MANORCARE HEALTH SERVICES, LLC; HCR HEALTHCARE, LLC; and HCR MANORCARE, INC., Plaintiffs-Appellees,
THE ILLINOIS HEALTH FACILITIES AND SERVICES REVIEW BOARD; KATHRYN J. OLSON, as Chair of the Illinois Health Facilities and Services Review Board; JOHN HAYES, as Vice Chair of the Illinois Health Facilities and Services Review Board; PHILIP BRADLEY, JAMES J. BURDEN, DEANNA J. DEMUZIO, DALE GALASSIE, ALAN GREIMAN, DAVID PENN, and RICHARD H. SEWELL, as Members of the Illinois Health Facilities and Services Review Board; THE DEPARTMENT OF PUBLIC HEALTH; LAMAR HASBROUCK, as Director of the Department of Public Health; THE SPRINGS AT CRYSTAL LAKE; FAIR OAKS HEALTH CARE CENTER; and CRYSTAL PINES REHABILITATION AND HEALTH CARE CENTER, Defendants(The Illinois Health Facilities and Services Review Board; Kathryn J. Olson, as Chair of the Illinois Health Facilities and Services Review Board; John Hayes, as Vice Chair of the Illinois Health Facilities and Services Review Board; Philip Bradley, James J. Burden, Deanna J. Demuzio, Dale Galassie, Alan Greiman, David Penn, and Richard H. Sewell, as Members of the Illinois Health Facilities and Services Review Board; The Springs at Crystal Lake; and Fair Oaks Health Care Center, Defendants-Appellants).
from the Circuit Court of McHenry County, No. 14-MR-569; the
Hon. Michael T. Caldwell, Judge, presiding.
J. Silberman and Nicholas J. Lynn, both of Duane Morris LLP,
of Chicago, for appellants The Springs at Crystal Lake and
Fair Oaks Health Care Center.
Madigan, of Chicago (Carolyn E. Shapiro, Solicitor General,
and Linda Boachi-Ansah, Assistant Attorney General, of
counsel), for appellant Illinois Health Facilities &
Services Review Board.
T. Lundy and Paula S. Kim, both of Polsinelli Shugart, P.C.,
of Chicago, for appellees. Panel JUSTICE ZENOFF delivered the
judgment of the court, with opinion.
JUSTICE ZENOFF delivered the judgment of the court, with
opinion. Justices Jorgensen and Spence concurred in the
judgment and opinion.
1 Plaintiffs, ManorCare Health Services, LLC, HCR Healthcare,
LLC, and HCR ManorCare, Inc. (collectively referred to as
ManorCare), filed an application with defendant, the Illinois
Health Facilities and Services Review Board (the Board), for
a certificate of need to construct a new nursing home
facility in Crystal Lake, Illinois. Three local nursing homes
opposed the application: defendants The Springs at Crystal
Lake (The Springs), Fair Oaks Health Care Center (Fair Oaks),
and Crystal Pines Rehabilitation and Health Care Center
(Crystal Pines). The Board denied the application, and
ManorCare filed a complaint for administrative review in the
circuit court of McHenry County, naming as additional
defendants the Board's members and the Department of
Public Health. The circuit court reversed the Board's
decision and instructed the Board to issue a certificate of
need. The Board and its members appeal, as do The Springs and
Fair Oaks. For the reasons that follow, we reverse the
circuit court's judgment and affirm the decision of the
2 I. BACKGROUND
3 ManorCare hoped to construct a 130-bed, skilled-nursing
facility on an 8.9-acre parcel at the intersection of Route
176 and Terra Cotta Road in Crystal Lake. To do so, it was
required to apply for and receive a certificate of need from
the Board. ManorCare emphasized in its April 24, 2012,
application that the number of area residents over the age of
65 was expected to grow by 7.5% between 2011 and 2016.
Additionally, the Board's bed-need formula showed a need
for 469 additional skilled-nursing-facility beds in McHenry
County by 2018. ManorCare also highlighted the lack of
available private nursing home rooms in the county, a need
that ManorCare intended to address with 50 private rooms.
