Some big for-profit rehabilitation providers expanded through acquisitions in 1993, but others opted to concentrate on outpatient and managed-care services.
The 44 providers responding to MODERN HEALTHCARE's 1994 Multi-unit Providers Survey operated 170 rehabilitation hospitals in 1993 with a total of 12,870 beds. That's up 19% from 10,858 beds operated by those hospitals in the previous year.
Among the various segments of the industry, for-profit rehabilitation hospitals showed the greatest change, a 55.5% increase to 11,198 beds in 1993 from 7,202 in 1992. Public hospitals increased the number of freestanding beds by 2.4% to 806 from 787.
Roman Catholic systems operating rehabilitation hospitals reported a 5.6% drop in beds to 1,347 from 1,427 in 1992. Beds at secular not-for-profits last year increased by 2% to 1,475 from 1,445.
HealthSouth numbers head north. Birmingham, Ala.-based HealthSouth Rehabilitation Corp. posted the most growth in 1993, stemming largely from a bookkeeping tactic that added its $350 million acquisition of 28 National Medical Enterprises rehabilitation hospitals and 45 outpatient clinics to its balance sheet effective Dec. 31, 1993.
Both sides declared the deal finalized Jan. 6, 1994. However, the effective date of the transaction was Dec. 31, spokespeople for both sides have confirmed.
HealthSouth's deal with NME also elevated the company to the top ranking in the rehab survey. In 1993's survey, HealthSouth was the fourth-largest rehab chain, behind NME, Continental Medical Systems and Mediplex Group.
The addition of the NME facilities gives HealthSouth 288 healthcare sites nationally, making it a more attractive provider for managed-care networks and other healthcare purchasers and alliances, a company spokesman said.
Along with 80-bed Vanderbilt Stallworth Rehabilitation Hospital, which was opened late last year in Nashville, Tenn., the additions gave HealthSouth a total of 3,255 beds at 40 hospitals in 1993, a 482% increase from 559 beds at 11 hospitals in 1992.
In addition to acquisitions, HealthSouth's strategy involves tertiary-care hospitals. For example, this month it will open newly constructed rehab hospitals in Dothan, Ala., and Memphis, Tenn. Financial details of those projects weren't disclosed.
NME divests facilities. Meanwhile, NME has divested itself of the bulk of its rehab hospitals in order to concentrate on its acute-care hospital business. It finished 1993 with seven hospitals, compared with 32 a year earlier. That's a 72.3% decline in beds to 747 from 2,704, making the revamped NME the fourth-largest rehab chain operator.
Of the seven hospitals remaining in 1993, one facility, 80-bed Rehabilitation Hospital of South Texas in Corpus Christi, was sold in March to Bay Area Healthcare Group, a partnership of Columbia/HCA Healthcare Corp., Medical Care America and local physicians. Terms of the transaction weren't disclosed.
NME said it intends to keep the remaining six rehab hospitals because they're being operated collectively with NME acute-care hospitals. Those rehab hospitals are in Modesto, Calif.; El Paso, Texas; Delray Beach, Fla.; San Ramon, Calif.; San Diego; and New Orleans.
Despite the downsizing of its rehab business, NME opened three hospitals in 1993, including the $23 million Central California Rehabilitation Hospital in Modesto. The 100-bed hospital is housed inside a three-story structure that formerly housed Modesto City Hospital. NME closed that acute-care hospital in 1990.
Two hospitals, a closed Conroe, Texas, psychiatric facility that was converted into the 36-bed North Houston Subacute Hospital, and the Rehabilitation Hospital of Midland-Odessa, Texas, also opened in 1993. Those facilities were part of the 28 hospitals NME sold to HealthSouth.
Meanwhile, another Birmingham company, ReLife Rehabilitation System, posted the second-highest growth last year with the addition of nine new hospitals. Its 712 beds at 19 hospitals elevated ReLife to fifth-largest rehab hospital operator from sixth the previous year.
Ken Oliver, ReLife's senior vice president of development, said the company plans more acquisitions. He said ReLife is eyeing markets in the Southeast, Southwest and Midwest as areas for future opportunities.
Of the nine hospitals added last year, six represent contract management arrangements ReLife inherited from last year's acquisition of Rebound, a Nashville-based provider of medical rehab services. The other three are new facilities opened in Birmingham, Ala.; Peach County, Ga.; and Kinston, N.C.
Mechanicsburg, Pa.-based Continental Medical Systems added six hospitals with a total of 347 beds to become the rehab industry's second-largest provider. The company finished 1993 with 34 hospitals and 1,764 beds, an increase of 24.4% from a year earlier.
In 1993, Continental Medical Systems opened hospitals in Fort Wayne, Ind.; Reno, Nev.; San Bernardino, Calif.; Terre Haute, Ind.; Tulsa, Okla.; and Tyler, Texas.
Continental Medical's game plan continues to concentrate on entering new markets and creating integrated services offering "one-stop" healthcare.
Other growth sources.Although industry experts continue to forecast growth in the rehabilitation business, expansion efforts have continued to shift to other sources such as outpatient care and healthcare services offered under managed-care contracts.
For instance, contract rehab provider NovaCare doled out some $195 million last October to acquire RehabClinics, an outpatient physical therapy company.
Under the agreement, the King of Prussia, Pa.-based companies combined to form one of the nation's largest contract rehabilitation services companies, having annual revenues of $700 million.
Last summer, NovaCare acquired King of Prussia-based Rehabilitation Hospital Corporation of America in a deal valued at more than $51 million.
RHCA provides rehabilitation services through a network of five inpatient hospitals with a total of 265 beds and three outpatient rehab clinics located largely in Maryland, Michigan, Virginia and West Virginia. It opened four additional outpatient clinics in Virginia and West Virginia last year.
Last month, Continental Medical took its first step toward solidifying its position in the rehab industry's emerging prepaid healthcare market by acquiring Los Angeles-based Medical Management Associates, a privately owned managed-care company operating a contract management firm and 15 independent practice associations with 4,000 physicians and 110,000 managed-care enrollees.
And ReLife earlier this month acquired outpatient rehabilitation facilities in Florida, which will operate collaboratively with a 40-bed Panama City rehabilitation hospital acquired under the same deal. Terms of the deal weren't disclosed.
Polishing the image.The industry last year continued efforts to recast its image, long shadowed by federal regulators and investigators probing allegedly fraudulent practices by head-injury treatment providers.
New Medico Healthcare System, a Lynn, Mass.-based head-injury rehabilitation company, vanished from this year's survey. Industry sources said it transferred ownership of its healthcare facilities last year to other New Medico's 40 facilities specializing in traumatic brain injury treatment and rehabilitation (Aug. 16, 1993, p. 9).
Rehab players continue to gobble up one another in merger mania. For instance, Wellesley, Mass.-based Mediplex Group, the third-largest rehab provider with 1,375 beds in 16 hospitals, will disappear from the survey list after its merger with Albuquerque, N.M.-based Sun Healthcare is completed.