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Dimensions Medical Center, LTD. v. Elmhurst Outpatient Surgery Center

September 29, 1999

DIMENSIONS MEDICAL CENTER, LTD.; ACCESS CENTER FOR HEALTH, LTD.; ACCESS HEALTH CENTER, LTD.; AND NORTHWEST COMMUNITY HEALTH CENTER, LTD., PLAINTIFFS-APPELLANTS,
V.
ELMHURST OUTPATIENT SURGERY CENTER, L.L.C.; ELMHURST MEMORIAL CENTER FOR HEALTH; ELMHURST MEMORIAL HEALTH SYSTEM, AN ILLINOIS CORPORATION, AND ELMHURST MEMORIAL HOSPITAL, AN ILLINOIS CORPORATION; THE ILLINOIS HEALTH FACILITIES PLANNING BOARD: PAM TAYLOR, CHAIRMAN; MARJORIE ALBRECHT, THOMAS BECK, FRED BENJAMIN, ERNEST JENKINS, BRO. PHILLIP KENNEDY, HARRY KURSCHENBAUM, STUART LEVINE, ROBERT LIBERT, WILLIAM MARSHALL, JR., M.D., ROBERT SCHRAYER, JOYCE WASHINGTON, BERNARD WEINER, AND RICHARD WRIGHT, MEMBERS; THE DEPARTMENT OF PUBLIC HEALTH; AND JOHN LUMPKIN, M.D., DIRECTOR, DEFENDANTS-APPELLEES



Appeal from Circuit Court of McLean County No. 97MR137

The opinion of the court was delivered by: Justice Steigmann

Honorable Ronald C. Dozier, Judge Presiding.

In October 1997, defendant Illinois Health Facilities Planning Board (Board) issued a permit, known as a certificate of need (CON), to defendant Elmhurst Memorial Hospital (Memorial), a wholly owned subsidiary of defendant Elmhurst Memorial Health System, to build an outpatient facility to be called the Memorial Center for Health (Center for Health). The Board issued a second CON to Memorial jointly with defendant Elmhurst Outpatient Surgery Center, L.L.C. (Surgery Center), a limited liability company owned by Memorial and several of its physicians, to build an ambulatory surgical treatment center (ASTC), which would provide outpatient surgery services inside the Center for Health.

Later that same month, plaintiffs, Dimensions Medical Center, Ltd. (Dimensions), Access Center for Health, Ltd., and Access Health Center, Ltd. (collectively Access), medical care providers operating existing ASTCs in the geographic area of Memorial's proposed facility, filed a complaint for administrative review in the circuit court, seeking reversal of the Board's decisions to issue the two CONs. In July 1998, intervenor, Northwest Community Health Center, Ltd. (Northwest), petitioned to intervene. (Northwest had previously applied unsuccessfully for a CON to operate an ASTC in the same geographic area as Memorial's proposed ASTC.)

In August 1998, the trial court conducted a hearing on Access and Dimensions' complaint and on Northwest's petition to intervene, granted Northwest's petition, and affirmed the Board's decision. Access, Dimensions, and Northwest appeal, arguing that (1) the administrative proceedings were unfair because (a) the hearing officer prohibited them from cross-examining witnesses, and (b) the Board allowed the applicants to provide additional materials in support of their CON applications after the close of the public hearing; and (2) the Board's decision was arbitrary, capricious, and against the manifest weight of the evidence. We affirm.

I. BACKGROUND

Pursuant to section 3-106 of the Code of Civil Procedure (Code) (735 ILCS 5/3-106 (West 1996)), the Board filed the record of administrative proceedings as its answer to Access and Dimensions' complaint. That record consists of 7 volumes and nearly 2,500 pages of documentation. The evidence was nearly identical regarding the CON applications for the Center for Health and the ASTC, and the only reason two different CON applications were involved is because two different corporate entities applied for the CONs. None of these nuances are relevant to our analysis. Accordingly, our references to the evidence will relate to both applications unless otherwise stated. In addition, we will avoid unnecessary confusion by referring to both Memorial and the Surgery Center as Memorial.

In June 1997, Memorial filed applications for the Board to issue CONs for the two projects at issue--namely, the Center for Health and the ASTC. According to the application materials, Memorial's existing hospital facilities were aging and overcrowded, and Memorial wanted to modernize some of its outpatient services. Because of physical limitations and zoning restrictions, Memorial could not accomplish these changes within the existing hospital structure, and adjacent land was not available.

