Provena Health v. Illinois Health Facilities Planning Board ( 2008 )

FIRST DIVISION
March 31, 2008
No. 1-07-1952
PROVENA HEALTH and PROVENA HOSPITALS, ) Appeal from the
) Circuit Court of
Plaintiffs-Appellants, ) Cook County.
)
v. )
)
ILLINOIS HEALTH FACILITIES PLANNING )
BOARD, ILLINOIS DEPARTMENT OF PUBLIC )
HEALTH, SHERMAN HOSPITAL, SHERMAN )
HEALTH SYSTEMS, and REEVEN J. ELFMAN, ) Honorable
) Peter J. Flynn,
Defendants-Appellees. ) Judge Presiding.
JUSTICE WOLFSON delivered the opinion of the court:
The Illinois Health Facilities Planning Board (Board)
approved a certificate of need (CON) permit for Sherman Hospital
and Sherman Health Systems (Sherman) to discontinue its old
hospital facility in east Elgin, Illinois, and construct a new
facility in west Elgin. Provena Health and Provena Hospitals
(Provena) operate the only other hospital in the planning area,
located in west Elgin. Provena filed a complaint for
administrative review opposing the construction of Sherman’s new
hospital, contending it would have a devastating impact on
Provena Saint Joseph Hospital (St. Joseph). We are called on to
decide whether the Board’s decision to grant the permit was
clearly erroneous. It was not.
FACTS
On October 24, 2005, Sherman submitted to the Board its
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application for a permit to construct a new hospital at 1425
North Randall Road in Elgin. The site for the proposed project
is approximately 4.5 miles from its current location at 934
Center Street in Elgin. The new facility would contain all the
services offered at the existing hospital. A small portion of
the old facility would remain open for scheduling, outpatient
testing, and immediate care; the older functionally obsolete
buildings would be demolished. The Board treated the application
as a proposal for the discontinuation of the old hospital and
construction of a new hospital. The estimated cost of the
project was $310,352,103. Sherman proposed decreasing the total
number of beds from 363 in the old hospital to 263 in the new
hospital. The beds would be divided as follows:
Service Existing Beds Proposed Beds
Medical/Surgical 293 196
Pediatrics 18 9
Obstetrics 24 28
Intensive Care 28 30
Total 363 263
Pursuant to the Illinois Health Facilities Planning Act
(Act), 20 ILCS 3960/8 (West 2004), Sherman requested a public
hearing, which was held on December 7, 2005. Members of the
public, including local officials and representatives from
Sherman, Provena, and other hospitals, attended the hearing and
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testified for and against the project.
St. Joseph is located in west Elgin. The Fox River
separates St. Joseph from Sherman’s current hospital in east
Elgin. St. Joseph and Sherman Hospital are the only two
hospitals in the planning area. The proposed site for Sherman’s
new hospital is in west Elgin, approximately 3.7 miles north of
St. Joseph, about the same distance between St. Joseph and the
current Sherman Hospital.
On February 21, 2006, Provena submitted written letters and
reports opposing the project, including a study by Deloitte
Financial Advisory Services, LLP (Deloitte), concluding the
proposed relocation of Sherman would cause Provena to lose $8
million or more annually. Other reports concluded the move would
affect patients’ access to Sherman and negatively impact the
ability of emergency responders to transport patients from east
Elgin to Sherman’s proposed new location in west Elgin.
The Board considered the application at a meeting on March
14, 2006. The Board members discussed area bed needs, the
suitability of alternate locations, the infeasibility of
renovating Sherman’s existing facility, and the impact of the
proposed project on Provena. The Board also considered the State
Agency Report (SAR) prepared by the Illinois Department of Public
Health, which provides staff assistance to the Board. The
Department reviewed Sherman’s application for compliance with the
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general review criteria set out in the State regulations. It
found the proposed project "did not appear to be in conformance"
with 7 of the 21 review criteria related to establishment of the
new hospital in part 1110 of the regulations. 77 Ill. Adm. Code
§ 1110 (2003). It found conformance with the nine financial and
economic feasibility provisions in part 1120 of the regulations.
77 Ill. Adm. Code § 1120 (2003).
Following the Board meeting, Sherman requested a deferral of
its application to address questions raised by Provena and by the
Board. Sherman’s representatives met with Department staff on
April 5, 2006, for technical assistance. Sherman submitted a
letter summarizing the discussions and proposed a reduction in
the number of beds from 263 to 255. The new total included 189
medical/surgical beds, 8 pediatric beds, 28 obstetric beds, and
30 intensive care beds. Both Sherman and Provena submitted
additional reports addressing the project’s financial impact on
Provena. The Department submitted a supplemental report to the
Board but did not change its finding that the proposed project
did not appear to be in conformance with 7 of the 21 review
criteria for establishment of a new hospital in part 1110 of the
regulations.
