Freestanding Inpatient Rehabilitation Facility Performance Following the 60 Percent Rule

Abstract

The 60 percent rule has served as a controversial policy change within the postacute care sector since its revision in 2004, requiring inpatient rehabilitation facilities (IRFs) to admit no less than 60% of patients according to 1 of 13 specific conditions or else risk the loss of IRF designation according to Medicare’s prospective payment system. Using a contingency theory framework, this study proposes that the 60 percent rule introduced considerable uncertainty into freestanding IRFs’ operational environment, and as a result, IRFs’ operational performance varied according to their “fit” between certain structural characteristics and the pervasive environmental uncertainty. The results suggest that operational performance, as measured by facility Malmquist Index scores, decreased on average for freestanding IRFs following the 60 percent rule’s enforcement in 2005. In contrast, organizations possessing structural characteristics that better “fit” the heightened environmental uncertainty exhibited improved performance on average during the study’s 6-year time period.