AMERICAN HOSPITAL ASSOCIATION, ET AL., APPELLANTS v. ALEX M. AZAR, II, IN HIS OFFICIAL CAPACITY AS SECRETARY OF HEALTH AND HUMAN SERVICES, APPELLEE
No. 20-5193
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 15, 2020 Decided December 29, 2020
Argued October 15, 2020 Decided December 29, 2020
No. 20-5193
AMERICAN HOSPITAL ASSOCIATION, ET AL., APPELLANTS
v.
ALEX M. AZAR, II, IN HIS OFFICIAL CAPACITY AS SECRETARY OF HEALTH AND HUMAN SERVICES, APPELLEE
Appeal from the United States District Court for the District of Columbia (No. 1:19-cv-03619)
Lisa S. Blatt argued the cause for appellants. With her on the briefs was Whitney D. Hermandorfer.
Chad I. Golder was on the brief for amici curiae Forty State Hospital Associations in support of appellants.
Benjamin G. Shatz was on the brief for amicus curiae Healthcare Financial Management Association in support of appellants.
Daryl L. Joseffer, Tara S. Morrissey, Jeffrey S. Bucholtz, and Joel McElvain were on the brief for amicus curiae Chamber of Commerce of the United States of America in support of appellants.
Courtney L. Dixon, Attorney, U.S. Department of Justice, argued the cause for appellee. With her on the brief were Ethan P. Davis, Acting Assistant Attorney General, Scott R. McIntosh, Attorney, Robert P. Charrow, General Counsel, U.S. Department of Health & Human Services, Brenna E. Jenny, Deputy General Counsel & Chief Legal Officer-CMS.
Robert Henneke and Jeffrey M. Harris were on the brief for amici curiae Texas Public Policy Foundation, et al. in support of appellee.
Before: TATEL and GARLAND1, Circuit Judges, and EDWARDS, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge TATEL.
TATEL,
I.
Understanding the issues before us requires an explanation of how hospitals charge for their services. In short, their charges look nothing like hotel room rates or car prices. Rather, hospitals charge different amounts for the same item or service depending on who is paying.
Three different groups pay hospitals for care: patients, insurers, and the federal and state governments (for Medicare and
Over ninety percent of patients rely on third-party payers, i.e., insurers, Medicaid, and Medicare. Medicaid and Medicare pay hospitals based on rates set by the states and the Centers for Medicare & Medicaid Services. Those rates are public.
With so many different methodologies for setting rates, determining what negotiated rate applies to a particular patient for a particular item or service is “exceedingly complex.” Appellants’ Br. 8. Adding to the complexity, negotiated rates are not necessarily what insured patients would pay, as their out-of-pocket costs depend on their health insurance plan, which has its own rules on copays, deductibles, and coverage limits.
Patients usually learn what a given hospital service cost only after the fact, either from a hospital bill or an “Explanation of Benefits” form from their insurance company; the latter details the insurer‘s negotiated rates and the patient‘s out-of-pocket costs. Patients are “understandably frustrated by their inability to easily determine in advance what they may pay out-of-pocket
Against this backdrop, Congress passed the Affordable Care Act of 2010, which added section 2718, entitled “Bringing down the cost of health care coverage,” to the Public Health Service Act. In language central to this case, subsection 2718(e) requires “[e]ach hospital operating within the United States” to “each year establish (and update) and make public (in accordance with guidelines developed by the Secretary) a list of the hospital‘s standard charges for items and services provided by the hospital, including for diagnosis-related groups established under [the Medicare reimbursement statute].”
Following passage of the Affordable Care Act, the Secretary allowed hospitals to comply with section 2718(e) by making their chargemasters public.
In June 2019, President Trump issued an Executive Order titled “Improving Price and Quality Transparency in American Healthcare to Put Patients First.”
After receiving nearly four thousand comments, the Secretary issued a final rule that defines “standard charge” as “the regular rate established by the hospital for an item or service provided to a specific group of paying patients.”
