The Minnesota Department of Health (MDH) has found that moving forward with a new, freestanding rehabilitation hospital in Roseville is not in the public interest based on a required review by the agency’s Health Economics Program of statutory criteria and other requirements.

MDH’s analysis of the project found that the proposed 60-bed rehabilitation hospital would establish unneeded, costly capacity and may destabilize the existing rehabilitation care delivery system in the Twin Cities metropolitan service area where the facility is intended to be built.

“MDH and its Health Economics Program take our statutory role in the public interest review process seriously and go to great lengths to provide transparent, impartial reviews of all proposals for new hospitals,” said Minnesota Commissioner of Health Dr. Brooke Cunningham. “As Minnesota is facing high and rising health care costs, it is important we ensure that any proposal truly is in the best interest of all Minnesotans. By law, there is a high bar to clear. Our analysis indicates that this project does not meet that burden and, therefore, MDH is unable to recommend that it is in the public interest.”

Minnesota law prohibits the construction of new hospitals, expansion of bed capacity at existing hospitals, or redistribution of beds within the state without specific authorization from the legislature or unless a proposal meets defined statutory exceptions. Minnesota Statute, section 144.552 allows an organization seeking to obtain a hospital license, and with it an exception to the moratorium, to submit a proposal to MDH for review and assessment as to whether it is in the public interest. The final decision to grant an exception for a proposal rests with the Minnesota Legislature.

In 2023, Nobis Rehabilitation Partners submitted a letter of intent notifying MDH of its plan to construct a $42.9 million, 60-bed, freestanding specialty hospital to serve certain patients with rehabilitation needs residing in the seven-county Twin Cities metropolitan area. The final application was deemed complete and ready for review on Sept. 29, 2023.

MDH’s evaluation of the proposal included a review of materials supplied by the applicant; public reporting by hospitals to state and federal government entities on financial, utilization and services data; staffing data for inpatient rehabilitation units; hospital quality data from the Center for Medicare and Medicaid Services; and hospital discharge data on diagnoses, utilization and patient demographics. MDH also considered feedback from rehabilitation care stakeholders and the public through written comments, informal interviews or conversations and a public meeting held on Dec. 6, 2023.

The finding is based on the assessment of the statutory criteria for documented need, an analysis of potential financial impact on other acute care hospitals offering rehabilitation services, the ability for current hospitals to maintain staff, the extent to which the new hospital would serve nonpaying or low-income patients, and the views of affected parties.

MDH reached its determination that the project is not in the public interest based on four primary considerations:

-- Adequate capacity within the intended service region based on an analysis of occupancy levels and miles traveled by patients to obtain care.

-- A lack of evidence that that the proposed facility would offer higher quality of care than is currently available to patients.

-- Concerns that the proposed hospital would have a negative financial and workforce impact on existing facilities.

-- A lack of explicit commitments in the project proposal for providing care to low-income and nonpaying patients.

In addition, while it is widely acknowledged that many Minnesota hospitals are facing challenges with finding placements for patients in nursing homes or other step-down settings when they no longer need hospital care, this hospital would not ease that burden. As proposed, the hospital is designed to serve patients whose care meets strict admissions criteria and who can tolerate the intense rehabilitative services that would be provided.

MDH’s analysis also raises concerns about whether the incentives associated with a private equity-financed for-profit hospital could contribute to destabilizing the existing market and pointed to an aggressive growth strategy by Nobis and its investment partners that resulted in the establishment of 20 facilities in 12 states just since 2021.

"The current and future health care needs of our communities require innovative and novel approaches to complex problems," MDH State Health Economist Stefan Gildemeister said. "We appreciate the proposal for a freestanding hospital Nobis has brought forward. However, our analysis indicates that this project attempts to solve a problem that does not exist within the proposed service area and, in fact, could create greater systemic challenges if approved."

Materials associated with the public interest review, including the initial proposal, questions MDH posed to Nobis Rehabilitation Partners and its responses are available online at MDH Public Interest Review – Nobis Rehabilitation Partners.