The Fifth Circuit recently dismissed a lawsuit brought by Physician Hospitals of America, the physician-owned hospital industrial trade association, and Texas Spine & Joint Hospital. The parties were attempting to overturn the Stark Law limits on Medicare reimbursement for services furnished to a patient referred to a physician-owned hospital by a physician owner. Texas Spine & Joint Hospital had started to expand its facilities and spent about $3 million toward a planned $30 million expansion when PPACA's limitations on new physician-owned hospital beds and ORs precluded continuation of the project, as the hospital would have been unable to complete its expansion before the statutory cutoff.
The Fifth Circuit held that the district court lacked subject matter jurisdiction because of the Medicare law's requirement that "virtually all legal attacks" be pursued through the statutorily-mandated administrative process prior to litigating in federal court. Thus, the court held that the plaintiffs were required to seek a remedy. Their failure to do so left the court without subject matter jurisdiction over their claims.