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09/29/87 Condell Hospital Et Al., v. the Health Facilities

September 29, 1987





515 N.E.2d 750, 161 Ill. App. 3d 907, 113 Ill. Dec. 765

Appeal from the Circuit Court of Cook County; the Hon. Albert Green, Judge, presiding. 1987.IL.1450


JUSTICE STAMOS delivered the opinion of the court. HARTMAN and BILANDIC, JJ., concur.


The two groups of appellant hospitals (the Condell appellants and the Highland Park appellants) jointly appeal from dismissals of their two respective complaints for administrative review of a decision by appellee board (the Board or the State Board) to issue a permit to appellees Chicago Medical School Hospital, Inc., and University Health Sciences/Chicago Medical School *fn1 (collectively CMS) for construction of a hospital in Lake County, Illinois. The two cases had been consolidated in the circuit court. Appellee Department (the Department), which was a party of record to the proceedings before the Board, was joined as a defendant in each case pursuant to section 3-107 of the Administrative Review Law (Ill. Rev. Stat. 1985, ch. 110, par. 3-107). The Board and the Department have been given leave to adopt the briefs of CMS on this appeal, which has been expedited on motion of CMS.

Appellants contend on appeal that (1) the Condell appellants' complaint was not premature and sought review of a final decision of the Board; (2) if the Condell complaint was in fact premature, then the complaint filed by the Highland Park appellants, after a later decision of the Board, was neither premature nor tardily filed; (3) the Highland Park complaint's failure to specify the later decision as the one of which that complaint sought review was not a proper ground for dismissal; (4) appellants adequately exhausted their administrative remedies; and (5) appellants, as parties adversely affected by a final decision of the Board, had statutory standing to seek judicial review and were not deprived of that standing by any failure to participate in administrative proceedings or any acquiescence in a final administrative decision.

At the time appellants filed their reply brief, the Highland Park appellants applied under Supreme Court Rule 362 (107 Ill. 2d R. 362) for leave of this court to amend their complaint, and thereafter CMS filed objections to the application. The application was taken with the case. I. FACTS

A detailed review of the facts *fn2 is necessary in order to convey the extent and origins of the procedural quagmire into which the parties have led themselves. Ambiguity in statutes, rules, and administrative actions is partly responsible for the confusion, but sheer procedural irregularity as well as procedural skirmishing by the parties may well be a factor.

A. Administrative proceedings

(1) Application for CON

In August 1984, Chicago Medical School Hospital, Inc., advised the Department of its intention to apply for a permit, termed a certificate of need , to construct a hospital in Lake County, Illinois. On November 13, 1984, the Department received an application for a CON, jointly filed by Chicago Medical School Hospital, Inc. (Humana), which was described as a Virginia for-profit corporation that is a wholly owned subsidiary of Humana, Inc., and has authority to do business in Illinois, and by the University of Health Sciences/The Chicago Medical School (the school), an Illinois not-for-profit corporation. The application was later modified or supplemented many times. The voluminous application document, attachments, and supplements, amounting to some 2,000 pages, were filed pursuant to sections 5 and 6 of the Illinois Health Facilities Planning Act (the Planning Act), under which no person shall construct a health care facility (defined as including hospitals) without first obtaining a permit or exemption from the Board. Ill. Rev. Stat. 1983, ch. 111 1/2, pars. 1155, 1156.

The application stated that the proposed 224-bed tertiary-care hospital would be the primary teaching hospital for the school and that the latter has not owned, operated, or controlled its own hospital until now and has been refused repeatedly both teaching affiliations and admitting privileges for its faculty members at Lake County area hospitals. The application also stated that the joint arrangement with Humana would significantly increase the availability of needed medical care for residents of Lake and McHenry counties. The Chicago Medical School is one of three divisions of the University of Health Sciences; it was founded in Chicago in 1912, became part of the University when the latter was established in 1967, and moved with the University to North Chicago in 1974 in conformity with a State plan to regionalize medical schools and to enable the school to serve the area between Chicago and Milwaukee. During several months after filing its initial application, the school engaged in negotiations with other area hospitals to discuss possible affiliations, and CMS supplemented the application with additional information requested by the Board. During this time, the Board was presented in writing with numerous comments from health care professionals and planners, editorial writers, and elected public officials regarding the proposed CMS permit. The application was deemed complete and the Board's review thereof was initiated on February 8, 1985.

