The ownership difference in relative performance of rehabilitation specialty hospitals

Abstract

Despite the rapid growth in the number of rehabilitation specialty hospitals in recent years, there is little knowledge of the performance of these facilities. The recent growth in the number of for-profit rehabilitation providers and increasing competition among for-profit and not-for-profit rehabilitation hospitals have raised questions about differences in performance. This study analyzed differences in financial and operational performance between for-profit rehabilitation specialty hospitals and not-for-profit rehabilitation specialty hospitals for fiscal years ending in 1989 through 1992. Because rehabilitation hospitals are exempted from Medicare's Prospective Payment System, but subject to cost limits established under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), this study controlled for the influence of TEFRA by grouping hospitals into “new” and “existing” categories. The findings show significantly higher net revenue and profits in existing for-profit rehabilitation hospitals. In addition, existing for-profit rehabilitation facilities served a larger percentage of Medicare patients and had fewer employees than existing not-for-profit facilities. It was concluded that existing for-profit rehabilitation hospitals maximized their charges to increase their revenues. These findings have important policy implications for reimbursement alternatives under consideration for inpatient rehabilitation programs.