Condell Hosp. v. Illinois Health Facilities Planning Bd.

• Citation: 124 Ill.2d 341,530 N.E.2d 217,125 Ill.Dec. 189
• Decision Date: 29 September 1988
• Docket Number: Nos. 66036,66123,s. 66036
• Parties: , 125 Ill.Dec. 189, 50 Ed. Law Rep. 135 CONDELL HOSPITAL et al., Appellees, v. The ILLINOIS HEALTH FACILITIES PLANNING BOARD et al., Appellants.
• Court: Supreme Court of Illinois

Page 217

530 N.E.2d 217

124 Ill.2d 341, 125 Ill.Dec. 189, 50

Ed. Law Rep. 135

CONDELL HOSPITAL et al., Appellees, v. The ILLINOIS HEALTH FACILITIES PLANNING BOARD et al., Appellants.

Nos. 66036, 66123.

Supreme Court of Illinois.

Sept. 29, 1988.

Jeffrey R. Ladd, Lawrence M. Gavin, Daniel J. Lawler, Bell, Boyd & Lloyd, Chicago, Ill., Gerald W. Shea, Ira A. Rogal, Shea, Rogal & Associates Ltd., Westchester, Ill., for defendants-appellants, Chicago Medical School Hospital, Inc., and University Health Sciences/Chicago Medical School.

Neil F. Hartigan, Atty. Gen., Shawn Denney, Solicitor Gen., Lance T. Jones, Asst. Atty. Gen., Springfield, Ill., for defendants-appellants, Illinois Health Facilities Planning Board and Illinois Department of Public Health.

Steven L. Bashwiner, Laurence H. Lenz, Jr., Daniel A. Kaufman, Katten Muchin & Zavis, Chicago, Ill., for plaintiffs-appellees, Condell Hospital, Lake Forest Hospital, Victory Memorial Hospital, Lutheran General Hospital, Inc., St. Therese Medical Center, Highland Park Hospital and Good Shepherd Hospital.

Justice CLARK delivered the opinion of the court:

This case arises out of a complaint filed by Condell Hospital, Lake Forest Hospital, Victory Memorial Hospital, Lutheran General Hospital, Inc., and St. Therese Medical Center (the Condell plaintiffs) seeking review in the circuit court of Cook County of a decision of the Illinois Health Facilities Planning Board (the State Board) which granted defendants, Chicago Medical School, Inc., and University Health Sciences/Chicago Medical School (collectively CMS), a permit to construct a new hospital in Lake County, Illinois. The State Board's decision sought to be reviewed by the plaintiffs was allegedly "initially rendered on May 1, 1986 and became final on July 10, 1986." The complaint filed in the Condell case was consolidated in the circuit court with a related case filed by Highland Park Hospital and Good Shepherd Hospital, which also sought review of the State Board's decision. On April 14, 1987, the circuit court dismissed the second amended complaint in the Condell case and the complaint in the Highland Park case. The circuit court dismissed counts I through IV of the second amended complaint in the Condell case because they were prematurely filed and the court thus lacked jurisdiction under the Administrative Review Law (Ill.Rev.Stat.1985, ch. 110, par. 3-101 et seq.). The circuit court also dismissed the Highland Park complaint because it, too, was untimely. On September 29, 1987, the appellate court reversed the circuit court's judgment insofar as it dismissed counts I through IV of the second amended complaint in the Condell case. The appellate court affirmed the judgment of the circuit court in regard to its dismissal of the Highland Park complaint. 161 Ill.App.3d 907, 113 Ill.Dec. 765, 515 N.E.2d 750.

Thereafter CMS and the State Board each petitioned this court for leave to appeal that part of the judgment of the appellate court which reversed the circuit court's judgment insofar as it dismissed counts I through IV of the second amended complaint in the Condell case. Pursuant to Supreme Court Rule 315 (107 Ill.2d R. 315), we granted the defendants' petitions for leave to appeal and consolidated these appeals.

The issues presented for our review are: (1) whether the State Board's May 1, 1986, decision granting CMS a permit to construct a new hospital was a final administrative decision subject to judicial review in the circuit court pursuant to the Administrative Review Law (Ill.Rev.Stat.1985, ch. 110, par. 3-101 et seq.); (2) whether the Condell plaintiffs adequately exhausted their administrative remedies before seeking judicial review in the circuit court of the State Board's decision; and (3) whether the Highland Park plaintiffs can appeal the dismissal of their complaint under Supreme Court Rule 318 (107 Ill.2d R. 318).

