5th Circuit Throws Out PPACA Medicare Pay Suit

By Allison Bell

August 21, 2012

A 3-judge panel at the 5th Circuit U.S. Court of Appeals has rejected efforts by a trade group and a physician-owned hospital to overturn Section 6001 of the Patient Protection and Affordable Care Act of 2010 (PPACA).

The panel held that, in most cases, health care providers that want to challenge the constitutionality of PPACA Medicare provisions must start by exhausting the Medicare program administrative review process.

PPACA Section 6001 puts new limits on Medicare enrollees use of physician-owned hospitals.

Physician Hospitals of America, Washington, and the and the Texas Spine & Joint Hospital Ltd., Tyler, Texas, sued to try to overturn PPACA Section 6001, contending that the provision would limit patients' access to high-quality hospitals, failed to offer the hospitals due process, and failed to offer the hospitals protection equal to that extended to other hospitals.

In May 2011, a judge in the U.S. District Court for the Eastern of Texas dismissed a the suit.

The district court judge said in a ruling on Physician Hospitals of America et al. vs. Sebeliusthat Congress had a rational basis for enacting Section 6001, that PPACA does not constitute a real or regulatory taking, and that Section 6001 is clear enough to be constitutional.

Paul Keckley, a health policy specialist at the Deloitte Center for Health Solutions, Washington, suggested earlier this year that the PHA case might prove to be a vehicle PPACA opponents could use to overturn PPACA, or a part of PPACA, if the U.S. Supreme Court blocked challenges to the constitutionality of a PPACA provision imposing a tax on many individuals who fail to have a minimum amount of health coverage in place by 2014.

The Supreme Court upheld the constitutionality of the uninsurance tax provision June 27.

In the new ruling, the 5th Circuit holds that the district court had no jurisdiction over the case to start with, because the Medicare Act requires that most legal attacks involving the act must first go through the Medicare administrative process rather than starting in the courts.

Circuit Judge Leslie Southwick writes in an opinion explaining the 5th Circuit ruling that the court drew from a 2000 Supreme Court ruling on Shalala vs. Illinois Council on Long Term Care Inc.

In that case, providers challenged the constitutionality of Medicare Act provisions that require the providers to channel reimbursement claims through an administrative process.

The limits on the providers' ability to start by going directly to court is the price the system pays for protecting Medicare against an endless series of court challenges, Southwick writes.

"The ever-evolving landscape of health care in the United States may one day prompt a new structure for judicial review in a case such as this," Southwick says of the PHA suit.  

But, "'if the balance is to be struck anew, the decision must come from Congress” and not from the courts," Southwick says, quoting the Shalala ruling.

Officials at the department in charge of Medicare, the U.S. Department of Health and Human Services and at the U.S. Department of Justice to comment on the ruling.

Representatives for the PHA were not immediately available to comment.