American Hospital Association v. Azar

983 F.3d 528 (D.C . Cir. 2020)

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Holding & Decision

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Nature Of The Case

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Facts

Three different groups pay hospitals for care: patients, insurers, and the federal and state governments. 'Self-pay' patients, pay directly for their care because they have no insurance, receive elective or out-of-network care, or believe that paying directly is cheaper than relying on insurance. Self-pay patients account for fewer than 10 percent of all patients. Hospitals generally charge these patients rates specified in what is called 'chargemasters,' which list all items and services provided by each hospital with their 'gross charges.' Many offer discounts to self-pay patients based on standardized cash discounts or individual financial need (or both). Chargemaster rates are 'virtually never what hospitals ultimately receive as payment.' Medicare requires hospitals' charges for Medicare and non-Medicare patients to be the same for a specific service, and hospitals comply with that requirement by listing chargemaster rates as if they were applicable to everyone, even though hospitals receive different payments depending on the payer's identity. Over ninety percent of patients rely on third-party payers, i.e., insurers, Medicaid, and Medicare. Medicaid and Medicare pay hospitals based on rates set by the states and the Centers for Medicare & Medicaid Services. Those rates are public. Insurance companies have contractual agreements with hospitals to pay negotiated rates. Negotiated rates are a product of a wide range of methodologies. Insurers may pay fixed fees for individual items and services, or they may pay for bundled packages based on common procedures, per diem rates, or other variable factors, set out in 'many dozens of pages of text.' They may also pay according to a 'diagnosis-related group' methodology, under which a rate is established for a group of hospital items and services based on the typical care provided to a patient with a particular diagnosis. The Medicare statute requires diagnosis-related-group classifications for inpatient Medicare reimbursements, and some private insurers use these classifications to establish rates with hospitals. Insurers may pay different amounts based on volume discounts, incentive payments for meeting quality metrics, and exclusions for certain services. The system is exceedingly complex. Adding to the complexity, negotiated rates are not necessarily what insured patients would pay, as their out-of-pocket costs depend on their health insurance plan, which has its own rules on copays, deductibles, and coverage limits. Patients usually learn what a given hospital service costs only after the fact, either from a hospital bill or an 'Explanation of Benefits' form from their insurance company; the latter details the insurer's negotiated rates and the patient's out-of-pocket costs. Patients are 'understandably frustrated by their inability to easily determine in advance what they may pay out-of-pocket for hospital services.' D claims this lack of price transparency has contributed to an 'upward spending trajectory' in healthcare. Congress passed the Affordable Care Act of 2010, which added section 2718, entitled 'Bringing down the cost of health care coverage,' to the Public Health Service Act. After passage, the Secretary allowed hospitals to comply with section 2718(e) by making their chargemasters public. But that changed in 2018 because chargemaster data were 'not helpful to patients for determining what they are likely to pay for a particular service or hospital stay.' In June 2019, President Trump issued an Executive Order titled 'Improving Price and Quality Transparency in American Healthcare to Put Patients First.' The Secretary was to 'propose a regulation, consistent with applicable law, to require hospitals to publicly post standard charge information, including charges and information based on negotiated rates and for common or shoppable items and services.' The Secretary proposed requiring hospitals to disclose not just chargemaster rates, but also 'payer-specific negotiated charges' for their items, and to disclose them in two different ways: a single digital file containing charges for all items and services, and a 'consumer-friendly' list of charges for three hundred 'shoppable' services, defined as services that can be scheduled in advance, 'like a colonoscopy.' Eventually, the Secretary issued a final rule that defines 'standard charge' as 'the regular rate established by the hospital for an item or service provided to a specific group of paying patients.' The rule lists five categories of standard charges that hospitals must disclose: gross charges from chargemasters; payer-specific negotiated charges; standardized discounted cash prices offered to self-pay patients before any individualized discounts; and maximum and minimum third-party negotiated charges for a given item or service, without identifying the specific payer ('de-identified minimum . . . and maximum negotiated charge[s]'). P filed suit, arguing that the rule's interpretation of 'standard charges' violates section 2718(e), the APA, and the First Amendment. The district granted summary judgment to D. P appealed.

Issues

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Legal Analysis

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