Hospitals get ready to fight CMS in court again, this time over transparency

Hospitals are already getting ready to sue over the Trump administration's transparency rule just a few hours after its release.

The final rule released Friday by the Centers for Medicare & Medicaid Services (CMS) will require hospitals to post in a searchable format payer-negotiated rates for 300 shoppable services starting in 2021 and to post raw data for all of its payer-negotiated rates. The agency also proposed a rule to require insurers to divulge real-time cost-sharing and rates for in- and out-of-network charges from providers.

“The fact is that this regulation exceeds the administration’s authority, and we plan on joining with hospitals to file a legal challenge,” said Federation of American Hospitals President and CEO Chip Kahn in a statement.

RELATED: CMS wants hospitals to post their races rates. But hospitals aren't sure how 

The American Hospital Association, Association of American Medical Colleges and Children’s Hospital Association said in a statement that they are filing a legal challenge alongside member hospitals.

The hospital groups charged that the rule will “introduce widespread confusion, accelerate anticompetitive behavior among health insurers and stymie innovations in value-based care.”

Hospital groups have had success challenging several CMS rules in recent years. Federal rulings have struck down CMS cuts to the 340B drug discount program and to hospital-based clinics in part because the agency didn’t have the authority to make the cuts.

RELATED: Hospitals and insurers question legality, need for CMS price transparency rule

Ready for a fight

But experts say that CMS is ready for the legal challenge.

“There is no question that in crafting this final rule it was crafted with the expectation it would immediately be subject to litigation,” said Emily Cook, a partner at law firm McDermott.

The rule stems from a part of the Public Service Act that requires hospitals to disclose “standard charges” for items and services.

“What this rule requires is not making public a list of a single set of charges, it requires making public a list of charges at five separate metrics,” Cook said.

So if a judge decides to strike down one of the metrics, hospitals would still have to disclose other ones, she added.

RELATED: Survey: Majority of hospital execs believe final CMS transparency rule will face court challenge, delay

A legal challenge could also focus on whether the rule violates federal antitrust law, as nearby hospitals could see what their neighbors received as far as rates from insurers, some experts say.

“This is going to be a clear case of whether this is going to be a violation of antitrust law,” said Mike Strazzella, head of federal government relations at the law firm Buchanan Ingersoll and Rooney. “The underlying theme of antitrust law is based on your own negotiation, not on what other people are doing.”

Other elements of a legal challenge could be whether the required disclosure violates First Amendment rights and whether the Freedom of Information Act already prevents the disclosure of payer-negotiated rates, Cook said.

It remains unclear if CMS will also face a legal challenge for the proposed insurance rule, which requires insurers to post real-time cost-sharing information for plans on the individual and group markets. Under the proposed rule, insurers will also have to make available to the public in-network negotiated rates with their network providers and historical payments of out-of-network payments.

The insurance industry lobbying group America’s Health Insurance Plans (AHIP) put out a statement slamming the proposed rule. Neither the proposed or final rules help consumers make informed decisions about their care or encourage competitive negotiations, AHIP said in a statement.

But AHIP demurred when asked whether it plans to join the burgeoning hospital lawsuit.

“We continue to evaluate and engage on the full impact of both the final and proposed rules, along with other rules currently in process,” said spokeswoman Kristine Grow.