American Hospital Association v. Alex Azar, II ( 2020 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
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
2
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 GARLAND* , Circuit Judges, and
EDWARDS, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge TATEL.
TATEL, Circuit Judge: As part of the Affordable Care Act,
Congress required hospitals to make public “a list” of “standard
charges” in accordance with guidelines developed by the
Secretary of Health and Human Services. 42 U.S.C.
§ 300gg-18(e). By rule, the Secretary defined “standard
charges” to include prices that hospitals charge insurers. The
American Hospital Association and others challenge the rule,
arguing that it violates the statute, the Administrative
Procedure Act, and the First Amendment. For the reasons set
forth in this opinion, we affirm the district court’s grant of
summary judgment to the Secretary.
*
Judge Garland was a member of the panel at the time this case
was argued but did not participate in the final disposition of the
case.
3
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 Medicaid). The first group, “self-pay” patients, pay
directly for their care because they have no insurance, receive
elective or out-of-network care, or believe that paying directly
is cheaper than relying on insurance. Self-pay patients account
for fewer than 10 percent of all patients. Price Transparency
Requirements for Hospitals to Make Standard Charges Public
(Price Transparency Requirements), 84 Fed. Reg. 65,524,
65,542 (Nov. 27, 2019). Hospitals generally charge these
patients rates specified in what is called “chargemasters,”
which list all items and services provided by each hospital with
their “gross charges.” Id. at 65,537. Many hospitals offer
discounts to self-pay patients based on standardized cash
discounts or individual financial need (or both). As a result,
chargemaster rates are “virtually never what hospitals
ultimately receive as payment.” Appellants’ Br. 7. Although
these gross charges “bear little relationship to market rates
[and] are usually highly inflated,” Price Transparency
Requirements, 84 Fed. Reg. at 65,538, they exist for “historical
and legal reasons,” Appellants’ Br. 7–8. Specifically, Medicare
requires hospitals’ charges for Medicare and non-Medicare
patients to be the same for a specific service, and hospitals
comply with that requirement by listing chargemaster rates as
if they were applicable to everyone, even though hospitals
receive different payments depending on the payer’s identity.
4
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.
Price Transparency Requirements, 84 Fed. Reg. at 65,542,
65,552. Insurance companies have contractual agreements with
hospitals to pay negotiated rates for their services. Although
insurers and hospitals often treat chargemaster rates as the
“starting point” for negotiations, negotiated rates are a product
of a wide range of methodologies. Appellants’ Br. 8. Insurers
may pay fixed fees for individual items and services, or they
may pay for bundled packages based on common procedures,
per diem rates, or other variable factors, set out in “many
dozens of pages of text.” Id. at 8 (internal quotation marks
omitted). They may also pay according to a “diagnosis-related
group” methodology, under which a rate is established for a
group of hospital items and services based on the typical care
provided to a patient with a particular diagnosis. The Medicare
statute requires diagnosis-related-group classifications for
inpatient Medicare reimbursements, and some private insurers
use these classifications to establish rates with hospitals. 42
U.S.C § 1395ww(d)(4); Price Transparency Requirements, 84
Fed. Reg. at 65,534. In addition, insurers may pay different
amounts based on volume discounts, incentive payments for
meeting quality metrics, and exclusions for certain services.
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.
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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 for hospital services.” Id. at 6. According to the
Secretary, this lack of price transparency has contributed to an
“upward spending trajectory” in healthcare. Price
Transparency Requirements, 84 Fed. Reg. at 65,525–26.
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].” 42 U.S.C. § 300gg-18(e). The statute nowhere
defines “standard charges.”
