved the way for the Rule to become effective as scheduled on January 1, 2021.

The Rule, part of an initiative to increase the transparency of health care pricing, requires hospitals to make public in a machine-readable form five categories of “standard charges” for all hospital items and services. These categories are:

• the charge master list of gross charges;
• the discounted cash price (applied to a person who pays cash);
• the payer-specific negotiated charges for all items and services with all payers;
• the de-identified minimum negotiated charges for all items and services (the lowest charge negotiated with any payer for each item or service); and
• the de-identified maximum negotiated charge for all items and services.

In addition, each hospital must list payer-specific charges, de-identified minimum and maximum charges and discounted cash prices for at least 300 “Shoppable Services” (those commonly provided by a hospital and which can be scheduled in advance), including 70 CMS-designated shoppable services, in a consumer friendly form.

The American Hospital Association and others had challenged the Rule, asserting the Rule’s interpretation of “standard charges” violated the authorizing statute (Section 2718(e) of the Public Health Service Act, which was added by the Affordable Care Act), the Administrative Procedure Act, and the First Amendment.

However, a unanimous panel of the D.C. Circuit rejected each of the challenges and upheld the Rule, affirming the opinion of the U.S. District Court, which also had upheld the Rule.

The Opinion means the Rule became effective on January 1, 2021. Hospitals violating the Rule may be issued a written warning, required to implement a corrective action plan and face a civil monetary penalty of up to $300 per day (which amount is adjusted annually).

The Rule is part of other transparency initiatives the federal government has implemented.  Notably, the Departments of Health and Human Services, Labor, and Treasury issued a final rule applicable to group health plans and health insurance issuers on October 29, 2020, with its requirements for public disclosure to be effective January 1, 2022 and its provisions for required disclosures to participants upon request to be effective for 500 items on January 1, 2023, and for all items and services for plan and policy years beginning on or after January 1, 2024. More information on the Transparency in Coverage Rule is available here.