Rul­ing buoys hopes

Physi­cian-owned hos­pi­tal seeks sum­mary judg­ment

Modern Healthcare - - Cover Story - Joe Carl­son

Physi­cian-owned hos­pi­tals are hop­ing to ben­e­fit from a rul­ing in Pen­sacola, Fla., that struck down the Pa­tient Pro­tec­tion and Af­ford­able Care Act last week.

The 20-bed Texas Spine & Joint Hos­pi­tal in Tyler, Texas, and trade group Physi­cian Hos­pi­tals of Amer­i­can filed a law­suit in June ask­ing a judge in the East­ern District of Texas to in­val­i­date the sec­tion of the law that pro­hibits new physi­cian-owned hos­pi­tals from be­com­ing cer­ti­fied for Medi­care af­ter March 2010 and places more re­stric­tions on re­fer­rals in­volv­ing physi­cian-owned hos­pi­tals.

Crit­ics say the Medi­care cer­ti­fi­ca­tion lim­i­ta­tion ef­fec­tively halted new con­struc­tion at hos­pi­tals around the coun­try, in­clud­ing Texas Spine, which was in the midst of a $35 mil­lion ex­pan­sion to dou­ble its bed count and add three op­er­at­ing rooms when the law was passed.

On Jan. 31, U.S. District Judge Roger Vin­son of Pen­sacola ruled that the en­tire health­care re­form law was un­con­sti­tu­tional be­cause one of its pro­vi­sions—a re­quire­ment that most U.S. cit­i­zens buy health in­surance—was il­le­gal and not sev­er­able from the en­tire act.

The next day, the at­tor­ney for Texas Spine and the PHA filed a mo­tion ask­ing the judge in east Texas to grant sum­mary judg­ment based on the Florida rul­ing. “In light of Judge Vin­son’s opin­ion, Sec­re­tary (Kath­leen) Se­be­lius is in­ca­pable, as an ex­ec­u­tive branch of­fi­cial, of en­forc­ing sec­tion 6001,” at­tor­ney Scott Oost­dyk wrote in a mo­tion for sup­ple­men­tal author­ity.

U.S. District Judge Michael Schneider an­nounced Nov. 24 that he was can­cel­ing a trial in the case and would rule in fa­vor of HHS on all five of its le­gal points, in­clud­ing that the law did not con­sti­tute a “tak­ing” un­der the law and that the law did not deny physi­cian-owned hos­pi­tals rights to due process or equal pro­tec­tion. How­ever, the fi­nal mem­o­ran­dum opin­ion has not yet been re­leased.

Physi­cian-owned hos­pi­tals’ “abil­ity to com­pete ef­fec­tively against lum­ber­ing hos­pi­tal sys­tems made them a po­lit­i­cal tar­get,” says a fil­ing from Texas Spine.

Attorneys for HHS coun­tered that “nu­mer­ous gov­ern­men­tal and in­de­pen­dent aca­demic stud­ies” have found that physi­cian own­er­ship leads to higher uti­liza­tion and more cost while un­der­min­ing the fi­nances of com­mu­nity hos­pi­tals that pro­vide “un­com­pen­sated care and other less profitable ser­vices.”

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