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PeaceHealth, LifePoint plan rehabilitation hospital in Springfield

The Catholic nonprofit system would join a private equity-owned chain to open a 50-room facility amid strong demand
The project would be built on PeaceHealth-owned land in Springfield, about a mile west of its flagship RiverBend hospital, pictured here. | CHRISTIAN WIHTOL/THE LUND REPORT
May 23, 2023

The PeaceHealth hospital system’s plan to open a 50-room rehabilitation hospital in Springfield has prompted the state to update its rules for evaluating such proposals.

The facility would provide rehab services for adults learning to live with a loss of function or new disability, including traumatic brain injury. The plan comes amid a shortage of rehabilitation capacity in Oregon, due to lack of staff and beds. Many hospitals complain that they are having to house patients who are ready for discharge to rehabilitation centers or nursing homes, but who, due to the facility shortage, can’t be moved out.

PeaceHealth hasn’t yet filed a formal proposal for the $76 million facility but it has notified the state it intends to do so. In response, the Oregon Health Authority earlier this month implemented temporary rules with new requirements for information applicants must submit in order to secure permission under the state’s Certificate of Need program. Set up to help control health care costs, the program evaluates whether a new facility is needed.

Among the rule changes, the state is asking for different information regarding the anticipated usage rate for new facilities as well as a “comprehensive market share analysis” that describes the geographic area served and the impact of the new facility on patients and on other similar facilities.

The rule upgrades come after two proposed standalone rehabilitation facilities — one in Tigard, the other in Hillsboro — were disputed at length in the Certificate of Need process over, among other issues, their necessity, their impact on other facilities, and whether enough workers were available to staff them.

PeaceHealth, a Vancouver, Wash.-based nonprofit, is teaming up with an unnamed real estate developer on the project as well as LifePoint Health, a giant, privately-held for-profit Tennessee-based health care chain. LifePoint, which is owned by a private equity firm called Apollo Global Managementhas been growing rapidly in recent years, and its hospitals have at times faced controversy.

PeaceHealth and LifePoint last November formed a joint entity that will lease the 67,000 square foot facility from the developer, PeaceHealth said in a news release. 

PeaceHealth will be the majority owner of the leasing entity, PeaceHealth said. However, LifePoint, which operates 30 freestanding rehabilitation facilities nationwide, as well as hospitals and behavioral health facilities, will oversee day-to-day operations.

The project would be built on PeaceHealth-owned land about a mile west of its flagship RiverBend hospital.

PeaceHealth already owns and runs a 27-bed acute rehabilitation center at its University District hospital in Eugene. On opening the new facility — projected for July 2026 — PeaceHealth would close the Eugene unit.

The University District hospital once was PeaceHealth’s leading Oregon facility. But RiverBend took on that role when it opened in 2008. Since then, PeaceHealth has substantially scaled back the Eugene facility’s operations and demolished old buildings there. Aside from the rehab unit, University District now houses only an emergency department, a medical floor and the 36-bed Johnson behavioral health unit.

PeaceHealth has not decided what, if anything, would go into the vacated rehab floor, a spokesperson said. PeaceHealth would not say whether it plans further reductions at the University District campus.

In the new facility, all 50 rooms would be private. The facility would provide services “for adults who have experienced a loss of function or disability due to stroke, brain injury, spinal cord injury, neurological disorders, orthopedic surgery, amputation or other conditions,” PeaceHealth said in its letter of intent. The new facility would include a 12-bed traumatic brain injury unit, which would be “a first of its kind for the area,” PeaceHealth wrote.

The facility would serve Lane, Linn, Coos and Douglas counties.

The new joint venture would pay $5.7 million for the first year of an initial 15-year lease, the application said. That lease payment equates to a 7.95% so-called “capitalization rate,” the gross return on the construction price. The facility is projected to cost $72 million, with equipment another $4 million.

LifePoint, founded more than two decades ago, was privately held for years, then became a publicly traded company before going private again. It has grown to 62 community hospitals, more than 30 rehabilitation and behavioral health hospitals and 170 other health care sites, such as outpatient centers and rehabilitation units, according to a recent LifePoint news release.

You can reach Christian Wihtol at [email protected].