Under the Illinois Health Facilities Planning Act (the Health Planning Act), an individual is required to obtain a permit (certificate of need (CON)) from the Illinois Health Facilities Planning Board before constructing, modifying, or establishing a health care facility or before purchasing major medical equipment. (Ill.Rev.Stat.1985, ch. 111 1/2, par. 1152 et seq.) The State Board is required to issue a permit if the applicant is qualified, the project is economically feasible, the project is consistent with the public interest, and the project is consistent with the orderly and economic development of such facilities and is in accord with standards, criteria, or plans of need adopted and approved pursuant to the Health Planning Act. See Ill.Rev.Stat.1985, ch. 111 1/2, par. 1156.

In November 1984, Chicago Medical School submitted an application to the State Board for a permit to construct a new 224-bed, university teaching and tertiary-care hospital in North Chicago, Illinois, at a cost of approximately $45 million. North Chicago is located in Lake County. The application stated that the new hospital would significantly increase the availability of needed medical care for residents of Lake and McHenry Counties. The Chicago Medical School is one of three divisions of the University of Health Sciences; it was founded in Chicago in 1912, became part of the University when the latter was established in 1967, and moved with the University to North Chicago in 1974 in conformity with a plan to regionalize medical schools and to enable the school to serve the area between Chicago and Milwaukee. During several months after filing its initial application, the school engaged in negotiations with other area hospitals to discuss possible affiliations, and CMS supplemented the application with additional information requested by the Board. During this time, the Board was presented in writing with numerous comments from health care professionals and planners, editorial writers, and elected public officials regarding the proposed CMS permit. The application was deemed completed, and the Board's review thereof was initiated on February 8, 1985.

On February 14, 1985, the Health Systems Agency for Kane, Lake and McHenry Counties, Inc. (HSA/KLM), issued to affected parties its "Notice of Public Hearing" regarding CMS's application. HSA/KLM was the health planning organization for the area encompassing the proposed CMS hospital, so recognized by the State Board pursuant to sections 8 and 9 of the Health Planning Act (Ill.Rev.Stat.1985, ch. 111 1/2, pars. 1158, 1159) and authorized by that act to review CON applications, to hold public hearings in connection therewith, and to certify to the Board its approval or disapproval thereof on the basis of "standards, criteria or plans of need adopted and approved by [HSA/KLM]." (Ill.Rev.Stat.1985, ch. 111 1/2, par. 1158.) In addition, the City of Chicago Health Systems Agency (Chicago HSA), which is Chicago's health planning organization, chose to perform its own review as a contiguous organization pursuant to section 8 of the Health Planning Act (Ill.Rev.Stat.1985, ch. 111 1/2, par. 1158).

Following extensive public hearings, HSA/KLM's board of directors voted on June 13, 1985, to recommend denial of the CMS application. Meanwhile, after its own review, hearings and staff report, Chicago HSA's governing body also voted on May 22, 1985, to recommend disapproval of the CMS application. Thereafter, on review, both HSA/KLM's board of directors and Chicago HSA's governing body again voted to recommend disapproval of the CMS application.

On January 10, 1986, the State Board held a public hearing on the CMS application. At the close of the hearing, the Board rejected by a 2 to 9 vote a motion to approve the CMS application. This vote constituted an intent to deny the application. On January 16, 1986, the Board sent a letter to CMS pursuant to section 10 of the Act, advising CMS of the Board's intent to deny the application and of CMS's opportunity to appear before the Board and present "such information as may be relevant to the approval of a permit * * * or in resistance of the denial of the application." (Ill.Rev.Stat.1985, ch. 111 1/2, par. 1160.) CMS responded to the Board's letter by sending additional material to the Board, with copies to HSA/KLM. On March 13, 1986, following its review of the additional material submitted by CMS, HSA/KLM's board of directors again voted to recommend disapproval of the CMS application.

Despite HSA/KLM's continuing recommendation to disapprove the application, on May 1, 1986, the State Board voted to approve CMS's application for a permit to construct the new hospital. The State Board found that the project was in "conformance with the applicable standards and criteria." In addition, the State Board specifically determined that the new hospital was necessary to improve medical services and assistance for underserved groups and to assist in the training and education of Illinois health professionals, which were priorities the State Board considered of "paramount importance."

In announcing its vote approving the CMS application, the chair of the State Board stated: "The project has been approved[;] the Board has voted approval but the HSA must be afforded the opportunity for appeal. They have 30 days in which to do that."

Thereafter, on May 23, 1986, the Board sent a letter (the May order) to CMS, which read in part as follows:

"On May 1, 1986, the [Board] approved your application for permit based upon the project's conformance with the applicable standards and criteria * * *.

* * *

* * *

* * * [Y]our permit * * * is valid for 18 months, expiring on November 1, 1987.

* * *

* * *

This permit is subject to the rights of the areawide health planning organization (HSA) to appeal this decision, 77 Ill.Adm.Code Section 1160.610. To proceed to obligate the permit during this period is to do so at your own risk. This permit period and time period for obligation of the project is not authorized by the...