Texas company wants to build Minnesota's first stand-alone medical rehab hospital

Help for overcrowded Minnesota hospitals could be coming from a for-profit Texas company that wants to build an inpatient rehabilitation facility in Minneapolis.

Nobis Rehabilitation is seeking a state license for a 60-bed rehab hospital, which would admit patients with strokes, traumatic brain injuries and complex medical conditions after they are stabilized at general hospitals. While widely used in other states, the stand-alone rehab hospital would be Minnesota's first.

The facility would improve "bed flow at crowded general acute care hospitals by admitting patients who need rehab services to our rehab hospitals, which frees up those general acute care hospital beds," said Chester Crouch, Nobis' founder and president, in a request letter to the state.

The request triggered a public interest review by the Minnesota Department of Health, which will advise the Legislature on whether to waive the state's moratorium on new hospital beds and allow the project. Competitors will have an opportunity to weigh in on the proposal and its fit in Minnesota's health care system, which is mostly nonprofit hospitals rather than for-profit companies.

Nobis operates 10 inpatient rehab facilities in the U.S. and has another eight under development in Florida, Ohio and Texas. It is one of several companies building multiple rehab facilities over the past two years, mostly in states with less regulation over hospital construction and rapidly aging populations.

"It is kind of a recipe for increased investment in the rehab business," said Fred Bentley, a managing director of ATI Advisory, a Washington, D.C., health-care research firm.

Nobis' chief development officer did not reply to questions about why the company chose highly regulated Minnesota for its next project, but its request letter indicated that the state could use 200 to 400 more rehab beds. Nobis' closest rehab hospital is in Milwaukee.

There is little question that Minnesota's hospitals are overcrowded and in need of more places to transfer patients. At peak demand this winter, some Twin Cities hospitals were treating patients in emergency room hallways and waiting rooms.

Hospital leaders said a lack of transfer options forced them to hang on to patients, creating the backlog. A Minnesota Hospital Association analysis of one week in mid-December found 1,984 patients whose hospital discharges were delayed — on average by seven days.

Whether rehab hospitals are the solution is unclear. A dozen Minnesota hospitals operate on-site inpatient rehab facilities, such as the Courage Kenny Center adjacent to Abbott Northwestern Hospital in Minneapolis. Only two-thirds of their rehab beds are filled at any given time, suggesting there is existing capacity.

Bentley said the market for inpatient rehab is shifting. Some U.S. hospitals are closing their units while private providers are building spa-like facilities that attract high-revenue patients. Stand-alone rehab hospitals posted almost 26% profit margins on Medicare patients in 2021, while in-hospital facilities reported 6% margins, according to a March report from the federal Medicare Payment Advisory Commission.

Minnesota's current system of post-hospital care consists of home health care agencies and skilled nursing facilities that provide therapy and rehab for patients who aren't quite ready to go home.

Two long-term acute care hospitals are operated by Regency Hospital Company in Golden Valley and Fairview Health at the former St. Joseph's Hospital in St. Paul. They provide extended post-hospital care — often a month or more — for patients who still need ventilators or have prolonged recoveries ahead.

Rehab hospitals sometimes overlap with nursing homes and long-term care hospitals and compete in other states for patients. Stays in rehab hospitals are often shorter, around three or fewer weeks, before patients are sent home or to nursing homes. The main federal requirement for rehab hospitals is that patients are strong enough to take part in three or more hours of therapy per day — though that was temporarily waived during the pandemic.

A stand-alone rehab hospital in Minneapolis probably wouldn't compete for patients much with skilled nursing facilities, but it might compete for the scarce supply of nurses and nursing assistants to staff them, said Patti Cullen, chief executive of Care Providers of Minnesota, an advocacy group for the nursing home industry.

Nobis in its request letter to the state said it already operates in two other states with severe caregiver shortages. The company has its own travel nurse program to fill gaps when its facilities are shorthanded on full-time staff.

While almost all Minnesota hospitals are nonprofit, the state has approved some for-profit projects to address health-care gaps. PrairieCare built a stand-alone pediatric psychiatric hospital in Brooklyn Park several years ago. Acadia Healthcare proposed a partnership with Fairview to build an adult psychiatric hospital on the former site of the Bethesda long-term acute care hospital in St. Paul.