The American Hospital Association, joined by other associations, individual hospitals, and hospital systems (collectively, the “Association“), filed suit, arguing that the rule‘s interpretation of “standard charges” violates section 2718(e), the APA, and the First Amendment. The district court granted summary judgment to the Secretary on all three claims. American Hospital Ass‘n v. Azar, 468 F. Supp. 3d 372 (D.D.C. 2020). Our review is de novo. See St. Luke‘s Hospital v. Thompson, 355 F.3d 690, 693 (D.C. Cir. 2004).
II.
The Association argues that the rule rests on an unlawful interpretation of section 2718(e) and that no Chevron deference applies partly because the President, through his June 2019 Executive Order, “picked the definition of ‘standard charges’ that [the Secretary] adopted.” Appellants’ Br. 43. The Association even “question[s] the validity of Chevron deference,” though it “recognize[s] the doctrine binds this Court.”
Although we have no reason to doubt Chevron‘s applicability, we need not decide that question here. Even if Chevron were inapplicable, we would “proceed to determine the meaning of” section 2718(e) by “decid[ing] for ourselves the best reading.” Miller v. Clinton, 687 F.3d 1332, 1342 (D.C. Cir. 2012) (internal quotation marks omitted). Employing the traditional tools of statutory interpretation—text, structure, and purpose—and following the “fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme,” we conclude that the best reading of section 2718(e), including the two statutory phrases at issue, i.e., “standard charges” and “a list,” permits the Secretary to adopt the challenged rule. Roberts v. Sea-Land Services, Inc., 566 U.S. 93, 101 (2012) (quoting Davis v. Michigan Department of Treasury, 489 U.S. 803, 809 (1989)); see In re Sealed Case, 932 F.3d 915, 928 (D.C. Cir. 2019).
The Association focuses primarily on the rule‘s inclusion of negotiated rates among the “standard charges” that hospitals must disclose. Based on the dictionary definition of “standard” as usual, common, or model, it argues that the definition is “antithe[tical]” to the rule‘s inclusion of negotiated rates for identifiable patient groups as “standard charges.” Appellants’ Br. 27. Rather, the Association contends, the “most natural way” to interpret the term “standard charges” is to define it as the seller‘s list price—such as the manufacturer‘s suggested retail price for cars—or “a jumping-off point,” even if few consumers pay the list price.
Viewed in its entirety, however, section 2718(e) is best interpreted as requiring disclosure of more than list prices. See American Coal Co. v. Federal Mine Safety & Health Review Commission, 796 F.3d 18, 25-26 (D.C. Cir. 2015) (“General-usage dictionaries cannot invariably control our consideration of statutory language, especially when the ‘dictionary definition of . . . isolated words[] does not account for the governing statutory context.‘” (alterations in original) (quoting Bloate v. United States, 559 U.S. 196, 205 n.9 (2010))). Recall that the provision requires hospitals to disclose “a list of the hospital‘s standard charges for items and services provided by the hospital, including for diagnosis-related groups established under [the Medicare reimbursement statute].”
Context and congressional purpose reinforce this reading. As to the former, because hospitals have numerous different charges that are formalized in contracts with third-party payers, rather than one “standard charge” applicable to all, or even most, patients, the dictionary definition of “standard” is unhelpful. The Association‘s contention that chargemaster rates represent “universal default prices irrespective of payer,” Appellants’ Reply Br. 3, moreover, is inconsistent with its assertion that hospitals have chargemaster rates simply to comply with the Medicare requirement that Medicare and non-Medicare patients be charged the same. See Appellants’ Br. 7-8. Chargemaster rates, in other words,
As to purpose, Congress enacted section 2718, as its title demonstrates, to “[b]ring[] down the cost of health care coverage.” See INS v. National Center for Immigrants’ Rights, Inc., 502 U.S. 183, 189 (1991) (“[T]he title of a statute or section can aid in resolving an ambiguity in the legislation‘s text.“). The Secretary was concerned that chargemaster rates, though previously treated as adequate for complying with section 2718(e), in fact failed to sufficiently inform patients of their costs. This is because, as the Association concedes, patients rarely pay chargemaster rates. Appellants’ Br. 7;
The Association also challenges the rule‘s inclusion of discounted cash prices and de-identified maximum and minimum negotiated rates as standard charges. Focusing on the definition of the word “discounted,” the Association contends that “a discount” is “by definition[] a departure from the norm” and therefore not “standard.” Appellants’ Br. 31. The rule, however, makes clear that the “discounted cash price” category refers only to standardized discounts that hospitals give to cash-paying patients and excludes individualized discounts based on financial circumstances.
