Creating a Joint Venture with a For-Profit Inpatient Rehabilitation Provider

Patrick Kendall

In Brief

2-Minute Read

As pressures to control costs and maximize revenue continue, health systems must do more than cut costs. One opportunity is a joint venture between a hospital’s inpatient rehabilitation unit and a national for-profit inpatient rehabilitation provider. Joint ventures allow health systems to begin shifting their revenue base from a foundation of increasing volume to one of value and quality outcomes.

Joint ventures can benefits health systems by:

  1. Increasing cash flow and profitability. Managers at for-profit entities can focus on details unique to rehab units that are often missed when an inpatient rehab unit operates as a service line or cost center in a hospital.  
  2. Decreasing rehabilitation patient leakage. For-profits can identify patients sent to nursing facilities and nonrehab facilities outside the health system. This decreases the number of inpatient rehab-eligible patients who are unnecessarily leaving the health system.
  3. Adding core competencies that acute care hospitals may not have. National rehab providers specialize in the industry and bring attention to rehab unit-specific details that are often not identified when the hospital manages the unit. 
  4. Better managing complex compliance-related issues. For-profit providers have the expertise to address these concerns, ensuring the unit is complying with all regulations.
  5. Lowering expenses by tapping into economies of scale. For-profit organizations use big data and leverage their extensive experience to analyze other areas to cut costs. They typically have staffing models that can contain costs while maintaining quality of care for the patient.
  6. Deterring other rehabilitation providers from entering the market. In states where a certificate of need isn’t required, joint ventures discourage other national providers from opening freestanding centers because there is less opportunity to gain market share.

Overall, joint ventures offer financial benefits to health systems by increasing profitability and cash flow while providing more robust rehab services to the communities served.

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