A new filing by Centegra Health System in its May 2004 lawsuit against the Illinois Health Facilities Planning Board and Mercy Health System dropped a bombshell and rekindled an influence-peddling scandal surrounding the board and two of its 2004 actions.
At the heart of the controversy is the board's April 2004 approval of Janesville, Wis.-based Mercy's request to build an $81 million hospital in Crystal Lake, Ill., and its denial of a proposal to build a $169 million hospital in Plainfield, Ill., by Edward Health Services Corp., the parent of Edward Hospital in Naperville, Ill.
Woodstock, Ill.-based Centegra alleged in its civil lawsuit that the selection process was corrupted by illicit communications among board members, contractors and Mercy officials and seeks to reverse the board's certificate-of-need approval.
Last year, Edward President and Chief Executive Officer Pamela Meyer Davis and William Kottman, Edward's vice president of physician integration, filed a federal whistle-blower lawsuit in U.S. District Court in Chicago alleging that a former CON board member and two politically connected contractors tried to strong-arm Edward into signing financing and construction contracts with them in exchange for approving the Plainfield hospital. That lawsuit, which is pending and remains under seal, alleges violations of the federal False Claims Act.
The U.S. attorney in Chicago is conducting a criminal investigation into the board's practices, and last year Illinois Gov. Rod Blagojevich disbanded the old board and appointed new members to a smaller, five-member board.
On March 12 attorneys for Centegra, the not-for-profit parent of 136-bed Centegra Memorial Medical Center in Woodstock, Ill., and 173-bed Centegra Northern Illinois Medical Center in McHenry, Ill., filed a sworn affidavit from Davis to bolster its CON lawsuit. In the affidavit filed in McHenry County Superior Court, Davis recalled that during 2004 meetings Nicholas Hurtgen, who headed the Chicago office of investment bank Bear, Stearns & Co., and Jacob Kiferbaum, president of Kiferbaum Construction Corp., told her "to use Kiferbaum's construction company or the Edward CON would not be approved." Kiferbaum said in an April 19, 2004 meeting that he was good friends with then-CON board Vice Chairman Stuart Levine and five existing board members, according to the affidavit. In some of those meetings Davis wore a wire to record the conversations for government investigators.
Edward refused to deal with either Kiferbaum or Hurtgen and the board denied its CON approval. Davis said she also met with Herbert Franks, the father of an influential Illinois legislator, and lobbyist Mike Noonan, who represented two-hospital Mercy in its successful CON effort, the first new-hospital construction approved in Illinois in 25 years. She said Franks and Noonan told her that Edward should hire Kiferbaum because he had clout with the board. She said Levine and Kiferbaum told her they'd met with Mercy's CEO to assure him that Kiferbaum "could get things done."
Mercy contracted with Kiferbaum and won the board's approval.
The Centegra lawsuit alleges that state law expressly prohibits members of the state board from communicating outside of hearings with parties seeking approvals. "The permit should be reversed based solely on the ex parte communications which were not disclosed. ... In addition, the permit should be reversed because the process was corrupted," the complaint states. No trial date has been set for the Centegra-Mercy lawsuit.
Kiferbaum, Hurtgen and Levine did not return calls by deadline, and Davis' attorneys declined to comment. In a statement, Mercy Vice President Barbara Bortner said, "We prefer to conduct our litigation in the courts, rather than in the media. We can say, however, that Mercy's actions concerning the CON were lawful and no one from Mercy had any improper or ex parte communications with any member of the CON board regarding the Crystal Lake project or any matter before the board."