At its next meeting on June 7, 2006, the Board voted 3-0 to
approve Sherman’s application. On June 15, 2006, the Board
issued a letter to Sherman, stating it approved the permit based
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on the "project’s substantial conformance with the applicable
standards and criteria of Part 1110 and 1120." The Board noted
it considered the Department’s findings, the application
materials, the public hearing report, and the testimony before
the Board. It stated the project must be obligated by December
7, 2007, and completed by June 30, 2010.
Provena filed its complaint for administrative review on
July 13, 2006. Its standing was based on section 11 of the Act,
which allows any person who is adversely affected by a final
decision of the Board to seek judicial review of the Board’s
decision. 20 ILCS 3960/11 (West 2004). Provena contended the
Board’s decision to award Sherman a permit would reduce Provena’s
net income by $8.7 million to $17.7 million per year and
potentially cause the closure of St. Joseph Hospital. Provena
noted it had begun a $97 million expansion and modernization
project that had been approved by the Board in August 2005.
The circuit court remanded the matter for the Board to
explain its decision to grant the permit to Sherman
"notwithstanding noncompliance with seven of the eight pertinent
regulatory criteria as reflected in the State Agency Reports."
The court ordered the permit would remain "in full force and
effect."
Provena filed a request that the Board consider additional
information, conduct further proceedings, and reconsider its
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grant of a permit, in light of data that Sherman’s average daily
census of medical/surgical patients dropped from 137.6 in 2004 to
117.2 in 2005. In approving the project, the Board had relied on
Sherman’s projections that its average daily census of
medical/surgical patients would increase from 137.6 in 2004 to
159.8 in 2011, which would support 188 medical/surgical beds at
an 85% utilization rate.
At a Board meeting on December 21, 2006, Chairperson Lopatka
read into the record a detailed statement explaining the Board’s
reasons for granting the permit. The Board voted to adopt the
statement.
On March 19, 2007, the circuit court remanded the matter to
the Board to determine whether it wished to consider Provena’s
submission of information about Sherman’s 2005 utilization rates
or updated ratings by a bond-rating agency. At its meeting on
March 27, 2007, the Board acknowledged having read the materials
and directed its staff to consider whether Sherman should have
submitted the information. On May 2, 2007, the Department
informed the Board that Sherman had complied with the rules on
the submission of data and there was no evidence Sherman had
concealed any information. The Board voted not to revisit its
decision or pursue further proceedings.
On July 5, 2007, the circuit court issued a memorandum order
and final decision affirming the Board’s issuance of the permit.
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Provena filed a timely notice of appeal.
DECISION
I. Review of Board’s Decision
On review, an administrative agency’s factual findings are
considered to be prima facie true and correct. 735 ILCS 5/3-110
(West 2004); Dimensions Medical Center, Ltd. v. Suburban
Endoscopy Center, 298 Ill. App. 3d 93, 99, 697 N.E.2d 1231(1998); Springwood Associates v. Health Facilities Planning
Board, 269 Ill. App. 3d 944, 947, 646 N.E.2d 1374 (1995).
We believe this case presents mixed questions of law and
fact. A mixed question of law and fact "involves an examination
of the legal effect of a given set of facts." City of Belvidere
v. Illinois State Labor Relations Board, 181 Ill. 2d 191, 205,
692 N.E.2d 295 (1998). The Board’s decision is, in part, factual
because it involves deciding whether the facts support the
issuance of a permit to Sherman. The Board also had to determine
the legal effect of its regulations and resolve the potential
conflict between the statute and the regulations. Accordingly,
we apply a clearly erroneous standard of review. City of
Belvidere, 181 Ill. 2d at 205.
Under this standard, while the agency’s decision is accorded
deference, a reviewing court will reverse the decision where
there is evidence supporting reversal and the court "is left with
the definite and firm conviction that a mistake has been
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committed." AFM Messenger Service, Inc. v. Department of
Employment Security, 198 Ill. 2d 380, 393, 763 N.E.2d 272 (2001),
quoting United States v. United States Gypsum Co., 333 U.S. 364,
395, 92 L. Ed. 2d 746, 766, 68 S. Ct. 525, 542 (1948). We review
the decision of the Board, not that of the circuit court.
Illinois Health Maintenance Organization Guaranty Ass’n v.
Department of Insurance, 372 Ill. App. 3d 24, 31, 864 N.E.2d 798(2007).
The purpose of the Act is "to establish a procedure designed
to reverse the trends of increasing costs of health care
resulting from unnecessary construction or modification of health
care facilities." 20 ILCS 3960/2 (West 2004). Under the Act, no
person may construct, modify, or establish a health care facility
without first obtaining a permit or exemption from the Board. 20
ILCS 3960/5 (West 2004).
The Board has the power to prescribe rules and regulations
to carry out the purpose of the Act and to develop criteria and
standards for health care facilities planning. 20 ILCS
3960/12(1),(4) (West 2004). The Department shall "review
applications for permits and exemptions in accordance with the
standards, criteria, and plans of need established by the State
Board under this Act and certify its finding to the State Board."
20 ILCS 3960/12.2(1) (West 2004). As the CON applicant, Sherman
has the burden of proof on all issues pertaining to its
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application. 77 Ill. Adm. Code § 1130.130(a) (2006).
