GRINNELL, Iowa — A for-profit company has proposed turning a boarded-up former nursing home here into a psychiatric hospital, joining a national trend toward having such hospitals owned by investors instead of by state governments or nonprofit health systems.

The companies see a business opportunity in the shortage of inpatient beds for people with severe mental illness.

The scarcity of inpatient psychiatric care is evident nationwide, especially in rural areas. People in crisis often are held for days or weeks in emergency rooms or jails, then transported far from their hometowns when a bed opens in a distant hospital.

Eight nonprofit Iowa hospitals have shuttered their psychiatric units since 2007, often citing staffing and financial challenges. Iowa closed two of its four mental health institutions in 2015.

The state now ranks last in the nation for access to state-run psychiatric hospitals, according to the Treatment Advocacy Center. The national group, which promotes improving care for people with severe mental illness, recommends states have at least 50 state-run psychiatric beds per 100,000 people. Iowa has just two such beds per 100,000 residents, the group said.

Two out-of-state companies have developed psychiatric hospitals in Iowa in the past four years, and now a third company has obtained a state “certificate of need” to open a 60-bed facility in Grinnell.

Before 2020, Iowa had no privately owned, free-standing psychiatric hospitals. But several national companies specialize in developing such facilities, which treat people in crisis from conditions such as depression, schizophrenia, or bipolar disorder, sometimes compounded by drug or alcohol abuse. One of the companies operating in Iowa, Universal Health Services, says it has mental health facilities in 39 states.

Lisa Dailey, the Treatment Advocacy Center’s executive director, said that for-profit hospitals don’t necessarily provide worse care than nonprofit ones but that they tend to be less transparent and more motivated by money. “Private facilities are private,” she said. “As a result, you may not have a great insight into why they make the decisions that they make.”

Dailey said solid data on privately run mental health hospitals nationwide is scarce. But she has heard for-profit companies have recently set up free-standing psychiatric hospitals in several states, including California. The California Department of Public Health confirmed three such facilities have opened there since 2021, in Aliso Viejo, Madera, and Sacramento.

The latest Iowa psychiatric hospital would be housed in a vacant nursing home on the outskirts of Grinnell, a college town of 9,500 people in a rural region of the state. The project’s developers noted there are no other inpatient mental health facilities in Poweshiek County, where Grinnell is located, or in any of the eight surrounding counties. The nearest inpatient mental health facilities are 55 miles west in Des Moines.

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