End of moratorium on new specialty hospitals likely to prompt 'building boomlet'

The decision earlier this month by CMS not to extend a moratorium on approval of new specialty hospitals likely will prompt a "building boomlet" of the facilities, the Wall Street Journal reports.

According to the Journal, concerns that specialty hospitals "drive up health care costs and undercut nonprofit community hospitals" prompted Congress in 2003 to implement a moratorium on new facilities (Armstrong, Wall Street Journal, 8/29).

The 2003 Medicare law included an 18-month moratorium that expired in June 2005, but CMS officials determined that the agency had the authority to extend the moratorium until Feb. 15.

In addition, the fiscal year 2006 budget reconciliation bill enacted in February included a six-month moratorium and required CMS to develop a plan on regulation of specialty hospitals.

CMS earlier this month finalized the plan to end the moratorium on approval of new specialty hospitals (Kaiser Daily Health Policy Report, 8/10).

As a result, new specialty hospitals are planned in California, Indiana, Pennsylvania and Texas, where about one-third of the 130 specialty hospitals in the U.S. are located.

James Grant, executive vice president of Chicago-based National Surgical Hospitals, said that he expects the construction of almost 30 new specialty hospitals within the next year.

Daniel Tasset -- CEO of Nueterra Healthcare, which develops specialty hospitals -- said, "We are back in business again," adding, "We have renewed interest from the banks and lenders and renewed interest from physicians."

The expected increase in the number of new specialty hospitals "is certain to ignite more controversy about the hospitals," the Journal reports. Senate Finance Committee Chair Chuck Grassley (R-Iowa) has asked Congress to implement a permanent moratorium on new specialty hospitals, a move supported by the American Hospital Association (Wall Street Journal, 8/29).