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Dallas Business Journal:

The new health insurance reform law’s restrictions on physician-owned hospitals will be a game-changer, especially in North Texas, where the ownership structure has proved popular, health care officials say.

Hospital systems and doctors are adjusting their strategies to reflect the new legislation that prohibits Medicare and Medicaid reimbursements to future doctor-owned hospitals and existing ones that expand, but it’s too soon to know whether the reform laws will lead to the demise of facilities owned under this type of arrangement.

There are more than 25 doctor-owned hospitals in North Texas and more than 200 nationwide, according to the industry group Physician Hospitals of America. Ownership by one or more doctors in a private hospital qualifies it as a doctor-owned facility.

Critics of doctor ownership of hospitals say it leads to conflicts of interest when physicians refer patients to their own facilities, and siphons insured patients and those with the ability to pay away from other hospitals. Proponents of doctor ownership argue it leads to better health care by giving physicians more of a stake in how hospitals serve patients.

Parts of the recently enacted Patient Protection and Affordable Care Act, passed in March, prohibit construction of doctor-owned hospitals after this year, put strict limits on the facilities’ ability to expand, and restrict new investment in hospitals by physicians, said Debbie Hay, president of the doctor-owned Texas Institute for Surgery in Dallas and president of the board of directors for Texas Physician Hospitals Advocacy Center.

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The suit, filed in U.S. District Court in Tyler, challenges the constitutionality of the ban on physician ownership of new hospitals and the restrictions on existing facilities’ growth. It names the U.S. Department of Health and Human Services as the defendant.

The suit argues that the law unfairly singles out hospitals owned by doctors for retroactive regulation, and that it financially deprives physicians by barring them from owning hospitals when people in other occupations can do so, said civil appellate lawyer Jeff Levinger of Dallas-based Hankinson Levinger law firm, who is not directly involved in the case. The suit also claims that the reform law amounts to a “taking” that violates the doctors’ due process rights, Levinger said.Under the Fifth Amendment, a taking occurs when a law restricts citizens’ use of their property and significantly diminishes its value, according to the suit. The Tyler doctors have invested about $3 million into their planned hospital expansion, buying land and undergoing an arduous zoning process for the project, the lawsuit says.

Lawyer Jeff Levinger in the Dallas Business Journal article

“They are challenging several aspects of this law,” Levinger said. “They may have a reasonably good chance to show there’s been a taking if it has put a halt to business plans that were already in effect (when the law passed).”

http://www.bizjournals.com/dallas/stories/2010/08/09/focus1.html

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