On February 14, 1985, the Health Systems Agency for Kane, Lake and McHenry Counties issued to affected parties its "Notice of Public Hearing" regarding CMS's application. HSA/KLM was the health planning organization for the area encompassing the proposed CMS hospital, so recognized by the Board pursuant to sections 8 and 9 of the Planning Act (Ill. Rev. Stat. 1983, ch. 111 1/2, pars. 1158, 1159) and authorized by that Act to review CON applications, to hold public hearings in connection therewith, and to certify to the Board its approval or disapproval thereof on the basis of "standards, criteria or plans of need adopted and approved by ." (Ill. Rev. Stat. 1983, ch. 111 1/2, par. 1158.) In addition, the City of Chicago Health Systems Agency (Chicago HSA), which is Chicago's health planning organization, chose to perform its own review as a contiguous organization pursuant to section 8 of the Planning Act (Ill. Rev. Stat. 1983, ch. 111 1/2, par. 1158.) Meanwhile, public comments, Board and HSA/KLM review of the CMS application and negotiations for other possible school-hospital affiliations continued.

After an extensive public hearing that was held on April 4 and 8, 1985, and was accompanied by hundreds of exhibits, HSA/KLM staff produced a report on May 15, 1985, finding that most of HSA/KLM's review criteria were not satisfied by the CMS application. HSA/KLM's board of directors then voted on June 13, 1985, to recommend denial of the CMS application. Meanwhile, after its own review, hearings, and staff report, Chicago HSA's governing body voted on May 22, 1985, to recommend disapproval of the CMS application.

The State Board's review of the CMS application continued to January 1986 as a result of additional modifications to the application; HSA/KLM and Chicago HSA were permitted to conduct their own additional reviews during this time. On October 10, 1985, HSA/KLM's board of directors voted 14 to 8, with one abstention, on rereview to recommend disapproval of the CMS application as then modified, and one director later filed a minority report. On October 28, 1985, HSA/KLM advised the State Board that revisions to the CMS application as of that date were not substantive and that they did not significantly alter previous HSA/KLM negative findings. On November 20, 1985, after further review, Chicago HSA's governing body again voted to recommend disapproval of the CMS application.

On January 10, 1986, the State Board held a public hearing on the CMS application. After its hearing and its review of a negative staff report by the Department, which provides the Board with administrative and staff support pursuant to section 4 of the Planning Act (Ill. Rev. Stat. 1985, ch. 111 1/2, par. 1154), the Board then rejected by a 2 to 9 vote a motion to approve the CMS application. This vote constituted an intent to deny the application. On January 16, 1986, the Board sent a letter to CMS pursuant to section 10 of the Planning Act, advising CMS of the Board's intent to deny and of CMS's opportunity to appear before the Board and present "such information as may be relevant to the approval of a permit . . . or in resistance of a denial of the application." (Ill. Rev. Stat. 1985, ch. 111 1/2, par. 1160.) Although Marshall A. Falk, M.D., the dean and executive vice-president of the school, had testified extensively at the Board's January 10 hearing, CMS responded on January 21, 1986, to the Board's letter of intent to deny by asking to appear, and on February 3, 1986, CMS sent additional information to the Board regarding its application. The Board began reviewing the additional material on February 4, 1986. CMS also provided HSA/KLM with copies of its additional material, and HSA/KLM began its own expedited review process. On March 13, 1986, on the basis of a new negative staff report, HSA/KLM's board of directors voted 11 to 5, with two abstentions, again to recommend disapproval of the CMS application.

Thereafter, at its meeting of May 1, 1986, where CMS appeared, the State Board considered a negative staff report by the Department as to CMS's additional material, but after testimony and Discussion it voted 7 to 2, with two abstentions, to approve CMS's application. In announcing the vote, the chair stated: "The project has been approvedthe Board has voted approval but the HSA must be afforded the opportunity for appeal. They have 30 days in which to do that." (Emphasis added.)

On May 23, 1986, the Board sent a letter (the May order) to CMS, which read in part as follows:

"On May 1, 1986, the [Board] approved your application for permit based upon the project's conformance with the applicable standards and criteria . . ..

The State Board rendered its decision following consideration of the application, the areawide health planning organization's findings and record of proceeding, the State Agency [Department] Report and the testimony of the applicant.

[Your] permit . . . is valid for 18 months, expiring on November 1, 1987.

This permit is subject to the rights of the areawide health planning organization to appeal this decision of the Board, 77 Ill. Adm. Code Section 1160.610. To proceed to obligate the permit during this period is to do so at your own risk. This permit period and time period for obligation of the project is not authorized by the Act to be stayed during this appeal process. Note, however, that requests may be made of the Board for permit extensions or renewals.

The project must be obligated by contract, purchase order or lease prior to the expiration of the permit and must proceed toward completion with due diligence.

Failure to comply with the applicable requirements may result in the State Board taking action to revoke the permit." (Emphasis added.)