A List
Turning its attention to a different word in section 2718(e), the Association argues that the rule‘s requirement of both a comprehensive, machine-readable list of charges for all services and a separate, consumer-friendly shoppable services list runs afoul of section 2718(e)‘s requirement that hospitals publish “a list” of standard charges. The Secretary, echoing his argument with respect to de-identified maximum and minimum charges, points out that the charge information in the shoppable services list is a subset of the information already made public in the comprehensive file.
To be sure, one could argue (as does the Association) that this is two lists. But one could also argue (as does the Secretary) that this is a single list displayed in two different ways. Contrary to the Association‘s argument, the best reading of section 2718(e), in its entirety, permits the Secretary to require hospitals to display the information in multiple ways.
III.
In support of its APA claim, the Association argues that the Secretary failed to adequately address the difficulties that hospitals face in compiling the information the rule requires, overestimated the rule‘s benefits, and changed the interpretation of “standard charges” without adequate explanation. In considering these arguments, we are “not to substitute [our] judgment for that of the agency, but instead to assess only whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment.” DHS v. Regents of the University of California, 140 S. Ct. 1891, 1905 (2020) (internal quotation marks and citation omitted). Moreover, and of special significance to this case, “when an agency‘s decision is primarily predictive, our role is limited; we require only that the agency acknowledge factual uncertainties and identify the considerations it found persuasive.” Rural Cellular Ass‘n v. FCC, 588 F.3d 1095, 1105 (D.C. Cir. 2009).
Feasibility and Administrative Burdens
The Association advances two slightly different arguments under the umbrella of excessive burden. First, many negotiated rates are “unknown“—or even “unknowable,” as Association counsel insisted at oral argument—so complying with the rule is “impracticable, and often impossible.” Appellants’ Reply Br. 24; Oral Arg. Rec. 8:36-9:10. Second, identifying each patient group‘s negotiated rate for all items and services would require a “herculean effort.” Appellants’ Br. 54. Central to both arguments, hospitals often build algorithms based on complex contracts to calculate the applicable negotiated rate for a particular patient‘s care.
The Association‘s arguments miss the mark. Consider two examples, one raised at oral argument and one offered by the Association in its brief. Patient A may have thought she needed only one x-ray, but she actually needed two; and instead of paying twice the amount of the first x-ray, the insurer paid only 1.5 times that amount based on a volume discount. Patient B scheduled a hand nerve-repair surgery but ended up receiving tendon repair as well to correct a problem discovered during surgery; the insurer paid a discounted rate for the tendon repair because it occurred at the time of a related procedure. Whether and how much Patient A would be charged for the second x-ray and Patient B for the tendon repair was, as the Association emphasizes, “unknown” until after their treatments. The rule, however, does not require hospitals to disclose all possible permutations of costs based on hypothetical additional care or any other variable factor. It simply requires disclosure of base rates for an item or service, not the adjusted or final payment that the
The same principle applies to rates for diagnosis-related groups. Responding to comments, echoed here by the Association, that payer-specific charges cannot be identified for diagnosis-related groups because rates can change based on the patient‘s condition or treatment plan, the rule makes clear that the disclosure requirement applies to “the base rate that is negotiated by the hospital with the third party payer, and not the adjusted or final payment received by the hospital for a packaged service.”
This distinction between negotiated rates and final payments also addresses the Association‘s contention that the rule fails to grapple with situations where no negotiated rate exists for a certain line item because “multiple items and services [are folded] into bundled rates for a particular procedure.” Appellants’ Reply Br. 25. In response to comments raising just this concern, the rule explains that hospitals must disclose only base rates that have been negotiated.
