Legal Insights and Perspectives for the Healthcare Industry

In what has become the new “normal” in Washington, DC, these days, hospitals and their associations filed a lawsuit today against the US Secretary of Health and Human Services (Secretary) challenging the recent Final Rule issued by the Centers for Medicare and Medicaid Services (CMS) on November 27, 2019, addressing hospital pricing disclosures.

In its complaint, the American Hospital Association, joined by the Association of American Medical Colleges, the Federation of American Hospitals, the National Association of Children’s Hospitals, Inc. (d/b/a Children’s Hospital Association), and three representative hospitals in Missouri, California, and Nebraska (collectively, Plaintiffs), argue that the Secretary issued a Final Rule that (1) is unlawful and in excess of his statutory authority; (2) is a violation of the First Amendment by unlawfully compelling speech; and (3) is arbitrary and capricious, an abuse of discretion, and contrary to law, citing the Administrative Procedures Act (APA).

Law clerk Dani Elks contributed to this article.

Price transparency rules impacting hospitals, health plans and third-party payers released by the Trump administration promise to substantially change how health plans, consumers, and providers will interact over the coming years. In this LawFlash, our healthcare industry team unpacks the final rule requiring hospitals to make standard charges public and the proposed transparency in coverage rule requiring group health plans and health insurance issuers to disclose negotiated rates with providers and out-of-network estimates for consumers. Across the industry as a whole, plans and providers alike will have to undertake additional costs to update their current programs, technology, and web pages to comply with the price transparency rules and take on or train personnel to maintain that programming and technology.

>Read the LawFlash

CMS has released a pair of rules “that take historic steps to increase price transparency to empower patients and increase competition among all hospitals, group health plans and health insurance issuers in the individual and group markets.” To that end, health plans would be required to disclose their negotiated rates for in-network providers and allowed amounts paid for out-of-network providers on a public website, according to the proposed rule. CMS also finalized its proposed hospital price transparency program released as part of the CY 2020 proposed outpatient prospective payment system (OPPS) rule last August.

Morgan Lewis is reviewing these rules more fully and will provide additional analyses on the proposed health plan rule and the final hospital transparency rule in the coming days.

We had a really enjoyable Fast Break yesterday on a non-traditional health law topic: radioactive material regulation. As it turns out, nearly all hospitals and larger provider groups, particularly those doing imaging, oncology, or neurosurgery, routinely use or come into contact with regulated radioactive material. PET scans, for instance, which are operated by a significant number of hospitals, rely on radioactive isotopes as the basis of the imaging procedure. Morgan Lewis partner Lewis Csedrik and associate Roland Backhaus explained that providers are regulated by the Nuclear Regulatory Commission (NRC) and/or similar state-based agencies (called Agreement States). Each provider has to secure a specific license for use of radioactive materials, which entails designating a radiation safety officer and establishing a radiation safety plan.

The 116th Congress convened on January 3 with Democrats controlling the House for the first time since 2011 and Republicans maintaining their majority in the Senate. Divided government typically constrains Congress’s ability to pass broad, new legislative initiatives, while also limiting the scope of the legislation that does pass. Healthcare policy, especially, has been a point of partisan contention in the past. However, there are several areas where some degree of cooperation is possible in the 116th Congress and will likely impact the healthcare industry and health policy in 2019.

Chairman of the Senate Finance Committee, Senator Chuck Grassley, sent a letter on February 19 to the Internal Revenue Service (IRS) asking questions regarding IRS efforts to enforce Section 501(r) as it applies to tax-exempt hospitals. Section 501(r) requires a hospital to meet the following requirements in order to be tax-exempt: (1) conduct a community health assessment; (2) establish a financial assistance policy; (3) have limitations on charges for emergency or necessary medical care provided to individuals covered under a financial assistance policy; and (4) not engage in extraordinary billing and collection actions before determining if someone qualifies for its financial assistance policy. Mr. Grassley cited as reason for his concerns of noncompliance a 2017 article with statistics that large tax-exempt hospitals have decreased amounts of free charity care, while increasing total revenue.