Moratorium for doctor-owned specialty hospitals now over

CMS outlines steps to ensure appropriate physician investment in the facilities.

By David Glendinning, AMNews staff. Aug. 28, 2006.

Washington -- The development of new doctor-owned specialty hospitals, an opportunity that has been largely closed off to physician investors for nearly three years, has once again received the go-ahead from the federal government.

The latest major administrative barrier preventing new cardiac, orthopedic and surgical hospitals from opening their doors to Medicare patients expired at the beginning of this month, when the Centers for Medicare & Medicaid Services released a congressionally mandated strategic plan for the future of the facilities. In doing so, CMS ended a phase during which Congress had prohibited the agency from issuing Medicare provider numbers to new specialty hospitals whose owners also would refer beneficiaries to the facilities.

New specialty hospital development has been significantly limited since December 2003, when President Bush enacted a Medicare reform law that temporarily prohibited physician investors from referring Medicare patients to facilities in which they had a financial interest. When that original 18-month moratorium expired, CMS and Congress kept specialty hospitals' Medicare applications on ice for more than a year while the Bush administration continued to craft its strategic plan and study whether these facilities were acting appropriately within the program.

The American Medical Association and the American Surgical Hospital Assn., a group that represents specialty hospitals, praised the decision to allow this latest obstacle to the facilities to disappear.