Challenge to physician-owned hospital ban dismissed

In a blow to physician-owned hospitals, a Houston federal appeals court threw out a challenge to an Accountable Care Act provision that halts Medicare and Medicaid reimbursements to any such hospitals licensed after December 31, 2010, MedPage Today reported.

The decision goes back to June 2010, when the Texas Spine & Joint Hospital and Physician Hospitals of America filed a lawsuit contesting part of the healthcare reform law. The federal district court agreed with the government that the provisions are constitutional, prompting the physician-owned hospital and trade group to appeal.

However, on Thursday the appeals court dismissed the case for lacking subject-matter jurisdiction, saying Congress had a rational basis for enacting the provisions and that the ACA requirements are not unconstitutionally vague, according to the judgment.

The ruling means the hospital must go though the appeals process before suing in federal court. But in order to sue, Texas Spine & Joint Hospital must finish its $30 million expansion and start treating patients. Once it's denied a claim, it can then proceed with the challenge, Medscape Medical News noted.

"The appellate court said you have to break the law in order to appeal the law," plaintiff attorney Scott Oostdyk told Medscape. "That isn't the American way to proceed."

The decision could stir up more debate about self-referral and cost efficiency at physician-owned hospitals. Supporters of the ban claim physician ownership leads to overuse of healthcare services, while opponents warn the ban will stall competition and access quality care.  

Adding to dispute, a May study found that surgeons who own surgical centers perform 14 percent to 22 percent more surgeries than nonowners.

For more:
- here's the court judgment (.pdf)
- check out the MedPage Today article
- read the Medscape Medical News article