Specialty providers RehabCare Group, St. Louis, and Magellan Health Services, Farmington, Conn., reported lower second-quarter earnings, blaming new Medicare regulations and higher medical costs, respectively. RehabCare said changes in Medicare eligibility requirements for rehabilitation hospitals, known as the 75% rule, had a more severe impact than previously anticipated, reducing net income to $5.5 million, or 32 cents per share, from $5.7 million, or 34 cents per share, in the year-ago quarter. Revenue rose 19% to $108.4 million. In the six months, RehabCare earned $10.4 million, or 60 cents per share, down from $10.8 million, or 64 cents per share, in the year-ago period. Revenue increased 7.9% to $210.8 million. RehabCare manages physical-therapy services at roughly 900 hospital rehabilitation units.
Behavioral-health provider Magellan said higher costs of care hurt its net income, which fell 20% to $22.7 million, or 62 cents per share, from $28.4 million, or 78 cents per share, in the year-ago quarter. Revenue rose 2.7% to $464.5 million. In the six months, Magellan earned $46.3 million, or $1.26 per share, up 11.8% from $41.4 million, or $1.17 per share, in the year-ago period. Revenue increased 2.8% to $917.3 million. Magellan provides behavioral-health services at 5,500 locations. -- by Joseph Mantone