Illinois approves closure of Franciscan Alliance hospital

The Franciscan Alliance won approval from Illinois regulators to close one south suburban Chicago hospital under a $137 million consolidation plan.

The state approved the Mishawaka, Ind.-based system's request to halt inpatient care at the Chicago Heights campus of Franciscan St. James Health. Acute care will be consolidated to the system's nearby campus in Olympia Fields under the plan unanimously approved Tuesday by the Illinois Health Facilities and Services Review Board. The two hospitals are about 5 miles apart.

The Franciscan Alliance, the Catholic parent of Franciscan St. James Health and 11 other hospitals, will expand outpatient and primary care at the Chicago Heights location.

“By consolidating our century-old Chicago Heights facility with an expanded, modern hospital in Olympia Fields, our doctors, nurses and staff will be able to provide quality care far into the future,” said Arnie Kimmel, CEO of Franciscan St. James.

The deal is the latest move by Franciscan St. James Health to address its hospital vacancy rate. Crain's Chicago Business analyzed hospital occupancy rates in 2014 across Chicago and Illinois and found median hospitals were 33% and 43% empty, respectively. Franciscan St. James Health's Chicago Heights campus ranked among Crain's Chicago Business' 10 emptiest hospitals in 2014.

Franciscan St. James Health has also lost market share to rivals in recent years, including Advocate Health Care, according to Franciscan Alliance financial statements. The Chicago Heights and Olympia Fields campuses accounted for 37% of their hospital market as of March 31, 2015. That's compared with 45% in 2012. Competing hospitals owned by Advocate accounted for 20% at the end of last March compared with 17% in 2012. Other rivals also gained market share during the period.

The $137 million consolidation of Franciscan St. James Health campuses will take place between 2017 and 2019.

Physician office space will be expanded at both campuses under the plan. The Chicago Heights campus will close its inpatient services but the system will expand its urgent-care capacity nearby. The campus at Olympia Fields will expand its surgical, endoscopy, obstetric and neonatal intensive-care services and emergency department.

Melanie Evans

Melanie Evans writes about healthcare finance, hospital management and governance issues. She has been part of the Modern Healthcare staff since 2004. Earlier in her career she covered healthcare and not-for-profits as a reporter at the Duluth (Minn.) News Tribune. She received a bachelor's degree in international relations from Boston University and a bachelor's in journalism from the University of Minnesota.

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