983 F.3d 528
D.C. Cir.2020Background
- Congress added §2718(e) to the Public Health Service Act (ACA) requiring each U.S. hospital to "establish (and update) and make public (in accordance with guidelines developed by the Secretary) a list of the hospital’s standard charges." The statute does not define "standard charges."
- Hospitals have complex, payer-dependent pricing: chargemasters list gross charges rarely paid by insurers or patients; most patients (90%+) are covered by third-party payers with negotiated, variable rates and bundled diagnosis-related-group payments.
- HHS promulgated a rule defining "standard charge" to include five categories: chargemaster gross charges, payer-specific negotiated charges, standardized discounted cash prices, and de-identified minimum and maximum negotiated charges; it required both a machine-readable comprehensive file and a consumer-friendly "shoppable" list for common services.
- The Secretary adopted the rule after notice-and-comment, adjusted compliance timing and burden estimates (delaying effective date and increasing first-year hours estimate), and justified the rule as advancing price transparency to help consumers and reduce costs.
- The American Hospital Association and others sued, alleging the rule exceeded statutory authority, violated the APA as arbitrary and capricious, and violated the First Amendment; the district court granted summary judgment to the Secretary, and the D.C. Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether "standard charges" may include payer-specific negotiated rates, standardized cash discounts, and de-identified min/max negotiated rates | Association: "standard" means a seller's list price (chargemaster); negotiated or discounted rates are not "standard" | Secretary: statute's text, context, and purpose permit a broader reading to include regular rates established in advance for identifiable payer groups | Court: Permits Secretary's broader definition; "including" clause and statutory purpose support disclosure of negotiated and other formalized rates |
| Whether §2718(e)'s requirement to publish "a list" precludes requiring both a comprehensive machine-readable file and a consumer-friendly shoppable list | Association: Two separate displays are two lists, exceeding the statute's plain requirement of "a list" | Secretary: The shoppable list is a subset/display of the comprehensive list; presenting the same data in two formats is permissible | Court: Affirms Secretary may require the information to be displayed in multiple ways (single dataset shown two ways) |
| APA arbitrary-and-capricious challenge: Did the agency adequately consider feasibility, burden estimates, benefits, and reliance interests? | Association: Many negotiated rates are unknown/unknowable; compliance is impracticable/overly burdensome; benefits speculative; agency reversed prior position without adequate explanation | Secretary: Rule limits disclosure to base rates (not all permutations), accounted for complexities, revised burden estimates, delayed effective date, and reasonably weighed costs and benefits based on available evidence | Court: Agency engaged in reasoned decisionmaking; acknowledged uncertainties, adjusted estimates, explained change in policy, and did not act arbitrarily |
| First Amendment: Does compelled disclosure of negotiated prices violate commercial speech protections? | Association: Disclosure is unrelated or not reasonably related to government interest and may mislead consumers; burden on speech via costs | Secretary: Disclosures are factual, uncontroversial, reasonably related to legitimate interest in price transparency and lowering costs; not unduly burdensome | Court: Zauderer governs; disclosures are factual and reasonably related to government interest and not unduly burdensome, so First Amendment claim fails |
Key Cases Cited
- Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio, 471 U.S. 626 (U.S. 1985) (permits compelled disclosure of factual, uncontroversial information about commercial transactions)
- Motor Vehicle Manufacturers Ass'n v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29 (U.S. 1983) (sets arbitrary-and-capricious review standards for agency rulemaking)
- FCC v. Fox Television Stations, Inc., 556 U.S. 502 (U.S. 2009) (agency must acknowledge and reasonably explain a change in policy)
- TRW Inc. v. Andrews, 534 U.S. 19 (U.S. 2001) (statutory language must be read in context and every clause given effect)
- PDK Laboratories, Inc. v. DEA, 362 F.3d 786 (D.C. Cir. 2004) (consider statutory context and the problem Congress sought to solve when interpreting ambiguous terms)