Accordingly, Memorial sought to build the Center for Health approximately four miles from the hospital. Memorial planned the Center for Health to be a four-story facility housing the following: (1) an outpatient care center, to include (a) diagnostic radiology, (b) magnetic resonance imaging, (c) non-invasive diagnostic cardiology and cardiac rehabilitation, (d) physical and occupational therapy, (e) preadmission and preprocedure testing, and (f) specimen collection; (2) a regional blood bank; (3) leased space for private physicians' offices; and (4) the ASTC, which would offer a variety of outpatient surgical procedures, not to include pregnancy terminations. The Center for Health was projected to cost approximately $48 million, and the ASTC was projected to cost approximately $4 million.

The applicants provided the Board with a large amount of documentation in support of their claims that the new facility was necessary because (1) Memorial was currently serving more patients than its existing building could comfortably accommodate; (2) the design of Memorial's existing building was inadequate to provide outpatient care; and (3) Memorial's patients were currently receiving outpatient surgery in the hospital's traditional operating rooms, an inconvenient arrangement due to the layout of the hospital and the need to reschedule surgeries whenever an emergency need for an operating room arose.

Memorial also provided referral letters and statistics regarding the utilization of the hospital's existing facilities to demonstrate that Memorial's existing patients and doctors would use the new facility sufficiently for it to be economically feasible. In making these utilization estimates, Memorial did not propose to draw patients from other area facilities. In particular, Memorial based its ASTC utilization estimates on the number of outpatient surgeries it was currently performing in the hospital's operating rooms.

Dimensions and Access objected to Memorial's applications and demanded a public hearing. Pursuant to section 8 of the Illinois Health Facilities Planning Act (Planning Act) (20 ILCS 3960/8 (West 1996)), a hearing officer for the Illinois Department of Public Health (Department) conducted two hearings in July 1997 on the same day, one on each of the CON applications. After convening the first hearing, the hearing officer stated the following:

"Keep in mind, this is not a debate. If you feel that something is raised today that you take real issue with and you are lucky enough to follow the person that made that comment, obviously, [you can] indicate[] your disagreement. But the best way to respond is to send me [comments] via [facsimile], because I will keep this record open until the close of business this Friday ***."

Memorial's president, Leo Fronza, was the first person to testify. Fronza introduced himself and then gave testimony substantially similar to the assertions in the application materials. When Fronza finished, no one asked to cross-examine him.

The city manager of Elmhurst, Tom Bochard, testified next and confirmed that "[i]t is doubtful that further development of the current hospital site will be allowed, and the [hospital's] current condition[al-]use permit prohibits any physician offices on the existing campus." Bochard indicated that the proposed location would avoid zoning problems, then concluded his testimony by saying, "I am pleased as a resident and pleased as a [c]ity manager, the community and hospital have been able to come together on a solution that fills the needs of everyone. I would encourage your approval of this project." No one asked to cross-examine Bochard. The next eight witnesses all spoke enthusiastically in favor of the proposed facility, and no one asked to cross-examine any of them.

The next witness was Allyson Bouldon, an attorney representing Dimensions, who read a prepared statement opposing Memorial's application. After Bouldon finished, the following exchange occurred between Memorial's attorney, Dan Lawler, and the hearing officer:

"MR. LAWLER: The rules under which this hearing may be conducted provide that any person shall have the right to be represented by counsel and may conduct reasonable questioning of persons who make relevant factual allegations. *** HEARING OFFICER[]: As I indicated earlier, counselor, *** the format that I adhere to is nondebate, nonquestioning. I know what the rules indicate, but I have never offered an opportunity for cross[-]examin[ation] or re-examination at any of my hearings. What I would recommend that you do is take advantage of the extension that's granted to file any factual information, to respond, to come back with a cross. But I will not allow a debate or a question-and-answer[,] period. MR. LAWLER: The rules that the [Board] sent us with the notice of procedure -- HEARING OFFICER[]: I understand that. And my interpretation allows me to make that decision. MR. LAWLER: But I will not have the opportunity to reasonably question this person. HEARING OFFICER[]: You are absolutely correct. * * * *** I think you're underestimating the intuitive process of the Planning Board. *** MR. LAWLER: *** [I]t's not the intuitive process of the [Board] that concerns me. It's that the only material[s] that go up to the [c]circuit [c]court *** is what our court reporter here is transcribing. And if I am not allowed to be heard -- HEARING OFFICER[]: What time limit are you talking? How detailed is your request for counsel going to be here? MR. LAWLER: I would have approximately five minutes of questioning. * * * HEARING OFFICER[]: You may-- MS. BOULDON [(the witness)]: If I could just interject, I believe I could possibly save everyone a lot of time. I prepared and submitted a written statement, and *** we are prepared and willing to respond to any inquiries in writing. That's for two reasons. To make sure we understand the inquiries, but also I am here in lieu of the attorney who usually represents the clients ***. HEARING OFFICER[]: Any concern about that, counselor? MR. LAWLER: Well, that's not what the rules allow. HEARING OFFICER[]: I know that's not what the rules allow. I interpret the rules. I'm well aware of the interpretation I've made. *** You have an opportunity to question and to prepare written documentation. MR. LAWLER: But I don't have a reasonable opportunity to question this person who's making irrelevant and factual allegations. HEARING OFFICER[]: This person is also indicating that [she's] not the proper counsel to ask those questions. MR. LAWLER: Well, then she shouldn't have been testifying. HEARING OFFICER[]: She didn't testify. She offered information on the project. *** MS. BOULDON: I read from a prepared statement verbatim. The statement has been submitted to the record. MR. LAWLER: Well, -- HEARING OFFICER[]: Counselor, as far as I'm concerned, you're starting to try my patience. If you have a problem with my ruling, you may certainly appeal it. Okay?"

