6 Factors Influence IL Race for Hospital Construction Rights

Does McHenry County, Illinois need a new hospital?

The Illinois Health Facilities and Services Review Board is expected to address the question this month when it considers certificate-of-need (CON) applications submitted by Mercy Crystal Lake Hospital & Medical Center and Centegra Health System.

Mercy proposes to construct a hospital in the community of Crystal Lake, while Centegra plans to build in Huntley. Meanwhile, the Review Board’s data indicates that McHenry County may need a new hospital soon, but not this year.

Moreover, the Board’s data suggests McHenry County will need, at most, one new hospital in the coming years. Therefore, the race is on as Mercy and Centegra vie to be the first to cross the finish line and obtain the coveted CON. Many factors could determine the outcome of this race.

1.The Odds
The odds of either hospital receiving a CON are not favorable. Historically, the Board has been reluctant to approve new hospitals. Since 1976, the Board has granted only one CON for a new hospital. However, Adventist Bolingbrook Hospital, approved in 2004, obtained its CON with much less favorable Board data when compared with the need data applicable to the McHenry County projects.

Adventist’s planning area had a surplus of 263 medical/surgical (M/S) beds. McHenry County, in comparison, needs 83 M/S beds. Despite this stated need, each Hospital proposes 100 M/S beds, which is 17 beds over the projected need. Board regulations provide that proposals for new hospitals within metropolitan statistical areas must be for no fewer than 100 M/S beds. As a result of this rule, Board staff will likely conclude that a need for the project does not exist at this time.

2.Timing
Because two hospitals cannot be justified, the order of Board consideration could be critical. Generally, the Board considers CON applications in the order they are received, although the Board may not follow this rule when competing applications aim to satisfy the same projected need. The main problem in this situation is that once one project is approved, the other is essentially unnecessary. Expect the Board to address this concern before it considers these two applications.
           
3.Construction Timeline
The average amount of time to construct a new hospital is five years. Both hospitals could argue that failing to start construction now may create patient access issues in the near future, especially if a hospital is not operational when patient need surpasses the 100 bed benchmark. The hospitals have a good point here—McHenry County’s M/S bed need could exceed 100 in just one or two years.

4.Population Growth
The Hospitals may need to explain how new population information released by the U.S. Census Bureau in March 2011 affects their CON applications. The key question is whether McHenry County’s population growth will continue at a rapid pace.

5.The Economy
A slow economy creates public policy considerations that support approval of at least one CON. Hospital construction projects will create good-paying jobs now and in the future, and greatly benefit the local economy. Furthermore, construction costs and interest rates are down and securing labor contracts and loans at today’s rates could save millions of dollars and reduce project costs.

6.Access to Care
A recent applicant was granted a CON even though the Board’s need data indicated the project was unnecessary. The applicant provided evidence that the project would improve access to care for underserved populations. Mercy or Centegra may find similar success if they can demonstrate that their hospital will enhance access to care.

Although Mercy and Centegra cannot justify all 100 M/S beds, several other factors support a decision for CON approval now. CON observers will have a great race to watch if the Board determines that McHenry County needs only one hospital. Only time will tell if Mercy or Centegra end up in the winner’s circle.

Joseph Hylak-Reinholtz is an Attorney, McGuireWoods LLP in Chicago. He formerly served as an ex-officio member on the Illinois Health Facilities and Services Review Board and can be  reached at jhreinholtz@mcguirewoods.com.