Inpatient Rehabilitation Facilities Variation in Organizational Practice in Response to Prospective Payment

When Medicare implemented a prospective payment system (PPS) for inpatient rehabilitation facilities (IRFs) in 2002, a lack of organizational research on IRFs hampered the ability to predict how providers would modify their behavior in response to the PPS. This study consists of 36 key informant interviews that examined the experiences of nine IRFs in the lead-up to and aftermath of the IRF-PPS. Drawing on earlier work by Oliver, the authors develop a taxonomy of the new organizational practices that IRFs adopted in response to the changing payment system. A model of key organizational and environmental characteristics that predict the adoption of these practices based on an IRF's willingness and/or capacity to comply with institutional pressure is then proposed. The proposed model can also be applied to other regulatory changes affecting IRFs.