A group of hospitals has filed a lawsuit challenging a provision in the health care reform legislation that limits Medicare and Medicaid reimbursements to doctor-owned facilities.

Physician Hospitals of America (PHA) and the Texas Spine & Joint Hospital filed the suit in federal district court in Tyler, Texas, saying the restriction on reimbursements in the recently passed Patient Protection and Affordable Care Act (PPACA) was exclusionary and arbitrary.

PHA, which represents 265 physician-owned hospitals in 34 states, said in a statement that the national health care law would "stop the growth of many of the best hospitals in the country."

The lawsuit is one of several filed that challenges the PPACA, and the first filed by health care providers.

The suit argues that the law violates due process because it “retroactively, illegitimately and irrationally burdens plaintiffs' private property.”  Additionally, the plaintiffs say the law violates equal protection because it “irrationally targets for its anti-competitive burden” hospitals owned by physicians.

The PPACA prohibits any physician-owned hospital from becoming Medicare-certified after December 31, 2010 as well as limiting the increase in the percentage of physician ownership of hospitals that are already certified.

Texas Spine & Joint Hospital, located in Tyler, was planning an expansion of their facility. The restrictions in the PPACA have put those plans on hold.

The restriction in the PPACA was supported by some hospital groups, claiming that physician-owned institutions “cherry pick” certain patients, especially those that are covered under Medicare. Other supporters of the limitation say that Medicare costs are increased when physicians refer patients to hospitals where they have an ownership interest.