A U.S. District Court judge in Tyler, Texas, denied the government's motion to dismiss a lawsuit filed against HHS Secretary Kathleen Sebelius that challenges the constitutionality of the healthcare reform law's expansion restrictions on physician-owned hospitals.
Judge denies motion to dismiss Sebelius lawsuit
In its motion, the government said the plaintiffs—the Physician Hospitals of America trade association and Texas Spine and Joint Hospital in Tyler—had not satisfied Medicare's “exhaustion requirement,” which requires that administrative remedies “be pursued fully” before legal action is taken. The plaintiffs argued back that the administrative remedies applied to monetary claims and that their dispute was a “constitutional claim” over Section 6001 of the Patient Protection and Affordable Care Act.
In his six-page ruling issued Feb. 18, U.S. District Judge Michael Schneider acknowledged the “exhaustion rule is virtually absolute regardless of the basis of the challenge,” and that “This exhaustion requirement is perhaps one of the most burdensome of all administrative proceedings.”
Schneider ruled that there are rare exceptions to this requirement and they applied to this case because, in order to exhaust administrative remedies, Texas Spine and Joint would first have to complete its expansion, file a reimbursement claim with HHS, wait to be denied and then appeal. If it lost this appeal, Schneider wrote, the hospital would also be forfeiting its ability to bill Medicare for future self-referrals.
“It is inconceivable that a hospital would gamble millions of dollars in construction and expansion costs with the hope that it would ultimately prevail in having Section 6001 deemed unconstitutional by the Court,” Schneider ruled. “In other words, the hospital would have to risk a death penalty sanction to challenge statute through administrative channels.”
Physician-owned Texas Spine and Joint Hospital opened in 2002 and was in the middle of a $35 million renovation project to expand to 10 operating rooms from seven and to 40 inpatient beds from 20 when the reform law passed and put a halt to expansion of existing physician-owned hospitals.
The case had been set to go to trial Dec. 9, but on Nov. 24, Schneider announced that he had canceled the trial and would rule on the case himself.
PHA and Texas Spine and Joint Hospital have since filed motions asking Schneider to recognize the ruling of a federal judge in Florida that the entire healthcare reform law was unconstitutional.
Representatives from HHS and the Justice Department were unavailable for comment.
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