On August 16, 2012, the U.S. Court of Appeals for the Fifth Circuit dismissed an appeal challenging the Patient Protection and Affordable Care Act’s (PPACA’s) restriction on expansion by physician-owned hospitals.  The lawsuit was initially filed in the Eastern District of Texas by the physician-owned hospital trade group (Physicians Hospitals of America) and a physician-owned hospital (Texas Spine and Joint Hospital) against the Secretary of the Department of Health and Human Services seeking declaratory and injunctive relief on the basis that Section 6001 of PPACA, which limits expansion of physician-owned hospitals, violates the Due Process Clause, is void for vagueness, and violates the Equal Protection Clause of the Constitution.

Texas Spine and Joint Hospital is a physician-owned 20-bed hospital that opened in Tyler, Texas in 2002.  In 2008, it spent approximately $3 million toward a planned $30 million expansion.  Because the hospital would have been unable to complete its expansion before the cutoff imposed by PPACA, the hospital stopped construction after passage of Section 6001 of PPACA.

The district court granted a summary judgment to the Secretary and the plaintiffs appealed. The Court of Appeals ruled that the district court lacked subject matter jurisdiction in the case because judicial review of such a claim is only available after a party first presents the claim to the Secretary and receives a final decision.  In other words, the hospital would have to finish the costly expansion, present a claim to Medicare, and then contest the constitutionality of the law.  The plaintiffs could possibly appeal the decision to the U.S. Supreme Court.