The same complex hospital billing systems and contracts drive the Association‘s argument that the rule will saddle hospitals with “inordinately costly” burdens.
In considering this argument, our job is to determine whether the Secretary “examine[d] the relevant data and articulate[d] a satisfactory explanation for [his] action.” Motor Vehicle Manufacturers Ass‘n of the United States, Inc. v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 43 (1983). The Secretary did just that.
As the Association concedes, the rule acknowledges that hospitals use different payment methodologies and house information across different systems, making it challenging to consolidate the data into one comprehensive list. Appellants’ Reply Br. 27;
Benefits
The Association challenges the Secretary‘s prediction that the disclosure scheme will advance the goal of “providing consumers with factual price information to facilitate more informed health care decisions.”
As to efficacy, the rule points out that even though disclosure of negotiated rates alone will be insufficient to provide out-of-pocket cost estimates for many insured consumers, such rates are “a critical piece of information necessary for patients to determine their potential out-of-pocket cost estimates in advance of a service.”
Finally, the rule acknowledges commenters’ concerns about potential anticompetitive effects but concludes that, based on available research in the healthcare industry and traditional economic analysis, the disclosure scheme is likely to lead to lower, not higher, prices.
The rule‘s chief purpose, as the Secretary emphasizes, is to “shift to hospitals some of the burden that patients currently bear” in “navigating a non-transparent hospital-care system.” Appellee‘s Br. 48;
Change in Position
The Association accuses the Secretary of “not adequately acknowledg[ing] [the agency‘s] about-face from its prior policy position.” Appellants’ Br. 63. As the Supreme Court has explained, an agency may change its policy position but must “display awareness that it is changing position” and “show that there are good reasons for the new policy.” FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009). Here, the Secretary did both. The rule expressly acknowledges the prior policy—that hospitals could comply with section 2718(e) by publishing chargemaster rates—and explains that disclosing only those rates was “[in]sufficient to inform consumers what their charges for a hospital item or service will be.”
The Association‘s passing mention of reliance interests falls short. True, “the APA requires an agency to provide more substantial justification . . . when [the agency‘s] prior policy has engendered serious reliance interests that must be taken into account.” Perez v. Mortgage Bankers Ass‘n, 575 U.S. 92, 106 (2015) (internal quotation marks omitted). But the Association has identified no reliance interests the rule might be upending. Moreover, nothing in the rule renders hospitals’ prior investments in individual counseling or online price transparency tools obsolete. Indeed, hospitals that have already developed online price transparency tools are exempted from the shoppable services list requirement. See
IV.
The Association‘s argument that the rule violates the First Amendment is squarely barred by the Supreme Court‘s decision in Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio, 471 U.S. 626 (1985), and our case law applying that decision. In Zauderer, the Court rejected a First Amendment challenge to a state disciplinary ruling that required an attorney to disclose that clients may be liable for significant legal costs even if not liable for legal fees. Critical to the Court‘s decision, the disciplinary ruling required disclosure of only “purely factual and uncontroversial information about the terms under which [the attorney‘s] services will be available,” and the attorney‘s countervailing interest “in not providing any particular factual information” was “minimal.” Zauderer, 471 U.S. at 650-51. The First Amendment, the Court held, permits such disclosure schemes “as long as [they] are reasonably related to the State‘s interest in preventing deception of consumers” and “are not unduly burdensome . . . by chilling protected commercial speech.” Id. at 651-52.
As in Zauderer, the information the rule requires hospitals to disclose—rates negotiated with insurers and formalized in their contracts—is “factual and uncontroversial” and directly relevant to “the terms under which [hospitals‘] services will be available” to consumers. Id. at 650-51. Also as in Zauderer, the rule requires disclosure of “more information than [hospitals] might otherwise be inclined to present,” rather than imposing an “outright prohibition[] on speech.” Id.; see also Spirit Airlines, Inc. v. DOT, 687 F.3d 403, 414 (D.C. Cir. 2012) (sustaining under Zauderer a Department of Transportation rule requiring airlines to prominently display final prices on their website because “the rule is aimed at providing accurate information, not restricting it“).
