United States Government Accountability Office

Washington, DC 20548 

May 19, 2005 

The Honorable Charles E. Grassley 

Chairman 

The Honorable Max Baucus 

Ranking Minority Member 

Committee on Finance

United States Senate 

Subject: Specialty Hospitals: Information on Potential New Facilities

Beginning in the 1990s, there was a substantial increase in the number of short-term 

acute care hospitals that primarily treat patients with specific medical conditions or 

who need surgical procedures. Advocates of such hospitals, commonly referred to as 

specialty hospitals, contend that their focused missions and dedicated resources can 

both improve quality and reduce health care costs. Critics contend that specialty 

hospitals siphon off the most profitable procedures and patient cases, typically 

without providing emergency care or other vital community services, and thus erode 

the financial health of neighboring general hospitals. Critics also contend that the 

ability of physicians to invest in a specialty hospital and then refer patients to that 

hospital creates financial incentives that may inappropriately affect physicians’ 

clinical and referral behavior. 

In 2003, we issued two reports on the growth, characteristics, and performance of 

specialty hospitals.1

 More than two-thirds of the 100 specialty hospitals we identified 

as being in existence in June 2003 had opened their doors since the beginning of 

1990.2 The specialty hospitals in existence in fiscal year 2000, the most recent year for 

which we then had data, accounted for about 1 percent of Medicare spending for 

inpatient services. We also identified an additional 26 specialty hospitals under 

 1

Specialty Hospitals: Geographic Location, Services Provided, and Financial Performance, GAO-04-

167 (Washington, D.C.: Oct. 22, 2003) and Specialty Hospitals: Information on National Market 

Share, Physician Ownership, and Patients Served, GAO-03-683R (Washington, D.C.: Apr. 18, 2003). 

2

We considered a hospital to be a specialty hospital if the diagnosis-related group (DRG) classification

for at least two-thirds of its Medicare patients (or two-thirds of all of its patients where such data were

available) fell into no more than two major diagnosis categories, such as diseases of the circulatory

system, or if at least two-thirds of its patients were classified in surgical DRGs. We excluded hospitals 

that were government owned or that specialized in providing long-term care or otherwise had missions 

largely distinct from the missions of short-term, acute care hospitals. Our analysis included specialty

hospitals that were owned, in whole or in part, by physicians and those that had no physician owners.

 GAO-05-647R Specialty Hospital Moratorium 
development in 10 states. Approximately 70 percent of the existing specialty 

hospitals were owned, in part or in whole, by physicians.3

 

Subsequent to our reports, Congress, through the Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003 (MMA), established a moratorium 

which, in effect, temporarily halted further development of physician-owned specialty 

hospitals that focus on cardiac, orthopedic, or surgical procedures and mandated 

additional studies of specialty hospital issues.4

 Specialty hospitals in operation as of 

November 18, 2003, are grandfathered under the moratorium and are allowed to 

expand within limits. Specialty hospitals not opened as of that date may apply to the 

Centers for Medicare & Medicaid Services (CMS) and request a determination of their 

development status. Hospitals not open as of November 18, 2003, but sufficiently 

advanced in their development may be grandfathered. The MMA moratorium expires 

June 8, 2005. 

To help you consider the likely consequences of the moratorium’s expiration, you 

asked us to provide updated information on the potential growth in the number of 

physician-owned specialty hospitals. This report responds to your request by 

presenting information that addresses the following questions: (1) How many 

applications for grandfather determinations has CMS received from specialty 

hospitals under development, what types of specialty hospitals applied, where were 

these hospitals located, and how many of the applications have been approved? 

(2) What information exists to indicate the likely number, location, and type of 

specialty hospitals not exempt from the moratorium that may be developed following 

its expiration? 

We determined the number and characteristics of specialty hospitals under 

development that had applied for a grandfather determination by obtaining 

summaries of the applications from CMS. Facilities that submitted such applications 

included potential new specialty hospitals and existing specialty hospitals with 

expansions underway as of November 18, 2003. We included both new and 

expanding facilities in our analysis of the applications that CMS received and in that 

analysis refer to both types of facilities as “under development.” To gather and assess 

information about the number of specialty hospitals potentially under development 

that are not exempt under the moratorium, we contacted representatives from 

national and selected state associations of community hospitals, including the 

American Hospital Association (AHA) and the Federation of American Hospitals 

 3

In its 2005 report to Congress, the Medicare Payment Advisory Commission (MedPAC) stated that 

there were 48 physician-owned cardiac, orthopedic, or surgical specialty hospitals in 2002. MedPAC 

identified fewer specialty hospitals than we did in our previous reports primarily because MedPAC 

excluded from its count women’s specialty hospitals and specialty hospitals that had no physician 

owners. See Medicare Payment Advisory Commission, Report to the Congress: Physician-Owned 

Specialty Hospitals (Washington, D.C.: March 2005).

