The Palo Alto Accountable and Affordable Care Initiative, challenged by certain hospitals and the California Hospital Association in Stanford Health Care v. City of Palo Alto, would impose an “acceptable payment amount” on the compensation hospitals and other medical providers can receive from insurers and certain other payers for the care provided to patients. “[T]he fact that no municipality has ever imposed price controls on hospitals should, at the very least, raise red flags ... about whether Palo Alto has the legal authority to do so,” states the AHA brief, filed in California superior court in Santa Clara County. “In addition, history reveals that Congress expressly invited … earlier State rate-setting experiments. Such an invitation is not only lacking today, but the Affordable Care Act provides a powerful signal that Congress sought to bring down the costs of hospital services using measures other than rate caps.”

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