ManorCare further noted that, in the United States, there are
43 licensed skilled-nursing-facility beds for every 1000
persons over the age of 65; the number of such beds within
both a 5-mile and a 10-mile radius of ManorCare's
proposed Crystal Lake facility was far below the national
average. A 2010 McHenry County "Healthy Community"
study also found that there was a lack of sufficient nursing
home options in the county.
4 In its application, ManorCare declared that McHenry County
residents were leaving the area for nursing-care services. In
support of that conclusion, ManorCare noted that in 2010 2627
residents in the area received Medicare discharges to
skilled-nursing facilities. If each of those patients
required the average 30-day Medicare stay at a nursing
facility, that would equal 78, 810 patient days. However, the
existing facilities in the area had provided only 68, 944
days of Medicare services in 2010. Therefore, ManorCare
posited, it was reasonable to assume that 9866 of the
required 78, 810 days of care had been provided outside of
the county. Again assuming an average 30-day stay, ManorCare
calculated that 328 patients had left McHenry County for
nursing-care services. ManorCare asserted that it intended to
bring those patients back to McHenry County.
5 On the other hand, ManorCare acknowledged in its
application that data indicated that existing nursing homes
in the area were being underutilized. According to the
Board's regulations, the target utilization rate for
long-term nursing-care services is an annual average
occupancy of 90% of licensed beds. 77 Ill. Adm. Code
1125.210(c)-(d) (2011). In its application, ManorCare
advanced possible reasons for the underutilization of
existing facilities. For example, some facilities might have
taken licensed beds out of service; it was also possible that
families might have chosen not to use the existing facilities
because of poor performance records.
6 The three existing nursing home facilities in Crystal
Lake-The Springs, Crystal Pines, and Fair Oaks-each objected
to ManorCare's application and argued that there was no
need for the project. They noted that Crystal Pines was in
the middle of a $500, 000 renovation project. Fair Oaks was
undergoing a $3.25 million renovation that included adding 16
private rooms. The Springs was a five-star facility that
currently had over 30 beds available. The Springs had also
recently received regulatory approval to expand its bed
7 Before the Board considers an application for a certificate
of need, the Board's staff reviews the application and
prepares a staff report. According to the staff report here,
ManorCare's application, as originally submitted,
complied with 16 of 20 review criteria. The initial
application did not meet the "service demand"
criterion, because ManorCare did not submit letters from
hospitals and physicians projecting the number of patient
referrals to the proposed facility. See 77 Ill. Adm. Code
1125.540 (2011). Additionally, the application did not meet
the "service accessibility" criterion,
i.e., it did not show that "[t]he number of
beds being established or added for each category of service
is necessary to improve access for planning area
residents." 77 Ill. Adm. Code 1125.570 (2011). To comply
with this criterion, the applicant must document that at
least one of the following factors exists in the planning
area: (1) an absence of the proposed service; (2) access
limitations due to the payor status of patients or residents;
(3) existing providers' restrictive admission policies;
(4) a medical-care problem in the area, such as an average
family-income level that is below the poverty level or a
designation of the area as a "Medically Underserved
Area, " a "Health Professional Shortage Area,
" or a "Medically Underserved Population"; or
(5) all services within a 45-minute normal travel time
meeting or exceeding the 90% occupancy standard. 77 Ill. Adm.
Code 1125.570(a) (2011). According to the staff report, there
was no absence of the proposed service in the planning area.
Nor were there access limitations, restrictive admission
policies, or indicators of medical-care problems in the area.
Additionally, 18 of the 26 facilities within 45 minutes of
ManorCare's proposed location were not operating at
8 The staff report also noted that ManorCare's
application did not meet the "unnecessary
duplication/maldistribution" criterion. See 77 Ill. Adm.
Code 1125.580 (2011). That criterion states:
"(b) The applicant shall document that the project will
not result in maldistribution of services. Maldistribution
exists when the identified area (within the planning area)
has an excess supply of facilities, beds and services