Federal Judge Upholds Trump Administration Rule Requiring Hospitals to Disclose Negotiated Prices

President Donald Trump walks on the south lawn of the White House on June 14, 2020. (Tasos Katopodis/Getty Images)

The Trump administration can compel hospitals and insurers to publish negotiated costs for health care services that are normally kept secret from patients, a federal judge has ruled.

The ruling from Judge Carl Nichols with the U.S. District Court for the District of Columbia on June 23 is a victory for the administration, which has been pushing for transparency in the U.S. health care system.

President Donald Trump signed an executive order in June last year that pushes hospitals to publicly disclose the actual cost of services in an effort to lower health care costs and empower patients with information they need to find the lowest costs and the highest quality of care.

The Department of Health and Human Services (HHS) introduced a rule in November 2019 that defined “standard charges,” laid out the publication requirements for hospitals and insurers, and the department’s enforcement plans.

At the time, hospital and insurer organizations and advocacy groups objected to the agency’s proposals, disputing that the Trump administration has the authority to require the disclosures, which they believe are trade secrets. The hospitals also disputed that the policy would benefit consumers and lead to lower costs, countering that compliance would instead be too burdensome and “get in the way” of providing services for patients.

The finalization of the rule, which goes into effect January 2021, prompted the American Hospital Association (AHA) to sue, arguing that the White House didn’t have the authority to make the directive, had violated the First Amendment in its creation, and had acted in an “arbitrary and capricious” manner.

Nichols, a Trump appointee, disagreed on June 23, saying that the hospital trade group was “attacking transparency measures generally” that are intended to “enable consumers to make informed decisions.”

“Hospitals may be affected by market changes and need to respond to a market where consumers are more empowered, but the possibility that the nature of their negotiations with insurers might change is too attenuated from the compelled disclosure to make the Rule unlawful,” Nichols wrote in his opinion (pdf).

The decision was welcomed by Trump, who said in a statement on social media that the ruling was a “BIG VICTORY for patients.”

“Federal court UPHOLDS hospital price transparency. Patients deserve to know the price of care BEFORE they enter the hospital. Because of my action, they will. This may very well be bigger than healthcare itself. Congratulations America!” the president wrote.

Meanwhile, the AHA said it intends to appeal.

“We are disappointed in today’s decision in favor of the administration’s flawed proposal to mandate disclosure of privately negotiated rates. The proposal does nothing to help patients understand their out-of-pocket costs. It also imposes significant burdens on hospitals at a time when resources are stretched thin and need to be devoted to patient care. Hospitals and health systems have consistently supported efforts to provide patients with information about the costs of their medical care. This is not the right way to achieve this important goal,” AHA General Counsel Melinda Hatton said in a statement.

“Today’s decision was also premised on the erroneous conclusion that the ‘standard charges’ referenced in current law can be interpreted to include rates negotiated with third-party payers. While the Court ruled that this was a close call, that conclusion clearly does not reflect the experience of hospitals and health care systems. The AHA will appeal this decision and seek expedited review.”

Trump’s executive order on improving transparency on health care prices and quality required the HHS secretary to propose a regulation to publicly post standard charge information “in an easy-to-understand, consumer-friendly, and machine-readable format using consensus-based data standards that will meaningfully inform patients’ decision making and allow patients to compare prices across hospitals.”

It also requires hospitals to regularly update the posted information.

David Mitchell, the founder of advocacy group Patients For Affordable Drugs, said in a statement to The Epoch Times in response to the ruling that he thinks “we have to get rid of our system in which prices are secret and hidden from those who must pay them.”

Additional reporting by Venus Upadhayaya.