4

MMA imposed an 18-month moratorium during which a physician who has an ownership or 

investment interest in a new specialty hospital (or has immediate family members who do) may not 

refer Medicare patients to that hospital for designated health services. Thus, in effect, the moratorium 

halted further development of physician-owned specialty hospitals. Pub. L. No. 108-173, §507, 117 Stat. 

2066, 2295-97.

2 GAO-05-647R Specialty Hospital Moratorium
(FAH); several large companies that own and operate specialty hospitals; the 

American Surgical Hospital Association; and the Medicare Payment Advisory 

Commission (MedPAC). Many of these representatives provided us with information 

about specific facilities that they had tentatively identified as specialty hospitals 

under development. Because MMA’s moratorium applies only to physician-owned 

cardiac, orthopedic, and surgical specialty hospitals, our analysis focused on facilities 

that had been tentatively identified as such by one or more of the above 

representatives. We then sought to ascertain the characteristics and status of each 

facility by contacting a facility official or, if that was not possible, obtaining 

corroborating information from news reports or other sources. We also solicited the 

views of the representatives mentioned above regarding the potential for specialty 

hospital growth. Additional details regarding our methodology are contained in 

enclosure I. Our work was performed during April and May 2005 in accordance with 

generally accepted government auditing standards. 

Results in Brief 

As of April 29, 2005, CMS had received 40 applications from specialty hospitals under 

development seeking determinations that they were grandfathered under MMA’s 

moratorium. CMS received 38 applications for new specialty hospitals and 

2 applications for specialty hospital expansions. Slightly more than half (22) of the 

40 applications were from surgical hospitals, while the rest were from cardiac 

hospitals (9), orthopedic hospitals (5), or hospitals that did not indicate their 

specialty (4). Three-fourths of the applications came from hospitals in four states: 

Texas (19), Louisiana (6), California (3), and Oklahoma (3). Of the 40 applications it 

received, CMS issued 12 favorable opinions (approvals) and 2 unfavorable opinions 

(denials). One of the 40 applications had been withdrawn. 

Comprehensive information about specialty hospitals that may be developed when 

the moratorium expires is both difficult to acquire and verify, although what does 

exist indicates continued growth in the number of specialty hospitals—in California, 

South Carolina, and Texas. Of the 52 facilities tentatively identified by AHA, FAH, 

and others as specialty hospitals under development, and that did not apply for a 

determination on whether they were subject to the moratorium, we were able to 

obtain information corroborating that 6 of the facilities will be physician-owned 

specialty hospitals. One of the 6 new facilities is planned as a cardiac hospital; the 

remaining 5 new facilities are slated to be surgical hospitals. Four of the 52 facilities 

had already opened as physician-owned specialty hospitals, while 4 others were no 

longer under development. We were unable to obtain sufficient information to 

determine the status and characteristics of 17 facilities. Finally, the available 

information for the remaining 21 of the 52 facilities indicated that they would not be 

physician-owned specialty hospitals. In short, the group of 52 facilities could include 

anywhere from 6 to 23 specialty hospitals under development. Additional facilities, 

especially those in the early planning stages, could also be under development as 

specialty hospitals. Representatives of community hospitals are concerned that the 

number of specialty hospitals could grow rapidly following the moratorium’s 

expiration. In contrast, most representatives of specialty hospitals said that 

3 GAO-05-647R Specialty Hospital Moratorium
continued uncertainty over future federal actions and other factors would cause any 

such growth to be both moderate and gradual. 

Upon reviewing a draft of our report, CMS acknowledged the usefulness of our report 

and provided context for the scope of the specialty hospital issue. 

