12 specialty hospitals exempt from moratorium

CMS may allow centers under development as of Nov. 2003 to continue to expand.

Despite the freeze in accepting new specialty hospital applications, as many as 37 new centers with applications already in process may be allowed to open.

According to a report by the Government Accountability Office, facilities under development as of November 18, 2003 may apply to the Centers for Medicare & Medicaid Services (CMS) to be grandfathered under the moratorium. CMS has already approved 12 specialty hospitals for exemption and received 40 applications seeking similar results.

“Whether or not MMA’s [Medicare Prescription Drug, Improvement, and Modernization Act] moratorium is allowed to expire, the number of physician-owned specialty hospitals will increase from present levels,” the Government Accountability Office (GAO) wrote in its report. “If the moratorium is extended, at least 12 and perhaps eventually as many as 37 new specialty hospitals could be completed and opened within a year or two. The exact increase would depend in part on the number of applications that CMS approves,” the organization wrote.

Forty centers have applied to the CMS since April 29, 2005. The applications include five identified orthopedic hospitals. The CMS has denied two of the 40 applications, but is re-evaluating one case at the request of the center, the GAO wrote. One center withdrew its application, leaving 25 submitted cases to be decided.

The GAO estimates that more centers could come forward. “CMS provided context for the relative potential growth of physician-owned specialty hospitals, stating that if the agency were to approve all pending applications for grandfather determinations and if all of the 37 potential specialty hospitals identified by GAO were to open, the number of acute care hospitals would increase by just over 1%,” the organization wrote.

The GAO based some findings on information gathered from organizations such as the American Hospital Association, the Federation of American Hospitals and the Medicare Payment Advisory Commission.

For more information:
Government Accountability Office. Specialty Hospitals: Information on Potential New Facilities. Report #GAO-05-647R. Dated: May 19, 2005. Released June 9, 2005. Available online at: http://www.gao.gov/new.items/d05647r.pdf.