The new CMS requirement that hospitals disclose secret negotiated rates with payers is facing legal challenges.

Four hospital trade groups (the American Hospital Association, the Association of American Medical Colleges, Children’s Hospital Association, and Federation of American Hospitals), said they will join with member hospitals to legally challenge the rule on grounds that it exceeds the administration’s authority.

“Instead of helping patients know their out-of-pocket costs, this rule will introduce widespread confusion, accelerate anticompetitive behavior among health insurers, and stymie innovation in value-based care delivery,” the groups said in a joint statement.1

Hospital Access Management spoke with two healthcare attorneys about what these legal challenges mean for hospitals. Medical facilities should proceed as though the rule will go forward as planned, says Michael Strazzella, JD, administrative head in the Washington, DC, office and head of the federal government relations practice group at Buchanan Ingersoll & Rooney. “They can’t wait based on the hopes that it will come out positively in the courts,” he offers.

One possibility is that litigation simply will delay the disclosure requirement. Regardless, “hospitals should be moving toward, and preparing for, public disclosure of charges,” advises Emily Cook, JD, a partner in the Los Angeles office of McDermott Will & Emery.

Many hospitals will struggle to find the resources to fully comply with the new requirements. “It is not a cheap or easy process to undertake the activities that the rule contemplates,” says Cook, who specializes in healthcare regulation and reimbursement.

According to Cook, there are three options available to hospitals:

  • Prepare to publicly post the charges;
  • Prepare for compliance by developing a searchable price estimator tool that is available to patients online;
  • Anticipate receiving a civil monetary penalty of $300 a day.

Some hospitals may opt to pay the fine instead of comply. “For a small rural hospital, a penalty of $110,000 a year is significant. For a large academic medical center, it is not as significant,” Strazzella notes.

On the other hand, there is no guarantee that the relatively low penalty will remain that way. “Penalties could change in the future,” Cook warns. “There could be other consequences for noncompliance.”

REFERENCE

  1. American Hospital Association. Hospital and health system groups on public disclosure of privately negotiated rates final rule, Nov. 15, 2019. Available at: http://bit.ly/2qOTnIc. Accessed Nov. 27, 2019.