Lawsuit Dismissed, Allowing CMS to Require Payer-specific Payment Rates

A federal judge in Washington, DC, recently dismissed the lawsuit challenging the Centers for Medicare & Medicaid Services’ (CMS) Price Transparency Final Rule that requires hospitals to disclose their privately negotiated, payer-specific payment rates effective Jan. 1, 2021. Plaintiffs in the lawsuit include the American Hospital Association (AHA), three other national organizations representing hospitals and health systems, and three hospitals in Nebraska, Missouri and California. Released Nov. 15, 2019, the transparency final rule requires hospitals to make their “standard charges” public in a machine-readable file and in a consumer-friendly display for 300 shoppable services. Key issues of the lawsuit are:

  • A provision that mandates public disclosure of individually negotiated rates between hospitals and commercial insurers. The lawsuit asked the court for relief on the basis that the U.S. Department of Health and Human Services lacks statutory authority to require and enforce this provision.
  • An argument that the provision violates the First Amendment by compelling the public disclosure of individual rates negotiated between hospitals and insurers in a manner that will confuse patients and burden hospitals.

The CMS presented additional pricing transparency requirements as part of the proposed rule to update the Medicare inpatient prospective payment system for fiscal year (FY) 2021. If finalized, the FY 2021 rule would mandate that hospitals report the median payer-specific negotiated rates for inpatient services by Medicare-severity diagnosis-related group for Medicare Advantage plans and third-party payers on the Medicare cost report for cost reporting periods ending Jan. 1, 2021, and after. The MHA will oppose these requirements in its comments to the CMS and encourages hospitals to do likewise in their comments due to the CMS July 10.  

Michigan hospitals remain committed to increased transparency around healthcare quality and costs, including price information for patients. Hospitals voluntarily share quality data on The AHA and other plaintiffs are expected to appeal the recent court decision on an expedited basis. The MHA will continue its efforts to assist hospitals in ensuring they are compliant with the transparency final rule prior to the Jan. 1, 2021, effective date. Members with questions should contact Vickie Kunz at the MHA.