A cloud hanging over inpatient rehabilitation providers lifted last week as the Centers for Medicare and Medicaid Services said it has completed the final set of regulations for Medicare's inpatient rehabilitation prospective payment system. The regulations are scheduled to be published in the Aug. 7 Federal Register.
The inpatient rehabilitation PPS will begin for cost-reporting periods beginning on or after Jan. 1, 2002, nine months after the system was originally intended to start. CMS published the proposed regulations in the Nov. 3, 2000, Federal Register, generating about 400 comments.
"That's huge for us. Jan. 1 is where we've been aligning ourselves," said Richard Scrushy, chairman and chief executive officer of HealthSouth Corp., Birmingham, Ala., during a July 31 conference call with analysts to discuss the company's second-quarter earnings. "There's been a cloud over this now for three years, and the cloud has been lifted. That's good news for everyone in our business today."
The rehabilitation PPS was authorized by the Balanced Budget Act of 1997. But last year's Benefits Improvement and Protection Act made a significant change: It removed a requirement that PPS rates be set to trim reimbursements by 2% from the old cost-based payment system.
Many rehabilitation providers, especially those that are for-profit, have been clamoring for the PPS, because they believe their costs are significantly below the reimbursement rates. HealthSouth said it expects to receive an average of $11,000 to $11,200 per discharge, well above its costs of about $9,600 per discharge, and Scrushy expects to squeeze costs even more.
Because of an $84.3 million charge related to the recent sale of its 111 occupational medicine centers, HealthSouth lost $19.9 million, or 5 cents per share, in the second quarter, compared with net income of $65.2 million, or 17 cents per share, in the year-ago quarter. Revenue rose 6% to nearly $1.1 billion.
Another company eager for the start of the inpatient rehabilitation PPS, RehabCare Group, St. Louis, last week reported earnings of $7.8 million, or 43 cents per share, for the second quarter, a 42% increase from $5.5 million, or 35 cents per share, in the year-ago quarter. Revenue was up 27% to $136.9 million. zxxx