The Board is to approve and authorize the issuance of a
permit if it finds (1) the applicant is fit, willing, and able to
provide a proper standard of health care service for the
community, (2) economic feasibility is demonstrated, (3)
safeguards are provided assuring that the establishment or
construction of the health care facility is consistent with the
public interest, and (4) the proposed project is consistent with
the orderly and economic development of such facilities and
equipment and is in accord with standards, criteria, or plans of
need adopted and approved pursuant to the provisions of Section
12 of this Act. (Emphasis added.) 20 ILCS 3960/6(d) (West
2004).
Provena contends the Board’s decision was clearly erroneous
because the Board ignored the Department’s findings that the
application did not conform to seven criteria.1 Those criteria
contain mandatory language--i.e., "shall not exceed *** unless"
"must document,"--which Provena says the Board was bound to
follow.
In its two reports, the Department found the proposed
1
Provena refers to seven of eight "pertinent criteria." We
cannot tell which eight criteria Provena considers to be
"pertinent." However, the Department found Sherman met 14
criteria in part 1110 and failed to meet 7 criteria. Provena
cites no authority to support the contention that one criterion
is more pertinent than any other.
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project did "not appear to be in conformance" with seven review
criteria for the establishment of a new hospital.
Under the criterion for allocation of additional beds, the
applicant "must document that access to the service will be
improved." 77 Ill. Adm. Code § 1110.320(b) (2001). The
Department found Sherman was proposing 39 more beds than the
historical utilization would justify. Based on the 2005 data,
216 beds were needed to reduce the applicant to the Board’s
target occupancy, 39 fewer beds than the 255 beds proposed by
Sherman.
Under section 1110.530(a)(3), the minimum size for a
pediatric unit is 16 beds, 8 more beds than the 8 beds proposed
by Sherman. 77 Ill. Adm. Code § 1110.530(a)(3) (2001).
Under the criterion for variances to bed need, an applicant
(1) "must document that the applicant facility has experienced
high occupancy," (2) "must also document that the number of beds
proposed will not exceed the number needed to reduce the
facility’s high occupancy to the target occupancy," and (3) "must
also demonstrate that the proposed number of beds will not exceed
the number of beds needed to meet the target occupancy rate over
the next 5 years." 77 Ill. Adm. Code § 1110.530(b)(1) (2001).
The Department found the historical utilization for the prior 24
months was 40.5% for medical/surgical beds, below the target
occupancy of 85%, and 59% for ICU beds, below the target
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occupancy of 60%.
Under the location criterion, an applicant "must document"
(1) that the primary purpose of the project will be to provide
care to the residents of the planning area, and (2) that the
location of the project will not create a maldistribution of beds
and services. 77 Ill. Adm. Code § 1110.230(a) (2003). The
Department found the number of beds in excess of the Board’s
target occupancy "appears to maintain a maldistribution to care
and is not necessary to improve or maintain access."
In its Supplemental Report, the Department addressed the
location criterion in reference to the Deloitte report submitted
by Provena:
"The State Agency reviewed the Deloitte Study
and notes it is possible that patients
currently served by PSJH could find it more
convenient to utilize the proposed Sherman
facility. It is also true, as stated by the
applicants, that the old campus will be used
as a portal for the new hospital. However,
the State Agency finds it compelling to note
that both hospitals have operated in close
proximity to each other for over 100 years
without financial disaster. It is also true
that 37% of the patient days generated at
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[St. Joseph] are for services that Sherman
Hospital does not provide (based on 2004
profile data). It also appears that it would
take changes in physician patient
relationships to cause the changes envisioned
by the Deloitte report. Finally, the State
Agency notes it is not the responsibility of
the State Board to maintain market share of
individual providers. However, it is the
State Board’s purview to determine whether
access for the residents of the planning area
will be improved by the proposed new
construction."
Under the criterion for alternatives to the proposed
project, an applicant "must document" that the proposed project
is the most effective or least costly alternative. 77 Ill. Adm.
Code § 1110.230(c) (2003). The Department found, even with the
reduction in proposed beds from 263 to 255, "[i]t still appears
that a smaller hospital and a smaller number of beds would be a
better choice than the alternative proposed."
Under the criterion for need for the project, "[i]f the
State Board has determined need pursuant to Part 1100, the
proposed project shall not exceed additional need determined
unless the applicant meets the criterion for a variance." 77
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Ill. Adm. Code § 1110.230(d)(1) (2003). If the Board has not
determined need, "the applicant must document that it will serve
a population group in need of the services proposed and that
insufficient service exists to meet the need." 77 Ill. Adm. Code
§ 1110.230(d)(2) (2003). The Department found the applicants
were unsuccessful in addressing the variances to bed-need because
the historical utilization was below the target occupancy for the
prior 24 months. Using the 2.3% annual growth factor submitted
by Sherman indicated a need for 6 fewer beds in 2012 (the second
full year after project completion) than what was proposed.
While the Department found Sherman did not meet this criterion,
the Board is not bound by the Department’s findings. Cathedral
Rock of Granite City, Inc. v. Illinois Health Facilities Planning
Board, 308 Ill. App. 3d 529, 543, 720 N.E.2d 1113 (1999).