Background 

Federal law, in general, prohibits physicians from referring Medicare patients for 

designated health services to facilities in which they (or an immediate family 

member) have an ownership or investment interest. In addition, the law prohibits 

such facilities from billing Medicare or the beneficiary for services rendered as a 

result of a prohibited referral.5

 Before MMA, an exception to this general prohibition, 

commonly called the “whole hospital” exception, allowed physicians who have an 

ownership or investment interest in an entire hospital, and who are authorized to 

perform services there, to refer patients to that hospital. MMA’s specialty hospital 

moratorium excludes from this exception those hospitals that are primarily or

exclusively engaged in the care and treatment of patients with cardiac or orthopedic 

conditions, or patients receiving surgical procedures or other specialized categories 

of services designated by the Secretary of Health and Human Services.6, 7 Therefore, a 

physician with an ownership or investment interest in a specialty hospital may not 

refer Medicare patients to that hospital, and the hospital may not bill Medicare or the 

beneficiary, for inpatient or outpatient hospital services or other designated health 

services while the moratorium is in effect. 

MMA grandfathers specialty hospitals that as of November 18, 2003, were in 

operation or under development. Hospitals may apply to CMS and request an 

advisory opinion on their development status as of November 18, 2003. In 

determining whether a hospital was under development as of that date, CMS is 

required to consider whether the following had occurred: architectural plans were 

completed; funding was received; zoning requirements were met; and necessary 

approvals from appropriate state agencies were received. CMS may also consider 

other evidence in reaching its determination. Specialty hospitals that had Medicare 

provider agreements in effect as of November 18, 2003, were considered to be in 

operation as of that date and thus grandfathered under the moratorium. During the 

moratorium, a grandfathered specialty hospital is not allowed to bill for physician 

investor referrals of Medicare designated health services if the hospital expands by 

 5

Certain aspects of the physician self-referral prohibition have been made applicable to the Medicaid 

program, 42 U.S.C. §1396b(s)(2000). 

6

CMS has not issued guidance to define the phrase “primarily or exclusively engaged.” For example, 

CMS has not stated whether the definition of “primarily” is based on the number of patients, percent of

revenues, or other factors.

7

Certain types of hospitals, for example, psychiatric hospitals and children’s hospitals, cannot be

designated specialty hospitals for the purposes of the moratorium. CMS has not designated other

types of specialty hospitals in addition to the ones (cardiac, orthopedic, and surgical) specifically 

mentioned in MMA. 

4 GAO-05-647R Specialty Hospital Moratorium
increasing the number of its physician investors, changing the specialized services it 

provides, or increasing its size by more than five beds or 50 percent of the number of 

beds in the hospital as of November 18, 2003 (whichever is greater).8

 

Although MMA’s moratorium specifically pertains to physicians’ referrals of Medicare 

patients and any corresponding billing for the referred services, the moratorium in 

effect curtails further development of physician-owned specialty hospitals. Existing 

specialty hospitals grandfathered under the moratorium, although limited in their 

ability to expand, may continue to bill for services rendered to patients referred to 

them by physicians who have ownership or investment interests in the facilities. 

Forty Specialty Hospitals Applied for a Determination 

of Their Development Status under the Moratorium

As of April 29, 2005, CMS had received 40 applications for grandfather determinations 

from specialty hospitals that sought to continue to develop or expand under the 

moratorium.

9

 CMS had approved 12 of the applications. Two of the applications 

were denied, although 1 of these 2 decisions is being reviewed by CMS at the request 

of the specialty hospital. Another of the 40 applications was withdrawn, while the 

remaining 25 applications are pending. The tables below provide detailed 

information on the status of the applications by type of application—new facilities or 

expansions of existing facilities (see table 1), hospital specialty (see table 2), and 

hospital location (see table 3). 

Table 1: Status of Applications for Specialty Hospital Grandfather Determinations, by Type of 

 Application, April 29, 2005

Application status

Application type Approved Denied Withdrawn Pending Total

New facilitya12 2 1 23 38 

Expansion 0 0 0 2 2 

Total 12 2 1 25 40

Source: CMS. 

a

New facilities include ambulatory surgery centers that were being converted to specialty hospitals. 

 8

An increase in the number of beds is allowed only on the main campus of the hospital. 

9

CMS indicated that 3 of the 40 applicants also requested determinations that the hospital in question 

was not a specialty hospital. In addition to the 40 applications, CMS received 8 applications from 

physician-owned specialty hospitals seeking advisory opinions on issues other than whether or not the 

hospital was under development as of November 18, 2003. 

