HealthSouth on Friday officially kicked off its $10 million, 27,100-square-foot expansion on McCallie Avenue.
The hospital will move 50 beds from the existing building, greatly enlarging the amount of space per patient in both buildings after construction and renovation is complete in June 2013.
While the total number of beds will not change, the new rooms will be much larger and more modern, officials said.
The rehabilitation hospital will triple the number of private rooms to 30 and renovate the dining room and therapy gym, said Scott Rowe, CEO of HealthSouth Rehabilitation Hospital of Chattanooga.
"While we've had challenges with the current building, we've had great outcomes for patients," Rowe said, noting that workers have continued to treat about 1,000 patients yearly.
Changes in Medicare restricted the types of patients the hospital could admit, making it "very difficult to survive," in the past, Rowe said.
"But we were able to weather the storm," he added.
Jay Grinney, president and CEO of HealthSouth, called the construction "a great project for Chattanooga," and "a continuation of our commitment to this area."
The hospital treats patients suffering from stroke, spinal cord injury, amputation and other disabling illnesses for two weeks following their discharge from nearby hospitals, he said.
In addition, the hospital has purchased additional parcels of nearby land, which Grinney said would be transformed into a park.