News & Insights


June 29, 2020

Health Headlines – June 29, 2020

D.C. District Court Upholds Price Transparency Rule – On June 23, 2020, Judge Carl Nichols of the United States District Court for the District of Columbia issued a decision upholding CMS’s price transparency rule, which was adopted late last year.  The case is cited as American Hospital Association v. Azar, No. 1:19-cv-03619, 2020 WL 3429774 (D.D.C. 2020).  The rule, slated to go into effect on January 1, 2021, will require hospitals to publish multiple types of pricing data for each item and service they provide, including the gross charge for the item, the discounted price that the hospital would accept from a cash payer for the item, and the payment rate for the item that was negotiated with any commercial payer.

The Affordable Care Act enacted section 2718(e) of the Public Health Service Act, which requires hospitals, under “guidelines” adopted by CMS, to annually publish a list of their “standard charges,” including Diagnosis-Related Groups (DRGs), for every item and service they provide.  CMS announced its first guidelines for section 2718(e) in 2014, stating that hospitals could comply with the provision by annually publishing their chargemasters.  In a 2018 rulemaking, CMS updated its guidelines to require hospitals to post their chargemasters in a machine-readable format. 

On June 24, 2019, President Trump issued an executive order directing the Secretary of HHS to propose a regulation consistent with applicable law that would require hospitals to publish, among other things, “charges and information based on negotiated rates” to “inform[] patients about actual prices.” 

Within months after the President’s order, CMS proposed and finalized updated implementation guidance for section 2718(e).  The agency found, based on comments from prior rulemakings, that hospitals’ charges tend to vary by patient population—particularly between self-pay patients and those with third party coverage.  Therefore, CMS redefined “standard charges” to mean “the regular rate established by the hospital for an item or service provided to a specific group of paying patients.” 

Consistent with this new definition, CMS’s new rule requires hospitals to publish five (5) types of standard charges for each item and service: (1) gross charges (i.e., the chargemaster); (2) discounted prices that apply to patients who pay cash; (3) payer-specific negotiated rates; and the de-identified (4) minimum and (5) maximum charges that a hospital has negotiated with third-party payers.  CMS will monitor compliance and will enforce these new guidelines with civil monetary penalties. 

Within days after CMS finalized its new rule, the American Hospital Association, along with several other advocacy groups and hospitals filed suit in the United States District Court for the District of Columbia to challenge the rule.  In a motion for summary judgment, the plaintiffs argued that CMS’s new rule belies the unambiguous meaning of the statute because “standard charges” can only mean chargemaster charges.  The plaintiffs also asserted that the rule is unreasonable and that it compels speech in violation of the First Amendment.  Finally, the plaintiffs challenged CMS’s authority to enforce section 2718(e) through civil monetary penalties. 

The district court denied the plaintiffs’ motion for summary judgment.  First, the court rejected the notion that “standard charges” unambiguously means chargemaster rates.  The court reasoned that chargemaster is a term of art in the healthcare industry, and the fact that Congress chose not to use it in section 2718(e) suggests that “standard charges” does not unambiguously mean chargemaster charges.  Furthermore, the district court observed that chargemaster rates are hardly “standard” because that they only apply to about 10% of patients.  Finally, the court noted that section 2718(e) says that standard charges should include DRGs, which are not in the chargemaster.

The district court also ruled that it was not unreasonable for CMS to require hospitals to report multiple forms of pricing data for each line of service given the agency’s finding that charges vary between different patient groups.  Furthermore, the court found that the rule did not violate the First Amendment because agencies can compel commercial speech when doing so is reasonably related to a public interest.  In the court’s view, CMS’s rule advanced the public’s interest in providing consumers with factual price information to facilitate more informed health care decisions. 

Finally, the district court found that section 2718(b)(3) of the Public Health Service Act empowered CMS to enforce 2718(e) through civil monetary penalties.  The court declined the plaintiffs’ invitation to read section 2718(b)(3) narrowly as only authorizing enforcement of subsection (b).

The plaintiffs in the action have filed a notice of appeal.  Briefing before the United States Court of Appeals for the D.C. Circuit is expected to occur over the next several months.   

A copy of the court’s decision is available here.