5 GAO-05-647R Specialty Hospital Moratorium
Table 2: Status of Applications for Specialty Hospital Grandfather Determinations, by Hospital Specialty, 

 April 29, 2005

Application status

Hospital specialty Approved Denied Withdrawn Pending Total

Cardiac 1 1 0 7 9 

Orthopedic 2 1 1 1 5 

Surgical 9 0 0 13 22 

Uncertaina0 0 0 4 4 

Total 12 2 1 25 40 

Source: CMS. 

a

Application did not indicate hospital’s specialty. 

Table 3: Status of Applications for Specialty Hospital Grandfather Determinations, by Hospital Location, 

 April 29, 2005

Application status

Hospital location Approved Denied Withdrawn Pending Total

Texas 7 1 0 11 19 

Louisiana 3 0 0 3 6 

California 1 0 0 2 3 

Oklahoma 0 1 0 2 3 

Othera1 0 1 7 9 

Total 12 2 1 25 40 

Source: CMS. 

a

Other states include Arizona, Arkansas, Colorado, Indiana, Kansas, Nevada, Ohio, and Pennsylvania. 

Limited Verifiable Information Suggests Continued 

Growth in the Number of Specialty Hospitals 

When the Moratorium Expires 

Comprehensive information about specialty hospitals that did not apply for a 

grandfather determination and that may be developed when the moratorium expires 

is not readily available, variable in its quality, and often difficult to verify. Although 

AHA, FAH, and others had tentatively identified 52 facilities as potential physicianowned specialty hospitals under development, the information available to us

corroborated this status for only 6 facilities. Available information on the remaining 

facilities was either insufficient for us to determine the status and characteristics of 

the facility or it indicated that the facility was not under development or was not a 

physician-owned specialty hospital. Other facilities, in addition to the 52 we 

attempted to confirm, could be under development as specialty hospitals. This is 

particularly true of facilities that are in the early planning stages, because those 

efforts are often not publicized. Because of the lack of comprehensive, verifiable 

information, the extent to which the number of specialty hospitals will increase when 

the moratorium expires is uncertain. Representatives of community hospitals told us 

they believe that there will be a rapid expansion in the number of new specialty 

hospitals, while most representatives of the specialty hospital industry said they 

believe that any such growth will be both modest and gradual. 

Of the 52 facilities tentatively identified as specialty hospitals under development, we 

obtained corroborating information that 6 were being planned as physician-owned 

specialty hospitals. (See table 4.) Five of the 6 specialty hospitals were slated to be 

6 GAO-05-647R Specialty Hospital Moratorium
surgical hospitals and 1 was being built as a cardiac hospital. (See table 5.) The 

6 specialty hospitals are located in three states: California (2), South Carolina (1), and 

Texas (3). An additional 4 facilities had opened as physician-owned specialty 

hospitals during the moratorium.10 We also identified 4 facilities that had been under 

development as specialty hospitals, but those projects had been terminated. 

Table 4: Characteristics of Facilities Identified as Potential Specialty Hospitals under Development that 

 Did Not Apply for Grandfather Determinations, April 2005 

Physician-owned 

specialty hospital? Facility characteristics 

Number of 

facilities 

Under development 6 

Opened after November 18, 2003 4 

Yes 

No longer under development 4 

Uncertain Information insufficient to determine characteristics 17 

No Physician-owned general hospital 12 

Not a hospital or not physician owned a

9

Total 52 

Source: GAO. 

Note: The facilities included in the table had been identified by representatives of community hospitals, state 

hospital associations, representatives of specialty hospitals, and GAO as potential specialty hospitals under 

development. We classified each facility based on available corroborating information regarding the 

characteristics of that facility. a Five of the nine facilities are ambulatory surgery centers, two are general hospitals that are not physicianowned, one is a physician’s office, and one is a recovery center. 

Table 5: Location and Type of Specialty Hospitals that Did Not Apply for Grandfather Determinations

and Were Verified as under Development, April 2005 

Specialty type

State Cardiac Surgical Total

California 0 2 2 

South Carolina 1 0 1 

Texas 0 3 3 

Total 1 5 6

Source: GAO. 

Note: We did not identify any orthopedic specialty hospitals under development. 

