Federal health officials do not inform consumers about severe safety violations in hospitals that specialize in physical rehabilitation. Nor does Medicare impose fines as it does for nursing homes, or provide easy-to-understand five-star ratings as it does for general hospitals, according to an investigation by KFF Health News and The New York Times.
Medical rehab hospitals have become a highly lucrative niche within the health care industry, collectively generating profits of 10%, more than general hospitals, which earn about 6%, and far more than skilled nursing homes, which make less than 0.5%, according to the most recent data from the Medicare Payment Advisory Commission, an independent congressional agency known as MedPAC.
But MedPAC and independent researchers have found that for-profit rehabs tend to have higher rates of patients being readmitted to general hospitals than nonprofits do.
In 2023, stand-alone for-profit rehabilitation hospitals overtook nonprofits as the places where most annual patient admissions occur, a KFF Health News and New York Times analysis found. These facilities are required to provide three hours of physical, occupational, or speech therapy a day, five days a week.
Congress has not authorized Medicare to fine rehab hospitals for violations uncovered during inspections, even ones that resulted in death, as it has done with nearly 8,000 nursing homes during the last three years, imposing average fines of about $28,000.
The only option is to entirely cut off a rehab hospital’s reimbursement for all services by Medicare and Medicaid, which cover most patients. That step would most likely put it out of business and is almost never used. Even the most serious violations effectively carry no punishments so long as the hospital puts steps in place to avert future problems.
The federal government’s overall quality oversight efforts are limited. Medicare docks payment to rehab facilities for patients readmitted to a general hospital during shorter-than-average rehab stays, but unlike at general hospitals, there are no financial penalties when recently discharged rehab patients are hospitalized for critical health issues.
The Biden administration announced last year it intended to develop a rating scale of 1 to 5 stars for rehab facilities on its Care Compare website. The industry’s trade association, the American Medical Rehabilitation Providers Association, requested a delay in the creation of star ratings until the current quality measures were refined. The Trump administration has not determined whether it will continue the effort to rate rehab facilities.
Also read our consumer guide to finding the right place to get physical, occupational or speech therapy.
KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF—an independent source of health policy research, polling, and journalism. Learn more about KFF.
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