The Association does not dispute that the government has a legitimate interest in promoting price transparency and lowering healthcare costs. Instead, it contends that the rule bears no reasonable relationship to those governmental interests because the required disclosures “may not be immediately or directly useful for many health care consumers.” Appellants’ Br. 47-48 (internal quotation marks omitted). But as explained in our discussion of the Association‘s APA claim, the Secretary, relying on complaints from consumers, studies of state initiatives, and analysis of industry practices, reasonably concluded that the rule‘s disclosure scheme will help the vast majority of consumers. See supra at 17-18. Moreover, Zauderer‘s “reasonably related” analysis need not involve “evidentiary
The Association argues that the rule fails Zauderer‘s reasonably related test for another reason, namely, that it will “mislead consumers.” Appellants’ Br. 48. But again, the Secretary found to the contrary—that the rule is unlikely to “cause confusion beyond the confusion and frustration that currently exists.”
Invoking Zauderer‘s final requirement that the challenged rule not be “‘unduly burdensome’ in a way that ‘chill[s] protected commercial speech,‘” the Association argues, as it did in its APA challenge, that the rule will impose excessive financial burdens on hospitals. American Meat Institute, 760 F.3d at 26 (alteration in original) (quoting Zauderer, 471 U.S. at 651). To prevail in a First Amendment challenge, however, the Association must demonstrate a burden on speech, and it has pointed to no such burden. The rule neither requires hospitals to endorse a particular viewpoint nor prevents them from adding their own message on the same website or even in the same file.
The Association‘s remaining arguments are equally without merit.
The Zauderer standard, the Association insists, is limited to restrictions on advertising and point-of-sale labeling. But our court has not so limited the standard, applying it, for example, to court-mandated disclosures on websites. See United States v. Philip Morris, 855 F.3d 321 (D.C. Cir. 2017) (applying Zauderer to corrective statements that the district court ordered the corporation to display on its website for a RICO violation). And in National Ass‘n of Manufacturers v. SEC, 800 F.3d 518 (D.C. Cir. 2015), relied on by the Association, our court declined to apply Zauderer because the rule at issue required corporations to “express certain views” that their products containing conflict minerals were “ethically tainted.” Id. at 523, 530. No such expressive content is at issue here.
The Association contends that the Secretary failed to consider “many less-speech restrictive alternatives.” Appellants’ Br. 25. Zauderer, however, imposes no such obligation. And even were we required to apply intermediate scrutiny, which does impose a “no broader than necessary” requirement, the Secretary would not have to demonstrate a “perfect means-ends fit,” or “satisfy a court that [he] has chosen the best conceivable option“—just that the fit is “reasonable.” National Cable & Telecommunications Ass‘n v. FCC, 555 F.3d 996, 1002 (D.C. Cir. 2009); Board of Trustees of State University of New York v. Fox, 492 U.S. 469, 479-80 (1989). Here, the Secretary carefully considered the alternatives suggested by commenters, and the record supports his decision to require more fulsome disclosure for all items and services.
Finally, the Association argues that we should subject the rule to strict scrutiny. In support, it relies on Barr v. American Ass‘n of Political Consultants (AAPC), 140 S. Ct. 2335 (2020), in which the Court sustained a First Amendment challenge to a statute barring political speakers from making robocalls while allowing the government to use them for debt collection. But unlike the rule at issue here, that law was “directed at certain content,” “aimed at particular speakers,” and restricted political speech. Id. at 2347 (internal quotation marks omitted). Significantly for our purposes, moreover, the AAPC plurality made clear that the decision not only “fits comfortably within existing First Amendment precedent,” but also is “not intended to expand existing First Amendment doctrine or to otherwise affect traditional or ordinary economic regulation of commercial activity.” Id. Requiring hospitals to disclose prices before rendering services undoubtedly qualifies as “traditional or ordinary economic regulation of commercial activity.” Id.
V.
For the foregoing reasons, we affirm the district court‘s grant of summary judgment to the Secretary.
So ordered.