Medicare ban extended 6 months; new specialty hospitals blocked

Studies show these facilities provide high-quality care, but two leading lawmakers voiced concern after the death of a patient who sought care at a doctor-owned hospital.

By David Glendinning, AMNews staff. March 6, 2006.

Washington -- The close of 2005 did not bring the cessation of hostilities that supporters of physician-owned specialty hospitals hoped for in the battle over the future of these facilities.

Tucked away in the massive deficit reduction measure that President Bush signed into law last month was more bad news for physician investors waiting in the wings to launch new cardiac, orthopedic or surgical hospitals. Congress has stipulated that the Centers for Medicare & Medicaid Services not approve any application to participate in Medicare from specialty hospitals for another six months -- or until the agency releases a report on how to regulate future physician investment in the facilities.

The latest delay will keep investors in limbo for more months on top of the years they already had to wait. The construction of new specialty hospitals effectively has been on hold since the end of 2003, when Congress implemented an 18-month ban on physician referrals to facilities in which they have an ownership interest. Although the moratorium expired last June, CMS announced it would not approve new specialty hospital applications through the end of 2005. The agency wants to determine if the facilities provide the level of care required by Medicare.

More delays simply will deprive physicians and patients of proven alternatives to general hospitals, said American Medical Association President-elect William G. Plested, MD, a thoracic and cardiovascular surgeon in Brentwood, Calif. Specialty hospitals often provide higher-quality care with higher rates of patient satisfaction, he said. The AMA sees continued legislative barriers as anticompetitive measures that stifle medical innovation.