Challenge to physician self-referral amendment rejected

Medicare and Medicaid

Challenge to physician self-referral amendment rejected The Secretary of Health and Human Services was granted summary judgment on a challenge to an amendment to the Medicare Act from a group of physician-owned hospitals (POHs). The amendment, Section 6001 of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), prohibits new or expanded POHs from filing claims for health services covered by Medicare if there is a financial relationship between the referring physician and the hospital receiving payment. The POHs allege that Sec. 6001 violates their constitutionally protected rights to due process and equal protection. They also challenge the law as unconstitutionally and retroactively confiscatory, and they claim the law is void for vagueness. The POHs asked the Court to declare Sec. 6001 unconstitutional and enjoin the Secretary from enforcing it.

Not an issue for the courts

Prior to the enactment of Sec. 6001, titled “Limitation on Medicare Exception to the Prohibition on Certain Physician Referrals for Hospitals,” there was an exception to the “Limitation on Certain Physician Referrals” in Soc. Sec. Act §1877. This law provision is part of legislation called the “Stark Law,” which generally prohibits hospitals from billing Medicare for patients referred to facilities in which the referring physician (or immediate family members) had an ownership or other investment interest. The Stark Law included a provision that was known as the “whole hospital exception.” It permitted Medicare payment for services when the referring physician had an ownership or investment interest in the entire hospital.

In March 2010, Congress dramatically limited the availability of the whole hospital exception by enacting Section 6001, based on concerns that physician investments in hospitals are incentives to increase referrals for Medicare-covered services.

In support of their claims that Sec. 6001 violates their constitutional rights, the POHs presented a wealth of evidence that demonstrates the hardship they face as a result of the amendment, the court said. At the summary judgment stage, however, the court explained that it is charged with a single task: to determine whether the evidence presents a genuine issue of material fact. The court found that although genuine factual disputes exist, none of them are material to the POH claims. Accordingly, the Secretary is entitled to judgment as a matter of law, the court held. Because the POHs cannot succeed on the merits of their claims, the court did not consider the equitable factors relevant to their request for a permanent injunction.

The court commented that the POHs offered testimony and evidence that questions the wisdom and fairness of the legislation. Although their evidence appears to be sound in logic and reason, the court said, it is not enough for the POHs to convince the court that their studies and reports are more likely correct. In a case like this, claimants have a particularly heavy burden to show that the justifications for enacting Section 6001 could not reasonably be conceived to be true. Short of that, the court does not have the authority to judge the wisdom or fairness of Congress’s decision, the court concluded.

Physician Hospitals of America and Texas Spine & Joint Hospital, Ltd. v. Sebelius, March 31, 2011, ¶303,748

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