Under the project size criterion, the applicant "must
document" that the size of a proposed project is appropriate, and
utilization will meet or exceed the Board’s standards by the
second year of operation. 77 Ill. Adm. Code § 1110.230(e)
(2003). The department found the proposed project exceeded the
size standards for all departments except diagnostic radiology,
MRI, nuclear medicine, laboratory, physical therapy, and
respiratory therapy, by a total excess of 63,058 gross square
feet (GSF). It found, based on the average inpatient growth of
4.8% for 2000 to 2003, by the second year after project
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completion, the applicants could justify 300 beds--45 more beds
than the 255 beds proposed by Sherman.
At its meeting following the circuit court’s first remand,
the Board said it reviewed material addressing 21 criteria for
the establishment of a new hospital. All the criteria for the
establishment of open heart surgery and catheterization,
background of the applicant, location, response to the
alternative, modernization, and financial and economic
feasibility were met. The Board was aware the number of
pediatric beds was less than the minimum standard but said that
criterion "was reviewed by staff for possible revision." The
criterion addressing size of the project was met in 11 of the 17
departments, subject to the standards set in the rules. The
criteria for bed need, based on inventory, was met for
obstetrics, but not for intensive care, pediatrics, and
medical/surgical beds. The Board said, "[t]his was mitigated,
however, by full compliance with our criterion regarding the
projected utilization of those beds in which the applicant was
fully compliant." The proposed total number of beds was reduced
from 263 to 255, which fell between the 216 beds calculated under
the bed-need formula, and the 299 beds derived from the projected
utilization allowed under the size-of-project criterion.
Generally, administrative agencies are bound to follow their
own rules as written, without making ad hoc exceptions or
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departures. Springwood, 269 Ill. App. 3d at 948; Albazzaz v.
Illinois Department of Professional Regulation, 314 Ill. App. 3d
97, 106, 731 N.E.2d 787 (2000). However, section 1130.660 of the
regulations provides: "[t]he failure of a project to meet one or
more review criteria, as set forth in 77 Ill. Adm. Code 1110 and
1120, shall not prohibit the issuance of a permit***." 77 Ill.
Adm. Code § 1130.660 (2004).
Provena contends section 1130.660 does not apply, relying on
Marion Hospital Corp. v. Illinois Health Facilities Planning
Board, 321 Ill. App. 3d 115, 746 N.E.2d 880 (2001) (Marion I),
vacated as moot, 201 Ill. 2d 465, 777 N.E.2d 924 (2002). We note
the Marion I decision was vacated as moot by our supreme court
and held to be "wholly advisory." Marion, 201 Ill. 2d at 475.
We give it no precedential value.
The majority of courts have held section 1130.660 allows the
Board to issue a permit even though a proposed project fails to
meet all the applicable review criteria. This is true even where
the applicant fails to comply with a criterion containing
"mandatory" language.
In Marion Hospital Corp. v. Illinois Health Facilities
Planning Board, 324 Ill. App. 3d 451, 453, 753 N.E.2d 1104 (2001)
(Marion II), Marion challenged the Board’s approval of the
application of Southern Illinois Hospital Services d/b/a Memorial
Hospital of Carbondale (Carbondale) for a permit to add open
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heart surgery service at its hospital. The parties agreed
Carbondale did not meet the review criterion in section
1110.1230(d), which provides, "[t]he applicant must document that
a minimum of 200 open heart surgical procedures will be performed
during the second year of operation or that 750 cardiac
catheterizations were performed in the latest 12 month period for
which data is available." (Emphasis added.) 77 Ill. Adm. Code §
1110.1230(b) (1998); Marion II, 324 Ill. App. 3d at 453.
Marion contended the Board’s actions were arbitrary and
capricious because it did not follow its own mandatory regulation
when it approved Carbondale’s application. Marion II, 324 Ill.
App. 3d at 455. The court held it must read section 1110.230(b)
in conjunction with section 1130.660, which unambiguously states
that the failure to satisfy one or more of the criteria in part
1110 shall not prevent the issuance of a permit. Marion II, 324
Ill. App. 3d at 456. The court affirmed the Board’s approval of
Carbondale’s permit application, finding:
"Although Carbondale’s application did not
meet all of the review criteria, section
1130.660 gives the Board the authority to
issue a permit. It is a necessary function
of the Board that it have the discretion to
make these types of decisions. It cannot be
said that the legislature intended for
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patients to leave the State in order to
receive necessary medical treatment. Here,
section 1130.660 gives the Board the
necessary discretion to bring much needed
medical services to a part of the state that
would otherwise have to do without those
services." Marion II, 324 Ill. App. 3d at
457.
In Dimensions, 298 Ill. App. 3d at 102, the objecting
hospitals argued the Board erred when it approved the application
where certain review criteria had not been met. Three necessary
criteria were found unmet by both the Department and the circuit
court, including sections 1110.230(f) and 1110.1540(e), requiring
that the "applicant must" perform a certain action. Dimensions,
298 Ill. App. 3d at 102. The court held section 1130.660 gave
the Board the authority to approve an application where one or
more review criteria were not met. Dimensions, 298 Ill. App. 3d
at 102.
