CON for Hospital Denied, Planning Board Sued Again

September 18, 2012

The Illinois Health Facilities and Services Review Board (the “Board”) voted on Tuesday, Sept. 11, 2012, to reject Mercy Health System’s (“Mercy”) certificate of need application to build a 70-bed, $115 million hospital in Crystal Lake, Illinois. This is the Board’s second rejection of Mercy’s proposed project. Mercy has sued the Board following its initial rejection of its principal application in December 2011, claiming that the Board’s rejection of its application was “arbitrary and capricious” and contrary to Illinois law.

The Board’s rejection of Mercy’s certificate of need application has prompted critics to again call into question the utility of the certificate of need process in Illinois. Such critics argue not only that Illinois certificate of need laws stifle economic and market growth by granting power to incumbent market competitors to challenge newcomers, but also that requiring healthcare providers to engage in a certificate of need process places an unwarranted financial burden on mounting healthcare costs. “There are all kinds of benefits of allowing newcomers to enter the market and ignoring the voices of incumbents who will use entry regulations to protect the status quo. … It’s the industry that is trying to protect itself and perpetuate the same myth that we’re in the same world we were in 1975,” stated healthcare economist and professor at Northwestern University’s Kellogg School of Management David Dranove. As such concerns relating to certificate of need approval in Illinois continue to surmount, future challenges to the Board’s decisions regarding permit applications and approvals may be seen.

Andrew L. Wang, “Illinois decision on Mercy, Centegra renew questions on certificates of need,” Crain’s Chicago Business (Sept. 13, 2012)