DALLAS-At long last – after five years, in fact – the federal government's moratorium on the development of new long-term care hospitals, as well as the expansion of existing ones, has finally come to an end.

An original three-year moratorium, under the Medicare, Medicaid and SCHIP Extension Act, was passed in 2007 and was set to expire in 2010, only to be extended through a provision of the Patient Protection and Affordable Care Act. The Centers for Medicare and Medicaid Services (CMS), however, recently announced that the moratorium was allowed to expire on Dec. 29, 2012.

So, what does the sunsetting of the moratorium mean for the LTACH sector? Will there be a spate of new LTCH projects, especially when considering that continuum of care facilities are expected to play an increasingly important role in the delivery of healthcare services in the era of healthcare reform?

Jason Greis, a Chicago-based attorney who authors a newsletter and blog called Greis Guide to LTACHs, recently wrote: “Many general acute care hospitals and post-acute care providers (in Certificate of Need and non-CON states alike) have begun contemplating developing new LTACHs after expiration of the moratorium.”

Even with the sunsetting of the moratorium, however, observers do not believe myriad developments will be taking place in every corner of the country. For one thing, the PPACA gives CMS the authority to turn down projects in certain areas for a number of reasons.

For another, some new LTACH development took place during the past five years, as the act passed in 2007 allowed the building of projects that were approved before the moratorium took effect – and in some cases the starting dates on those projects were delayed.

In addition, there are some who believe that the need for new LTACH facilities could be tempered in the future by a new trend in which areas inside of hospitals with excess capacity are remodeled as long-term and post-acute beds. Federal law allows such “hospitals within hospitals” to exist as long as the two entities are unaffiliated.

Even so, there are a number of LTCH companies that are talking about and planning new facilities. One such operator, Dallas-based Cornerstone Healthcare Group, recently broke ground for a 54-bed LTACH in Round Rock, Texas. Cornerstone, which operates 17 facilities in six states, is planning to grow “prudently,” president David Smith told D Healthcare Daily, which covers healthcare in the Dallas-Fort Worth area.

Smith says the company plans this prudent growth in areas where it already has a market presence; the company, he adds, is focusing on revenue growth through building occupancy in its current facilities.

Despite the note of caution, the end of the LTCH moratorium is all but certain to unleash at least some new development. In addition to Cornerstone, at least a few other LTCH operators took steps on new projects in the past month, including HealthSouth in Chattanooga, Tenn., and Mercy Hospital in Springfield, Mo. – perhaps just the first ripples in a new wave a LTCH construction.

John Mugford is the Editor of Healthcare Real Estate Insights™, the nation's first and only publication totally dedicated to covering news and trends in healthcare real estate development, financing and investment. For more information, please visit www.HREInsights.com.