Following passage of the Affordable Care Act, the
Secretary allowed hospitals to comply with section 2718(e) by
making their chargemasters public. Transparency Requirement
Under the Affordable Care Act, 79 Fed. Reg. 49,854, 50,146
(Aug. 22, 2014). But in 2018, the Secretary found that
“challenges continue to exist for patients due to insufficient
price transparency” because chargemaster data were “not
helpful to patients for determining what they are likely to pay
for a particular service or hospital stay.” Requirements for
Hospitals to Make Public a List of Their Standard Charges via
the Internet, 83 Fed. Reg. 20,164, 20,549 (May 7, 2018). As a
6
result, the Secretary required hospitals to make their
chargemasters available online in a machine-readable format.
He also sought public comment on how “standard charges”
should be defined and “what types of information would be
most beneficial to patients.” Id.In June 2019, President Trump issued an Executive Order
titled “Improving Price and Quality Transparency in American
Healthcare to Put Patients First.” Exec. Order No. 13,877, 84
Fed. Reg. 30,849 (June 24, 2019). The Executive Order
directed the Secretary to “propose a regulation, consistent with
applicable law, to require hospitals to publicly post standard
charge information, including charges and information based
on negotiated rates and for common or shoppable items and
services.” Id. at 30,850. Two months later, the Secretary issued
a notice of proposed rulemaking, which explained that despite
the existing requirements to post their chargemaster rates
online, “consumers continue to lack the meaningful pricing
information they need.” Proposed Requirements for Hospitals
to Make Public a List of Their Standard Charges, 84 Fed. Reg.
39,398, 39,571, 39,574 (Aug. 9, 2019). The Secretary proposed
requiring hospitals to disclose not just chargemaster rates, but
also “payer-specific negotiated charges” for their items, and to
disclose them in two different ways: a single digital file
containing charges for all items and services, and a
“consumer-friendly” list of charges for three hundred
“shoppable” services, defined as services that can be scheduled
in advance, id. at 39,402, 39,579–80, 39,589–90, “like a
colonoscopy,” Appellants’ Br. 56. The notice estimated that
compliance with the rule would require twelve hours per
hospital and proposed an effective date of January 1, 2020.
Proposed Requirements for Hospitals to Make Public a List of
Their Standard Charges, 84 Fed. Reg. at 39,400, 39,403.
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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.” Price
Transparency Requirements, 84 Fed. Reg. 65,524, 65,540
(Nov. 27, 2019). To qualify as a “regular rate,” the rate must
be formalized in advance—e.g., through hospital contracts or
fee schedules—and there must be an “identifiable” group of
patients for whom that rate would usually apply. Id. at 65,546,
65,539, 65,542. The rule lists five categories of standard
charges that hospitals must disclose: gross charges from
chargemasters; payer-specific negotiated charges; standardized
discounted cash prices offered to self-pay patients before any
individualized discounts; and maximum and minimum
third-party negotiated charges for a given item or service,
without identifying the specific payer (“de-identified minimum
. . . and maximum negotiated charge[s]”). Id. at 65,540. In
response to comments, the Secretary waived the three hundred
shoppable services list requirement for hospitals already
providing internet-based price estimator tools for patients. Id.
at 65,577. The Secretary also revised the initial compliance
burden estimate up to 150 hours per hospital in the first year
and 46 hours per hospital in subsequent years. Id. at 65,591–94,
65,596. Finally, persuaded that “some hospitals may find it
challenging to initially comply with the new requirements . . .
in a short timeframe,” the Secretary delayed the rule’s effective
date by one year to January 1, 2021. Id. at 65,585.
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.
8
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.” Id. at 41 n.10. The Secretary points out that he adopted
his interpretation after notice-and-comment rulemaking and
argues that his interpretation is the best one and at a minimum
reasonable under Chevron.
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).
9
Standard Charges
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. Id. at 27, 32.
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].” 42 U.S.C.
