Member Article

Coming to Grips with Hospital Price Transparency – DC Circuit Rejects American Hospital Association’s Effort to Invalidate Price Transparency Requirements Rule

• Since 2010, Section 2718(e) of the Public Health Service Act has required hospitals to establish and publish annually “a list of the hospital’s standard charges for items and services provided by the hospital.” Until recently, HHS was content to allow hospitals to comply by simply publishing their chargemasters. Finding that approach to price transparency paid lip service to the statutory purpose of better informing customers, in June 2019 President Trump issued an Executive Order directing the Secretary of HHS to develop a new price transparency rule. HHS responded by serving up a final rule that imposes a far more demanding level of price disclosures starting January 1, 2021.
  
  
• Predictably, with its members facing the prospect of having to invest substantial resources to achieve a level of pricing transparency never before seen in the hospital industry (including disclosure of rates negotiated with third party payers), the American Hospital Association (AHA), with a bevy of supporting amicus curiae, sued HHS to block implementation of the final rule. On June 23, 2020, the Federal District Court in DC summarily dismissed that lawsuit and AHA promptly appealed to the Circuit Court of Appeals, contending the final rule violates the Affordable Care Act, the First Amendment and the Administrative Process Act.
  
  
• On December 29, 2020, just days before the rule was to take effect, the DC Circuit upheld the lower court’s grant of summary judgment, dealing the AHA a substantial setback in its efforts to block implementation. Whether the AHA will now carry its fight into the US Supreme Court is unknown at this writing. That same day, the Circuit Court also dismissed as moot the AHA’s emergency request to stay enforcement of the rule. Prior to the ruling, the AHA wrote to the Biden-Harris Transition Team asking the incoming administration to state that it would “exercise its enforcement discretion while you evaluate whether to rescind the onerous and anticompetitive requirement to publish the prices for each item and service negotiated for each commercial health insurer.”
  
  
• Two separate sentences in the Circuit Court’s opinion suggest the panel of judges hearing the appeal was not persuaded that the hospital industry should remain immune from price comparisons typical in other industries:
  
  
  • Leading off, the opinion observed “their [i.e., hospitals’] charges look nothing like hotel room rates or car prices.”
    
    
  • And in response to the AHA’s criticism that the final rule invites reliance on third-parties as “irrationally convoluted,” the Circuit Court defended the Secretary’s reliance on third-party price aggregators and researchers to bring more efficiency to the industry stating “such services are ubiquitous in other industries where prices are publicly available, such as travel booking websites and used car price aggregators.”
    
    
• Perhaps the most noteworthy aspect of the Circuit Court’s opinion is the clear lack of any sympathy for the positions advanced by the AHA in its appeal. In fact, the AHA’s arguments appeared to strike the Circuit Court as straining well-accepted tenets of deference to administrative agencies and statutory construction, and, as to the First Amendment, “squarely barred” by prior case law.
  
  
• Key Takeaways:
  • American hospitals have long been insulated from price competition commonly seen in other sectors of industry – that is coming to an abrupt halt.
    
    
  • While the reasons for current state of inscrutable hospital pricing are not solely the fault of hospitals, it is now their problem.
    
    
  • If the current state makes hospital pricing too difficult to comply with a rule requiring price transparency, an unintentional (or perhaps intentional) consequence of the price transparency rule may be a fundamental change to how hospitals seek to price their services and approach negotiations with third party payors.
    
    

The Centers for Medicare & Medicaid Services announced the launch of a new Geographic Direct Contracting Model to test “whether a geographic based approach to value-based care can improve quality of care and reduce costs for Medicare beneficiaries across an entire geographic region.”

• According to CMS, the Model is an opportunity for accountable care organizations, health systems, health care provider groups, and health plans in a selected region to coordinate the care of Medicare beneficiaries as Direct Contracting Entities (“DCEs”). Under the Model, DCEs will take responsibility for the total cost of care for Medicare fee-for-service beneficiaries in a specific region and “implement region-wide care delivery and value-based payment systems with the goal of improving care for beneficiaries through higher quality and lower cost.”
  
  
• The Model allows DCEs to offer a number of beneficiary engagement incentives, including but not limited to, vouchers for over-the-counter medications recommended by a health care provider, wellness programs memberships, vouchers for vision and dental care services, and vouchers for transportation services to and from an appointment with a health care provider.
  
  
• DCEs also may offer certain enhanced Medicare benefits to Model beneficiaries, such as streamlined access to a skilled nursing facility by waiving Medicare’s 3-Day SNF Rule, home visits for care management, and asynchronous telehealth services for certain conditions.
  