Reporter, Alek Pivec, Washington, D.C., +1 202 626 2914,

Sixth Circuit Upholds Validity of Medicare Audit Despite Lack of Notice, Citing Lack of Substantial Prejudice – On June 24, 2020, the U.S. Court of Appeals for the Sixth Circuit issued an opinion addressing whether an overpayment assessment should be invalidated when the Medicare contractor fails to provide notice of a post-payment audit as required by the Medicare statute.  In this case, a Medicare contractor sent record requests to numerous physicians without notifying the parent entity that the contractor was conducting an audit.  The court concluded that such failure to comply with the statute may be excused by a court if the provider was not substantially prejudiced by the lack of notice.  In reviewing the facts of the case, the Sixth Circuit concluded that the provider was not substantially prejudiced by the lack of notice because the additional records that could have been gathered by the provider in response to a notice would not have changed the overpayment determination, and because the provider was able to ably argue the principal issues resulting from the audit.  The case is cited as General Medicine P.C. v. Azar, 2020 BL 234272, 6th Cir., No. 19-1365, 6/24/20.

The case involved General Medicine, P.C. (General Medicine), a medical services provider whose physicians and nurse practitioners perform services for patients in long-term care facilities.  In 2004, a CMS contractor initiated an audit of all General Medicine physicians without notifying General Medicine of the audit. The CMS contractor sent record requests to the twelve facilities in which General Medicine’s physicians provided services.  The physicians maintained their medical records in the patient charts at these facilities.  Based on the records collected, the CMS contractor denied payment for over 80% of the claims reviewed.  Of the denied claims, 75% were denied due to failure to document medical necessity, 23% were denied due to lack of documentation to support the services and the rest were denied due to failure to meet policy guidelines.

General Medicine argued that the CMS contractor’s failure to provide notice of the audit to General Medicine violated 42 U.S.C. § 1395ddd(f)(7)(A), which states that “the contractor shall provide the provider of services or supplier with written notice … of the intent to conduct [a post-payment] audit.”  While the statute does not state what consequence should be imposed if a CMS contractor fails to give the provider notice of the audit, General Medicine argued that failure to provide a notice should invalidate the entire audit.  

The Sixth Circuit acknowledged that the purpose of the notice requirement was to give the provider an opportunity to gather and review its records in order to present its best case to the auditor before the audit begins.  Based on this legislative purpose, the court concluded that Congress intended for there to be a consequence if the lack of notice substantially prejudices the provider. 

Applying this standard to the facts in the case, the Court agreed with the Medicare Appeals Council’s conclusion that that lack of notice did not substantially prejudice General Medicine.  The conclusion was based on the findings that (i) the overpayment assessment was based on records that should have supported coverage on their own, without any supplemental records that could have been provided by General Medicine following a notice, and (ii) General Medicine was able to “ably and thoroughly” argue the principal issues resulting from the audit, the validity of the sampling methodology, and the coverage of the reviewed claims.” 

A copy of the Sixth Circuit case is available here.

Reporter, Igor Gorlach, Houston, +1 713 276 7326,

CMS Issues Proposed Rule That Would Update Home Health Payments and Allow Home Health Agencies to Continue Telemedicine Beyond Pandemic – On June 25, 2020, CMS issued a proposed rule that proposes routine updates to the home health payment rates for calendar year (CY) 2021 and includes a proposal to make permanent certain regulatory changes related to telehealth beyond the expiration of the public health emergency for the COVID-19 pandemic (the Proposed Rule).

Home Health Agency Use of Telehealth

The Proposed Rule would finalize, effective January 1, 2021, the amendment to the home health regulations outlined in the March 30, 2020 Policy and Regulatory Revisions in Response to the COVID–19 Public Health Emergency Interim Final Rule (85 FR 19230). Accordingly, home health agencies (HHAs) would be able to continue to use telecommunications technologies to provide care to Medicare beneficiaries beyond the duration of the COVID-19 pandemic. The telecommunications technology must be related to the skilled services being furnished, be outlined on the plan of care, and be tied to a specific goal indicating how such use would facilitate treatment outcomes. CMS cautions, however, that the use of telemedicine may not substitute for an in-person home visit on the plan of care, nor can telemedicine be considered a visit for the purpose of patient eligibility or payment. The Proposed Rule would also allow HHAs to continue reporting the costs of telecommunications technology as allowable administrative costs on the home health agency cost report beyond the COVID-19 pandemic.

