Trends in the supply of inpatient rehabilitation facilities services: 1996 to 2004.

OBJECTIVES: Describe the supply of inpatient rehabilitation facilities (IRFs) services in 1996 and examine changes between 1996 and 2004, including the impact of the IRF prospective payment system (PPS) in 2002 on organizational trends.

DESIGN: Retrospective pre-post design.

SETTING: Freestanding and subprovider (distinct-part units) IRFs.

PARTICIPANTS: IRFs (N=1424), including 257 freestanding IRFs and 1167 IRF units reported in the Healthcare Cost Report Information System database, from years 1996 to 2004.

INTERVENTIONS: Not applicable.

MAIN OUTCOME MEASURES: Number of IRF openings, IRF closures, beds, and inpatient days.

RESULTS: The number of IRFs grew from 1037 to 1183 between 1996 and 2001 and grew to 1235 between 2001 and 2004. The likelihood of IRF closures trended lower after PPS, and there was a significant increase in the likelihood of openings when PPS was introduced. For-profit, rural, and small IRFs were more likely to open over the entire period. There was a 12.9% increase in the number of total inpatient days, somewhat less than the 15.7% growth in IRF beds over the period. There was no impact of PPS on beds available but a significant decline in total inpatient days after PPS.

CONCLUSIONS: Inpatient days rose under the Tax Equity and Fiscal Responsibility Act and declined after 2002. Yet the likelihood of openings and closures did not appear to respond to these changes, perhaps because they were modest compared with changes in local IRF markets. The IRF PPS did little to affect service distribution in less well-served areas, although we did find growth in rural areas. Occupancy rates in 2004 were close to rates at the start of the period (70%). This observation implies that IRFs were implementing strategies to recruit a sufficient number of patients, even though bed numbers were increasing and length of stay was declining. Consequently, policy that limits the potential of IRFs to increase patient admissions, such as the limits on admissions to IRFs of patients with conditions other than those included in the 75% rule, is likely to produce substantial decreases in total inpatient days.