Where There’s Smoke

Details of how Lakeshore Care will be regulated are needed before its permit to open a recuperative care facility for the homeless at 918 Lake Street is approved.

The Business, Housing, and Zoning (BHZ) committee, led by CM Jamal Osman, unanimously approved the permit application submitted by Tim McLaughlin of West Lake Colfax, LLC. The permit allows Lakeshore Care Inc. to operate a 24-bed, around-the-clock medical facility at 918 Lake Street in the Uptown Business District. The committee showed little interest in the background of the owners or the community’s objections, making the permit approval seem preordained. The final hurdle will be approval from the full council on October 2.

Recuperative care facilities are a relatively new concept meant to provide care for unhoused people who have suffered a medical emergency. After receiving treatment at a clinic or hospital they often have nowhere to go. Hospitals want to free up their facilities for new patients and recuperative care centers are seen as a way to provide a lower-cost care option for these individuals. The model has worked in other states and the Minnesota State legislature created the statues in 2023 to allow them in Minnesota. The 2040 plan allows for them to be located anywhere in the city. According to senior planner Lindsey Silas, “The staff recommendation is based on the policies of the comprehensive plan, the zoning code, and applicable state statutes related to required findings. Neighborhood opposition is considered by the Planning Commission, not by staff doing the analysis of the project. In addition, neighborhood opposition alone does not constitute a legal basis for denial of a land use application.” A larger recuperative care center, capable of housing 64 individuals, is being considered for 1801 Nicollet.

It took significant public outcry for Lakeshore Care to agree to meet with community members. The company appears to consist of two key figures: its owner, Ali Warsame, and project manager, Zakaria (Zach) Suleman. Tim McLaughlin, the applicant, is part of the company that owns the building. According to their community engagement notes, they claimed they could only meet with people via Zoom due to safety concerns with in-person meetings. This is not a promising start for a business aiming to integrate into a busy neighborhood while ensuring it will “not be detrimental to or endanger the public health, safety, comfort, or general welfare.” In the same notes, they stated that they chose the site “for its high visibility, proximity to public transportation, and access to nearby medical services.” They further explained that “it is important for clients to have access to community amenities, including local businesses, which can help foster a sense of belonging and stability during their recovery.”

More employees have been promised, including doctors, nurses, case workers, a community liaison, and security personnel. However, what is missing from the list of potential new hires is regulatory and compliance staff, a topic that was overlooked by the council. The state legislature paved the way for these recuperative care facilities, even establishing the pay rates that will be billed to Medicaid.

• Recuperative care services rate – at least $300 per diem, with the phrase “at least” implying that it could be higher.
• Recuperative care facility rate – paid through Medical Assistance directly to the provider for facility costs at their standard rate, which is not specified in the legislation.

At these rates, the base amount they will bill Medical Assistance (Medicaid) each month will be $216,000. Given the multiple Medicaid fraud investigations underway in the state, extra caution seems appropriate.

Begin with Compliance

At no point has it been discussed that every dollar of income for these facilities will be generated by billing Medical Assistance. It’s possible this fact is being downplayed to avoid raising uncomfortable questions or associations with the many Medicaid fraud investigations currently underway in the state. The first question the city council should ask any business planning to open one of these facilities is, “Who is your compliance officer?” There is a wealth of talent and expertise in health care compliance in this city and state. An afternoon of phone calls could easily inform any uninitiated party about what an effective compliance program looks like and why it is crucial.

In her article about the committee action, Susan Du reported that “the state Department of Human Services’ enrollment process for new recuperative care operators is currently paused due to ‘systems work related to claims processing,’” according to spokesman Scott Peterson. He noted that DHS expects enrollment to reopen in a couple of months.” This delay could indicate a recognition by the state that they opened the door for these new facilities without fully understanding how to monitor the claims process.

It may not be the responsibility of the BHZ committee to question the business model or financial backers of a business. The city council might be unconcerned with whether the business abuses a federal program because it does not impact their budgets. However, we encourage them to request specific plans from both the county and state as to how these medical facilities will be monitored. Lakeshore Care is likely a legitimate business with no intention of submitting falsified claims or inflating the number of meals, rides, or people served, but it is still prudent to develop robust oversight. Seizing a business opportunity is fine, but it makes sense to ensure transparency.

Good governance demands that medical facilities be clear about their compliance and regulatory plans. Every business owner deserves the benefit of trust, but trust must be verified. Residents and businesses have a right to know what happens if Lakeshore Care fails to enforce curfews or other promises they have made. If a patient becomes unruly while visiting local businesses, what occurs? When testifying in support of the 1801 facility, Connie Melchizedek, Manager for the operator Accord Health, stated they expect patients to be recovering from tuberculosis. There must be regulatory oversight to ensure these patients are no longer contagious before being allowed to access community amenities and businesses.

The Minneapolis City Council can best serve city residents by ensuring that county and state regulators are involved before granting permits for recuperative care facilities. It is in the interest of these types of businesses to know how they will be regulated so they can develop appropriate compliance procedures, as any medical facility would. This could help Lakeshore Care build trust with their neighbors. It might even enable them to hold safe in-person meetings with the community, where they could share compliance reports and address concerns—silencing critics in the process.