A freestanding, 60-bed hospital costing $66.3 million and focused on rehabilitation for people after strokes, brain injuries, fractures and a range of other medical problems would be built on Springfield’s far west side if state regulators approve the plan in the next month or two.
The for-profit Rehabilitation Institute of Springfield would be built at the northwest corner of Milby Lane and Alex Boulevard in a farm field about a half-mile northwest of the 4600 block of West Wabash Avenue through a 50/50 joint venture that involves nonprofit Memorial Health and Alabama-based Encompass Health Corp.
Encompass and Memorial officials said the new hospital, which could open in early 2029 and eventually employ up to 190 people, would make intensive inpatient rehab services available to more people in the area who otherwise would have to go without, resort to care in a nursing home or face long waits locally or trips to other parts of Illinois or out of state.
“This will expand access so that we can take care of more of these types of patients in this community, closer to home, closer to their families and closer to their support systems,” Evan Davis, interim president and chief executive officer of Springfield Memorial Hospital, told Illinois Times.
Added Tiffany Kiehl, a regional president for Encompass Health, a publicly traded company based in Birmingham, Alabama, “Our focus is to help our patients get to the highest functional capability so they can return home.”
The 350-page joint application by the two organizations for “certificate of need” approval could be debated and voted on during either the December or January meeting of the Illinois Health Facilities and Services Review Board. The board is part of the Illinois Department of Public Health.
The proposed single-story, 63,250-square-foot hospital would be built on a 5.8-acre site that Memorial is buying from Kinscherff Properties LLC. The site is part of 40 acres of farmland owned by Kinscherff that Memorial has a contract to purchase and for which Memorial received Springfield City Council approval this year to rezone as a highway business district meant for commercial establishments.
If the project receives state approval, the joint partnership would begin construction in late 2027. The partnership would operate the hospital and extend Alex Boulevard so it becomes the southern border of the site. A portion of what would become Bradfordton Road would be built north of Wabash Avenue to provide access to the facility from Wabash, Memorial spokesperson Catie Sheehan said.
The closest rehabilitation hospital to Springfield is in Quincy, and Springfield Memorial’s current inpatient rehab unit, licensed by the state for 30 beds but operated as a 21-bed unit because of facility limitations, is often full, according to the application.
The new hospital would replace and expand what is offered at Springfield Memorial, Davis said. But because some staff members who work in the current rehab unit may move to the new hospital, he said it’s unclear how much of a net increase in jobs the Rehabilitation Institute would create.
Encompass Health would put up all the money to build and set up the new hospital, and the people who work there would be employed by the joint venture entity and would be eligible for Encompass benefits, Sheehan said.
At present, there’s a “gap in care” in the Springfield area for patients eligible for inpatient rehab care and the three hours of therapy provided five days a week in a rehab hospital, according to the application.
As a result, the application says, many patients are discharged from acute-care hospitals to nursing homes or their homes and miss out on functional gains that have been documented by the rehab hospital industry and at Encompass facilities.
As the population ages, the gap will only worsen, the application says.
Encompass and Memorial Health said rehab hospitals outperform nursing homes when it comes to patients receiving rehab services – as measured by the patients’ mortality rates and their ability to regain function and avoid needing hospital emergency room care.
Juan Morado Jr., a Chicago attorney representing Memorial Health and Encompass in their quest for certificate of need approval, said the funding model for rehab hospitals through Medicare is more stable and generous than the funding stream for long-term acute-care hospitals, known as LTACs. About two-thirds of the Springfield rehab hospital’s patients are anticipated to be covered by Medicare.
Morado said LTACs provide the equivalent of intensive-care unit services, while rehab hospitals serve patients that aren’t as ill. The average length of stay at the new Springfield rehab hospital, which would offer all private rooms, is projected at about two weeks.
Morado said rehab hospitals also provide services that are different from the “swing-bed” programs that provide services similar to those in nursing homes at “critical-access” hospitals such as Taylorville Memorial and Lincoln Memorial hospitals.
Joint partnerships involving longtime acute-care hospitals such as Springfield Memorial and companies like Encompass Health – which bills itself as the nation’s largest owner and operator of inpatient rehab hospitals – are growing nationwide.
Those partnerships make money, with average profit margins of 24% at freestanding rehab hospitals, according to Medicare data. Rehabilitation Institute of Springfield is estimating total annual revenues of $30.8 million and a profit margin of about 4% after two years, but Kiehl said the profit margin probably would grow after that.
The rehab hospital stands to improve Memorial Health’s finances, which have taken a hit in recent years because of the COVID-19 pandemic and other factors. The $1.7 billion-a-year health system posted only $13,000 in net income from operations after expenses in the fiscal year that ended in September 2025.
Sheehan said: “Memorial Health, like most health systems across the country, is operating in a challenging environment marked by rising costs, reimbursement pressure and very narrow margins. The rehabilitation hospital is not a stand-alone solution to those challenges, but it is one of a number of solutions recently identified in its broader strategy to strengthen the organization for the future.
“By partnering with Encompass Health, we can expand a high-demand service, improve the patient experience and provide specialized rehabilitation care through a more efficient site of care.”
Dean Olsen is a senior staff writer with Illinois Times. He can be reached at dolsen@illinoistimes.com, 217-679-7810 or www.x.DeanOlsenIT.