See also Cathedral Rock, 308 Ill. App. 3d at 544 (section
1130.660 allowed Board to grant permit where applicant met 15 of
18 review criteria); Access Center For Health, Ltd. v. Health
Facilities Planning Board, 283 Ill. App. 3d 227, 236, 239, 669
N.E.2d 668 (1996) (applicant’s failure to comply with 3 of 13
review criteria in section 1110 could be excused by the Board
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pursuant to section 1130.660). But see Springwood, 269 Ill. App.
3d at 950 (court held Board’s action was arbitrary for failing to
follow its own regulations, but did not consider section
1130.660).
Provena does not contend section 1130.660 is invalid.
Rather, it says the regulation must be read together with
sections 6(d) and 12 of the Act, and, to the extent there is a
conflict, the statutory provisions must control.
Provena contends the Board erred in failing to find
Sherman’s project was "in accord" with the criteria in the
regulations, according to the language in section 6(d) of the
Act. 20 ILCS 3960/6(d) (West 2004). Instead, the Board’s letter
issuing the permit indicated the project’s "substantial
conformance" with the applicable standards and criteria.
First, this court has considered and rejected the contention
that the Board is required to make specific written findings when
it issues a permit. In Charter Medical of Cook County v. HCA
Health Services of Midwest, Inc., 185 Ill. App. 3d 983, 991, 542
N.E.2d 82 (1989), the permit letters stated that the Board
considered the Department’s report, the application materials,
and the applicant’s testimony. The letters stated the Board’s
approval was "based on the project’s substantial conformance with
the applicable standards and criteria," and that "the applicants
had documented and justified the need to establish freestanding
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acute mental health facilities." Charter Medical, 185 Ill. App.
3d at 991. Charter argued the Board failed to make specific
findings regarding the application’s conformance with the
applicable review criteria. The court held the explanation in
the letters was sufficient. The regulations did not require a
detailed explanation for how and why certain review criteria were
applied. Charter Medical, 185 Ill. App. 3d at 991.
The Act and the regulations require the Board to explain its
decision and specify its "findings and conclusions" only when it
denies an application. Access Center, 283 Ill. App. 3d at 237;
20 ILCS 3960/10 (West 2004); 77 Ill. Adm. Code § 1130.680 (2004).
In the transcript of the Board’s hearing following the circuit
court’s first remand, the Board explained how its criteria
related to its decision.
Second, Provena contends "substantial conformance" is a less
stringent standard than "in accord with" and allows more leeway
to stray from pertinent criteria. Neither the statute nor the
regulations define the phrase, "in accord with." In the absence
of a statutory definition, words are to be given their ordinary
and commonly understood meaning. Price v. Philip Morris, Inc.,
219 Ill. 2d 182, 243, 848 N.E.2d 1 (1994). The dictionary can be
used as a resource to ascertain the ordinary meaning of words.
Price, 219 Ill. 2d at 243.
The dictionary defines "substantial" as "consisting of,
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relating to, sharing the nature of, or constituting substance,"
"being that specified to a large degree or in the main," "of or
relating to the main part of something." Webster’s Third New
International Dictionary 2280 (1981).
"Conformance" is "the act of conforming, conformity."
"Conformity" is "correspondence in form, manner or character: a
point of resemblance (as of tastes)," "harmony, agreement,
congruity," the "action or act of conforming to something
established (as law or fashion): compliance, acquiescence," or an
"action in accordance with some specified standard or authority."
Webster’s Third New International Dictionary 477 (1981).
"Accord" means "to bring into agreement: reconcile,
harmonize," or "to arrive at an agreement: come to terms," or "to
be in harmony: be consistent." Webster’s Third New International
Dictionary 12 (1981).
We hold the Board’s decision that the project "substantially
conformed" with the criteria was equivalent to finding it was "in
accord with" the criteria. The definition of "accord" does not
suggest complete compliance. The definitions of "conformity" and
"accord" both contain the words "harmony" and "agreement,"
suggesting a distinction without a difference. In Charter
Medical, 185 Ill. App. 3d at 991, the court held the Board’s
finding of "substantial conformance" with the applicable criteria
reasonably complied with the regulations.
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We further note that the Illinois legislature has not
amended section 6 to require that an applicant completely conform
to all of the applicable criteria. The legislature made no
change even after Marion II, Dimensions, Cathedral Rock, and
Access Center held the Board may grant a permit where the
applicant has not met all the criteria. The legislature is
presumed to know how courts have interpreted a statute and may
amend the statute if it intended a different construction.
People ex rel. Dept. of Labor v. Tri State Tours, Inc., 342 Ill.
App. 3d 842, 847, 795 N.E.2d 990 (2003).
