On Tuesday, the D.C. Circuit upheld a mandate of the Affordable Care Act (ACA) — enforced via a regulation by the Department of Health and Human Services (HHS) — that required hospitals to publicly publish the prices charged for services rendered, when the services differ in price between those with or without insurance. The court held that the implementing regulation did not violate the Administrative Procedures Act (APA) or the First Amendment.
The opinion explained that the pricing requirement mandated that a hospital providing services to both insured and uninsured patients must “make public a list of standard charges” for services rendered parsed out for patient type based on method of payment. This resulted in three desired lists; one list for charges to insurance companies who pay for services on behalf of its customers, another for those who pay full cash price for services rendered (self pay), and a third list for self-pay customers who receive a standardized discount (discounted self-pay) based on financial status.
In response to the issuance of the price list regulation by the DHHS, the American Hospital Association (AHA) sued the federal government arguing first that the DHHS’s rule violated the APA as the agency did not adequately consider the burden the rule placed on the hospitals nor did the agency use the correct definition of what constitutes a “standard charge” under the ACA. Specifically, the plaintiff asserted that a standard charge should be the list price for a service rendered, not the price after discounts are applied. To do such a calculation of list price minus discount for every service, AHA asserted, creates an insurmountable administrative burden since price varies not only service-to-service, but also depending on what group of services are being bundled together.
The court disagreed with the plaintiff, holding that the court could not substitute its own judgment for that of the DHHS, but could merely examine the record to determine if the agency had “examined the relevant data and articulated a rational connection between the facts found and the choice made.” In this example, the appellate panel explained, the DHHS proffered that the pricing lists would require 150 work hours annually per hospital, which was not an unreasonable burden to the hospital given the massive benefit to patients that such lists would provide.
Additionally, the court further determined that how DHHS defined a standard charge — the prices for services rendered after discounts are applied — was in line with the ACA’s intended definition. The goal of the price list mandate was to ensure that hospitals were not violating the federal law requirement that a hospital shall not charge a person more who is uninsured or who has services covered by Medicaid or Medicare than one is charged with insurance paying, at least in part, for the services rendered.
Lastly, the plaintiff argued that the price list mandate violated the First Amendment by chilling commercial speech. The court summarily dismissed this argument, holding that the entirety of the legal claim was barred by undisputed Supreme Court precedent, namely Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio. Zauderer, like this case, upheld such mandated disclosure schemes as the schemes fail to chill commercial speech —since the pricing disclosures “undoubtedly qualif(y) as ‘traditional or ordinary economic regulation of commercial activity’”— and in fact promote freedom of speech by ensuring that consumers are not mislead and thoroughly informed about a particular service prior to purchasing.
The plaintiffs are represented by Williams & Connolly and Hogan Lovells.
