WWE sources indicate the decision was made late last week after Bryan was sent to Pittsburgh for additional tests when his physical therapy was not leading to him responding as quickly as originally expected.
PWInsider.com originally reported that there were some in WWE who didn't realistically expect Bryan back in action before Summerslam, but there was cautious optimism that he would be back by MITB, at least, and he was advertised for all of the July house shows in main events.
WWE will have quite a storyline gap to fill as Bryan has already stated, on television, that he would not hand the title over, since it would negate everything he accomplished from Summerslam 2013 through Wrestlemania and more importantly, everything the fans accomplished with their support. WWE now finds themselves in a position where they have to take the title from Bryan without damaging his character. As I wrote earlier, I expect this to be addressed in some capacity on Raw.