§ 300gg-18(e) (emphasis added). The “including for” clause
gives an illustrative example of “standard charges.” That is, the
list must contain standard charges for items and services, as
well as standard charges for things like “diagnosis-related
groups” established under the Medicare statute, i.e., charges
bundled for a given diagnosis as opposed to charges for
individual items and services. See Puerto Rico Maritime
Shipping Authority v. Interstate Commerce Commission, 645
F.2d 1102, 1112 n.26 (D.C. Cir. 1981) (“It is hornbook law that
10
the use of the word ‘including’ indicates that the specified list
. . . that follows is illustrative, not exclusive.”); see also
Include, The Merriam-Webster Collegiate Dictionary 629
(11th ed. 2011) (“include” means “to take in or comprise as a
part of a whole or group”). Reading the statute’s “including
for” clause as illustrative of charges that are bundled together
and negotiated between hospitals and insurers, as does the
Secretary, gives effect to “‘every clause and word of [the]
statute.’” TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001)
(quoting United States v. Menasche, 348 U.S. 528, 538–39
(1955)). By contrast, the Association’s interpretation—that the
clause requires hospitals to disclose nothing more than
already-public Medicare charges—not only renders it
redundant of the Medicare statute’s requirement that the
Secretary make all Medicare charges public, but also conflicts
with the rest of section 2718(e), which requires disclosure of
each hospital’s charges, not charges set by the Secretary.
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, are neither
universal nor default, except for purposes of complying with
the letter of the Medicare rule. Given this context, the statute
allows the Secretary to define standard charges more broadly
as regular rates set in advance for identifiable groups of
patients.
11
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; Price
Transparency Requirements, 84 Fed. Reg. at 65,542. Given
this, and given the Secretary’s finding that requiring disclosure
of negotiated rates will help more patients select hospitals with
more affordable rates, the Secretary interpreted the undefined
term “standard charges” in a way that best effectuates
congressional intent to lower healthcare costs. The best reading
of the statute is that it permits such an interpretation. See PDK
Laboratories, Inc. v. DEA, 362 F.3d 786, 796 (D.C. Cir. 2004)
(“The words of the statute should be read in context, . . . and
the problem Congress sought to solve should be taken into
account.”).
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. Price Transparency
Requirements, 84 Fed. Reg. at 65,553. Defined that way,
discounted cash price is a formalized rate that applies to a set
group of patients regardless of individual circumstances, just
12
like third-party negotiated rates. As for the de-identified
maximum and minimum negotiated rates, they are simply a
subset of already-disclosed negotiated rates listed in separate
columns. As explained above, section 2718(e) permits the
Secretary to require disclosure of negotiated rates, and
requiring hospitals to display certain datapoints separately falls
squarely within the Secretary’s authority to develop guidelines
for making the list public.
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. Id. at 65,575. For example, getting a
colonoscopy may incur charges for anesthesia, a pathology lab
service, and a facility fee. Id. at 65,566. Individual charges for
those three components would already appear in the
comprehensive list; the shoppable services list would group
them together under the heading “colonoscopy.”
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.
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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. Id. at 53. Accordingly, the Association
argues, many negotiated rates are determined only after the
patient receives care and so cannot be disclosed beforehand.
Relatedly, the Association argues that hospitals’ complex
14
pricing systems produce an “unlimited number” of “standard
charges,” because possible permutations for identifiable patient
groups are “infinite.” Id. at 27, 30.
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 hospital ultimately receives based on additional
payment methodologies. See Price Transparency
Requirements, 84 Fed. Reg. at 65,550–51. So for Patient A, the
rule requires disclosure of only the cost of one x-ray, and for
Patient B, only the cost of a tendon repair procedure without
any related procedures. Nothing in the rule requires the
disclosure of discounts that may be applicable based on
variable factors.
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
15
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.” Id. at 65,547.
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. Price
Transparency Requirements, 84 Fed. Reg. at 65,551. In other
words, nothing in the rule requires hospitals to
“reverse-engineer” what negotiated rate they may have
hypothetically reached in lieu of a bundled rate. Appellants’ Br.
54.
The same complex hospital billing systems and contracts
drive the Association’s argument that the rule will saddle
hospitals with “inordinately costly” burdens. Id. at 25.
