Oklahoma will likely see more specialty hospitals built in the future, now that a federal moratorium on new specialty hospitals has been lifted.

When the moratorium went into effect, Oklahoma was near the head of the pack with nine specialty hospitals, which provide services only for a particular ailment, namely, a cardiac or orthopedic condition. In 2004, a study by the federal General Accounting Office showed Oklahoma ranked third in the nation in the number of specialty hospitals, behind two states with considerably higher population densities than Oklahoma. Texas had 20 specialty hospitals, and California had 11.

U.S. Sen. Tom Coburn, R-Okla., one of two physicians in the U.S. Senate, praised the Centers for Medicare and Medicaid Services last week for lifting the moratorium.

"As a practicing physician, I am pleased that this ruling will allow market forces to increase quality and decrease costs in health care," said Coburn. "For more than two-and-a-half years, this important market innovation has been stymied. CMS has taken critical steps to update its hospital payment system to the 21st century with reforms that will level the playing field. Today's report and the end to the moratorium reaffirm that specialty and traditional hospitals can coexist in a free-market world. "

According to the 2004 GAO study, 28 states had at least one specialty hospital, but two-thirds of the 100 specialty hospitals in operation at the time were located in just seven states: Oklahoma, Texas, California, Kansas, Louisiana, Arizona and South Dakota. Specialty hospitals tend to crop up most in states where the law makes it fairly easy to create one, the study found.

"Specialty hospitals are much more likely to be found in states where hospitals are permitted to add beds or build new facilities without first obtaining state approval for such health care capacity increases," reads the study.

The CMS implemented a moratorium to curb the growth of such hospitals until further research could be done regarding the quality of patient care they provided and the impact they were having on larger, general hospitals.

After the original 18-month moratorium expired, the CMS instructed its regional offices and contractors not to enter new provider agreements with specialty hospitals and not to enroll new specialty hospitals as Medicare providers. Four hospitals were found to have violated the moratorium, with CMS identifying more than $12 million in potential overpayments.

Advocates of specialty hospitals say they offer a greater level of care by specializing in specific procedures, but detractors have accused the specialties of "cherry-picking" the lucrative procedures general hospitals tend to rely on to make up the difference for the losses they incur in providing care for the uninsured and underinsured.

Several questions were also raised about conflicts of interest, as many specialty hospitals are owned by physicians.

The U.S. Department of Health and Human Services was directed by Congress in the Deficit Reduction Act of 2005 to develop a strategic plan to address physician investment, reimbursement, and the referral process. The plan firstly introduces major reforms in Medicaid reimbursement rates for hospitals, which have traditionally been too low to compensate for the cost of providing health care to indigent patients.

"By eliminating the sometimes large difference between payments and costs for some types of hospital care, improper incentives can be eliminated for physicians and hospitals to invest in services simply because they are most profitable," reads a statement from CMS.

The new plan would implement a new level of transparency regarding physician investment and compensation arrangements, requiring such information be disclosed to patients.

"The strategic plan announces CMS' position that nonproportional returns on investments and non-bona fide investments may violate the physician self-referral statute and are suspect under the anti-kickback statute," CMS announced.

CMS administrator Mark B. McClellan said the new disclosure requirements will provide a better foundation for enforcing the physician self-referral statute whenever appropriate.

"Hospitals that do not comply with this new disclosure requirement may face civil penalties of $10,000 per day that they are in violation of the law," said McClellan.