Advocate Health Care is scaling back a proposed hospital tower in Oak Lawn, Ill., cutting the cost by 13%, to about $300 million, citing reduced demand for beds due to the federal overhaul of healthcare.

The Oak Brook, Ill.-based hospital network intends to lop two floors off a proposed nine-story patient tower on the campus of Advocate Christ Medical Center, 4440 W. 95th St., in the southwest suburb of Chicago.

Instead of adding 134 beds, Advocate just plans to add 98, increasing Christ's total by 14%, to 788, according to documents filed Wednesday with the Illinois Health Facilities and Services Review Board, which must review Advocate's plans.

“Recent changes in healthcare delivery, both nationally and at Advocate, have cause us to re-examine the scope of this project,” Jeffrey So, director of business development and community relations at Christ, says in letter dated Tuesday to the board.

The move comes as hospitals are increasingly taking a hard look at constructing new inpatient towers and focusing instead on less costly alternatives, such as renovation, said architect James Zajac, head of the healthcare practice in Chicago at Perkins & Will Inc.

“People will start projects and have grand plans and phase it back,” he said. “Everybody's gun-shy, and the economics are driving that.”

Also on Tuesday, Advocate announced it had reached a non-binding agreement with Elgin-based Sherman Health System on a partnership or merger.

Advocate is already the largest healthcare network in Illinois, with $4.4 billion in revenue in 2011 and 12 hospitals statewide, all but two in the Chicago area.

The decision to shrink the Christ project came after Advocate conducted a review of its facilities plan for the entire network, encouraging top executives to re-evaluate their spending on new projects, according to Christ's revised application.

Advocate is squeezing the project even though Christ is suffering from an “acute shortage” of beds, particularly for intensive care, the revised application says.

In August, Advocate submitted plans to the state for the Oak Lawn project and a $109.2 million building at Illinois Masonic Medical Center in Lakeview.

An Advocate spokeswoman said the hospital network is not reducing the size of the North Side project, a three-story building to treat outpatients with digestive diseases and cancer.

Cutting the size of the Christ project was prompted by Advocate's experience with its accountable care organization with Blue Cross & Blue Shield of Illinois, Mr. So's letter says.

The organizations, called ACOs for short, are key features of the Obama Administration's overhaul of healthcare. They are intended to reduce costs by having providers share in any savings from more effective care, but also bear the burden of cost overruns.

“Our initial results indicate that patients in our ACO have few hospitalizations,” he writes.

About 435,000 patients are in the Advocate-Blue Cross ACO, which was launched in early 2011.

Costs for treating ACO patients are roughly 2% lower than the average in the Chicago market, a Blue Cross spokesman said.

The federal healthcare overhaul is also expected to place a greater emphasis on primary care provided outside a hospital by general practitioners and internists.

As a result, healthcare clients around the country are anticipating “a pretty significant drop in inpatient utilization,” said William Hejna, managing principal in healthcare consulting in Chicago at architecture firm Loebl Schossman & Hackl.

Though Advocate plans to scale back the expansion, the building will be designed so it can accommodate additional floors if they become necessary.