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Specialty Hospital Issues

In section 507 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173) Congress:

  • Amended the "whole hospital" and "rural provider" ownership exceptions to establish an 18-month moratorium during which physician-investors could not refer to specialty hospitals, and under which specialty hospitals were prohibited from billing or submitting claims for designated health services (DHS) furnished as a result of a prohibited referral;
  • Defined specialty hospitals as those that are primarily or exclusively engaged in the care and treatment of: 1) patients with a cardiac condition; 2) patients with an orthopedic condition; or 3) patients receiving a surgical procedure;
  • Created an exception for those hospitals that were under development as of November 18, 2003. Section 507 directed CMS to consider whether the following had occurred as of that date: (i) architectural plans were completed; (ii) funding was received; (iii) zoning requirements were met; and (iv) necessary approvals from appropriate state agencies were received; and
  • Mandated the Secretary to conduct a study during the moratorium to assess the referral patterns of physician owners of specialty hospitals and to compare the quality of care and differences in the amount of uncompensated care furnished by specialty hospitals versus general acute care hospitals.

Notification Issued March 19, 2004

CMS, in the Notification issued March 19, 2004, alerted its contractors to the 18-month moratorium. (See download below.) The moratorium was in effect from December 8, 2003 through June 7, 2005.

The specialty hospital advisory opinions that CMS issued relating to the exception for hospitals that were under development can be accessed by clicking on the link titled “Specialty Hospital Advisory Opinions” on the left side of this webpage.

MMA Report to Congress

HHS submitted the Required Interim Report to the Congress regarding physician-owned specialty hospitals on May 12, 2006. The Final Report to the Congress was submitted on August 8, 2006.

See below for links to the:

  • Fact Sheet
  • Report to Congress: Study of Physician-Owned Specialty Hospitals
  • Recommendations Regarding Physician-Owned Specialty Hospitals
  • Testimony of CMS Administrator Dr. Mark McClellan, May 12, 2005

DRA Report to Congress

Section 5006 of the Deficit Reduction Act of 2005 (DRA), enacted February 8, 2006, directed the Secretary of HHS to develop a strategic and implementing plan concerning certain specialty hospital issues. The DRA required the Secretary to issue an interim report on the status of the strategic and implementing plan within three months and a final report within six months. On March 8, 2006, we held a Special Open Door Forum about our proposed strategic and implementing plan.

Congress continued the enrollment suspensions under section 5006(c) of the Deficit Reduction Act of 2005 (DRA). The extension set by Congress continued until August 8, 2006, when the Secretary submitted his final Report to Congress. These temporary enrollment suspensions did not apply to those specialty hospitals that submitted a CMS-855A prior to June 9, 2005, or that requested prior to that date an advisory opinion from CMS as to their status under the specialty hospital moratorium.