As we indicated in last week’s blog post , the D.C. Circuit Court’s refusal to uphold HHS’ pharmaceutical price disclosure rule (“RX Rule”) was not a predictor of how the trial court might rule in the closely watched challenge to HHS’ hospital price transparency rule (“Hospital Rule”). In a June 23, 2020 ruling on cross motions for summary judgment, American Hospital Association, et. al. v. Azar, D.C. District Court Judge, Carl Nichols, ruled that HHS did not overstep its authority under Section 2718 of the Public Health Services Act (“Section 2718”) by requiring hospitals to publish their “gross charges”, payer-specific negotiated rates, discounted cash prices, and de-identified minimum and maximum negotiated charges.
In applying the Chevron test to the rule, the judge found that Section 2718’s mandate for hospitals to publish their “standard charges” did not unambiguously limit such publication to “charge master” charges as the plaintiffs, led by the American Hospital Association, argued. Applying the second step of the Chevron test, the judge found that HHS’ expansion of the term “standard charges” to include “gross charges”, payer-specific negotiated rates, discounted cash prices, and de-identified minimum and maximum negotiated charges was reasonable and therefore the rule could stand. The judge also rejected the plaintiffs arguments that the Hospital Rule violated hospitals’ First Amendment rights, was arbitrary and capricious, and that the penalties HHS intends to levy against hospitals who violate the Hospital Rule, which include civil penalties of up to $300 a day, exceeded its statutory authority. Although it can certainly be argued that most hospital industry insiders would not interpret the term “standard charges” as broadly as HHS has under the Hospital Rule, Judge Nichols found enough ambiguity in the term to uphold it. Absent a successful appeal by the plaintiffs by the end of this year, hospitals will have to comply with the Hospital Rule as of January 1, 2021.