The information available on 17 of the 52 facilities was insufficient for us to 

determine whether they were being developed as physician-owned specialty 

hospitals. Consequently, the 52 facilities could include from 6 to 23 physician-owned 

specialty hospitals under development. In another 21 of the 52 cases, the available 

information indicated that the facility would not be a physician-owned specialty 

hospital. 

Many community hospital representatives that we spoke with said that the expiration 

of the moratorium will lead to a rapid increase in the number of specialty hospitals. 

The representatives stated that such development would occur, in part, because 

 10None of the four specialty hospitals (one cardiac, one orthopedic, and two surgical) had applied to 

CMS for a determination of their development status under the moratorium. CMS stated that the 

agency strongly recommends, but does not require, entities to seek a favorable grandfather 

determination before opening as a specialty hospital. 

7 GAO-05-647R Specialty Hospital Moratorium
physicians view specialty hospitals as an attractive financial opportunity. Community 

hospital representatives said that, in some instances, it would be relatively easy for 

physician-owned general hospitals to change their missions and begin functioning as 

specialty hospitals. The representatives also raised concerns about some physicianowned hospitals, in existence and under development, that classify themselves as 

general hospitals. The representatives said that some of these self-classified general 

hospitals predominately focused, or will focus, on surgical procedures, and thus 

should be considered specialty hospitals by CMS and be subject to MMA’s 

moratorium. 

Most of the specialty hospital representatives we spoke with expected that any 

growth in the number of specialty hospitals following the moratorium’s expiration 

would likely be both modest and gradual. Officials representing companies that own 

specialty hospitals said that continued uncertainty regarding future federal 

restrictions would dampen their interest in developing new specialty hospitals and 

make it difficult to obtain the financing necessary for such projects.11 Some company 

representatives said that the lack of a clear definition of what constitutes a specialty 

hospital has led their companies to avoid investments in certain facilities. The 

representatives said that they were concerned that if Congress extends the 

moratorium, CMS could later classify the facility as a specialty hospital, potentially 

subject to the moratorium or other restrictions. Specialty hospital representatives 

also said that not all physician-owned specialty hospitals have been financially 

successful and that some such hospitals have closed and physicians have lost their 

investments. Some representatives added that, although physicians are primarily 

interested in specialty hospitals for nonfinancial reasons, the financial risks are now 

more apparent and may dampen some enthusiasm for future development. The 

representatives said they believed that any growth in the number of specialty 

hospitals will be gradual because not all of the specialty hospitals under development 

will open immediately and that it typically takes 2 or more years to develop, 

construct, and open a new facility. Finally, they added that it is likely that some of 

the planned specialty hospitals, especially those in the early stages of planning, may 

never be built or opened. 

Concluding Observations 

Whether or not MMA’s moratorium is allowed to expire, the number of physicianowned specialty hospitals will increase from present levels. 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. If the moratorium 

is allowed to expire, the increase would likely be greater, but how much greater is 

uncertain. Specialty hospitals under development whose applications for grandfather 

status have been denied, and specialty hospitals that have not applied, could open. 

 11Some specialty hospital representatives stated that uncertainly also exists with regard to potential 

state legislative efforts. Several states are considering legislation that would prohibit or discourage 

future specialty hospital growth. 

8 GAO-05-647R Specialty Hospital Moratorium
We identified 6 specialty hospitals under development that had not applied. In 

addition, some or all of the 17 facilities where we had insufficient information to 

classify the facility could also be physician-owned specialty hospitals under 

development. The lack of comprehensive, verifiable information makes it difficult to 

know exactly how many hospitals may be under development. Ultimately, the extent 

to which physicians and other investors are attracted to specialty hospitals, or are 

deterred by the uncertainty of future federal restrictions or other factors, will decide 

how quickly the industry grows when the moratorium expires. 

Agency Comments 

We provided a draft of our report to CMS for review. In written comments, CMS 

acknowledged the usefulness of our report concerning physician-owned specialty 

hospitals under development. 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 percent. We have reprinted CMS’s letter in 

enclosure II. CMS also provided technical comments, which we incorporated where 

appropriate. 

- - - - - 

As agreed with your offices, we plan no further distribution of this report until 

30 days after its date. At that time, we will send copies of this report to appropriate 

congressional committees and other interested parties. We will also make copies 

available to others upon request. This report will be available at no charge on GAO’s 

Web site at http://www.gao.gov. 

If you or your staffs have any questions, please call me on (202) 512-7101 or James 

Cosgrove on (202) 512-7029. Other contributors to this report include Zachary 

Gaumer and Jennifer Podulka. 