At that point, Lawler requested and received permission to enter a statement into the record in response to Bouldon's testimony. When he finished, no one asked to cross-examine him.

Heather Lesson, an attorney representing Access, testified next in opposition to Memorial's application. When she had finished, the following exchange occurred between Lawler and the hearing officer:

"MR. LAWLER: *** I just want to preserve the record on the objection for the record. I didn't stand up to question the witness, but if I would have had the opportunity, I would have. I just want to make that clear. I'm assuming you would not have let me. HEARING OFFICER[]: You're absolutely correct. MR. LAWLER: Nor any other opponents? HEARING OFFICER STEVENS: Nor any other individuals. There's no cross[-]examination, no rebuttal."

After that exchange, the final witness at the first hearing spoke in favor of the project. No one asked to cross-examine her.

At the second hearing, conducted later the same day, only two witnesses spoke in favor of the application, and no one asked to cross-examine either of them. Attorneys for Access and Dimensions gave statements in opposition to the project, and George Olson, the administrator for Oakbrook Medical and Surgical Center, also testified in opposition to the project. Olson was the final witness.

No party ever contested the core assertions of Memorial's application--namely, that the facility was needed because Memorial's patient base had outgrown the existing facility, which could not be renovated to adequately provide outpatient services. However, Dimensions and others claimed that the proposed ASTC would have an adverse effect on their medical practices because several of these parties offered the same services in the same geographic area in facilities that were underutilized. Access' existing ASTC, in contrast, provided only pregnancy-termination services. However, Access had also applied for a CON to open a multispecialty ASTC, and the Board had previously denied Access' application on the ground that facilities in the area were underutilized. The Board had also denied Dimensions a CON to relocate its existing facility on the ground that facilities in the area were underutilized.

Dimensions provided a list of five other medical-care providers to whom the Board had denied CONs to construct ASTCs in the same geographic area as Memorial's proposed project on the ground that existing facilities in the region were underutilized. Beyond making that point, Dimensions' objections were general and conclusory, consisting of assertions such as, "there are inaccuracies in outpatient information contained in [Memorial's] application," without stating what was purportedly inaccurate about the application materials. Northwest did not participate in the administrative proceedings on Memorial's CON applications.

The hearing officer allowed each person attending the hearings to give testimony, and also kept the administrative record open for several additional days, until July 11, 1997, so that anyone could submit additional written materials. Once the record was closed, the Department, acting pursuant to sections 8 and 12.2 of the Planning Act (20 ILCS 3960/8, 12.2 (West 1996 & Supp. 1997)), submitted two reports to the Board, one for each of the CON applications. Each of these reports discussed over 20 different review criteria that applicable regulations required to be considered in issuing a CON (77 Ill. Adm. Code §1110.210 et seq. (1996)) and concluded that the Center for Health satisfied all but two review criteria and the ASTC satisfied all but one of the criteria. (The criteria that the Department found the project did not satisfy involved financial issues unrelated to this appeal (77 Ill. Adm. Code §§1120.310(e), (f) (1996)).)

At some point not reflected in the record, Michael Copeland, who worked for the Department, requested Memorial to provide some additional materials to the Board, and Memorial did so in a letter dated in September 1997. In October 1997, the Board conducted an agenda meeting, and Memorial's representatives gave oral testimony in support of the CON applications. Afterwards, the Board voted unanimously to ...


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