CMS offers guidance on specialty hospital moratorium

Facilities under development could be exempt from a ban on physician referrals.

By Markian Hawryluk, AMNews staff. April 5, 2004.

Washington -- Advanced Surgical Associates, a group of 17 Tacoma, Wash., doctors seeking to build the state's first specialty hospital, simply ran out of time.

Despite being three years into the project, the hospital had not met enough of the benchmarks by the Nov. 18, 2003, deadline to be protected from a federal moratorium on new physician-owned hospitals. In mid-March, the group decided to abandon its efforts.

"We assessed what the federal legislation said, and we just didn't think we met the test," said ASA spokesman Bill Stauffacher. "Ongoing operating costs weighed against the unpredictable outcome of a federal study during the moratorium led the group to determine that our innovative idea would have to wait for another day."

Under a guidance issued March 19 by the Centers for Medicare & Medicaid Services -- two days after ASA announced its decision -- other specialty hospitals in development will have to petition the federal government to know for sure whether they are exempt from the moratorium.

The Medicare reform bill signed into law last year by President Bush implemented an 18-month moratorium starting Jan. 1 on referrals to new specialty hospitals in which the referring physician has an ownership interest. Congress exempted specialty hospitals already in operation or those under development as of Nov. 18, 2003. But lawmakers left it to the secretary of the Dept. of Health and Human Services to define "specialty hospital" and "under development."