Facts
- Federal law required hospitals to publicly disclose “a list of the hospital’s standard charges for items and services” under guidelines issued by the Secretary of Health and Human Services.
- HHS had historically treated compliance as posting chargemaster gross charges, which often differed from amounts actually paid.
- In 2019, HHS issued a rule redefining “standard charges” to include gross charges, payer-specific negotiated rates, discounted cash prices, and certain de-identified minimum and maximum negotiated charges.
- The rule required (1) a comprehensive, machine-readable public file listing standard charges for all items and services and (2) a consumer-oriented list of standard charges for at least 300 schedulable “shoppable services.”
- Hospital associations and hospitals sued under the APA and the First Amendment, arguing the rule exceeded statutory authority, was arbitrary and capricious, and compelled speech.
- The district court granted summary judgment to HHS, and the hospitals appealed.
Issues
- Whether the statutory term “standard charges” authorizes HHS to require disclosure of payer-specific negotiated rates and other non-chargemaster prices.
- Whether the rule is arbitrary and capricious under the APA due to alleged infeasibility, excessive burden, or inadequate justification of benefits.
- Whether compelling disclosure of negotiated rates violates the First Amendment as compelled commercial speech.
Decision
- The court affirmed summary judgment for HHS and upheld the rule in full.
- It held that “standard charges” is ambiguous and that HHS reasonably construed it to include payer-specific negotiated rates and other charge categories.
- It rejected the APA challenge, concluding HHS reasonably addressed feasibility, compliance costs, and the rule’s expected effects.
- It held the disclosure requirements constitutional under the standard governing compelled disclosure of factual commercial information.
Legal Principles
- When a statute uses an ambiguous term and delegates implementation through agency “guidelines,” a reasonable agency interpretation may be upheld.
- Under arbitrary-and-capricious review, a rule is sustained if the agency considered the main objections, responded to material comments, and explained its predictive judgments without ignoring important aspects of the problem.
- An agency need not prove predicted market benefits with certainty; reasonable forecasting and consideration of countervailing risks can suffice.
- Compelled disclosure of purely factual, uncontroversial commercial information is permissible when reasonably related to a legitimate governmental interest and not unjustified or unduly burdensome.
Conclusion
The court upheld HHS’s hospital price-transparency requirements, ruling that the agency permissibly interpreted “standard charges” to include negotiated rates, reasonably justified the rule under the APA, and did not violate the First Amendment because it mandated disclosure of factual pricing information without imposing an undue burden.