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The Healthcare Investor Insights on Issues & Trends that Impact Investments in Healthcare & Life Science Businesses

How Does the U.S. Supreme Court’s Ruling on Healthcare Reform Impact Physician-Owned Hospitals?

Posted in Healthcare Services Investing

We have discussed in several prior posts the lawsuit challenging Section 6001 of the healthcare reform law (the Affordable Care Act, or the ACA) lead by Texas Spine & Joint Hospital (TSJH) and Physician Hospitals of America on behalf of the physician-owned hospital industry.   The challenge claims that Section 6001 is unconstitutional in its aggressive restrictions on development of new and expansion of existing physician-owned hospitals that bill Medicare/Medicaid, with a particularly damaging impact on hospitals that were in development when the law was passed on March 23, 2010.   The case got additional national attention when Judge Smith ordered US Attorney General Eric Holder to deliver a 3-page letter addressing President Obama’s statements regarding the right of the judiciary to declare Congressional acts unconstitutional.   Most industry watchers believe that the Fifth Circuit had withheld its ruling on Section 6001 pending the US Supreme Court’s decision on the ACA, because, if the US Supreme Court had deemed the individual mandate unconstitutional and the lack of a "savings" or "severability" clause as fatal to the entire law, then Section 6001 would have fallen with the rest of the ACA, thereby rendering the TSJH and PHA case moot.  Now that the US Supreme Court has upheld the individual mandate (without ruling on Section 6001 as it was not part of the challenge to that particular court), the Fifth Circuit must now render its ruling in the physician-owned hospital case.   The ruling will be the next in the line of cases challenging various aspects of the ACA.

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