Hospitals sue CMS over price transparency rule

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Hospitals have filed a lawsuit against the Trump administration to fight a rule mandating they post payer-negotiated rates. (Getty/designer491)

Major hospital groups and several individual facilities have filed a lawsuit charging the Trump administration’s price transparency rule is “unlawful, several times over.”

The federal lawsuit announced Wednesday was widely expected after the Centers for Medicare & Medicaid Services (CMS) finalized the rule last month that requires hospitals to post payer-negotiated rates for 300 shoppable services. Hospitals have balked at the cost of implementing the rule, which goes into effect in 2021, and warn the regulation could harm price competition.

“Hospitals and commercial health insurers keep the rates they privately negotiate confidential for good reason: it would undermine competition if they were required to be disclosed publicly and blunt incentives for health insurers to participate in innovative arrangements,” according to the lawsuit filed in the U.S. District Court for the District of Columbia.

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

The American Hospital Association, Association of American Medical Colleges, Federation of American Hospitals and National Association of Children’s Hospitals led the lawsuit. Individual facilities Memorial Community Hospital in Nebraska, California-based Provide Health System and Missouri-based Bothwell Regional Health Center are also listed as plaintiffs.

The lawsuit does not contain any plaintiffs from the insurance industry, which has also bashed the rule.

The lawsuit argues that CMS violated a slew of laws when it released the final rule; chief among them is the First Amendment, because the rule “mandates speech in a manner that fails to directly advance a substantial government interest.”

The rule also exceeds CMS’ federal authority, the lawsuit charges.

CMS argued in the rule that its authority to mandate the posting of payer-negotiated rates comes from a federal law that requires hospitals to publish standard charges for items and services.

“But to state the obvious, negotiated charges are not ‘standard charges,’” the lawsuit said. “They are the opposite of standard, in fact, because they reflect the non-standard amount negotiated privately between a hospital and a commercial health insurer.”

CMS also greatly underestimates the time and cost for complying with the rule. Even though the rule doesn’t go into effect until Jan. 1, 2021, hospitals will “need to start devoting substantial planning efforts and resources toward compliance with the final rule almost immediately,” the lawsuit said.

So the hospital groups intend to file an early motion for summary judgment to get a decision soon.

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

Hospitals have had success challenging several CMS moves. Courts have struck down CMS rules to institute payment cuts to the 340B drug discount program and to off-campus hospital clinics as part of a site-neutrality rule.

The groups are also making a "solid argument" to strike a distinction between payer-negotiated rates and standard rates, said Mike Strazzella, head of federal government relations at the law firm Buchanan, Ingersoll and Rooney.

Strazzella added that he was surprised there wasn't as much emphasis on if the rule violated federal antitrust laws. 

"It was perceived that when the rule came out there would be a lot of challenge around this issue," he said. 

The Department of Health and Human Services (HHS) blasted the lawsuit and reinforced the agency's commitment to price transparency.

"Hospitals should be ashamed that they aren’t willing to provide American patients the cost of a service before they purchase it," said HHS spokeswoman Caitlin Oakley.

CMS Administrator Seema Verma said in an op-ed in the Chicago Tribune Wednesday that the rule is necessary to help patients shop for lower healthcare costs.

“Those with a vested interest in maintaining the status quo of preposterously high and unpredictable health care pricing will no longer be able to hide,” she wrote.

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