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Marion Hospital Corporation v. Illinois Health Facilities Planning Board

March 29, 2001


The opinion of the court was delivered by: Justice Hoffman

Appeal from the Circuit Court of Cook County.

Honorable Robert v. Boharic Judge Presiding.

The Illinois Health Facilities Planning Board (Board) granted a permit allowing Southern Illinois Orthopedic Center, L.L.C. (SIOC) to construct an ambulatory surgical treatment center in Herrin, Illinois. The plaintiff, Marion Hospital Corporation (Marion), which operates Marion Memorial Hospital, filed a complaint for administrative review in the circuit court of Cook County challenging the issuance of the permit. The circuit court confirmed the Board's decision, and this appeal followed.

In accordance with the Illinois Health Facilities Planning Act (Planning Act), any party wishing to construct a health care facility must first obtain a permit from the Board. 20 ILCS 3960/5 (West 1998). The Board shall approve the issuance of a permit if it finds that the applicant is fit, willing, and able to provide a proper standard of health care for the community and that the project is economically feasible, consistent with the public interest, consistent with the orderly and economic development of such facilities, and in accord with the criteria adopted pursuant to section 12 of the Planning Act. 20 ILCS 3960/6 (West 1998). Pursuant to section 12, the Board has promulgated regulations containing criteria for it to consider when reviewing permit applications. The regulations relevant to the instant case are contained in sections 1110 and 1120 of Title 77 of the Illinois Administrative Code (Title 77). 77 Ill. Adm. Code §1110, 1120 (1996).

SIOC is a joint venture between defendants Southern Orthopedic Associates, L.L.C., which is comprised of six orthopedic surgeons practicing in three different southern Illinois cities, and Southern Illinois Hospital Services, which owns and operates a number of hospitals in southern Illinois. On November 18, 1998, SIOC filed an application to build and operate an ambulatory surgical treatment center (ASTC) specializing in orthopedic procedures and an attached medical office building to house the practices of the orthopedic surgeons. It estimated the cost of the proposed project as being $8,163,347. The application, which was supplied by the Board (20 ILCS 3960/6 (West 1998), required the submission of information and documentation relating to the criteria contained in sections 1110.230, 1110.1540, and 1120 of Title 77. The completed application is greater than 300 pages in length. As required, the application listed, inter alia, the names of "all the other facilities providing the same service within the planning area and surrounding planning areas within 30 minutes travel time of the proposed facility". 77 Ill. Adm. Code §1110.230(a )(1996). Among the hospitals identified was Marion Hospital, located 10 miles and a 10 minute drive from the location of the proposed facility.

Pursuant to section 12.2 of the Planning Act, the Illinois Department of Public Health (Department) reviews all permit applications in accordance with the criteria established by the Board. 20 ILCS 3960/12.2 (West 1998). As part of that review, the Department conducted a public hearing on January 28, 1999, at which it accepted 38 written statements and heard oral testimony from 17 witnesses, 15 of whom had also submitted written statements.

The vast majority of the written and oral testimony was in support of the proposed project. The City Clerk of Herrin, several members of the Herrin Chamber of Commerce, officers of several local banks, and several local business owners supported the project. Administrators from Memorial Hospital of Carbondale, St. Joseph Memorial Hospital in Murphysboro, and Herrin Hospital also supported the project, stating their beliefs that the project would not adversely affect their facilities.

The Department accepted written statements and oral testimony from seven doctors who were affiliated with the SIOC project. These doctors stated that the proposed project would provide convenience, efficiency, and reduced cost to patients by bringing orthopedic evaluation, testing, surgery, and follow-up together in one location. Several doctors stressed that other area facilities have a long waiting period for non- emergency orthopedic surgeries and that, accordingly, many patients currently leave the area, sometimes even the state, for non-urgent orthopedic care. Dr. Robert Golz cited an eight week waiting period for orthopedic evaluations and a four to six week waiting period for elective orthopedic surgery and stated that "health planners from the hospital system" estimate that 40% of orthopedic patients leave the area to seek treatment due to limited access to care. There was testimony that the ASTC project would alleviate this problem in two ways: 1) by increasing the efficiency of the orthopedic surgeons already working in the area, and 2) by attracting more orthopedic specialists and ancillary staff to the area, something which had been a problem in the past. There was evidence that, since SIOC filed its permit application, two additional orthopedic surgeons had agreed to join the group. Dr. John Wood testified he believed this was largely due to the ASTC. Several of the doctors opined that, in the long term, the ASTC would benefit area facilities by keeping orthopedic patients, some of whom would ultimately require inpatient surgery, from leaving the area.

Local physicians Dr. Jeffrey Parks and Dr. Kevin Oestmann offered oral testimony in support of the project. Dr. Oestmann testified that, although there are operating rooms available at current facilities, the orthopedic surgeons in the area are so busy providing emergency care, they do not have time to provide elective care. He opined that orthopedic surgeons practicing at the ASTC would save time now spent traveling from facility to facility and, accordingly, would be able to perform more procedures. He also opined that the ASTC would attract more orthopedic surgeons to the area.

