The effect of prospective payment on rehabilitative care

To estimate the difference between cost and prospective payment system (PPS) reimbursements for rehabilitation care and to simulate potential consequences of cost-reducing strategies.

A retrospective study to estimate costs and functional status at discharge from care.

An academic, urban, rehabilitation hospital.

Stroke patients on their first admission to a rehabilitation hospital between 1994 and 1998.

Not applicable.

Cost was estimated from billing databases. Function was measured using the motor and cognitive components of the FIM instrument.

PPS reimbursements were 10,825 dollars (37%) lower than costs. No matter how much therapy was reduced, the costs were still greater than the mean PPS reimbursement. A reduction in length of stay by 9.6 days was required to bring costs in line with the PPS reimbursement, reducing discharge cognitive function by 1.1 points (P <.01). Use of group therapy brought costs close to PPS reimbursement amount and improved discharge cognitive function by 0.5 points (P <.10).

Our study shows the large difference between costs and expected PPS reimbursements that would have been observed before the PPS. Institutions have many options that reduce costs, with little effect on function at discharge. Future studies should determine the impact of evolving reimbursement rules on facilities financial status, and on patient outcomes.