A federal advisory group urged lawmakers on Tuesday to extend a moratorium on new, small specialty hospitals while more information is gathered on whether they drain resources from full service community hospitals.

Key lawmakers said they were working on bipartisan legislation drawing on the advisory group’s recommendations for these specialty hospitals - doctor-owned “boutique” facilities that offer one type of medicine, usually cardiac care, orthopedics or surgery.

“This is another step toward two-tier medicine in America,” said Sen. Ron Wyden, an Oregon Democrat.

Critics say they pose potential conflicts of interest to doctor-owners who refer patients to them, and may undermine community hospitals that have emergency rooms and serve the poor.

“We need to tighten up on specialty hospitals,” Max Baucus of Montana, the top Democrat on the Senate Finance Committee told Reuters. He said a moratorium until at least 2007 was under consideration. The 2003 Medicare drug law included a moratorium on new specialty hospitals through June 8, 2005.

An aide to Finance Committee Chairman Charles Grassley, an Iowa Republican, said the Grassley-Baucus bill was not finished but would use the recommendations of the advisory Medicare Payment Advisory Commission, or MedPAC, as a starting point.

MedPAC chairman Glenn Hackbarth told a Finance hearing that Congress should extend the moratorium until January 1, 2007, and adjust some Medicare payments to make competition more equitable between physician-owned and other hospitals.

MedPAC also favors “gainsharing,” or allowing physicians and hospitals to share savings from more efficient practices. That could reduce the incentive for more specialty hospitals.

But Hackbarth said he was not ready to conclude that specialty hospitals be banned. “We remain concerned (but are) not quite ready to conclude that they ought to be outlawed.”

The independent Medpac study found the specialty hospitals did often treat patients who were not quite as sick - and therefore more profitable.

Some doctors and medical experts say specialty hospitals give patients more choices and enable doctors to have more control over how they practice.

The American Medical Association also told a separate House Ways and Means Committee hearing that specialty hospitals encourage competition and therefore promote high quality care.

And Jamie Harris, chief financial officer of the Charlotte, N.C.-based MedCath Corp., which owns hospitals in partnership with doctors specializing in heart care, told the House panel that their hospitals typically provide better care than the competitors and help the communities they serve.