The village of Melrose Park has filed a state lawsuit against the new owners of West Suburban Medical Center in Oak Park. The action comes one day before state lawmakers hold the first of two hearings designed to explore the community impact of closing West Suburban’s sister institution — Westlake Hospital in Melrose Park.
The lawsuit, filed on Mach 7 in the Cook County Circuit Court’s Chancery Division, accuses Pipeline Health, along with other entities, of “committing fraud and civil conspiracy in connection with their purchase of Westlake Hospital [in Melrose Park],” according to a summary of the lawsuit released Thursday by Edelson PC, the law firm representing Melrose Park.
The complaint names Pipeline Health, TWG Partners, Eric Whitaker and Nicholas Orzano, among other entities, as defendants. Whitaker and Orzano are listed as the principals of Pipeline Health, a California-based private healthcare network, and TWG Partners, a private equity firm headed up by Whitaker — a close friend of former president Barack Obama.
According to the lawsuit, Pipeline and TWG, through their principals Orzano and Whitaker, reached an agreement in 2018 to purchase Westlake, along with Weiss Memorial Hospital in Chicago and West Suburban Medical Center in Oak Park from Dallas-based Tenet Healthcare.
The purchase first had to be approved by the Illinois Health Facilities and Services Review Board, which reviews change of ownership applications to make sure they’re compliant with the Illinois Health Facilities Planning Act — a law enacted to make sure that “essential health care services” are available for people who can’t afford them, the lawsuit states.
Westlake is considered a “safety net” hospital, which is an institution that doesn’t deny patients medical care if they can’t pay and “provides services completely free of charge to individuals in households with incomes less than 200 [percent] of the Federal Poverty Level — called ‘charity care’ — and steeply discounted services to individuals in households with incomes under 500 [percent] of the Federal Poverty Level or that are already cost-burdened by medical debt,” the lawsuit explains.
Westlake — which has 230 beds and employs around employs around 670 people, 200 of them “on an as-needed basis,” according to Pipeline officials — is a Level II trauma facility, a Level II nursery, provides in-patient mental health services to people who have exhausted their Medicare coverage and is the only hospital in the area with a functioning obstetrics department that provides pregnancy, childbirth and post-partum services, according to the complaint.
From fiscal years 2015 to 2018, Westlake served more than 30,000 Medicaid beneficiaries, the lawsuit explains. In addition, it’s been “one of the few bulwarks against the opioid crisis” in the area, operating the only in-patient substance abuse facility in the village.”
The lawsuit points out that in September 2018, the defendants submitted their change of ownership application, in which they promised that Westlake would remain open and that the purchase “will result in no changes to the scope of services offered at Westlake.”
Both Orzano and Whitaker ensured community members and local lawmakers that the statements in the application were true. Since the pending closure was announced, Melrose Park Mayor Ron Serpico, state Rep. Kathleen Willis (77th) and state Rep. Emanuel “Chris” Welch (7th) have all said that they were told by Pipeline officials that Westlake would not close.
The lawsuit states that, based on Whitaker’s promises, the village of Melrose Park decided to “waive its right to object and oppose the [defendant’s] change of ownership application; waive its right to request a public hearing on the matter before the Review Board; and approve the Private Equity Defendants’ request that it assign the rights to a redevelopment agreement that the village entered into with the previous owner of Westlake.”
But two weeks after the $70 million purchase was finalized in January, Pipeline announced that it planned on closing Westlake by the second quarter of 2019. Whitaker has told reporters that the decision to close Westlake was necessary in order to ensure that Weiss and West Suburban remain open.
Pipeline Health officials have said that they’ll invite qualified Westlake employees to apply for positions at West Suburban or Weiss Memorial, and that a community shuttle between Melrose Park and West Suburban in Oak Park “is also in the works.”
According to Edelson’s statement, Pipeline’s conspiracy to hide their true intentions of closing Westlake so that their application might be approved by the Review Board “was exposed just a few weeks after the transaction was completed when Pipeline and Whitaker announced that they would be closing Westlake as soon as possible.”
Melrose Park claims that, in addition to fraud and conspiracy, the defendants also violated various village ordinances and created a public nuisance. The village is requesting that the defendants pay all fines and penalties allowable under Melrose Park’s municipal code and attorney’s fees, among other costs.
“Some private equity billionaires think it is ethical and right to generate their fortunes at the expense of the health and welfare of smaller communities,” Jay Edelson, Edelson PC’s founder. “That strategy is only successful if the community rolls over. Pipeline picked the wrong target here. The village under Mayor Serpico’s leadership is going to fight aggressively to protect its citizens.”
Edelson also represents Melrose Park, along with other municipalities — including Bellwood, Broadview and Maywood — “in a lawsuit against more than 20 pharmaceutical companies and their subsidiaries, drug distribution companies and three doctors who formerly ran an alleged opioid ‘pill mill’ out of a now-shuttered pain clinic in Riverside,” according to a report published last year in the Riverside-Brookfield Landmark.
When reached for comment on Thursday evening, Pipeline Health released the following statement:
“Melrose Park’s lawsuit, filed by a class action law firm, is defamatory and false. Pipeline Health’s plans are to invest in the patients, not buildings. As will be discussed in the regulatory process, the proper forum for this debate, Westlake Hospital has been deprived of state funding for years, is losing millions of dollars each month and draining resources from primary care as well as from West Suburban and Weiss Hospitals.”
According to a recent Chicago Tribune report, which referenced a variety of healthcare experts, state officials likely don’t have the power to stop the pending closure, since a 2015 change in statutes requires the state’s review board to approve hospital closure applications as long as companies meet certain standards. State officials can, however, hold hearings about proposed hospital closures.
Rep. Welch and Rep. Willis — both of whom have constituents served by Westlake — announced on March 4 that they pushed for hearings on Westlake’s closure before the House Appropriations Human Services committee.
The first hearing is scheduled to take place Friday, March 8, 10 a.m., in room C-600 of the Bilandic Building, 160 N. Lasalle St. in Chicago. Another hearing is scheduled for the following Monday.
“I commend the village of Melrose Park for taking quick action to save Westlake Hospital,” Welch explained in a statement released March 7. “Pipeline Health and Eric Whitaker perpetuated fraud on our community. We all stand united in our fight to keep healthcare for the poor in our community.”
The first court hearing date for Melrose Park’s lawsuit is scheduled for July 5.