According to the Association, hospitals can have “thousands of
agreements” with individualized subcontracts for each plan,
with each contract featuring “dozens of pages of complex
conditions and formulae.” Id. at 53. The rule, the Association
complains, will require hospitals to “manually cull their
contracts to identify each variable (location, inpatient versus
outpatient setting, plan, etc.) and run each permutation,”
resulting in thousands of different patient groups. Appellants’
Reply Br. 26, 30. As a result, hospitals expect to spend much
more time and resources—“orders of magnitude” more—to
comply with the rule than the Secretary’s estimates.
Appellants’ Br. 57.
16
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; Price Transparency Requirements, 84 Fed. Reg.
at 65,556. The rule also recognizes that due to the number of
payers per hospital, hospitals may have many payer-specific
charges to compile, and that they utilize “a variety of payment
methodologies in their contracts” with insurers. Id. at 65,593.
In response to commenters’ concerns, the rule clarifies that
hospitals must disclose only base rates, delays the effective
date by a year, and increases its burden estimate tenfold. Id. at
65,550–51, 65,575–76, 65,592–93. The rule thus recognizes
that hospitals are at “different stages of readiness to offer
consumers transparent price information” and that “different
hospitals may face different constraints when estimating their
burden and resources required.” Id. at 65,593. Indeed, the
resulting burden estimate for the implementation year—150
hours per hospital location—is similar to the estimate provided
by the Healthcare Financial Management Association
(HFMA), which filed an amicus brief in support of the
Association. To be sure, as the Association points out, the
rule’s ultimate estimate is less than HFMA’s because, unlike
that estimate, it declines after the first year and includes
clinician time. In our view, however, the Secretary reasonably
adjusted the estimate downward for subsequent years based on
a perfectly sensible assumption that compliance costs will
decline once hospitals start using “the business processes and
17
system infrastructures or software . . . built or purchased during
the first year.” Id. at 65,596. That the Secretary arrived at an
estimate thirty hours lower than an industry association’s
calculation was hardly unreasonable given the wide range of
estimates offered by commenters. Id. at 65,593–94, 65,595–96;
see National Ass’n of Home Builders v. EPA, 682 F.3d 1032,
1040 (D.C. Cir. 2012) (“[W]e do not review [the agency’s] cost
figuring de novo, but accord [the agency] discretion to arrive
at a cost figure within a broad zone of reasonable estimate.”
(internal quotation marks omitted)). As the district court aptly
put it, “[i]t can hardly be said hospitals’ concerns about their
burden fell on deaf ears.” American Hospital Ass’n, 468 F.
Supp. 3d at 389.
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.” Price Transparency
Requirements, 84 Fed. Reg. at 65,544–45. Instead, the
Association claims, the rule is likely to “misinform[]
consumers” and “facilitate anticompetitive effects.”
Appellants’ Br. 59, 62. But again, the Secretary “examine[d]
the relevant data and articulate[d] a . . . ‘rational connection
between the facts found and the choice made.’” State Farm,
463 U.S. at 43 (quoting Burlington Truck Lines v. United
States, 371 U.S. 156, 168 (1962)).
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.” Price
Transparency Requirements, 84 Fed. Reg. at 65,543. It then
18
explains that the disclosure scheme will provide out-of-pocket
cost estimates for consumers without insurance and will be
“highly beneficial for consumers in [high-deductible insurance
plans] and in plans where the consumer is responsible for a
percentage (that is, co-insurance) of the negotiated rate.” Id. at
65,547. For example, a consumer who knows that her copay is
twenty percent can estimate her out-of-pocket cost as twenty
percent of the rate negotiated by the insurer. See id. The rule
compares this outcome to the status quo, i.e., only
chargemaster rates are publicly available and they apply to
fewer than ten percent of patients, and concludes that the
enhanced disclosure scheme will help more consumers. The
rule also predicts that its disclosure scheme will enable
researchers, government officials, clinicians, employers, and
other third parties to “bring more value to healthcare.” Id. at
65,555–56, 65,599.