  
• To be included in the Model, a beneficiary must satisfy certain requirements. A beneficiary must: (1) be enrolled in both Medicare Part A and Part B; (2) not be enrolled in a Medicare Advantage plan, Medicare-Medicaid Plan, cost plan, PACE organization, or other Medicare managed care plan; (3) have Medicare as a primary payer; (4) be a resident of the United States; and (5) have their address of record in a region included in the Model. Beneficiaries will maintain all of their current Medicare benefits and may continue to see any enrolled Medicare provider or supplier of their choosing. Beneficiaries’ out-of-pocket costs will never increase under the Model.
  
  
• The Model will be tested over a six-year period in four to ten regions which have not yet been selected. The first performance period will span January 1, 2022 through December 31, 2024. The second performance period will take place from January 1, 2025 through December 31, 2027.
  
  
• Key Takeaway: The Model is still in its initial stages of development, but offers participants the opportunity to utilize a range of flexibilities and tools to better coordinate care for Medicare beneficiaries across an entire region while providing beneficiaries with enhanced benefits and the potential for lower out-of-pocket costs.
  
  

Proposed amendments to the HIPAA Privacy Rule aim to strengthen individuals’ right to access their health information and facilitate the transition to value-based care by reducing constraints on case management and care coordination communications.

• Last month the US Department of Health and Human Services (“HHS”) Office for Civil Rights issued a long-anticipated notice of proposed rulemaking (the “Proposed Rule”) to modify the Standards for the Privacy of Individually Identifiable Health Information (the “Privacy Rule”) under HIPAA and the HITECH Act.
  
  
• If finalized, the Proposed Rule would affect numerous provisions of the Privacy Rule and substantially modify the compliance obligations of covered entities and their business associates.
  
  
• Significantly, HHS is proposing revisions to the Privacy Rule designed primarily to strengthen an individual’s right of access to their protected health information (“PHI”). Among other revisions, HHS proposes to
  
  
  • Reduce a covered entity’s response time for a request for access from 30 to 15 days, with an opportunity to extend by up to 15 days.
    
    
  • Require covered entities to develop written policies for prioritizing urgent or other high priority access requests in order to limit the need to use the 15-day extension to respond to such request.
    
    
  • Strengthen an individual’s right to inspect their PHI in person, formally allowing note-taking, videos and photographs and the use of other personal resources to capture PHI.
    
    
  • Limit an individual’s right to direct a copy of their PHI to a third party to an electronic copy of their PHI in an electronic health record, consistent with Ciox v. Azar (a revision that would favor covered entities rather than an individual’s right of access).
    
    
  • Create a pathway for individuals to direct the sharing of an electronic copy of PHI in an EHR among covered health care providers and health plans.
    
    
  • Make adjustments and clarifications to the fees that covered entities may charge for copies of PHI, and place additional obligations on covered entities to provide advance notice of estimated fees for copies of PHI requested pursuant to an individual’s right of access or with an individual’s valid authorization. In certain instances, the modifications would prohibit charging any fee.
    
    
  • Prohibit a covered entity from using unreasonable identification verification requirements on an individual or their personal representative exercising a right under the Privacy Rule.
    
    
• A second key goal of the Proposed Rule is the removal of impediments to the exchange of PHI for case management and care coordination. Among numerous proposed revisions tailored to meet this goal, HHS proposes to
  
  
  • Create an express exception to the “minimum necessary” standard for disclosures to, or requests by a health plan or covered healthcare provider for individual-level care coordination and case management.
    
    
  • Expressly permit covered entities to disclose PHI to social services agencies, community based organizations, home and community-based services (“HCBS”) providers, and other similar third parties that provide health-related services to specific individuals for individual-level care coordination and case management.
    
    
• HHS also is proposing a number of modifications to facilitate sharing of PHI with family members, friends, and caregivers of individuals, some of which are specifically geared to individuals substance use disorders (“SUD”) or serious mental illness (“SMI”).
  
  
• Finally, HHS is proposing certain modifications around the required Notice of Privacy Practices (“NPP”), including revisions to the required NPP content, and elimination of the requirement for a covered health care provider with a direct treatment relationship to an individual to obtain a written acknowledgment of receipt and, if unable to obtain the written acknowledgment, to document their good faith efforts and the reason for not obtaining the acknowledgment.
  
  
• Key Takeaway: If finalized as proposed, the modifications to the Privacy Rule would become effective 60 days following publication of the final rule in the Federal Register, and covered entities and business associates would have 180 days thereafter to come into compliance.