The Crystal Lake, Ill.-based Centegra Health System has filed a lawsuit against Mercy Health System and the Illinois Facilities and Services Review Board, alleging that the agency's approval of a new Mercyhealth "micro-hospital" violates the board's own standards, is out of its jurisdiction and creates an oversupply of hospital beds in the area.
"The board's approval of the application was arbitrary and capricious, and an abuse of discretion," according to a complaint filed July 25 in the McHenry County Circuit Court. "Its explanation for approving the project ran counter to the evidence and was implausible."
Rockford-based Mercyhealth, a five-hospital system in Wisconsin and Illinois, received nearly unanimous approval from the Illinois Health Facilities Review Board in late June to construct a 13-bed "micro-hospital" in Crystal Lake. Six of the seven Board members voted to approve the facility. The Health Facilities & Services Review Board, which decides the fate of health care projects to prevent duplicating services, twice rejected Mercyhealth's previous hospital proposals in 2011 and 2012.
Mercyhealth has said the new $81.7 million hospital would not add any patient beds to the area, a crucial point, because many medical centers statewide are saddled with vacant beds. Instead, Mercy plans to shift 11 medical-surgical beds (the most common in a hospital) and two intensive care unit beds from its hospital in Harvard to the one proposed in Crystal Lake.
In its January application to state regulators, Mercyhealth says it's targeting those who need outpatient care, Medicaid patients and a growing baby-boomer population that now leaves the area to find doctors.
But neighboring rival Centegra says the project isn't needed and puts patients at risk if they're seriously injured and don't realize that a micro-hospital doesn't have the capabilities to treat them, according to the complaint.
Centegra argues that, although the new "micro-hospital" would not add beds to the far northwest suburb, it would still "adversely affect" business of three of Centegra's nearby hospitals in McHenry, Huntley and Woodstock. All of these facilities are located within 10 miles of the proposed new hospital and offer the same services, the complaint says. The Crystal Lake facility would be built on vacant land at the southeast corner of State Route 31 and Three Oaks Road.
But Javon R. Bea, president and CEO of Mercyhealth, said Centegra's cutback of services at its Woodstock facility makes the need for a "micro-hospital" greater than ever. Centegra has moved all of its acute patient care services from Woodstock to nearby hospitals in Huntley and McHenry, in a move to reduce operating costs.
"Having hospital and clinical facilities close to where our patients live and work results in better patient outcomes and lives saved," Bea said in a statement. "Our Crystal Lake facility will prevent delays in care that jeopardize the lives and health of patients, and provide easier access for senior citizens, the disabled, and those who have transportation issues."
Centegra also alleges that the "micro-hospital" fails to meet the Board's minimum sizing criteria for Illinois hospitals, which states that facilities must have at least 100 medical- surgical beds and four intensive care unit beds, according to the complaint. (Mercyhealth has acknowledged that its plan falls outside of requirements.)
Nearly all Board members rationalized the "micro-hospital" size by saying that they must analyze regulations and then think about them in terms of the health care needs today. One member dissented, and called first to formally change the rules before applying them to a "micro-hospital" application.
Mercyhealth would be the first "micro-hospital" in Illinois, although the concept has taken off across the country. The health system's CEO has previously called it a new model of health care delivery.
But by that logic, the health facilities board was not authorized to approve this project, the lawsuit contends. Under statute, alternative health care services require prior authorization by the Legislature, governor and oversight by the Illinois Department of Public Health, none of which Mercyhealth holds, according to the complaint. This invalidates the board's decision.
"The project constituted an unnecessary duplication of services, and a maldistribution of services in violation of the board's regulations," the complaint reads.
A spokeswoman said Centegra declines to comment on ongoing litigation. If approved, the micro-hospital is projected to be complete by late 2020.
"'Micro-hospital' draws suit from a full-sized rival" originally appeared in Crain's Chicago Business.