As to consumer confusion, the rule recognizes such a
possibility but nonetheless concludes that the disclosure
scheme will benefit the “vast majority” of consumers,
especially because consumers are already “exceptionally
frustrated at the lack of publicly available data,” and because
the availability of the data will lead to more price transparency
tools developed by third parties. Id. at 65,547. The Association
criticizes the rule’s reliance on third-party actors, calling it
“irrationally convoluted.” Appellants’ Br. 60. But anticipating
that third-party price aggregators and researchers will bring
more efficiency to an industry as large and important as
healthcare hardly strikes us as irrational. Indeed, such services
are ubiquitous in other industries where prices are publicly
available, such as travel booking websites and used car price
aggregators.
Finally, the rule acknowledges commenters’ concerns
about potential anticompetitive effects but concludes that,
19
based on available research in the healthcare industry and
traditional economic analysis, the disclosure scheme is likely
to lead to lower, not higher, prices. Price Transparency
Requirements, 84 Fed. Reg. at 65,529, 65,538–39, 65,598–99.
The Association complains that the rule’s analysis rests on
inapposite data that came from state-led initiatives that either
failed to disclose precisely the same information or collected
the information from different sources. The Secretary,
however, is not limited to relying only on definitive evidence:
“even if this dataset was less than perfect, imperfection alone
does not amount to arbitrary decision-making.” District
Hospital Partners, L.P. v. Burwell, 786 F.3d 46, 61 (D.C. Cir.
2015); see also State Farm, 463 U.S. at 52 (“It is not infrequent
that the available data does not settle a regulatory issue and the
agency must then exercise its judgment in moving from the
facts and probabilities on the record to a policy conclusion.”).
Given the newness of this disclosure scheme, the Secretary
reasonably relied on studies of similar price transparency
schemes to inform his policy judgment.
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; Price Transparency Requirements, 84 Fed.
Reg. at 65,547. The Secretary weighed the rule’s costs and
benefits and made a reasonable judgment that the benefits of
easing the burden for consumers justified the added burdens
imposed on hospitals. See Ad Hoc Telecommunications Users
Committee v. FCC, 572 F.3d 903, 908 (D.C. Cir. 2009)
(explaining that agency decisions implicating “competing
policy choices . . . and predictive market judgments” warrant
particular deference).
20
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.” Price
Transparency Requirements, 84 Fed. Reg. at 65,525, 65,537.
The rule then gives “good reasons” for requiring more, namely,
that the disclosure scheme will fill the “information gap” in
“easily accessible pricing information for consumers.” Id. at
65,527.
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 Price
Transparency Requirements, 84 Fed. Reg. at 65,578.
21
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”).
22
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 parsing” where, as here,
“the government uses a disclosure mandate to achieve a goal of
informing consumers about a particular product trait.”
American Meat Institute v. USDA, 760 F.3d 18, 26 (D.C. Cir.
2014) (en banc). Even in cases that employ more searching
standards of review, courts have accepted “reference to studies
and anecdotes,” as well as justifications “based solely on
history, consensus, and simple common sense.” Lorillard
Tobacco Co. v. Reilly, 533 U.S. 525, 555 (2001) (internal
quotation marks omitted).
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.” Price Transparency Requirements, 84 Fed.
Reg. at 65,547. Indeed, it is the current rule (preferred by the
Association) that is misleading, as it requires disclosure of only
chargemaster rates, even though they apply to fewer than ten
percent of consumers.
23
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”
24
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. Price Transparency Requirements, 84 Fed. Reg.
at 65,446, 65,560–62, 65,601; see also National Cable &
Telecommunications Ass’n, 555 F.3d at 1002 (finding that the
agency complied with the “no broader than necessary” prong
under intermediate scrutiny because it “carefully considered
the differences between [] two regulatory approaches, and the
evidence supports the [agency]’s decision”).
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.25
V.
For the foregoing reasons, we affirm the district court’s
grant of summary judgment to the Secretary.
So ordered.