(2) Reconsideration and HSA hearings

In addition, on May 23, 1986, the Board sent a letter to HSA/KLM pursuant to section 8 of the Planning Act (Ill. Rev. Stat. 1985, ch. 111 1/2, par. 1158) and its own regulations (77 Ill. Adm. Code 1160.610 (1985)), providing a detailed statement of the reasons for the inconsistency between the Board's decision and HSA/KLM's findings, and affording HSA/KLM an opportunity for a hearing before a Board-appointed hearing officer. The letter to HSA/KLM stated in part:

"On May 1, 1986, the Illinois Health Facilities Planning Board approved the application for permit of the above referenced project. This decision is contrary to the findings of your areawide health planning organization.

If you decide to exercise your right to a hearing, you must submit your request to the State Board . . . within 30 days . . ..

If you decide to exercise your right to a hearing, the State Board through the Board Chairman, shall, within 30 days after the receipt of your request, schedule the time and place for the hearing and appoint a hearing officer. The hearing will afford you the opportunity to address the inconsistency(ies) between your organization's findings and the State Board's decision. Following its consideration of the report of the hearing, or upon default of the party to the hearing, the State Board shall make its final determination.

A copy of the permit letter evidencing the decision of the State Board regarding the above-referenced project is attached." (Emphasis added.)

A copy of this letter to HSA/KLM was sent to CMS.

On May 29, 1986, Chicago HSA sent a letter to the Board, requesting a reconsideration hearing on the CMS application. On May 30, 1986, counsel for seven hospitals sent the Board their request for a reconsideration hearing. The hospitals' counsel was the same law firm that represents appellants in the instant case; five of the hospitals were the same ones that now constitute the Condell appellants; and of the other two, one was Highland Park Hospital, which is one of the two Highland Park appellants.

The reconsideration hearings requested by Chicago HSA and the hospitals were apparently sought and were treated by the Board as having been sought pursuant to sections 1160.650, 1220.20(a)(1), and 1220.30 of the Board's rules, which provide for such hearings before the Board when any interested person (other than the recipient of a permit) makes a request therefor within 30 days after a Board decision. In order to obtain such a hearing, such a person must show "good cause," a term that is defined by Board rule. 77 Ill. Adm. Code 1160.650, 1220.20(a)(1), (c), 1220.30 (1985).

On June 12, 1986, after the requests for reconsideration hearings had been filed, HSA/KLM requested a hearing before a hearing officer pursuant to the Board's May 23 letter.

This latter hearing would have differed from the reconsideration hearings sought earlier by Chicago HSA and the hospitals in that it was sought pursuant to section 8 of the Planning Act and sections 1160.610 and 1220.20(a)(3) of the Board's rules. The Planning Act and the Board's rules entitle any areawide health planning organization to such a hearing before a hearing officer whenever the Board renders a decision on an application that is contrary to the areawide HSA's findings. The areawide HSA must submit any hearing request within 30 days after the Board decision at issue but is not required to show "good cause" in order to obtain the hearing, and the hearing is before a hearing officer rather than the full Board. (Ill. Rev. Stat. 1985, ch. 111 1/2, par. 1158; 77 Ill. Adm. Code 1160.610, 1220.20(a)(3) (1985).) Although the Board and the parties have sometimes referred to both types of hearings as "reconsideration" hearings, it is clear that they are distinct from each other in regard to authority, procedure, and perhaps issues to be addressed. They were so differentiated by the Board when it subsequently met to consider Chicago HSA's and the hospitals' requests for reconsideration hearings. Furthermore, they are treated as two different types of proceedings in the Federal regulations governing certificate-of-need reviews. 42 C.F.R. secs. 123.104(b)(17), 123.410(a)(11) (1986).

On June 13, 1986, the Board's chairman, Pam Taylor, sent a letter to each of the first group of filers of requests for reconsideration hearings, advising that the requests would be referred to the full Board for a determination as to whether good cause had been shown to reconsider.

On June 30, 1986, counsel for CMS sent the Board a response by CMS to the requests for reconsideration hearings that had been filed. On July 3, 1986, the Board's chairman distributed to Board members copies of CMS's response and a memorandum from the Board's counsel, although she stated that the responsive material was not provided for under Board rules. The record does not disclose the contents of the Board's counsel's memorandum.

On July 10, 1986, the Board met and considered the requests for reconsideration hearings. At the meeting, the Board's executive secretary, Ray Passeri, reviewed the requests for reconsideration hearings and the request of HSA/KLM for a hearing and, according to the transcript, stated:

"[Given] that the HSA has requested an administrative hearing, there is a process that must be followed with that decision which will be returning to the Board for a final administrative decision. Therefore, the matters, that the Board ...

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