The Board did not apply an incorrect legal standard in its
decision to grant Sherman’s application. We find section
1130.660 of the regulations allows the Board to grant a permit
application even where the Department has found the proposed
project not in conformance with all the pertinent review
criteria. Both the Board’s adoption of regulations and its
interpretations of those regulations are presumptively valid and
are entitled to deference. Charter Medical, 185 Ill. App. 3d at
987, 989; Manor Healthcare Corp. v. Northwest Community Hospital,
129 Ill. App. 3d 291, 295-96, 472 N.E.2d 492 (1984).
We now turn to a discussion of whether the Board’s decision
was clearly erroneous. The record contains substantial evidence
supporting the Board’s decision to grant the permit. The
Department found Sherman’s reasons for discontinuation of the old
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hospital were valid based on the facility’s location and age.
The current hospital could not be expanded, and the cost to
modernize the facility was cost-prohibitive due to the age of the
buildings. Other mechanical and environmental issues could no
longer accommodate the workload at the current facility. The
Department found the discontinuation of the old facility created
a bed-need in the planning area, which would be addressed by the
new facility. A representative from the Elgin Fire Department
testified the proposed relocation would in no way compromise
emergency services and would improve emergency service access for
residents of the planning area.
The Department found Sherman met 14 of the general review
criteria and all of the economic and financial feasibility
criteria. Most of the criteria where Sherman fell short related
to bed-need. Sherman proposed reducing the number of beds from
363 at the current facility to 255 at the new facility. See
Access Center, 283 Ill. App. 3d at 239-40 (applying section
1130.660 where applicant was not seeking permission to increase
the number of beds in its facility; relocation without expansion
is different from expansion alone).
Provena contends the Board disregarded the mandatory
language in rule 1110.230(d)(1) by allowing 88 more beds than the
projected bed-need. See 77 Ill. Adm. Code § 1110.230(d)(1)
(2003) ("the proposed project shall not exceed additional need
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determined unless the applicant meets the criterion for a
variance.")2 In the portion of its report discussing the bed-
need criterion under section 1110.230(d), the Department found
that in 2012, the second full year after project completion,
there will be a need for 249 beds, only 6 fewer beds than the 255
beds proposed by Sherman. As far as the allocation of additional
beds criterion in section 1110.320(b), Sherman proposed 39 more
beds than the utilization rates would justify. The Board found
the difference to be permissible because the Department projected
future utilization rates of up to 299 beds. The Board found 255
beds was an approximate midpoint between the 216 beds needed to
reduce the applicants to the Board’s target occupancy, and the
299 beds needed by 2012.
The stated bed-need in a planning area is a projection made
by the Department. It is well settled that the Board is not
bound by the Department’s findings; it must make its own decision
based on the evidence in the record. Cathedral Rock, 308 Ill.
App. 3d at 543; Access Center, 283 Ill. App. 3d at 236. The
stated bed-need in a planning area is a projection; it does not
2
After oral arguments members of this panel received a
letter from one of the Sherman Hospital lawyers. It referred to
a document that is not part of the record and it attached that
document. In addition, the letter contained further argument in
support of Sherman Hospital’s position. We consider the
communication inappropriate and unwarranted. It was not
considered by this Court.
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create a fixed pool of beds or bind the Board. Charter Medical,
185 Ill. App. 3d at 988. The Board has discretion to approve
projects for more beds than present figures might warrant, even
where underutilization exists. Cathedral Rock, 308 Ill. App. 3d
at 544.
Provena contends the Board ignored the decline in Sherman’s
use of medical/surgical beds in 2004 and 2005, including a 15%
drop in 2005 that Sherman failed to disclose. The record shows
the Board was aware of the figures cited by Provena. Following
the second remand by the circuit court, Chairperson Lopatka said:
"Even though the data in 2005 showed fewer
inpatient admission days, it also showed a
significant increase in the actual numbers of
clients who were accepted into med/surgery.
So there was a change particularly in the
length of stay, not in the number of people
who are actually being served by the
hospital."
In Cathedral Rock, the plaintiff nursing care facility
contended the Board failed to consider more recent 1995 data on
bed need in the area, erroneously finding an 80-need bed existed,
when the need was only for 52 beds. The court held the Board’s
decision was not arbitrary or capricious because the record
showed the Board "was keenly aware of the discrepancy in the
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numbers and understood that it was a dilemma it needed to
resolve." Cathedral Rock, 308 Ill. App. 3d at 544.
Provena urges this court to find its interpretation of the
data and evidence is more correct than the Board’s. We decline
to do so. It is not this court’s function to reweigh the
evidence; our review is limited to determining whether the
Board’s decision is clearly erroneous. Charter Medical, 185 Ill.
App. 3d at 990. "The mere fact that an opposite conclusion is
reasonable or that a reviewing court might have ruled differently
will not justify reversal of the administrative findings."
Cathedral Rock, 308 Ill. App. 3d at 545.
With regard to the impact of Sherman’s project on Provena,
the location of the new hospital is the same distance from
Provena as the old hospital. The Department noted that 37% of
the patient days generated at Provena were for services not
provided by Sherman. The dire consequences envisioned by
Provena’s Deloitte study did not take into account the likelihood
of changes in physician-patient relationships and third-party
coverage.