Only three persons giving evidence at the hearing opposed the project, each one providing a written statement and oral testimony. Linda Bickers of HealthSouth Surgery Center of Southern Illinois, located in Marion, expressed her opinion that the ASTC would result in a loss of orthopedic surgeries to HealthSouth and other facilities, leaving all area facilities underutilized. Cindy Ford, chief nursing officer of Harrisburg Medical Center, Inc., stated that various area facilities already have a total of 35 operating room suites, all of which are available for orthopedic surgery. In her opinion, the ASTC would be a costly duplication of services and would negatively impact current area hospitals. Finally, Tom Keim opposed the project on behalf of Marion, stating the project would have a negative effect on the hospital. He further stated that the ASTC did not meet the Board's regulations in many respects, most notably that other surgical facilities located within 30 minutes of the proposed ASTC are not fully utilized.

At the conclusion of the hearing, the hearing officer announced that he would keep the record open until February 5, 1999. On that date, Marion submitted a statement in opposition to the project, arguing that, based upon the data SIOC provided in its application, Marion's hours of surgery would be reduced by over 1,500 hours per year. Marion stated that it had an application on file to build a new hospital with a new surgery suite and that SIOC "should work with Marion Memorial to avoid unnecessary duplication of services." Marion further argued that the proposed ASTC did not meet the requirements of section 1110.1540(g) of Title 77. The Department also received a letter from Dr. Mark Smith, a local family physician who supported the ASTC project. Dr. Smith stated that the vast majority of workers' compensation cases he deals with involve orthopedic injuries and that the lengthy delays for orthopedic evaluation and surgery are unacceptable. He attested to the frustration he himself experienced when, two years earlier, he partially amputated his thumb and had to leave the area for surgery as no orthopedic surgeon in the area felt qualified to perform the procedure. Finally, Dr. Smith opined that, in the long run, the ASTC would benefit area facilities by keeping more patients in the area for care.

Following the hearing, the Department issued a report to the Board regarding SIOC's application. In its report, the Department discussed the evidence pertaining to each of the applicable review criteria. Section 1110.230 of Title 77 contains general review criteria applicable to all projects. The Department found that the proposed project appeared to be in conformance with all but three of these general review criteria; namely: location, alternatives to the project, and need for the project. See 77 Ill. Adm. Code §1110.230(a),(e),(f) (1996). With regard to location, the Department noted the existence of "a large number of underutilized operating rooms" in the area and concluded that the ASTC project "would result in a maldistribution of services in the planning area." Regarding alternatives to the project, the Department concluded that SIOC should work with other health care providers to develop an outpatient surgery program that better utilizes the area's existing resources. It noted that, if a freestanding program is developed, it would appear area hospitals would need to close operating rooms. In support of its finding that SIOC did not meet the need criterion for the ASTC portion of the project, the Department again cited the negative impact the project would have on existing area facilities.

The Department also reviewed the ASTC project to determine its compliance with the criteria contained in section 1110.1540 of Title 77, which apply specifically to ASTCs. It found that the project appeared to be in conformance with all but two of the applicable review criteria; namely, impact on other facilities and establishment of new facilities. See 77 Ill. Adm. Code §1110.1540(f),(g) (1996). With respect to impact on other facilities, the Department noted that there are nine hospitals and two ASTCs within the proposed project's target area. It concluded that the ASTC project would have a negative impact on at least four hospitals, namely Harrisburg Medical Center, Marion, Carbondale Memorial Hospital, and Herrin Hospital. The Department expressed particular concern with regard to Carbondale Memorial Hospital, which had recently received approval to modernize its surgery department based on surgical volume figures which would be significantly reduced by the proposed facility. The Department also concluded that the proposed ASTC did not appear to be in conformance with the establishment of new facilities criterion, set forth in section 1110.1540(g), because the applicant had failed to establish that: there are no other ASTCs within the intended service area; all of the other ASTCs and hospitals in the service area are being utilized at or above 80% occupancy; or the facility is necessary to improve access to care.

Finally, the Department considered the proposed project's compliance with the financial and economic feasibility criteria contained in section 1120 of Title 77. See 77 Ill. Adm. Code §1120.210, 1120.310 (1996). It found that the proposed project appeared to conform to all such review criteria except the reasonableness of the project cost (77 Ill. Adm. Code §1120.310(d) (1996)).

After the Department issued its report, SIOC amended its application to address the Department's finding that the proposed project did not comply with the reasonableness of the project cost criterion. It provided revised project costs showing a total cost of $7,648,791. SIOC also informed the Board that, as part of the project, an operating room at United Mine Workers of America Hospital in Frankfort would be closed to address in part concerns about surgery capacity.

After this material was submitted, the Department issued a supplemental report, in which it re-analyzed, in light of the amendment to the application, the review criteria on which it had previously made unfavorable findings. The Department again found that the proposed project ...

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