This paper examines the legal framework for regulating the development of new private hospitals in Victoria. It first reviews the genesis of the statutory power for private hospital regulation and outlines the two court cases which clarified the interpretation of the statute. The legislation and its interpretation by the courts emphasise a particular approach to private hospital planning which does not necessarily address the problems faced by consumers of hospital services in Victoria. It is argued that the law has constructed a particular framework for private hospital regulation which does not address the critical problems facing the hospital system in the 1990s. The legal framework for regulation is based on property rights rather than the needs of hospital users, despite the language used in the legislation.