We reject Provena’s contention that the Board failed to hear
the testimony of key witnesses for Provena and ignored the
adverse impact on Provena. It is not the Board’s responsibility
to protect market share of individual providers. See Cathedral
Rock, 308 Ill. App. 3d at 540. Nor does the Planning Act protect
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jobs. American Federation of State, County & Municipal
Employees, Council 31 v. Ryan, 347 Ill. App. 3d 732, 741, 807
N.E.2d 1235 (2004).
The Board is required to consider the impact on another
provider only insofar as it affects "total health care
expenditures in the facility and community," that construction is
"consistent with the public interest," and the project is
"consistent with the orderly and economic development of such
facilities." 20 ILCS 3960/6(d) (West 2004). The Board stated on
the record that it considered whether the financial impact on
Provena would affect the public’s access to health care, cost of
health care, visibility of services, and avoidance of unnecessary
duplicative services. It was not required to consider the effect
on Provena’s market share or profitability. To the extent that
Provena contends we should consider the impact on its own $97
million modernization project, the Act does not allow
"comparative review" of CON applications. Access Center, 283
Ill. App. 3d at 240.
In response to Provena’s contention that the Board erred in
failing to hear live testimony of Provena’s witnesses, the Act
and the regulations require only that interested parties have the
opportunity to attend a public hearing and make written
submissions. 20 ILCS 3960/8 (West 2004); 77 Ill. Adm. Code §§
1130.620, 1130.630 (2005). Provena had that opportunity. Only
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when an application is denied may the applicant choose to have an
administrative hearing in front of a hearing officer. (Emphasis
added.) 20 ILCS 3960/10 (West 2004); 77 Ill. Adm. Code § 1130.680
(2005). Provena was not the applicant, and the application was
not denied. Provena has no protectible right or constitutional
interest to maintain its market share or to be shielded from
competition. Cathedral Rock, 308 Ill. App. 3d at 539-40. "While
plaintiff’s market share may have been adversely affected by the
Board’s decision, plaintiff’s interest in such share is certainly
not akin to the types of property interests entitled to due
process protections." Cathedral Rock, 308 Ill. App. 3d at 540.
Provena was given a meaningful opportunity to present its
case under the Act and the regulations. Provena presented
testimony at the public hearing, submitted written materials, and
sought judicial review of the Board’s decision. The Board took
into account the impact on Provena in deciding to grant the
permit. To allow a party adversely affected by a permit greater
participation opportunities "would risk unnecessarily prolonging
and complicating the CON application process." Cathedral Rock,
308 Ill. App. 3d at 541.
Finally, based on the extensive evidence in the record, we
hold the Board’s finding that Sherman’s proposed project was the
most effective or least costly alternative was not clearly
erroneous.
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II. Ex Parte Communication
Provena contends the April 2006 "technical assistance
meeting" attended by Sherman representatives, Department
personnel, and members of the Board, was a prohibited ex parte
communication in violation of the Act. 20 ILCS 3960/4.2 (West
2004). Section 4.2 of the Act prohibits the Board, any Board
member, employee, or hearing officer from engaging in ex parte
communication "in connection with the substance of any pending or
impending application for a permit with any person or party or
the representative of any party." 20 ILCS 3960/4.2 (West 2004).
Sherman submitted into the record a Technical Assistance
Letter dated April 17, 2006, from Sherman Hospital to the Board.
The letter states its purpose as documenting technical assistance
provided by Department staff at a meeting on Wednesday, April 5,
2006. At the meeting, according to Sherman, Department staff
identified five areas for further explanation or clarification by
Sherman: (1) anticipated components of the campus at the site of
the old hospital; (2) clarification of the number of rooms in
ancillary departments; (3) additional justification for number of
inpatient beds; (4) physical access to proposed location; and (5)
financial impact on Provena.
Provena contends the lack of a transcript or minutes of the
April 2006 meeting violated the rules and led the Board to
believe it could not consider the impact of Sherman’s project on
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Provena unless it was severe enough to drive Provena out of
business. Provena contends the Board failed to take action to
ensure the ex parte violation did not "prejudice any party or
adversely affect the fairness of the proceedings." 20 ILCS
3960/4.2(f) (West 2004).
Provena forfeited this issue by failing to raise it before
the Board. Provena was aware of the meeting and made no
objection to the meeting in the proceedings below. Moreover,
William Brown, St. Joseph’s president and CEO, referred to the
meeting as involving “technical assistance” and did not suggest
the meeting constituted a prohibited ex parte communication.
Where a party fails to assert a particular argument before an
administrative agency, the point is forfeited and should not be
considered on appeal. Access Center, 283 Ill. App. 3d at 238-39.
If the issue were not forfeited, we would find it lacks
merit. The Board’s rules contemplate the type of technical
assistance provided in this case. "Technical assistance with
respect to an application, not intended to influence any decision
on the application, may be provided by [Department] employees to
the applicant. Any assistance shall be documented in writing by
the applicant and employees within 10 business days after the
assistance is provided." 2 Ill. Adm. Code § 1925.293(g) (2001).
