CHICAGO - Joliet, Ill.-based Silver Cross Hospital and Medical Centerwon state regulatory approval this week to build a nearly $400 million replacement hospital a few miles from its current location while consideration of Edward Hospital's proposed new facility was again postponed by the Illinois Health Facilities Planning Board.
Silver Cross' proposal was opposed by Joliet officials concerned that the hospital would abandon low-income residents in the city about 45 miles southwest of Chicago by moving to a location just a few miles away in a rapidly developing but more affluent area. Officials from Will County, which includes both Joliet and the new site in New Lenox, endorsed it saying it would provide better services to the overall region.
"We are especially pleased that the board recognized the significant effort that we put into making sure the state-of-the-art care at our new facility is accessible and available to everyone, especially our patients who are poor and uninsured," Silver Cross chief executive officer Paul Pawlak said in a statement.
Fitch Ratings in late May placed Silver Cross' A credit on negative watch ahead of its plan to restructure through the Illinois Finance Authority $80 million of auction-rate bonds to a fixed-rate mode. The hospital used Lehman Brothers and UBS Securities LLC on the deal. The rating agency action was due to the hospital's plan to add a significant level of debt - $265 million - to finance the new 289-bed hospital.
If the planning board had rejected the hospital's application for a certificate of need, required for major healthcare construction projects, Fitch had said it would remove the negative watch. The credit now faces review and a possible downgrade.
Standard & Poor's had opted to leave the hospital's A rating and stable outlook intact as the CON was pending, but analysts did say at the time in late May that they would view a bond issue of this size to be consequential and could result in a lower rating.
The A rating is supported by growing patient volumes, market share gains amid rapid population growth in the region, solid profitability, and strong growth in liquidity. Between 2003 and 2007, inpatient admissions increased by 16.3% to a total of 17,010 while emergency room visits increased by 29.2% to 54,192 and surgical procedures increased 26.7% to 12,976.
The planning board deferred for at least a month consideration of Naperville-based Edward Hospital's proposal to build a $250 million 162-bed hospital in the growing area south of it in Plainfield. Edward has struggled for five years to win approval to build in Plainfield. Past proposals were rejected or deferred as the board's staff said sufficient beds are available to serve the growing region. The hospital would sell roughly $222 million in tax-exempt bonds to finance construction.
Proponents of the new hospital said recently they were hopeful that a recent change in the certificate of need law would result in approval of the plan, but planning board members this week said they would like to see some revisions to the proposal.
Edward's original proposal became embroiled in a federal corruption case involving allegations that businessman Stuart Levine, who previously sat on the planning board, along with former Bear, Stearns & Co. public finance banker P. Nicholas Hurtgen and a construction company owner attempted to force the hospital to use the construction company for its project in exchange for regulatory approval. The hospital refused and its plan was rejected. Hurtgen faces a federal trial on the charges later this year.