Bare Minimum Level of Scrutiny Applied to Federal Rule Requiring Publication of Hospital Price Sheet

A recent decision out of the United States District Court of the District of Columbia upheld a new federal rule requiring hospitals in the United States to make publicly available a data file containing detailed pricing information—hundreds of thousands of rows and hundreds or thousands of columns of pricing information. The lawsuit was brought by various hospital associations and trade groups as well as several health systems and the Association of American Medical Colleges in December 2019, asking the court to strike down the new rule, and to do so quickly. Plaintiffs hoped to mitigate the incredible costs and logistical difficulties that will be involved in complying with the rule.


The court relied upon familiar deferential standards in reviewing and upholding the November 27, 2019 rule by the United States Department of Health and Human Services, Centers for Medicare & Medicaid Services (“the Agency”), that will involve a herculean effort and corresponding costs to create, publish, and regularly update pricing data sheets that will potentially contain millions of individual prices and data points.


Based upon the court’s written opinion, the colossal amount of pricing data involved was a point that appears to have given the court some pause on its road to upholding the rule. How could a price sheet that may contain millions of individual prices be considered a list of standard charges? Standard charge is a term commonly understood to refer to the usual, common, or customary charge as opposed to, as the plaintiffs put it, an individualized, tailored, or bespoke charge applicable to a particular circumstance, payor, and plan. The court ultimately held, however, among other things, that the large number of prices was a consequence of the complexity associated with health care and hospital billing and that plaintiffs’ analogies to menu pricing at a restaurant were inapt as a restaurant rarely deviates from its menu price and a hospital, on the other hand, rarely charges a uniform price.


Plaintiffs argued that the Agency exceeded their statutory authority under the 2010 Affordable Care Act, which only required that each hospital make public “a list of the hospital’s standard charges for items and services provided by the hospital.” Plaintiff also argued that the rule amounted to compelled speech subject to strict scrutiny and violative of the First Amendment for failing to directly advance a substantial government interest in a narrowly tailored way. Lastly, in perhaps their least forceful argument, plaintiffs argued that the rule was arbitrary and capricious under the Administrative Procedures Act.


The court resolved the standard charges argument as discussed above. The court also sided with the Agency on the First Amendment question, rejecting a strict scrutiny analysis of the rule on the basis that the rule regulates commercial speech. The court, however, went even further and instead of applying intermediate scrutiny under the Supreme Court’s Central Hudson decision, applied the Supreme Court’s “less exacting” Zauderer framework on the basis that the rule does not impede the hospitals’ own messaging. The court held that the rule survives Zauderer-level scrutiny because it is sufficiently related to the Agency’s interest in “‘providing consumers with factual price information to facilitate more informed health care decisions’ and ‘lowering healthcare costs.’” Having resolved the first two questions in favor of Agency, the court quickly knocked down the Administrative Procedures Act argument.


The rule goes into effect on January 1, 2021, so hospitals are running out of time to avoid the costs and burdens of implementing the rule. It is likely a decision on any appeal from the court’s decision will arrive long after the time when hospitals will have to start the expensive and laborious task of complying with the rule. Barring further changes, by January 1, 2020, hospitals will have to publicly disclose (1) a file with gross charges, payer-specific negotiated charges, discounted cash prices, de-identified minimum negotiated charges, and de-identified maximum negotiated charges as well as (2) a consumer-friendly publication of payer-specific negotiated charges, discounted cash prices, de-identified minimum negotiated charges, and de-identified maximum negotiated charges for 300 shoppable services.


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