For Cirrus Health in Dallas, a three-year federal moratorium directed at specialty hospitals has given them time to work on some long-range planning. "To be honest," says Cirrus spokesperson Tracy Edwards, "we've been laying the foundation for physician-owned hospitals during the moratorium. With it ending, of course, it just opens up the opportunities." Those opportunities lie in signing up groups of physicians to invest in new specialty hospitals for a development pipeline that now includes eight to 12 projects around the country. Don't expect a big burst of new construction, says Molly Gutierrez, executive director of the American Surgical Hospital Association, but with the moratorium lifted and the intense scrutiny of the past 36 months now over, a pick up in building activity is more than likely. The federal ban on reimbursements to new specialty institutions didn't eliminate new construction, notes Gutierrez, but it obviously dulled the industry's appetite for new projects. The lifting of the moratorium will also likely trigger a change at many of the ambulatory surgical centers that have been built around the country as they switch to specialty hospitals with a broader range of services. The moratorium did have "a dampening effect on the industry," says Gutierrez. "Coming out from under that will be a freeing effect." And that is exactly what the American Hospital Association and its allies have dreaded. "We expected that (the Centers for Medicare and Medicaid Services) would not be extending the moratorium," says Mary Beth Savary Taylor, vice president of executive branch relations for the American Hospital Association, even though the AHA had presented a raft of reasons why the moratorium should be extended. But the fight's not over yet. The AHA has continued to complain that specialty hospitals "cherry-pick" patients, scooping up those with insurance for high-margin procedures and thereby undercutting the biggest revenue streams. It's those well-paying procedures that community hospitals rely on to subsidize their other work. Additionally, notes Taylor, a number of Congressional figures have raised concerns about the controversial issue of physician self-referrals to specialty hospitals in which they have a financial stake. And CMS' report on specialty hospitals, delivered right on schedule on August 8, highlights those concerns as well, she continues. Says Taylor: "We need to ban self-referrals." AHA clearly hopes the CMS report, which also outlines specific steps doctors will need to take in informing patients about their financial stake in any specialty hospital they refer to, will put a chill in new development plans. "I think there's enough uncertainty in the report that came forward that it will likely give pause to other limited service hospitals," says Taylor. Supporters of specialty hospitals, though, are quick to respond that what the hospitals really hate is the new competition. That competition, they add, comes from better health outcomes, which in turn is driving everyone in the field to perform better — a big win for patients. But they will also face a changed reimbursement field. CMS has been restructuring reimbursements to give higher pay for more difficult procedures … which in turn, may lower the amount specialty hospitals may be able to gain for their work. "There will be a financial impact," says Gutierrez. "But I don't think it will put our industry out of business. We do a lot of acute patients. We've been in favor of the change to be based on acuity. The DRG system is outdated." What the arrival of specialty hospitals hasn't done, say a group of independent researchers, is drive costs down. Specialty hospitals have helped drive a big trend toward specialization in the healthcare field, according to a new peer-reviewed study by the Center for Studying Health System Change. But while more and more specialty services help build competition, it is actually having the unexpected effect of driving up costs. Healthcare "is increasingly organized through specialty-service lines, which are already leading to early signs of increasing healthcare costs and having as-yet-unquantified effects on the quality of care," concluded researchers Robert Berenson, Thomas Bodenheimer and Hoangmai Pham. Specialty centers are competing on service, not price, say the researchers. And new competition is driving prices northward. Community hospitals have not suffered financially from the spread of specialty centers, say the researchers, simply because they have responded by raising the price on their own lines of specialty services.