Reform Ramifications

An association of physician-owned hospitals filed a lawsuit against the federal government in a long-shot attempt to overturn restrictions included in the recent healthcare reform bill that limit the growth and new construction of the controversial facilities.

The suit was filed jointly by Physician Hospitals of America and Texas Spine & Joint Hospital, a 20-bed private hospital in Tyler, TX, and alleges that the new law violates due process and equal protection rights granted under the U.S. Constitution.

At issue is Section 6001 of the Patient Protection and Affordable Care Act, which limits the development of new physician-owned hospitals or the expansion of existing ones. Although standing hospitals were grandfathered, the law prevents them from expanding unless they meet new requirements.

There are more than 300 physician-owned hospitals across the country, and 39 were in development but cannot continue because of the new law, according to PHA.

After the legislation passed, Texas Spine & Joint Hospital halted a planned expansion that had been in the works for years, says Michael E. Russell, II, MD, an orthopedic spine surgeon at the facility. The hospital had purchased nearby property and spent several million dollars preparing for the 20-bed expansion, which had already won local zoning approval.

Although the hospital will be able to remain open in the near future, hospital leaders are now unsure about its long-term prospects because of the restrictions, says Russell. "We are going to have a huge increase in patients because of reform, and we need more access to care, not less. Why would the government seek to keep a wonderful, high-quality, efficient way to perform hospital services from expanding and growing?"

The effort to ban physician ownership has often been spearheaded by other hospital organizations, including the American Hospital Association. While the AHA has raised questions about financial conflicts of interests and the safety of physician-owned hospitals, PHA claims that the restrictions are about eliminating competition.

"[Physician-owned hospitals] undermine the ability of full-service hospitals to continue to provide essential services as the community's healthcare safety net," says AHA spokesperson Elizabeth Lietz.

After losing the lobbying battle, the courts may be physician-owned hospitals' last chance. The plaintiffs will try to convince the court that the law "treats physicians different than any other class of citizen," says Molly Sandvig, executive director of PHA. "Anyone else can own a hospital except a doctor. It's outrageous and not based on what this country's founded on."