Sherman’s letter complies with the requirements of section
1925.293(g). The letter merely documents and lists specific
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areas for which Sherman needed to provide additional
clarification and information to the Board.
III. Mootness
The State contends Provena’s appeal is moot because Sherman
has begun construction of the new hospital and has spent $29
million in capital expenditures. See Marion, 201 Ill. 2d at 472.
Sherman does not make the same argument in its brief. Because no
stay of the CON was ordered, Sherman broke ground on June 27,
2006, several weeks after the Board granted the permit.
"[W]hen the resolution of a question of law cannot affect
the result of a case as to the parties, or when events have
occurred which make it impossible for the reviewing court to
render effectual relief, a case is rendered moot." Marion, 201
Ill. 2d at 471.
In Marion, 201 Ill. 2d at 472, at the time the appellate
court filed its opinion, the ambulatory surgical treatment center
at issue had been built and the capital earmarked for the project
had been spent. The capital expenditure had been made and could
not be undone. Because the Board has no oversight of a medical
facility’s operations once it has been built (20 ILCS 3960/5
(West 1998)), any question concerning the propriety of that
expenditure--the issue addressed by the permit application
process--was moot. Marion, 201 Ill. 2d at 472. In addition, the
defendant had obtained an operating license for the ASTC, and a
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valid permit was not required to obtain a renewal license.
Marion, 201 Ill. 2d at 474-75. The supreme court vacated the
appellate decision as moot. Marion, 201 Ill. 2d at 475-76.
The State relies on the definition of a capital expenditure
in section 3 of the Act--an expenditure made by a health care
facility which exceeds the "capital expenditure minimum" of $6
million, adjusted for inflation. 20 ILCS 3960/3 (West 2004).
Because Sherman has spent more than the $6 million minimum, the
State contends, it has spent the "capital expenditure" referenced
in the Marion supreme court opinion.
The appeal is not moot. According to the State, Sherman has
spent $29 million of the approximately $310 million earmarked for
the project. Unlike the applicant in Marion, Sherman has not
spent its total capital expenditure. The resolution of this
appeal will directly affect the parties. If we were to reverse
the Board’s decision, Sherman would not be allowed to proceed
with construction of the project or to obtain an operating
license without a valid permit. Furthermore, both remand orders
by the circuit court stated further expenditures made by Sherman
were "at Sherman’s risk" and could not be used as arguments
against setting aside the CON.
CONCLUSION
We affirm the circuit court’s order affirming the Board’s
decision to grant a CON to Sherman. Provena forfeited its
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contention regarding the alleged ex parte communication between
Sherman and the Board. This appeal is not moot.
Affirmed.
CAHILL, P.J., and R. GORDON, J., concur.
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REPORTER OF DECISIONS - ILLINOIS APPELLATE COURT
(Front Sheet to be Attached to Each Case)
Please use PROVENA HEALTH and PROVENA HOSPITALS,
following form:
Plaintiffs-Appellants,
Complete v.
TITLE
of Case ILLINOIS HEALTH FACILITIES PLANNING BOARD, ILLINOIS
DEPARTMENT OF PUBLIC HEALTH, SHERMAN HOSPITAL,
SHERMAN HEALTH SYSTEMS, and REEVEN J. ELFMAN,
Defendants-Appellees.
Docket Nos. No. 1-07-1952
COURT Appellate Court of Illinois
First District, 1st Division
Opinion
Filed March 31, 2008
JUSTICES JUSTICE WOLFSON delivered the Opinion of the court:
CAHILL, P.J., and R. GORDON, J., concur.
APPEAL from the Lower Court and Trial Judge(s) in form indicated in margin:
Circuit Court of
Cook County; the Appeal from the Circuit Court of Cook County.
Hon.___________,
Judge Presiding. The Hon. Peter J. Flynn, Judge Presiding.
For APPELLANTS, Indicate if attorney represents APPELLANTS or APPELLEES and
John Doe, of include attorneys of counsel. Indicate the word NONE if
Chicago. not represented.
For APPELLEES, For Plaintiffs-Appellants Provena Health and Provena Hospitals:
Smith and Smith, Jeffrey R. Ladd, James W. Collins, and Lawrence M. Gavin,
of Chicago. BELL, BOYD & LLOYD LLP, of Chicago.
(Joseph Brown, of For Defendants-Appellees Sherman Hospital, Sherman Health
counsel). Systems and Reeven J. Elfman: Richard T. Greenberg, Kara
M. Friedman, Jeffrey C. Clark and Kelly A. Morgan, McGUIRE
WOODS LLP, of Chicago.
Also add attor-
neys for third-
party appellants For Defendants-Appellees Illinois Health Facilities Planning
and/or appellees. Board and Illinois Department of Public Health: Lisa Madigan,
Attorney General for the State of Illinois, Michael A. Scodro,
Solicitor General and Evan Siegel, Assistant Attorney General,
of Chicago.
(USE REVERSE SIDE IF NEEDED)
33