5th Circuit Upholds PPACA’s Limits on Physician-Owned Hospitals

Last Thursday, the 5th Circuit Court of Appeals dismissed a  lawsuit challenging provisions in the Patient Protection and Affordable Care Act (PPACA) that effectively limit expansion of physician-owned hospitals.

The challenge, filed by plaintiffs Physician Hospitals of America and the Texas Spine & Joint Hospital against HHS Secretary Sebelius, alleged that Section 6001 of the PPACA violates the Due Process and Equal Protection clauses of the Constitution.

Section 6001, as amended, limits Medicare reimbursement payments to hospitals owned by physicians, unless the hospital was licensed prior to December 31, 2010, or unless the HHS Secretary grants an exception.  Texas Spine & Joint was in the middle of a $37 million hospital expansion when the PPACA passed in 2010, and filed its challenge shortly after.

Because provisions of the Medicare Act restrict the way in which legal challenges can be brought against Medicare regulations, the 5th Circuit held that the federal courts lacked subject-matter jurisdiction over the case because administrative review—review by the HHS Secretary—had not first been sought.

Plaintiffs claimed that administrative review would have required them to first complete new construction, and then seek review and a final decision by the HHS Secretary, risking enormous waste and loss.  HHS did not deny this allegation.

Nonetheless, the 5th Circuit found that even “severe economic impracticability…[was] not enough” in this case to merit judicial review.

For the full opinion, visit: http://www.ca5.uscourts.gov/opinions/pub/11/11-40631-CV0.wpd.pdf.