Changes in performance of inpatient rehabilitation hospitals after PPS

Inpatient rehabilitation hospitals provide specialized clinical services to individuals in order to restore physical and cognitive functioning. These facilities have been reimbursed by Medicare under a cost-based system, but in 2002, Medicare implemented a rehabilitation prospective payment system (PPS). Despite the implementation of a PPS for rehabilitation, there is a lack of published research addressing operating and financial performance of these facilities. Using data from the Centers for Medicare and Medicaid Services, we examined performance of these facilities in the pre- and post-PPS periods for for-profit and non-profit freestanding inpatient rehabilitation hospitals to test for pre- and post-PPS differences within the ownership groups. Our final sample was 140, and was comprised of 44 non-profit hospitals and 96 for-profit hospitals both pre- and post PPS. We utilized a pair-wise comparison test (t-test comparison) to measure the significance of differences in each performance variable between pre- and post-PPS periods, by ownership group. Findings indicate that both non-profit and for-profit rehabilitation hospitals reduced length of stay and operating expense per adjusted discharge, while both groups increased discharges and increased profitability. Within the for-profit group, the percentage of Medicare discharges increased. Practice and policy implications of these findings are discussed.