A. Bruce Steinwald 

Director, Health Care 

Enclosures 

9 GAO-05-647R Specialty Hospital Moratorium
Enclosure I Enclosure I 

Scope and Methodology 

This enclosure provides additional details about the scope of our work, our 

methodology, and key limitations. First, it describes the data that we obtained from 

the Centers for Medicare & Medicaid Services (CMS) regarding specialty hospitals 

under development that applied for a determination that they were grandfathered 

under the moratorium. Second, it describes the approach we used to identify 

information about other specialty hospitals under development and to verify the 

accuracy of this information. 

Information on Specialty Hospitals under Development 

that Applied for Grandfather Determinations 

CMS provided information on the 40 specialty hospitals under development that had 

applied for grandfather determinations as of April 29, 2005. From CMS, we obtained 

summary information on each hospital’s name, state location, and area of 

specialization; whether the application was for a new facility or an expansion of an 

existing one; and the current status of the application: approved, denied, withdrawn, 

or pending. 

Information on Other 

Specialty Hospitals under Development 

To gather information about specialty hospitals potentially under development that 

had not applied for a determination that they were grandfathered under the 

moratorium, we consulted organizations and individuals most likely to be aware of 

such development. Specifically, we contacted the two government agencies 

mandated by the Medicare Prescription Drug, Improvement, and Modernization Act 

of 2003 (MMA) to study specialty hospital issues for Congress: CMS and the Medicare 

Payment Advisory Commission. Because hospital officials and hospital associations 

are likely to be aware of developments in their industry, we contacted representatives 

from both community hospitals and specialty hospitals. Specifically, the community 

hospital representatives included officials from the American Hospital Association, 

the Federation of American Hospitals, the Coalition of Full-Service Community

Hospitals, and nine state hospital associations.12 We selected the nine state hospital 

associations because our October 2003 report on specialty hospitals identified those 

states as having concentrations of specialty hospitals in existence or under 

development at that time.13 Officials of specialty hospitals that we contacted 

represented the American Surgical Hospital Association and five corporations that 

own specialty hospitals: Baylor Health Care System, Hospital Partners of America, 

MedCath Corporation, National Surgical Hospitals, and United Surgical Partners 

 12The nine states were Arizona, California, Idaho, Kansas, Louisiana, Oklahoma, South Dakota, Texas, 

and Wisconsin. 

13GAO-04-167. 

10 GAO-05-647R Specialty Hospital Moratorium 
Enclosure I Enclosure I 

International. Many of the organizations and individuals we contacted provided us 

with information on specific facilities that they said were likely specialty hospitals 

under development and offered their views on the potential for specialty hospital 

growth after the moratorium expires. 

We consolidated the information we obtained from the sources described above, 

along with the information on specialty hospitals under development that we had 

identified for our October 2003 report. After excluding those facilities that had 

submitted applications for grandfather determinations to CMS, we were left with a 

list of 52 potential new specialty hospitals. 

We then sought corroborating information that the 52 facilities in question (1) were 

under development, (2) would specialize in treating cardiac or orthopedic patients or 

in treating patients that need surgical procedures, and (3) that these facilities would 

be owned, at least in part, by one or more physicians. If sufficient information was 

available, we attempted to contact a representative of the facility. When we were 

successful in making contact, we used the information we obtained to determine the 

status of the facility. If we could not make contact with the facility directly, we 

turned to a variety of independent news sources to obtain information about the 

facility. These sources included local newspapers, local business journals, health 

care industry publications, and company Web sites. Following the process outlined 

above, we determined the status of 35 of the 52 facilities tentatively identified as 

specialty hospitals under development. In 17 instances, we could not locate 

sufficient information within the time frames allotted for the study to determine the 

status of the facility. Although our findings are based on the best information

available to us, it is very likely that we do not have a complete list of all specialty 

hospitals under development. Some facilities, particularly those in the initial 

planning stages, may not have come to the attention of the individuals and 

organizations we contacted. Our work was performed during April and May 2005 in 

accordance with generally accepted government auditing standards. 

11 GAO-05-647R Specialty Hospital Moratorium
Enclosure II Enclosure II 

Comments from the Centers for Medicare & Medicaid Services 

(290453) 

12 GAO-05-647R Specialty Hospital Moratorium 
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