Home Health Agency Payments

The Proposed Rule also proposes updates to the home health payment rates for CY 2021. Based on the proposed changes, CMS estimates that Medicare payments to HHAs in CY 2021 would increase by 2.6 percent, or $540 million. This change reflects a proposed 2.7 percent home health payment update and a 0.1 percent decrease in payments due to reductions made in the rural add-on percentages mandated by the Bipartisan Budget Act of 2018 for CY 2021. The Proposed Rule would also update the home health wage index including the adoption of revised Office of Management and Budget statistical area delineations and limiting any decreases in a geographic area’s wage index value to no more than 5 percent in CY 2021.

Home Infusion Therapy

Further, the Proposed Rule would implement Medicare enrollment policies and specific requirements for qualified home infusion therapy suppliers. CMS explained that given CMS’s responsibility in preventing waste and abuse in the Medicare program, the agency believes that the safeguards that Medicare enrollment furnishes are needed with respect to home infusion therapy suppliers. CMS also proposes updates to the CY 2021 home infusion therapy services payment rates, consistent with the requirements outlined in the 21st Century Cures Act.

The Proposed Rule is expected to be published in the Federal Register on June 30, 2020. The Proposed Rule is available here and the CMS fact sheet is available here.

Reporter, Lauren S. Gennett, Atlanta, + 1 404 572 3592,  

CMS Calls for Renewed Commitment to Value-Based Care in Light of New COVID-19 Data – On June 22, 2020, CMS issued a press release calling for a renewed national commitment to value-based payment models for healthcare providers rather than fee-for-service models.  The proclamation came as CMS also released data demonstrating the disparate impact of COVID-19 on Medicare recipients including higher hospitalization rates among older Americans, those with chronic conditions, minorities and low-income individuals.

According to CMS, the healthcare industry must change its payment structure to promote the overall health of patients and create incentives for doctors to keep patients healthy, rather than continue to deliver expensive healthcare services and treatments on a fee-for-service basis.  A blog post published in conjunction with the press release from CMS added, “We have to hold providers accountable for the outcomes they achieve, and poor health outcomes for minorities or those of a lower socio-economic status is not acceptable.  Until we move to a system that incentivizes value over volume and starts paying doctors for better health outcomes, we’ll never be able to adequately address the social determinants of health.”

The data included in the announcement found more than 325,000 Medicare beneficiaries contracted COVID-19 between January 1 and May 16, 2020 and nearly 110,000 Medicare beneficiaries were hospitalized for COVID-19-related treatment.  The hospitalization rates were highest for beneficiaries with end stage renal disease, African American beneficiaries, Hispanic beneficiaries and among beneficiaries who are age 85 or older.  The data also showed that 28% of hospitalized Medicare beneficiaries died in the hospital.  

The CMS announcement is available here.  The CMS blog post by CMS Administrator Seema Verma with more details on the new data is available here.

Reporter, Nicholas Kump, Sacramento, +1 916 321 4817,


CMS Requires Nursing Facilities to Submit Payroll-Based Staffing Data for the Second Quarter

During the COVID-19 public health emergency, CMS waived the requirement for nursing home providers to submit staffing data through the Payroll-Based Journal system in accordance with 42 CFR 483.70(q). On June 25, 2020, CMS issued a memorandum indicating that nursing facilities that accept Medicare and Medicaid patients must now submit payroll-based staffing data for the second quarter, which includes the months of April through June, by August 14, 2020. Nursing facilities are additionally encouraged to submit payroll-based data for the first three months of 2020, however, that information is not required. The CMS memorandum is available here.

King & Spalding Business Recovery Task Force

Healthcare organizations now must navigate the challenge of both resuming and continuing work in the context of the ever-changing “new normal.”  To help our healthcare clients address this challenge, the King & Spalding Coronavirus Business Recovery Task Force has created a tool for healthcare organizations to assess and strengthen their recovery response.  Access the COVID-19 Recovery Response Assessment for Healthcare Organizations here.  Access the Coronavirus Business Recovery – Return to Work Hub here.